Chinese Financial Investment Stimulates Development in Africa

China in Africa: Mandarin Translation of the Week

Chinese Financial Investment Stimulates Development in Africa

"According to the Africa Attractiveness Survey 2013 produced by Ernst & Young PPL, in the past five years, FDI (Foreign Direct Investment) in Africa grew from 3.2% to 5.6%. Since 2012, the total amount of FDI from emerging markets exceeded the total amount of FDI from developed countries. These investments from the emerging markets effectively promoted the overall development in Africa, opened up more employment opportunities, developed skill training programs, reduced poverty and eliminated inequalities. China has been playing a very important role in these investments and developments."

"安永会计师事务所5月6日发布的《2013非洲吸引力调查报告》指出，过去5年，非洲吸引全球外国直接投资份额从3.2%上升到5.6%。2012年，来自新兴市场国家的直接投资超过发达国家对非投资，这些投资有力促进了非洲发展，推动了非洲创造就业、技能开发、减贫和消除不平等，其中中国投资作用毋庸置疑。"

This article has been translated from Mandarin. Click here to read the original version on 163.com

The Proportion of FDI in Africa to the entire World Increased Exponentially

The Africa Attractiveness Survey 2013 is a report that combines potential market analyses from 38 different countries and over 500 business leaders in the world. The report highlights that over the past 5 years, FDI in Africa increased 12.8%. Eighty six percent of the business leaders believe that business environment in Africa will be further improved in the next 3 years, and it will become the second most attractive area after Asia.

Continuously improving business environment in Africa, the growing trade and investment have been very effectively promoting the economic growth in Africa. The survey points out that since 2000, the total economic output has doubled in the area southern to Sub-Saharan Africa.  Ajen Sita, the Area Managing Partner for Africa at Ernst & Young, remarked: "FDI has a particularly important role to play as a future source of longer-term capital for reinvestment in infrastructure initiatives and as an accelerator of sustainable growth across Africa. And there is far more to come".

According to the survey, in the past 5 years, Foreign Indirect Investment included areas such as service, manufacturing, and infrastructural construction, etc., and these areas are not solely in the resource and energy sectors.  Service area accounts for 70% of the entire FDI projects, and 73.5% of FDI flew to infrastructural construction and other sectors. Moreover, the inflow of African private equity funds reached nearly $12 billion. The survey states that one of the biggest challenges in Africa is poor infrastructure, but this challenge is progressively solved. In 2012, Sub-Saharan Africa had more than 800 infrastructural projects under construction, and the total project value was more than 700 billion U.S. dollars.

BRIC Countries are the Main Stream

The Africa Attractiveness Survey 2013 shows that since 2007, FDI from the emerging market countries to Africa grew 20.7%; compared to developed countries, their total FDI only grew 8.4%. In 2012, the total amount of FDI from emerging markets exceeded the total amount of FDI from the developed countries. Among these emerging market countries, China and the United Arab Emirates invested the most in Africa, Chinese FDI grew 28%.

In 2012, FDI from developed countries dropped significantly – a drop of 20%.  In the past 10 years, the United States, the United Kingdom and France were ranked top three countries invested the most in foreign countries. Last year, the United Kingdom FDI to Africa increased 9%, but the United States and France dropped 22% and 39%.

British think-tank The Overseas Development Institute released a report in March, this report stated that FDI in Africa grew from $15 billion in 2001 to $37 billion in 2011; and in 2010, 25% of FDI in Africa came from BRIC countries. United Nations Conference on Trade and Development released the World Investment Report in March 2012. In this report, it states that FDI in Africa grew by 5.5%, and the BRIC countries are among the countries in the forefront of FDI in both stocks and flows. Although Africa only accounts 4% of total amount of FDI from BRIC countries to foreign countries, the investment of construction projects from BRIC countries increased from 19% in 2003 to 25% in 2012. Most of these investments focused on infrastructures and service sectors, only 26% of these projects focused on the primary sector.

Chinese Investment in Africa Fills out the Funding Gap

In the Africa Attractiveness Survey 2013, FDI has played a key role in the rapid economic development in Africa over the past 10 years. FDI in Africa over the past 10 years has created at least 15 million jobs, promoted more skill training programs, reduced poverty and eliminated inequalities. China has been playing a very important role in these investments and developments. The survey shows that over the past 5 years, China invested more than 152 new projects, ranked number 9 in the world.  Chinese FDI in Africa also grew 28%. CEO of Standard Chartered Bank of Africa said "in the past 10 years, there was a rapid growth in South-South trade and investment". Last year, the total amount of trade was near 200 billion between China and Africa.

Industrial and Commercial Bank of China (ICBC) Africa representative and General Manager Liu Yagan told the reporter that ICBC in 2008 invested 5.5 billion and acquisition of 20% stake in Standard Bank in South Africa. This investment is one of the biggest investments China has made in Africa. Liu also said the annual investment from China to Africa is 2 to 3 billion; upon until 2012, the total saving exceeded 15 billion.

U.S. think-tank Center for Global Development senior researcher Vijaya Ramachandran said China plays an important role in filling in the funding gap in Africa. Kenya's major newspaper The Standard reports that Chinese investment and trade in Africa provides a historical opportunity for African self-development.

In the East Industrial Park in Ethiopia, Hua Jian Shoe Factory production line supervisor Ji Ru told the reporter that she is very proud to be able to work at a Chinese factory. Not only she is able to support her siblings to attend school, reduce the burden on the family, this job also gives her a new learning opportunity.

Professor Sandy, Honorary Professor at the Political Science department in the University of South Africa, and Director at the Institute for Global Dialogue told the reporter that the Chinese President Xi Jinping just announced that China is going to provide 20 billion loans to Africa in the next 3 years – this will greatly promote the development in Africa. Professor  Sandy also believes that President Xi Jinping's visit to Africa, including signing more than 40 cooperation documents, and announcing a series of measures to support Africa, in terms of strengthening assistant, investment and financing cooperation, as well as vocational trainings, etc. These series of investments will become a catalyst for the further development of Africa.