An Analysis of Chinese Foreign Direct Investment (FDI) in Sub-Saharan Africa: A Particular Focus on Ethiopia

Abstract

This study offers an assessment of' Chinese FDI in Sub-Saharan Africa with a
particular focus on Ethiopia. The research method employed in this study has
both qualitative and quantitative features. The findings of the study are
presumed to be of paramount importance by inducting policy direction for
policy makers in sub-Saharan Africa regarding Chinese investment in the
region. The findings demonstrated some 90% of China (Sino) - sub-Saharan
African trade is based around natural resources: oil, ores and minerals (Mary-
Françoise Renard, 2011). Of course, China has certainly been contributing to
sub-Saharan Africa’s economic growth, both in terms of trade and building of
infrastructure. However, the Chinese exports of natural resources by
themselves do not help sub-Saharan Africa because oil and mining are not
labor intensive industries which even if natural resources may create economic
growth in figures, does not necessarily translate into widespread job creations.
In addition, large oil and mineral reserves can also distort the local currency,
pushing up prices of other exports, such as agricultural and manufacturing
products making them much harder to sell overseas.
What makes the Chinese FDI unique in Ethiopia is almost 60% of these
investments are concentrated in the manufacturing sector and infrastructural
development, which is different from what happened in other African countries
where the Chinese FDI is pretty much resource seeking (Alemayehu Geda and
Atnafu G. Meskel, 2009). There are concerns related to China FDI in Ethiopia
such as the dumping of low quality Chinese goods in Ethiopian markets,
Chinese manufacture poor employees’ safety practices, the Chinese imports
negative impact on domestic industries and Chinese investors’ involvements in
corruption and other trade frauds. In conclusion, to realize the major benefits
by reducing risks associated with this Chinese FDI in sub-Saharan Africa,
countries must have appropriate policies and strategies including strong
institutions arrangement.