China’s New Approach to ODI in Africa: A Model for a Government Seeking Natural Resources

Abstract

The emergence of the Chinese economy, which has grown rapidly since the late 1970s, has increased the country’s demand for natural resources. China’s demand surplus for raw materials has made it increasingly dependent on the global supply of raw materials and energy (Cheng & Zihui, 2007). Throughout this period, policymakers in China’s central government understood the importance of being open to the global economy, first as receivers of inward foreign direct investment (FDI) and, more recently, also as a provider of outward direct investment (ODI). China is well known for its central planning and control in economic issues (Scott, 2002), especially of ODI. Although formal regulation of ODI has been eased since 2002 (Sauvant, 2005), China’s central government still maintains significant formal and informal control over the goals and amount of Chinese ODI (Buckley, et al., 2007). Cheng & Ma (2007) argue that the bulk of China’s FDI comes from the country’s state-owned enterprises (SOEs), in particular the large multinational companies that are administered by the Central Government’s ministries and agencies. The central government SOEs’ share of FDI flows in 2003–2005 were 73.5%, 82.3%, and 83.2%, respectively. Their shares of FDI stocks by the end of 2004 and 2005 were 85.5% and 83.7% respectively.KeywordsForeign Direct InvestmentHost CountryPolitical RiskOutward Foreign Direct InvestmentForeign Direct Investment StockThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.