Chinese State-Owned Enterprises in Africa: Myths and Realities

Though China’s foreign investment in Africa is still relatively small, it is growing at a phenomenal rate and attracting international attention. Investment is especially pronounced in the mining and energy sectors, as China consumes a quarter of the world’s annual production of minerals and Africa accounts for thirty per cent of the world’s mineral reserves. This article views China’s foreign investment in Africa through the lens of the mining industry and argues that supply and demand considerations, not political factors, are the primary drivers of Chinese investment. China has designated seven Special Economic Zones in Africa that make broad contributions to economic development in various countries by supporting industries ranging from seafood processing to the production of ceramics, textiles, medicines, and furniture. Various large infrastructure projects exist, like the 2008 Sicomines resource-for-infrastructure deal in the Democratic Republic of Congo. With $6 billion earmarked for road, railway, and water projects, it will represent the largest infrastructure upgrade in Congo since colonization. Western investors, meanwhile, face pressure from shareholders to keep activities focused and are narrower in their infrastructural contributions. On the negative side, Chinese state-owned enterprises are insufficiently transparent (e.g. in the reporting of local tax payments). Their environmental record invites scrutiny, and some critics argue that Chinese SOEs show a laissez-faire attitude and exploit weak institutional structures. Ultimately, the reality of Chinese foreign investment in Africa is neither one of “saints nor sinners.”

• State-owned Enterprises
• Transparency
• Infrastructure
• Institutional Structure
• Mining Industry
• China
• Africa