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We are thankful to Yongzheng Yang for inspiring and extensively reviewing this paper, and to Cathy Pattillo and Chris Lane for helpful comments and suggestions. In addition, we are grateful for Ke Wang, Sibabrata Das and Trung Bui for excellent research assistance. All remaining errors are ours.
UNCTAD FDI data base (http://www.unctad.org/Templates/Page.asp?intItemID=1923).
See also Dabla-Norris et al. (2010) on this point. Their study uses FDI data from OECD countries to LICs.
Excluding Chinese territories such as Hong Kong SAR and Macau SAR.
In late 2007, Chinese Industrial and Commercial Bank announced its investment into Standard Bank in South Africa for US$5.5 billion. This big investment is shown in a sharp jump in Chinese investment into South Africa in 2008.
Private Participation in Infrastructure Project Database (http://ppi.worldbank.org) also shows that there are infrastructure projects involving equity participation by Chinese entities in SSA countries. However, the participation rate is not known.
A survey was conducted of all desk economists covering LICs with the aim of filling the data gap of BRICs’ FDI to LICs.
Estimates of the number of Chinese FDI firms vary widely. UNDP/UNCTAD (2007) estimated that there were approximately 700 Chinese enterprises operating in Africa alone, including in three of its eight overseas economic and trade cooperation zones in Africa. The Chinese EXIM Bank puts the number at 800 in 2006. Other Chinese sources suggest that there were at least 2,000 Chinese enterprises in Africa in 2007–08. The exact number of FDI firms is difficult to estimate, as the situation is quite dynamic, and many small and medium sized enterprises (SMEs) are often not covered by official statistics. Baah and Jauch (2009) report that of the 450 recorded Chinese investment projects in Africa, an estimated 46 percent are in manufacturing, 40 percent in services and 9 percent in resource-related industries. The latter account for 28 percent of the total in value terms.
See for instance various publications by the Centre for Chinese Studies, Stallenbosch University.
China Monitor, August 2006.
According to a survey by Yao and He (2006), Chinese firms investing in Africa rank “Chinese government support” as the second most important determinant of their investment decision. Also, on average 88 percent of Chinese firms engaged in FDI are owned by provincial governments.
The ten largest construction companies in Botswana are Chinese, including China State Construction Engineering Corporation and China Civil Engineering Construction Company. For the giant US$1.4 billion Morupule power plant, China National Electric Equipment Corporation was awarded a contract of US$970 million.
An econometric model of the FDI determinants à la Dabla-Norris et al. (2010) did not yield any significant results.
CPIA or any of its components quality of public institutions and such as control of corruption were used as structural indicators.
Darby et al. (2009) show empirically that when South multinational enterprises have had prior experience of poor institutional quality at home, the impact of good governance on FDI in a given host country is moderated significantly or even eliminated in some cases. Gu (2009) argues that Chinese private entrepreneurs have a strong entrepreneurial spirit and have changed the concept of risk: “when Western firms see ‘risk’, they see ‘opportunity’.
We are grateful to Chris Lane for contributions to this section.
For instance, the West Africa Power Pool, which is working on a regional approach to power projects, could benefit from better coordination in order to reduce the region’s very high unit power costs.