Localización del mito y conclusiones

Anders Bastholmand Peter Kragelund

Introduction

The meeting in November 2006 of 48 African leaders gathered in Beijing , to- gether with their Chinese hosts, President Hu Jintao and Premier Wen Jiabao, to inaugurate the 3rd _{Forum on China -Africa Cooperation (FOCAC) marked the}

zenith of Sino-African cooperation. It followed the dramatically intensified po- litical and economic interactions between China and African countries. Figures on trade, aid and investment are increasing rapidly and political ties are growing stronger, as are personal ties between the political elites of China and Africa. This relationship is of immense significance for Africa’s political and economic development; and naturally, both media and scholarly attention on the topic is growing.

While overall Foreign Direct Investment (FDI )2 _{into Africa is relatively mod-}

est (Asiedu, 2004), Chinese FDI to Africa is growing at a very fast pace: China is currently the third most important investor in Africa, and African expectations for the future are high. A recent survey amongst national investment promotion agencies in several African countries ranked China as the third most important future investor after South Africa and the United States (US) (UNCTAD, 2005). In a decade, Chinese FDI stock in Africa has increased almost five times – from approximately 260 million US$ in 1995 to 1250 million US$ in 2006 (Chapter 3). The Beijing Action Plan 2007-2009, the immediate result of the FOCAC, along with China’s Africa Policy (from 2006) lays the foundation for strengthening the relationship between China and African countries in the future. In particular, trade and FDI figures are likely to continue growing rapidly, underpinned by political initiatives like, for example, the creation of three to five Economic Trade and Cooperation Zones in Africa; the establishment of the China-Africa Devel- opment Fund of five billion US$ to support Chinese investors in Africa; and the provision of a zero-tariff treatment on a large range of African goods.

 Anders Bastholmand Peter Kragelund

The purpose of this chapter is to go beyond the all-encompassing type analy- ses that have characterized most recent writing on the Sino-African relationship. Instead, we take a closer look at one particular aspect of this complex and multi- faceted issue, namely Chinese FDI in one African country. This chapter focuses on the ability of the Chinese state to create advantages for Chinese companies that invest in Africa. It seeks to increase our knowledge of the international as well as the local dynamics of Chinese investments in Africa, and heighten our understanding of the terms on which Chinese companies operate in the African context. We use Zambia as a case and scrutinize Chinese investments here and the conditions under which they take place.3

FDI is important in the capital formation process in Africa. In fact, external fi- nance currently dominates the majority of African economies, and FDI is a grow- ing source of external finance. Proponents of FDI argue that FDI creates employ- ment, facilitates technology transfer, and improves competitiveness. It should be noted though, that FDI is by no means by definition positive for development. Rather, the developmental effects of FDI are ambiguous, depending on factors such as the motive of FDI, the strategies, the time, and the local absorption capac- ity (Kragelund, 2007). In order to further our understanding of the consequences of China ’s FDI in Africa we need first to scrutinize the specific mechanisms and strategies of these investments.

Zambia has been chosen as a case for several reasons: China has been present in Zambia since independence in 1964; Zambia is the third most important destina- tion of Chinese FDI in Africa (Lafargue, 2005) and, next to South Africa , Zam- bia is the most important destination for Chinese non-oil investments in Africa. Chinese companies invest in practically all sectors of the Zambian economy; to date, more than 200 Chinese companies have invested in Zambia; and the stock of Chinese investment reached 570 million US$ in 2006.4 _{These figures are likely}

to increase significantly as President Hu Jintao, during a visit to Zambia in Feb- ruary 2007, pledged Chinese FDI of 800 million US$ for Zambia.

This chapter is structured as follows. Section two sets out to build a framework to understand why and how Chinese companies invest in Zambia . It departs from the eclectic paradigm and stresses the importance of both home and host factors as well as the institutional context for FDI . This set of theories, however, is criti- cized for not taking the role of the state into account. Therefore, inspiration is drawn from the literature on transnational corporations (TNC) from emerging economies in order to further our understanding of the specific nature of Chinese FDI. Section three pinpoints the strategic importance of outward FDI (OFDI) for China . While section four provides an overview of Chinese investments in Zambia, section five illustrates how the Chinese state supports Chinese inves-

 State-driven Chinese investments in Zambia

tors in Zambia. Sections six to eight describe Chinese investments in three key sectors of the Zambian economy: mining, construction, and agriculture. Based on these cases, section nine takes a fresh look at the motives for Chinese FDI in Zambia and how the Chinese state facilitates these investments.

Understanding Foreign Direct Investments – bringing the state