A Chinese-invested clothes-making enterprise in Dar es Salaam, Tanzania
With abundant labor resources and the increase in policy support for economic development and foreign investment, Africa is becoming a new sought-after destination for investment by multinational companies. Among them, Chinese investments are taking up an increasingly prominent place. According to Ernst & Young, Chinese businesses invested $66.4 billion on 239 projects in Africa from 2005 to 2016, creating more than 130,000 jobs for local people. The investments covered a wide range of sectors like energy and resources, infrastructure construction, as well as agriculture and related industries.
By the end of 2017, China had become the third largest foreign investor on the continent. The Belt and Road Initiative further stimulates a new upsurge in China's investment in Africa. Along with recognition, the risks Chinese investors are facing in this regard are attracting widespread attention.
The 2018 China's Overseas Security Risks Bluebook jointly issued by China Overseas Security Research Institute and China National Petroleum Corp. earlier this year categorizes nine countries worldwide as extremely dangerous for businesses. They are Afghanistan, Libya, Syria, Yemen, South Sudan, Sudan, Somalia, Central African Republic and Venezuela. Disturbingly, five out of the nine countries are in Africa, reflecting the prominent security issue of China's investment on the continent.
On the whole, security risks of China's investment in Africa are highlighted in three aspects. First, Western countries continue to hold a hostile attitude toward China's investment in African countries, maliciously advocate the "China threat" theory and tarnish China's constructive engagement in Africa as "neocolonialism." As former colonial masters, they exert their influences on political leaders or interest groups to undermine China-Africa cooperation.
Second, the increasingly complex political, religious and ethnic conflicts in some African countries and regions, especially in North Africa and the African Great Lakes Region, result in social instability and upheaval, further daunting the investment prospect. Over the past years, various extremist forces represented by Islamic extremism have continued to penetrate and expand to North Africa and Sub-Saharan Africa. For example, extreme terrorist groups such as Boko Haram pledged allegiance to the Islamic State. The militants have been launching guerrilla raids against government forces of surrounding countries, during which they constantly harass and brutally attack innocent civilians, severely disrupting local stability and development, as well as the business environment.
A berth at Mombasa Port in Kenya built by a Chinese company
In terms of domestic political situations, external interference, domestic religious conflicts, confrontation between the government and local ethnic minorities, and regional political tensions create a breeding ground for various extremists. The rise of Boko Haram shows that as long as the timing is appropriate, separatists and extremists will expand, jeopardizing the safety of both Chinese investment and facilities, as well as employees of Chinese firms.
Third, the business environment of the host country is a very important consideration for multinational companies' investment decisions. The losses are often unbearable if the environment is poor. On the annual Ease of Doing Business Index issued by the World Bank, African countries often rank lowest among the surveyed 190 countries and regions worldwide. Inadequate legal and taxation systems, corruption in government and the military, and overlaps of administrative departments are universal problems in many African countries. These also seriously affect the normal development of Chinese businesses and their investment interests.
In the long term, China-Africa friendship is clouded by the possible prospects of sudden deterioration of relations among major world countries, hindering in-depth China-Africa cooperation on a wider scale. In the short term, some investment projects were accidently involved in certain political feuds, escalating the uncertainties and risks they face. To effectively contain possible risks, China should take countermeasures from the following three aspects.
First, China should, as always, adhere to the principle of non-interference in the internal affairs of other countries and strictly abide by the principle of neutrality in investment activities. It is wise to learn from others' experience, conduct business activities from a neutral stance, and consciously avoid getting involved in various local political or military conflicts. Historically speaking, China has no disputes with African countries. China's investments in Africa are restricted to the commercial sectors and are conducted in a neutral, cooperative, mutually beneficial and win-win manner.
Second, Chinese businesses should actively shape positive corporate images through strengthening the ability of conducting public diplomacy. Before investing, they should fully learn local laws and customs, and the procedure of doing businesses, follow issues relating to local people's livelihood, and honor their rights to know. Meanwhile, they should actively conduct public relations activities, contribute to local charitable causes, and invite local media outlets to visit and learn about their projects, so as to establish dynamic interaction and dialogue with local society. They should also improve their way of duly and effectively informing local people of their contribution toward protecting the local environment and fulfillment of corporate social responsibilities to avoid possible hostilities.
Third, the Chinese Government should coordinate to establish a risks assessment and emergency response mechanism for the country's foreign investments. Currently, as China has secured its market stance in Africa, it faces a changed priority of stabilizing and expanding its investment interests. Against this backdrop, the government should assist enterprises in establishing such a mechanism which may comprehensively assess China's foreign investment risks in terms of politics, business environment, security, market stability and unpredictable threats, and then make tailored comprehensive response plans accordingly.
The future of China-Africa economic cooperation is bright. As long as major difficulties are well resolved and risks are dealt with by preventive measures, the partnerships between China and African countries could be deepened and expanded. In the future, the Belt and Road Initiative provides another important platform for cooperation. African countries are expected to attract more Chinese businesses. Therefore, all related parties are suggested to sum up previous experience and make good use of the established foundation to prevent potential risks for a new chapter in China-Africa mutually beneficial economic partnership.
The author is an associate professor of Beijing Academy of Social Sciences