China is one of the top overseas direct investment recipients and is also increasing its investments in other economies, especially in Africa, says a UN report.

 

The report on Asian Foreign Direct Investment in Africa, released by United Nations Conference on Trade and Development (UNCTAD) and United Nations Development Program yesterday, shows Africa is emerging as an important destination for Chinese direct investment.

 

Though Africa accounted for only 3 percent of direct investment flows from China, it is increasing dramatically as the trade between China and Africa rose from US$11 billion in 2000 to almost US$40 billion in 2005, according to the report.

 

Chinese investment in Africa had reached US$1.6 billion by 2005, with a presence in 48 African countries, the report says. China's total outward direct investment stock, according to the Ministry of Commerce, stood at US$57 billion by the end of 2005.

 

China's investment in Africa is mainly in manufacturing, resource extraction, construction and other services, the report says. Sudan is the largest recipient of direct investment from China in Africa, followed by Algeria and Zambia.

 

China's direct investment flows into African economies are mainly in the form of equity joint ventures with local companies, with over half of them operating well and only a small percentage incurring a loss.

 

The successful enterprises meet local demands, and export to other African countries as well as to Europe and North America.

 

Many investors are large-scale Chinese multinational corporations, including Sinochem Corporation and COFCO. Thirty of the 500 projects undertaken by 2000 exceeded US$10 million.

 

The investors also include some small- and medium-sized enterprises (SMEs), reflecting the potential for future cooperation between China and African economies.

 

Investing in Africa is a good opportunity for Chinese SMEs because they are flexible in getting information, and quick in decision-making and market reactions, said Wu Changqi, associate dean of Peking University's Guanghua School of Management.

 

The rapid growth of direct Chinese investment in Africa is the result of common efforts of the governments of China and African countries, the report says. High-ranking official visits help consolidate mutual understanding and promote cooperation between China and African countries.

 

China's direct investment in Africa is likely to keep growing because of their complementary nature of economic development, said Masataka Fujita, UNCTAD's chief of Investment Trends and Data Section.

 

Africa serves as a market for China's manufactured goods. Its investment in Africa's infrastructure is important for promoting economic development on the continent, said Xing Houyuan, a researcher with Chinese Academy of International Trade and Economic Cooperation, under the Ministry of Commerce.

 

(China Daily April 4, 2007)