Chinese investment in Africa has been a hot topic for discussion over recent years. Is Chinese investment good for Africa? What is the projected trend for Chinese investment in Africa? Félix Dox believes that China intends to maintain long-term and mutual relationships with its African counterparts and that there are advantages for both sides to conduct relationships in a positive manner. Excerpts of Dox's thoughts follow:

The import and export cooperation between China and Africa is gathering pace. However, 20 years ago, direct investments from China to Africa were almost non-existent. During the span of seven years and with the establishment of the China-Africa Development Fund (CADFund), the foreign direct investment (FDI) outflow value from China to Africa quadrupled, reaching more than $12 billion in 2013.

CADFund

Created in 2007, the CADFund aims to help Chinese companies investing in Africa, while promoting Sino-African commercial ties. The fund has been a success, and to date, there are more than 2,000 established Chinese companies doing business in Africa, according to the Chinese Ministry of Commerce. 

Several key areas differentiate Chinese investments from their Western counterparts.

Firstly, Chinese companies operating in Africa have always been less averse to risk, and therefore often invest in regions or countries where their counterparts, for political, social and security reasons, do not.

Secondly, nearly all Chinese investments in Africa are done through state-owned companies, while we see a larger share of investments from private companies by the developed countries when investing in Africa.

Finally, the business culture in most African countries and China is the same, facilitating deals and bilateral agreements.

Investments and Infrastructures

Chinese investments are primarily oriented to raw materials and this is due to China's growing reliance on raw materials, particularly oil, in order to drive economic growth. As a matter of fact, for the period 2007-13, the majority of investments were made in the mining (27 percent) and oil (21 percent) sectors.

Until now, one-third of China's oil supplies come from Africa, in particular Nigeria and Angola.

China is Sudan's largest economic partner for its petroleum industry. For instance, the oil giant China Petroleum and Chemical Corp. is operating the largest oilfield in Sudan and has invested more than $2.4 billion in projects to explore three offshore oilfields.

In Gabon, Chinese companies have mineral rights to 30 million tons of iron ore each year. Angola, Nigeria and Sudan are the three main countries targeted for the commodities. Unsurprisingly, Africa's exports to China are essentially mineral fuel and lubricant products. In 2013, according to the CADFund annual report, China imported 32 percent of its products from Angola, 20 percent from South Africa and 11 percent from Sudan.

Apart from that, there are increasing investments in the telecommunications and financing sectors. In 2013, these sectors represented 13 percent and 5 percent respectively of the total investments made by China in Africa.

Huawei, one of the few privately owned Chinese companies doing business in Africa, has made significant investments in Africa since the 2000s and is now one of the main telecommunications providers. Last year, it launched its first call center in South Africa as well as instant network solution providing communication services for clients and e-government networks.

Regarding the banking industry, ICBC (Industrial and Commercial Bank of China) purchased 20 percent of South Africa's Standard Bank for $5.5 billion in 2007 and has been offering unconditional and low-rate credit lines to both Chinese and local companies since then.

Since 2007, China has also been doing infrastructure investments in Africa. African governments with limited resources often welcome Chinese investments. Some argue that China is exploiting Africa's resources, while others suggest that there are mutual benefits in trades being made between China and Africa.

That being said, China is investing not only in the raw materials sector but also in the power and transport sectors. Indeed, China possesses an expertise in construction, which most African countries do not have. Thus, in Gabon, a 430-km railway has been created due to Chinese investments, in addition to more than $5.4 billion investments in road and hydropower stations in Nigeria.

However, there are disparities in the geographic allocation of infrastructure. Most infrastructure investments are used to build roads and railways carrying raw materials to the coast. If some investments directly benefit the local population, it is not the same case in every situation.

Future trend

The trend will continue until 2020 at least. China will continue to invest in oilfields as it needs oil to support its growing economy. China will also continue to invest in infrastructure as it is a way for China to globalize its companies and gain market share rapidly. These investments will, however, be more equally spread in the long term as China aims to gain a strong foothold in less developed countries by providing telecommunications and transport services.

As most African countries are facing risks and political instability, it seems that China intends to maintain long-term and mutual relationships with its African friends and has advantages to conduct such relationships in a good way.