Chinese FDI Stock and Flows by Region

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BOX 2.4
Patterns of Chinese Investment in Africa from Outward
Chinese FDI Survey
China’s relatively recent Going Global policy has encouraged Chinese firms to invest abroad to seek inputs in support of the country’s fast-paced economic development, and to exploit its rapidly developing comparative advantages. While reliable and complete statistics are hard to come by, China s outward foreign investment (OFDI) stock and flows have been estimated at around $50 billion and $5 billion, respectively, in Much has been written, often anecdotally, about China’s OFDI. Less attention has been directed toward developing abetter empirical understanding of the impact of the Going Global policy from the firms points of view. In mid, the Foreign Investment Advisory Service and the Multilateral Investment Guarantee Agency sponsored a survey of 150 Chinese firms based in eight Chinese cities that had invested or were about to invest abroad. The purpose of the survey was to learn about the motivations, experiences, and perceptions of the firms, and their future investment plans.
Defining dimensions of the survey audience include the following The surveyed firms have made 251 overseas investments to date, and of those investments more than half (129) were in developing countries Reasons for investing are similar to those found in overseas investors worldwide—market access, resources, and strategic assets (for example, technology, brands, distribution channels) are the key drivers,
across all regions of interest Most are new to investing overseas, and need support to better understand the procedures required, and the opportunities and challenges these markets represent.
With regard to Africa in particular, some specific findings are worthy of note:
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PERFORMANCE AND PATTERNS OF AFRICAN
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ASIAN TRADE AND INVESTMENT FLOWS Africa is second only to Asia as the destination of choice of the firms surveyed, accounting for some 18 percent of the overseas projects.
(Asia accounted for nearly 40 percent of the total Reflecting the composition of the firms surveyed, manufacturing was the primary sector of interest of firms investing in Africa (45 percent),
followed by construction and services (35 percent, and resource- based investment at 20 percent (focusing on agriculture, oil, gas, and mining Support from the Chinese government was considered to bean important factor driving FDI to Africa relative to other regions Africa was the least attractive environment in the eyes of the Chinese investors with regard to political risk, perceived by 94 percent of the firms surveyed as the riskiest region Some 60 percent of the firms investing in Africa ranked the policy environment there as good which was twice the levels achieved by Latin
America at 29 percent. In terms of the future trends and destinations for Chinese outward investment, nearly 60 percent of the firms surveyed had concrete plans for additional overseas projects in the next three years, and an additional 13 percent had plans but no specific projects. Here again Africa fares well, as the intended destination for 21 percent of the planned projects.
It is worth noting that the survey found the firms often lacking information on both sides of the equation—on the procedures required by the government of China for outward investors, and on the investment conditions in the countries in which they were establishing operations. This implies information gaps both behind and across borders that should be addressed.
Source: World Bank Group/MIGA.
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Mauritius is a major Indian FDI destination in Africa, particularly in the financial sector, as well as in the telecommunications and pharmaceuticals sectors (figure 2.27). However, it is difficult to assess the extent to which the investment stays in the country or passes through to take advantage of
Mauritius’ low tax regime.
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FDI from India to Africa is set to increase, as the Indian conglomerate Tata Motors has identified South Africa as the next frontier in its globalization policy. It plans to use South Africa as its gateway to Europe by expanding its automotive operations there, taking advantage of South Africa’s favorable trade regime with Europe.

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