Chinese engagement in Africa to date may provide some clues as to how China will impact the "belt and road" nations in the future.
In a far-reaching study of Chinese business in Africa, McKinsey consultants interviewed more than 1,000 Chinese companies, compiling what they describe as the closest look yet at Chinese engagement in Africa. Among the highlights of their findings:
- As Africa’s largest economic partner, China’s trade with Africa has been growing at a rate of 20% since the year 2000, while foreign direct investment has grown 40% annually.
- While China is far and away the world leader in African infrastructure investment, it ranks number three in aid to Africa.
- More than 10,000 Chinese firms are believed to be operating in Africa, more than three times the number indicated by existing company data.
- Although Chinese state-owned firms tend to be the larger players, over 90% of companies are privately owned.
- Chinese firms claim nearly half of Africa’s internationally contracted construction market.
- Most Chinese firms are profitable, and most focus on the African market rather than on exports.
- Nearly two-thirds of Chinese employers offer some sort of skills training.
- Some firms have done well at recruiting African talent, but, of all the companies surveyed, less than half had African managers.
The McKinsey report suggests the track record of Chinese companies is mixed and depends in large part on how proactive the host nation is in dealing with Chinese companies. Local companies in some sectors will need to significantly increase their productivity if they are going to compete with new Chinese entrants to the market. In addition to the need to strengthen the role of African managers, the Chinese-African economic partnership faces three particular “pain points,” namely, corruption, concerns about personal safety, and language and culture issues.
McKinsey is optimistic about the impact of Chinese business in Africa. Going forward, they identify two potential scenarios.
In the first scenario, business grows at a steady rate between now and 2025 to reach $250 billion in revenue, with most business concentrated in manufacturing, resources, and infrastructure. The second scenario sees accelerated growth if Chinese businesses were to expand into five new sectors: agriculture, banking and insurance, housing, information communications technology and telecommunications, and transport and logistics.
If the Africa experience is any indication, private Chinese businesses could play a significant role in future “Belt and Road” nations by providing employment and job skills, contributing to local infrastructure, and developing local markets. Chinese Christian entrepreneurs have the added opportunity and challenge of doing business in a way that stands out from crowd by not exploiting local resources or relying on corruption in order to get ahead. How their contribution will ultimately contribute to the cultural and spiritual development of the lands to which they go remains to be seen.
Image credit: Chinese company in the Congo by jbdodane via Flickr.
Brent Fulton is the president of ChinaSource and the editor of the ChinaSource Quarterly. Prior to assuming his current position, he served from 1995 to 2000 as the managing director of the Institute for Chinese Studies at Wheaton College. From 1987 to 1995 he served as founding US director of... View Full Bio