The impact of Chinese direct investments on employment in Africa
| Pages | 86-101 |
| Date | 06 June 2016 |
| Published date | 06 June 2016 |
| DOI | https://doi.org/10.1108/JCEFTS-03-2016-0009 |
| Author | Aliaa Nabil Khodeir |
| Subject Matter | Economics,International economics |
The impact of Chinese direct
investments on employment
in Africa
Aliaa Nabil Khodeir
Department of Economics and Foreign Trade,
Faculty of Commerce and Business Administration,
Helwan University, Egypt
Abstract
Purpose – Chinese direct investments play a very prominent role in economic interactions with many
African countries and result in many economic effects. This study aims to identify the employment
effect of Chinese direct investments in Africa.
Design/methodology/approach – This paper empirically investigates the employment effects of
Chinese direct investments using a panel data approach over the period 2007-2012.
Findings – The results suggested that for Africa as a whole, represented in 38 countries, Chinese direct
investments had a signicant positive effect on employment. They also indicated that the education
level supported employment. In southern Africa, represented in 32 countries, the results were the same.
So, there is a need to encourage and diversify Chinese investments. However, in northern Africa,
represented in six countries, the results indicated that Chinese direct investments had an insignicant
effect on employment, while education still had its positive effect. Therefore, it is important for northern
African Governments to ensure issues like job creation and technology transfer in any future
investment projects with China.
Originality/value – This study is characterized by the following contributions: it deals with a gap in
the economic knowledge concerning the impact of Chinese investments on employment. Most of the
previous studies have focused on the determinants of these investments or on their economic growth
effects. It is the rst study that measures the employment impact of Chinese investments in Africa at
both macro and regional levels. The study deals with the period of nancial crisis and its ensuing
repercussions on the movement of investments, and this makes it more reective of current
developments through the most recent data available.
Keywords China, Africa, Employment, Panel data, Direct investment
Paper type Research paper
1. Introduction
China is a living example that serious human efforts can achieve miracles. It has
managed during a period not exceeding 30 years of transforming from a country
suffering poverty and underdevelopment to a prominent global economic power, and
one of the largest manufacturing and exporting economic powers in the world.
Direct investment is one of the most important mechanisms upon which the Chinese
economy in establishing the rules of global presence and continuity of its growth. These
investments are characterized by concentrating not only in developed countries but they
also extend to many developing countries, and investments directed toward the African
countries are clear examples of this policy.
The current issue and full text archive of this journal is available on Emerald Insight at:
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JCEFTS
9,2
86
Journalof Chinese Economic and
ForeignTrade Studies
Vol.9 No. 2, 2016
pp.86-101
©Emerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-03-2016-0009
Africa is one of the few regions to enjoy year-on-year growth in foreign direct
investment inows since 2010. Investment in exploration and exploitation of natural
resources and high ows from China both contributed to the current level of inward
ows. More generally, the continent’s good economic performance underpinned the
rise in investment, including in manufacturing and services.
China, with a stock of direct investment about $16bn in 2011, was the third
country in the list of the direct investment inows from emerging economies to
Africa after Malaysia and South Africa (UNCTAD, 2013). Cross-border Greeneld
investment projects data, the major investment type in Africa, indicate that Chinese
rms continue to be a notable investor in Africa. In 2014, the share of Chinese
Greeneld investment projects has increased signicantly to form about 41 per cent
of total Asian Greeneld projects in Africa, after 7 per cent of them in 2012 (Figure 1). As a
per cent of total developing countries Greeneld projects in Africa, the share of
China increased four times from about 6 per cent in 2012 to 24 per cent in 2014,
reecting that global economic growth may make the faster-growing African
economies relatively more attractive.
The impact of Chinese direct investments has many aspects on the African
economies, but this study focuses on the employment aspect, as it is controversial and a
critical issue at the same time.
The rst side relates to variations in the analysts’ opinions about the special nature
of Chinese investments toward African economies. In contrast to the treatment of other
foreign countries in the Organisation for Economic Co-operation and Development
(OECD), China pursues a distinctive path in terms of investment in these economies not
based on the political side or on the interventionist policy in the existing conditions. It
prefers separating between economics and politics issues, and its investments are
spread despite what ails the African economies of instability and destabilization of
security. This prompted some to say that China is pursuing its economic interests
without paying attention to the interests of the African economies and the conditions of
their people.
The other side relates to how important is the role of foreign direct investments in the
activation of the use of the human resources in the host economies. This is achieved
through their abilities to contribute to the creation of new jobs and improvement the
quality of this kind of resources.
The importance role of Chinese direct investments increases with regard to the
decline in employment rates and its varying levels between African economies. The
Figure 1.
Geographical
distribution of main
Asian sources of
Greeneld
investment in Africa,
2012 and 2014
87
Chinese direct
investments
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