China maintains investment focus on Africa amid trying economic climate
The economic downturn notwithstanding, China is far from turning away from Africa, which has been one of its key investment areas in this decade.
Despite the declines in China’s outbound direct investment (ODI), investment into African countries keeps growing at a rather fast pace with £345 million having been invested so far this year, marking a twofold increase from 2008, whilst China’s total ODI has plummeted 60% year on year during the first half of 2009.
The country has so far poured US$26 billion into Africa, US$7.8 billion of it in direct investments. Last year the continent accounted for roughly 10% of China’s total ODI.
The rapidly Chinese industries account for a good share of the global demand for oil and metals, making obvious its interest in the hydrocarbon reserves of countries like Angola, Sudan and Nigeria. A third of China’s oil imports currently come from Africa, however, China isn’t merely looking to grab a bigger share of the continent’s vast natural resources. Chinese investors have as much interest in areas like agriculture and engineering, where scores of construction and development projects have been launched to support Africa’s economic growth. The 1,216 kilometre Algeria East-West Expressway, built by a consortium led by two Chinese companies, alone has created 100,000 jobs in that country, while CNCPIEC’s sugar plants and refineries in Togo, Madagascar, Sierra Leone and Benin created 8,000 jobs and earned these countries US$20 million in tax income.
China’s intention to develop strong economic ties with Africa were made clear during the first bilateral summit in 2006 when China pledged US$2 billion in loans, which has been used to finance 11 projects throughout the continent, according to the People’s Daily.
Investment into agriculture is particularly encouraged by the Chinese government, which is looking to both cover the increasing food demand in Africa and secure food supplies for the growing Chinese population. Chinese investors have so far poured US$134 million into the sector, helping set up 72 agriculture enterprises.
The development of closer ties to the African nations though increased investment and extensive cooperation puts China in a position to fill the void left by the colonial powers that once dominated region by providing an alternative to the aid from the developed countries that most of the time comes in the form of food and subsidies that fail to address the continent’s investment demands. The reluctance to cut investments into Africa only reaffirms China’s strategic goal to establish a solid footing in the rapidly developing region that promises China both economic and political benefits that are already starting to materialise.
The bulk of China’s non-financial direct investments go to Asia, Europe, the US, Africa and Oceania, while financial investments target Hong Kong, the UK and the US. China’s ODI amounted to US$13.3 billion in H1 this year, while direct foreign investment into China for the same period was at US$48 million.
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