Question

What are the reasons that made China invest in Africa?

Answer 1

The state of government is weak in Africa and Chinese companies are using it to their advantage to shore up their profits in Africa. Africa is rich in natural resources. China is capitalizing on this by taking primary goods from Africa and selling manufactured items in Africa. The Chinese companies, thus, aim to exploit the local comparative advantage in Africa. Moreover, Chinese companies are concerned with the political stability while investing. Africa has political stability. Chinese do not pay too much importance to the environment of rule of law.

Another reason for increased investment in Africa is that trade tariffs have reduced in Africa, thanks to steps taken by WTO. The marketplace in Africa has become more open.

Chinese companies are investing more in East and South African regions as the infrastructure is more developed in these parts. Also, these regions enjoy relative geographical proximity with China than other parts.

Besides, the obvious commercial reasons, the Chinese government is also encouraging companies to invest in Africa as China needs the political support of Africa as a defense against the West.