Chinese Investments And Business Interest In Africa Case Study

2. “Chinese investments and business interests are now to be found all across Africa” (Commission for Africa, 2005). Why have Chinese companies found the emerging markets of Africa less risky and a more attractive proposition than western multinationals?

Africa is the second largest continent in the world, lack of rules, poverty, and corruption are the basic characteristics of this huge continent. However, a market with a very high amount of resources such as natural gas, raw materials, and oil which we mainly know as commodities , why can’t it be developed or, at least, developing in such a time, in which we have seen the development of many emerging economies including Latin America, Asia, and Central Europe .
China, often called as the
Africa is known for its overabundant amounts of natural gas, oil, and petroleum. In fact, many African countries are totally reliant on these commodities to attain their revenues, and this is why too many African countries face fluctuations, since any increase or decrease in the price of these commodities, will affect African countries such as Angola, Algeria, and Congo. Due to this, China held talks with African governments, and had an agreement, called Chinese Aid Agreement, in which is defined by, the Chinese will help African countries in building an improved infrastructure by taking care of all construction work, in addition to building bridges, apartments, and modes of communication, Moreover, China will provide long term loans for African countries, in order for these countries to invest in manufacturing, agriculture, and industrialization; Thus, helping them in edging closer to development .Furthermore, African students will have the opportunity to attain scholarships and study in China, and finally medical teams will be sent from China to Africa, to help in fighting diseases and to increase awareness and knowledge of African people in the medical field. In return, China will benefit from the commodities found in Africa, in which they will have access to, under the guidance of African’s governments.
This benefitted China in two major ways, one of them is by accessing one of the biggest continents in terms of resources,
As for the second reason, China wanted to avoid trade barriers in overseas market (19%) such as in Europe, US, and Latin America. Going into a foreign market do have some benefits such as increase market share, brand recognition, and an increase in profits; However, some of the limitations would be, high amount of taxes placed on the foreign products to enter new markets, in addition to the rules and regulations that China need to follow to enter this new market, this is why going into Africa was less risky for China, because of the minimal amount of taxes imposed, and the high abundance of natural resources that China would have access to(19%), in which will help its economy improve in the coming decade, as discussed earlier