Question

Turning Ethopia into china's China: Why are Chinese companies investing in Africa?

Answer 1

Reasons Behind the Investment of Chinese Companies in Africa

Chinese companies have been enthusiastic about making investments in African nations since the starting of this decade (since the 2010s). China -Africa Cooperation Forum program is attended by delegates of either of the regions and investment plans are conceived after identification of the rights business sectors. Chinese companies are investing in areas including oil, mining, telecommunications, utilities, transportation and port construction among others, in Africa. One-third of all Chinese FDI (foreign direct investment) is in the mining sector. Below are the reasons why Chinese companies are undertaking and accelerating investments in Africa.

a. Raw Material Assess- Chinese firms get access to a variety of raw materials when they deal with countries of the continent of Africa. The raw material is required by China for its economic growth, and Africa can provide it at cheaper costs, when compared to, say, Europe.

b. Improved Political Influence- the Chinese government also encourages companies to look for business avenues in Africa, as it would help the country gain better political leverage and understanding, and will increase the political influence of China. Many of the Chinese firms investing in African nations are owned by the State. These firms hence get a lot many privileges (including subsidies), which helps them do business in Africa conveniently.

c. Business Foresight- Africa has got many new and emerging markets. While Asia and countries including China and India lag behind the European nations in development, their economies will also reach a saturation point soon, and henceforth the growth rates will be marginal. Chinese companies hold a good future when they start doing business in Africa from an early stage. The development of African countries will take quite a lot of time from now, and for the period the Chinese companies are bound to get ample business and profits.