Conventional wisdom suggests that African leaders gain politically when Chinese firms invest in their countries. However, in a new research paper, we demonstrate that Chinese investment may not be the boon that Africa’s political leaders hope for.
What does Chinese private investment look like?
Chinese investments have reached all corners of Africa. In contrast to official development aid projects — typically one-off infrastructure projects or services aimed at reducing poverty — these investments are usually firm-driven. They also vary considerably in size and sector, ranging from mines in Guinea to pharmaceutical manufacturing in Ethiopia to retail phone shops in South Africa.
In the data we analyzed, just over 40 percent of Chinese foreign direct investment projects in Africa fall into the manufacturing sector, producing things like medical devices, packaging and beverages. Slightly under 40 percent are service sector projects, such as mobile phone shops and financial services offices. About 18 percent are mining and other resource extraction projects.
How we investigated the political effects of these investments
To determine how investment from Chinese firms shapes the views of citizens in Africa, we geolocated all 438 Chinese foreign direct investment projects in Africa reported in the Financial Times’ fDi Markets database. We also recorded when those projects were announced publicly and when they became operational.
We then connected those projects to geolocated responses from the Afrobarometer public opinion surveys, using all seven survey rounds from 1999 to 2018. Our final data set included over 179,000 respondents spread across the 21 countries for which we have both public opinion data and data on precisely geolocated Chinese investment projects.
We wanted to see if living in proximity to a Chinese investment project alters citizens’ views of the economy and their political leaders. One specific challenge, however, is that the location of these projects is not random; firms choose the sites of their investments for particular reasons, and the residents of those locations may differ from residents of other places in ways that affect the outcomes we wished to investigate.
To address this challenge, we compared respondents living near Chinese investment projects to those living near an eventual Chinese investment site — but where no such project had yet been announced at the time of their survey response. This let us do a comparison of similar respondents, since both sets reside in places selected, at some point, for Chinese foreign direct investment.
What happens when a Chinese investment kicks off?
Announcements and completed Chinese investment projects affect citizens’ attitudes about the economy and political leaders, but in strikingly different ways. As the two figures below show, when new Chinese investment projects in Africa are announced, popular perceptions of the economy improve dramatically, especially in locations closest to the announced projects. In fact, these announcements continue to generate improved economic perceptions up to 100 km (60 miles or so) away from the projects.
But once these Chinese projects become operational, the narrative flips, our research found. Africans’ average views of the domestic economy plummet by 26 percent and are significantly worse in locations around projects than in our comparison locations with no Chinese investment. Notice in the second of these figures that respondents’ rating of domestic economic conditions, relative to the comparison respondents, remains negative at distances all the way out to about 200 km (about 125 miles).
How Africans view the domestic economy — when Chinese projects are announced
How Africans view the domestic economy — when Chinese projects are operational
We also found that Africans’ views of their political leaders follow a similar pattern. On the announcement of nearby Chinese investment, Afrobarometer surveys show that perceptions of political leaders’ capacity to manage the economy, their ability to create jobs and presidential approval all rise.
But these political gains seem to last for only about one year — after two years, the benefits evaporate before perceptions eventually turn negative. Meanwhile, living near operational Chinese investment projects again provokes consistently worse views of the competence of political leaders.
We tested numerous comparisons using different subsets of countries, project sectors and time windows for these investments. In all of our analyses, the results remain strong: Chinese foreign direct investment leads to initial popular excitement, but that excitement turns to disappointment once projects begin operating.
This is more than inflated expectations
We think there’s a pattern here: inflated expectations, followed by political blame. The rapid expansion of Chinese investment has raised the profile of China in Africa, and Afrobarometer results suggest that citizens take a mostly sanguine approach to China’s presence and appreciate China’s economic dynamism. This, along with the touting of Chinese investment by African leaders, means that citizens living in proximity to announced Chinese investments have high hopes of accessing jobs. Widespread benefits never fully materialize, however, as Chinese firms seek local acceptance initially but focus on maximizing and extracting profits.
In fact, our results are strongest in proximity to Chinese manufacturing and resource projects, where expectations of abundant jobs would be most pronounced. In addition, we don’t see the same pattern of inflated expectations and political blame in proximity to foreign aid from the Chinese government.
Of course, it may be that political leaders in Africa focus on the immediate rewards from announcements about Chinese investment projects, and worry about the longer-term impact later. In the bigger picture, it’s likely Africa’s leaders pay a political price for welcoming Chinese investment.
With time, both citizens and leaders may express greater skepticism over Chinese investment, or may hold Chinese firms to account over expected jobs. That is when Chinese foreign investment may provide the type of positive returns that Africa’s political leaders so actively covet.
John McCauley (@johnfmccauley) is an associate professor of government and politics at the University of Maryland, where he studies development and conflict in Africa.
Margaret Pearson is the Horace V. and Wilma E. Harrison Distinguished Professor of government and politics at the University of Maryland. She studies China’s domestic and international political economy.
Xiaonan Wang is a PhD candidate in government and politics at the University of Maryland who studies bureaucratic politics and China’s domestic and international political economy.