Chinese investment in East Africa: History, status, and impacts

Abstract

ABSTRACT This paper investigates the development trajectory of Chinese investments in two East African countries and their implications for technology transfer. It traces the transformation of Chinese economic engagements with Africa since the early independence era. Most Chinese investments were established in the past decade, except for a few aid-driven investments created in the 1970s and those made by the first wave of Chinese expatriate entrepreneurs to East Africa in the 1990s. These recent investments have concentrated in construction-related industries, export-oriented garments industry, plastic recycling and reprocessing, and agro-business. In terms of technology transfer, there are local training efforts and signs for intra-industry spillovers. Large-scale Chinese investments or development projects have established formal training programs with explicit localization targets and are more likely to collaborate with government agencies or vocational training institutes. Moreover, horizontal and vertical spillovers have also taken the form of the development of sub-contracting, local supply, distribution networks, and imitation by local firms. Nevertheless, those industry-level spillovers are less systematic due to the limitations of local investors’ financial and technological capacity.