The Potential of Chinese Manufacturing Investment on Economic Development in Sub-Saharan Africa: Case Studies of Ethiopia and Nigeria

Abstract

The relationship between China and the African continent has swelled and deepened to a remarkable extent in the past decade. This phenomenon has come to international attention, under much interest and scrutiny from people all over the world. Much of the focus has been on trade and investment in infrastructure, stemming in part from China’s ambitious Belt and Road initiative, but less attention has been given to China’s investment in manufacturing on the continent. Particularly in light of East Asia’s recent successes in development, the manufacturing sector is often viewed as a key component of economic growth and development. Ethiopia and Nigeria are both economic powerhouses in Africa, which means that their development outcomes may have implications on the entire continent. Therefore, this paper intends to show specifically how Chinese investment in manufacturing in Africa may influence the trajectory of the continent, with a focus on the two case study countries.

Is it possible that China, and specifically its role in the manufacturing sector, is key to Africa’s development in the 21st century? Or might it be detrimental to the continent – or somewhere in between? Focusing on the two most populous countries in Africa, this paper addresses this important question.

This paper uses both quantitative and qualitative analyses and a framework of four key factors: 1) Commitment to manufacturing and Chinese investment, 2) Political economy & institutions, 3) Chinese incentives, and 4) Impact of Chinese investment in the manufacturing sector. Through this framework and analysis, this thesis argues that China’s investment in manufacturing has significant potential to transform Ethiopia but limited potential in Nigeria unless significant changes are made. It finds that the nature of China’s relationship with the African continent in and out of the manufacturing space is varied and not conducive to a one-size-fits-all approach by African countries. It concludes that although Chinese manufacturing investment may ultimately not be a panacea for the African continent, there are still nevertheless rays of hope and significant opportunities to be seized. It will ultimately be up to African countries themselves to figure out the best response in order to help dictate better prospects for themselves and take advantage of this phenomenon.