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China in Africa: The Real Story

Chinese Investment in Africa: Good Deals or Bad?

Deborah Brautigam

Back home for a few days after weeks of travel, mainly South Africa & Namibia, including some research, and a lot of the World Cup... I've been offline a lot, and haven't been posting much.

I just read a draft paper by two US-based economists who use Chinese FDI data to analyze determinants of Chinese investment in Africa. I've already posted here on the problems with using Chinese official FDI data. (Derek Scissors at American Heritage Foundation, who hosts the China Global Investment Tracker, commented recently on a different set of challenges raised for those who try and track investments by using media reports: "An accurate assessment, however, is confounded by widespread credulity regarding Chinese investment. Although global media trumpet supposedly “gigantic” Chinese deals, such reports can be based on disinformation spread by host country governments.")

But the paper by the two economists reminded me of another issue. They state as a "fact" that Chinese companies will pay significantly inflated prices in order to get access to resources, citing a 2006 article in African Affairs -- Jedrzej G. Frynas and Manuel Paulo, 2006, “A New Scramble for African Oil? Historical, Political, and Business Perspectives,” African Affairs, 106, 423, 229 – 251 -- as their source for this "fact".  But at the same time, others worry that Chinese banks & companies are not giving African countries good deals (see for example, a comment on China's huge Congo deal). 

Where does most of the evidence lie? Are Chinese companies consistently paying inflated prices? Or are they "ripping African countries off"? Has behavior changed over time? If it varies, why and how? I don't have the answers to this -- informed comments, evidence & analysis are welcome.