THIS REPORT PROVIDES A PRELIMINARY ANALYSIS OF THE NATURE of Chinese manufacturing investments, focusing predominantly on Ethiopia, Ghana, Nigeria, and Tanzania. Drawing on fieldwork conducted between 2014 and 2016, the paper explores the varieties of existing Chinese manufacturing investment and the sectors into which Chinese companies are investing.
As costs of production in China’s coastal factory belt began to rise around 2005, China’s labor-intensive companies began seeking offshore production locations. Coupled with China’s economic slowdown, overcapacity challenges created an additional incentive for companies to move to less competitive locations overseas. The Chinese government announced new inducements to boost industrial cooperation between China and Africa in late 2015. Japanese scholar Kaname Akamatsu described this shift as the “flying geese” model. Akatmatsu detailed a phenomenon already underway in Asia in the 1950s, where the “lead geese” were located in the West, but companies in countries like Japan were catching up and would take over the lead goose position. Production would then eventually move from Japan to other parts of Asia.
Today, Chinese manufacturers moving out of an increasingly high cost China could be a new generation of “flying geese.”
We demonstrate that Chinese manufacturing investment in Africa is expanding rapidly. Several investors fit the model of Akamatsu’s “flying geese”–large, export-oriented firms seeking new locations for production as part of global networks and value chains. However, we also identified three other kinds of “geese”: large, strategic, local market-seeking geese; raw material-seeking geese; and small geese travelling
together in flocks. The four kinds of firms each offer different kinds of development opportunities and challenges.
METHODOLOGY
WE BEGAN BY LOCATING AFRICAN COUNTRIES where Chinese companies appeared to have set up a significant number of manufacturing operations. Obtaining a database of overseas foreign direct investment (OFDI) registrations between 2000 and 2014 from
MOFCOM we found that the number of manufacturing proposals submitted by Chinese firms for investment approval in Africa began rising sharply in 2005. They reached a peak of 162 in 2013, with over a thousand proposals registered between 2000 and 2015.
We selected four sub-Saharan African countries with the largest number of manufacturing investment registrations for further investigation: Ethiopia, Ghana, Nigeria, and Tanzania. In 2014 and 2015, we conducted field-scoping studies to identify and visit Chinese manufacturers in those countries. We then identified the sector and products being produced, ownership structure, age of the firm, and its patterns of employment. The firms interviewed for this study all focused on relatively simple, entry-stage manufacturing, in a mix of export-oriented and import-substitution products. At least 15 firms interviewed were producing plastics; 18 in metal and mineral-based building materials such as glass, recycled steel, aluminum, ceramics, and gypsum board; eight in textiles and apparel including garment factories, dying, spinning, and weaving; and 11 in leather and related operations such as tanneries and shoe factories.
Copyright © 2018 Johns Hopkins University School of Advanced International Studies – China Africa Research Initiative
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