An In-Depth Report: Chinese Foreign Direct Investment in Africa

This report delves into the topic of Chinese Foreign Direct Investment (FDI) in Africa, examining the motivations behind Chinese companies' investments in the region. It identifies key factors influencing these investments, such as wage rates and labor skills. The report analyzes the issues associated with Chinese FDI in Africa, considering both positive and negative impacts on the African economy. It also explores strategies to reduce the potential negative effects of Chinese investment, such as securing local funding and maintaining strong relationships with African banks. The report concludes by summarizing the key findings and implications of Chinese FDI for Africa's economic development and future prospects. It highlights the need for a balanced approach that maximizes benefits while mitigating risks.

Foreign Direct
Investment

Contents
MIAN BODY...................................................................................................................................3
What are the reason due to which Chinese companies are making foreign direct investment in
Africa?....................................................................................................................................3
Identifying the factors which are impact on Chinese Foreign Direct Investment in Africa...3
Determine the issues related with Chinese foreign direct investment in Africa....................4
Analyse the ways to reduce the negative impact of Chinese FDI in Africa...........................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6
CONCLUSION................................................................................................................................1

INTRODUCTION
The Foreign Direct investment is an type of investment where it made for one county into
business where he interest located in another country (Doku,, Akuma and Owusu-Afriyie, 2017).
As in general way the foreign direct investment is majorly establishes about business operates
and acquires to assets within forgein company. In this report there is situation in four factor that
China is implementing FDI system to investing in Africa.
MIAN BODY
What are the reason due to which Chinese companies are making foreign direct investment in
Africa?
There are some of Chinese company such as
 Petro China Co. LTD
 China Petroleum and Chemicals
 Ping an Insurance group
 Alibaba
These are some of biggest companies in China based where the investment are generated
within funds that process towards industries field that help to promote Africa’s economic
development and agriculture or other sector (Mourao, 2018). As it is been record that Africa
is one of the cheapest economic scale country where investments rate are very low but there
is high scope of return as currency rate of Africa is more than China Yen currency. The
China Arica development fund was one of eight measure that was announced through
President of China. The main objective of China is to providing the Foreign Direct
Investment to Africa is to better development and it would also create positive economic and
social outcomes. As the Africa can easily target because there is less development
segmentation and market are ready to expand their economy but due to lack of investment
there is no scope of development in infrastructure.
Identifying the factors which are impact on Chinese Foreign Direct Investment in Africa.
The major impact which are on Chinese Foreign Direct Investment in Africa such as:
 Wages Rates: This is one of major incentives for China company to investment in Africa
in production base country where he wages rate of Africa is lower then expected.
However the wages rates are not focus on Foreign Direct Investment through which

China wage can attract the Africa people to allows for investment and generate
opportunities for further development.
 Labour Skills: As some of industries are require as higher skills labour where Africa can
easily afford the Chinese labour as the labour cost of china is cheap in rate. Therefore in
context of china they also have benefits to work and investment in Africa zone as their
labour rate is quite affordable (Li, Gallagher and Mauzerall,., 2020). However, this could
make it an attractive place of outsourcing and therefore towards attract investment.
 The Chinese Foreign Direct Investments to Africa is bad faith, as most of Africa business
traditional partner where this is good understanding about business. However, through
this FDI from china some small business in Africa would get benefit in terms of high rate
of profitability..
Determine the issues related with Chinese foreign direct investment in Africa.
In recent years, countless factual and hypothetical studies have tried to consider the impact of
foreign direct investment (FDI) on the economy. A surprisingly larger part of these tests
concluded that FDI represents a movement of innovation across countries, thus increasing the
general interest in the host country's economy. These studies also suggest that FDI will make a
significant additional contribution to rural enterprise development. However, when it comes to
learning about Chinese interests in Africa, many creators have argued that Chinese interests in
Africa are doing more damage to the economy than anything else. They even go so far as to say
that the Chinese are hunters of African commodities and most of the creators remain very
vigilant in publishing the lucrative results of these profits.
The conclusion drawn towards the end of this study was that, far from being a negative impact,
China's profitability is putting the African economy on the right track to achieve economic
progress. This is because they allow African countries to move towards modernization, industry
and hard currency development. It has also been noted that the problem of China's hunting for
African commodities is quite obvious. In addition, this commodity conservator promotes the
elimination of a number of neighbourhood groups (McCaleb and Szunomár., 2017). Outside of
this, it is accepted that the harmony and development of Chinese interests in Africa go hand in
hand with regard to the rules driven by the legislatures (foundations) and the attention to global
guidelines.

Analyse the ways to reduce the negative impact of Chinese FDI in Africa.
Some of the ways to reduce the negative impact of Chinese FDI includes:
African fundraising and good customer relations: Obtaining nearby funds from African banks
would reduce the likelihood of government arrest and acquisition. That is, the banks would
receive their advances quickly and could try to prevent the African government from taking over.
Similarly, the benefit of the neighbourhood would reduce the risk of a variance in the turnaround
scale on the basis that less money is transferred to the parent group. Establishing excellent links
with bank lenders would help reduce contract loan fees, which reduce construction costs. This
would, in turn, improve the financial position of the land lenders.
By taking into account additional property investments with other property investments (if any)
they kept the profit. Therefore, the parent agency does not have to support the new property
investment project. As a result, less money from the Chinese agency will be involved in Africa,
which in turn reduces the risk of capital mishaps (Camba, 2017). The Chinese group also has the
alternative of acquiring independent resources from existing investment properties to support
new businesses. This funding strategy will weaken the African government in establishing
seizure or seizure options for the introduction of African banks.
Conclusion
To overcome the rising cost of capital barriers, proponents of land financing should consider
reaching specific financial bases, such as African banks to determine welfare levels. Likewise,
proponents of land financing should investigate the collection of loan taxes and the general cost
of borrowing from a number of banks as construction is heavily affected and the cost of
construction is high.

References
Doku, I., Akuma, J. and Owusu-Afriyie, J., 2017. Effect of Chinese foreign direct investment on
economic growth in Africa. Journal of Chinese Economic and Foreign Trade Studies.
Mourao, P.R., 2018. What is China seeking from Africa? An analysis of the economic and
political determinants of Chinese Outward Foreign Direct Investment based on
Stochastic Frontier Models. China Economic Review. 48. pp.258-268.
Li, Z., Gallagher, K.P. and Mauzerall, D.L., 2020. China's global power: Estimating Chinese
foreign direct investment in the electric power sector. Energy Policy, 136, p.111056.
McCaleb, A. and Szunomár, Á., 2017. Chinese foreign direct investment in central and Eastern
Europe.
Bodomo, A., 2017. The globalization of foreign investment in Africa: The role of Europe, China,
and India. Emerald Group Publishing.
Yu, S., Qian, X. and Liu, T., 2019. Belt and road initiative and Chinese firms' outward foreign
direct investment. Emerging Markets Review, 41, p.100629.
Camba, A., 2017. Inter-state relations and state capacity: the rise and fall of Chinese foreign
direct investment in the Philippines. Palgrave Communications, 3(1), pp.1-19.

CONCLUSION
1