Chinese OFDI in Africa. A firm-level analysis of Chinese investments in Sub-Saharan Africa

Abstract

As a result of the widespread globalization, historically separated markets have merged into one global marketplace and consequently MNEs have been able to disperse their operations abroad. Over the past decades, there has been a shift in the FDI pattern as flows now originate from developing and emerging economies, in particular from China. More recently the OFDI flows from China have not only been targeted towards countries in the West but also into countries in Africa known for their natural resources endowments. Earlier research has retained its focus on an aggregated level. Therefore the purpose of this thesis has been to analyze China’s motives behind investments in African firms and the subsequent consequences considering the long-term impacts on economic development in receiving countries. This has been done by analyzing a number of selected case studies that illustrate Chinese OFDI in firms in South Africa, Nigeria and Angola. Our empirical findings have been analyzed utilizing Dunning’s eclectic paradigm (1980, 1988, 2000) extended with Rugman’s FSA/CSA Matrix (1981, 2010) and Mathews’ LLL-model (2006). We found that Chinese MNEs invest in African firms primarily for resource-seeking motives and in the long-term Chinese OFDI provides economic and social development in receiving countries. Nevertheless, political and institutional aspects could increase the risk and impede potential economic development for the FDI receiving countries and its people. Hence, emphasizing the importance of a long-term strategy for global investment, not only for China as an investor, but for the receiving African country.