China’s Africa investment shifts from quantity to quality

By Yu Ning Source:Global Times Published: 2016/8/25 23:23:40

Is Chinese investment being withdrawn from Africa? Signs of a rebound have yet to come following a sharp decline in Chinese investment to the continent of hope last year. In the first half of 2015, China's investment in the continent stood at $1.19 billion, falling by 40 percent year-on-year, according to China's Ministry of Commerce. Recent data showed that the first seven months of 2016 saw $1.13 billion flow into Africa from China, sparking a new round of speculation over whether Beijing is shifting its capital away from the continent.

The importance of Africa to China is clear-cut and China's goals to aid the continent's economic development and poverty alleviation remain unchanged. Despite the recent drop in Chinese investment, in the long-run, many African nations, which have maintained a long history of friendly ties with China and have huge untapped market potential, will still be an important destination for Chinese investments. Chinese President Xi Jinping pledged a $60 billion development initiative at a summit in South Africa last year to finance development projects in African nations. An article in the Hong Kong-based Phoenix Weekly calls the pledged funding support China's "ace in the hole" of investing in Africa in future.

It's too early to say if the decline in China's investment to Africa will become a long-term trend. But noticeably China is changing its approach, with more attention paid to quality rather than quantity.

Chinese investment in natural resources in Africa is waning. Instead of eyeing mega infrastructure projects for short-term gains as it did in the past, China now attaches more importance to expanding investment in the manufacturing industry.

For instance, it has devoted more efforts to setting up economic development zones along the railway lines in different nations to create more opportunities for manufacturing investment. Meanwhile, it offers preferential policies and support for more Chinese manufacturing enterprises to invest in Africa through the China-Africa development fund. These investment patterns better conform to the demands of industrialization in African countries.

Besides, drawing lessons from incidents in which political and social instability muddied operating environments for Chinese overseas investments, China now has become more conscious of the political risks it will face when investing in Africa. It has actively explored investment opportunities in countries with stable politics such as Kenya, Ethiopia, Tanzania and Senegal.

Against the backdrop of a global economic slowdown, China is innovating to explore new investment opportunities so as to inject new impetus into the development of the African continent.

Posted in: Observer

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