The Contribution of Chinese FDI to Africa's Pre Crisis Growth Surge

From the new paper "The Contribution of Chinese FDI to Africa's Pre Crisis Growth Surge" by Weisbrod and Whalley.

In the 3 years before the 2008 Financial Crisis, GDP growth in sub Saharan Africa (averaged over individual economies) was around 6%, or 2 percentage points above mean growth rates for the preceding 10 years. This period also coincided with significant Chinese FDI flows into these countries, accounting for up to 10% of total inward FDI flows for certain countries in these years . . .  Our individual results vary by year and country, but there are several year/country combinations where Chinese FDI contributed to an additional one half of a percentage point or above to GDP growth. These results suggest that a significant, even if in some cases small, portion of the elevated growth in sub Saharan Africa in the three years before the Financial Crisis and also in the two years afterwards (2008-2009) can be attributed to Chinese inward investment. 

Book review of "The Dragon's Gift: The Real Story of China in Africa"

The book does not fall into the trap of characterising China’s interests as either good or evil. Instead it makes use of specific, empirical examples to intriguingly argue that despite the numerous ‘challenges and opportunities’ arising from Chinese aid and investment, offering Africa an olive branch for development is a central tenet of Chinese engagement. In teaching African states the lessons of China’s own developmental experiences, China is acting on its win-win rhetoric, and creating a partnership that is beneficial to both parties; Africa gets prospects for development through knowledge transfer and large-scale Chinese investments, while China gains access to new markets, natural resources, and acquires political currency in the continent.

Brautigam’s experiences of living in Africa and Asia and of researching in numerous African countries are obvious throughout this immaculately researched book. Such emipirical evidence lends credence to Brautigam’s argument and is testament to her strong local knowledge in Africa and vast array of reputable contacts. The careful attention paid to local businesses like wax print fabric industries in Nigeria and hide tanners in Ethiopia creates a richness that forces a re-conceptualisation of the orthodox views of China in Africa. Brautigam is unafraid to use examples that might be seen to strengthen China's critics such as job losses in African manufacturing industries, but she also shows a bold assertiveness in highlighting the promise of African industrialisation through Chinese engagement.

The book offers insightful analysis into how China’s attempts to move up the economic value-chain may lead to labour-intensive industries moving into Africa, as part of an economic paradigm known as the “flying geese” model. The book hones in on some of China’s promised investments in Africa in the form of Export Processing Zones (EPZs), also called Special Economic Zones, in countries as varied as Nigeria, Mauritius, and Zambia. Undoubtedly technology transfer and joint-ventures between African and Chinese companies are crucial to long-term African development goals; however, the book needs to more convincingly argue that these processes are underway. The book would have benefited from more honesty on the Chinese aversion to sourcing local inputs, and could also have done more to negate persistent fears that EPZs simply create enclave economies with no real benefit for the wider economy.  

The whole review is worth reading.