Sino-substitution: Chinese foreign direct investment in Zambia

Publication Date27 May 2014
AuthorStuart John Barton
SubjectEconomics,International economics
Sino-substitution: Chinese
foreign direct investment
in Zambia
Stuart John Barton
Corpus Christi College, University of Cambridge, Cambridge, UK
Purpose – This paper aims to establish the level (if any) of Chinese State inuence on setting the terms
of Foreign Direct Investment in Zambia, specically their inuence on improving access for Chinese
investors through the establishment of Special Economic Zones.
Design/methodology/approach – The paper presents a process trace to test primary archival data
and elite interviews against growing academic and popular “China in Africa” literature.
Findings – After examining primary data, existing academic and popular literature is found to poorly
describe China’s economic inuence in Zambia, primarily by largely speculating on non-evident
coercive investment practices. Instead, the paper concludes that similarities between new Chinese
investment and retreating Western sources in Africa can better be described as “Sino-Substitution”.
Research limitations/implications The primary research has focused on English language
Zambian sources; access to further Chinese sources would improve the breadth of the study.
Practical implications – The study has found the terms of new Chinese investment in Zambia to be
far more calculated, consensual and symbiotic than described in the existing literature. This more
balanced view of Chinese investment is important if other foreign investors are to retain or regain
competitive advantage in the region.
Originality/value No existing research has traced empirically the process through which the
Zambian Government developed Special Economic Zones into the country’s largest investment vehicle,
or how Chinese investment came to dominant capital ows within them. As investment in these zones
grows, a better understanding of the Zambia–China relationship should help other investors compete,
and improve Zambia’s access to capital.
Keywords China, Zambia, Foreign direct investment (FDI), Multi facility economic zone (MFEZ),
Special economic zone (SEZ)
Paper type Research paper
1. Introduction
Since economic liberalisation in the early 1990s, the Government of the Republic of
Zambia (GRZ) has sought Foreign Direct Investment (FDI) to help accelerated economic
growth. By 2007, investors from the People’s Republic of China (China) had become
Zambia’s biggest provider of FDI (PRC, 2009), offering the GRZ and Zambian business
a welcome alternative to Western terms of economic engagement (Zambia Association
of Chambers of Commerce and Industry, 2011). By far, the largest part of this new
investment has been made in two of the four Special Economic Zones (SEZs) established
by the GRZ to attract FDI, industrialise and ultimately diversify the economy away from
JEL classication – F21
The current issue and full text archive of this journal is available at
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 7 No. 2, 2014
pp. 90-109
© Emerald Group Publishing Limited
DOI 10.1108/JCEFTS-08-2013-0025
mining (Economist Intelligence Unit, 2011). These SEZs are today widely seen as key to
the Government’s success in delivering on its promise to create a “conducive business
environment for sustainable economic growth in Zambia” (Times of Zambia, 2013).
However, despite the GRZ’s success in attracting considerable investment to the
SEZs from China and elsewhere, and China’s claims of offering “mutually benecial”
terms, China’s involvement in the zones has come under signicant criticism from
Zambians and Western commentators alike for allegedly having manipulated GRZ
policy to gain exploitative access to the country’s mineral wealth. However, frequently
overlooked in this type of analysis are the local political and economic factors
motivating host governments – in the GRZ’s case its motivation to maintain the broad
reform package agreed in the 1990s, to separate itself from previously failed attempts at
a planned economy and to establish a more market-based economic system that includes
policies to attract foreign investment, grow the economy, and create jobs.
More broadly, a body of literature analysing China’s involvement in Africa is steadily
developing, and a clear trichotomy of viewpoints has already emerged: China is either
portrayed as applying coercive economic pressure and acting in a neo-colonial manner,
as taking advantage of already heavily liberalised African markets or as offering
African Governments a new development model in exchange for mutually benecial
market and commodity access. Halper (2010), for example, has argued that China’s
model of “authoritarian capitalism” has facilitated African Government’s avoidance of
“good governance” in exchange for preferential market access, while Kragelund (2009)
has argued that this access is instead the result of Western donors previously insisting
on highly liberal markets in Africa. In contrast, Brautigam (2009) has more
optimistically argued that China’s investment in Africa is offering governments a new
and unique route to accelerated development.
This theoretical divergence may have resulted from the very limited empirical data
available on individual cases, and both Large (2007, p. 45) and Haglund (2009, p. 77) have
called for more focussed case research to overcome these simple generalisations. Alden
(2007, p. 72) has identied China’s relationship with Zambia as an ideal example of
China’s growing involvement in Africa, particularly since making substantial
investments in a series of SEZs set up by the GRZ specically to attract foreign
investment (Mail and Guardian, 2010).
This study attempts to make such an empirical contribution by presenting primary
evidence of the critical events that led up to China’s considerable investment in Zambia,
as well as the GRZ’s decision to establish SEZs and China’s investment dominance
within them. In doing so, the paper challenges the three established theoretical
viewpoints by showing that many dominant assumptions about Chinese investment in
Africa are largely unsupported by the Zambian case. It argues that instead of being
inherently coercive, opportunist or developmentalist (as might be implied by the
theoretical literature), China’s large-scale investment in Zambia can perhaps better be
described as facilitating the GRZ’s longer-term policy to realign its economy with a
dominant neo-liberal world order. Taking this perspective, the dominance of Chinese
investment in Zambia can be better understood as a symbiotic partnership, and a broad
substitution of historically more exploitative sources of capital.
The study contributes to the debate, therefore, by shifting its focus away from the
portrayal of African Governments as passive in the investment process – that is to say,
being coerced, exploited or “developed” – towards one more active – i.e. calculated,

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