Chinese FDI and Structural Transformation in Africa: Technology Transfer, Linkages, and Learning

For the past decade, Sub-Saharan Africa has been growing, yet growth is not the same as structural transformation. China's development trajectory since 1980 provides an example of how a government focused on modernization can marshal foreign capital and technology to assist in the reduction of poverty and economic transformation in manufacturing and agriculture. In Africa, China is largely seen as a competitor for local firms, primarily through imports. This competition can be devastating in some countries and some sectors, driving local firms out of business. Yet on the other hand, growing Chinese investment in African manufacturing and contract farming can also offer opportunities for joint ventures with local firms, training, and diffusion of more productive technologies. If this were to follow Asian experience, Chinese firms could be catalysts for local firms to move into manufactured exports, although they might also be footloose investors, moving on with only fleeting impact on local knowledge. In agriculture, Chinese investment might also be enclave, with little connection to local farmers - the picture presented in fears of "land grabbing" - or it might follow the pattern laid out by foreign investors in China, with out-growers, demonstration farms, and technology and skills transfers.
Our earlier research suggested that Chinese firms are thinking strategically about backward linkages. For example, at least five Chinese shoe manufacturers we interviewed in 2009 had moved their shoe-making assembly lines to Nigeria, while still importing uppers and soles from China. In 2012, one company was in discussions with their Chinese supplier about moving to Nigeria to produce soles locally from Nigerian rubber. Similarly, we have identified Chinese contract farming investments and commercial agriculture projects with demonstration farms, advisers, and input supplies in places like Mali, Zimbabwe, and Malawi.
This project will enable a more refined picture of the actual scope and impact of Chinese investment and the potential and experience of technology transfer in commercial agriculture and agro-industry. We will combine multiple methods: database construction, scoping studies, cluster surveys, a national survey, and eight paired, comparative case studies, following an approach tested in our earlier research on Chinese agro-industrial and commercial agriculture engagement in Ethiopia (2011-2014), and Chinese commercial agricultural investment in Zambia and Zimbabwe (2013). The scoping studies will allow us to better map existing Chinese (and other) investment in agro-industry and commercial agriculture, while the cluster surveys will provide an overview of existing linkages and opportunities for technology transfer. A further level of depth will be obtained through adding a technology-transfer module to two national surveys of manufacturers. Finally, eight in-depth, paired case studies will complement the survey research by using process-tracing to compare specific experiences of agro-industrial FDI and technology transfer in China, with Chinese and a similar non-Chinese experience in Africa. For example, we will study the institutional framework and approach that allowed the Thai firm CP Group to become China's largest foreign investor in the Chinese poultry industry, with significant technology spinoffs, and compare this with the spinoffs and technology transfer from significant Chinese and South African investors in Zambia's poultry industry (Zhongken Farm and Astral Foods). The output of the research will be a far more robust basis for analysis of the current and future possibilities for technology transfer in China's African investment, and guidelines for governments and development partners to derive maximum benefit from these opportunities.

The topics we propose to study are also practical issues that have been the subject of much interest from practitioners and decision-makers. Further, as this research call notes, the general level of knowledge of China's economic cooperation activities in Africa remains quite low. Our focus on evidence-based analysis of learning and technology transfer, our emphasis on entry-level manufacturing, agro-industrial value chains, and commercial agriculture, and our comparative perspective, mean that specific beneficiaries of this research will be those who work to support African entrepreneurs, women, farmers, and workers: governments, development organizations and donors; NGOs. For example, our studies of technology diffusion from foreign agribusinesses to Chinese farmers, and from Chinese (and other) manufacturing operations to African investors, workers, and farmers in Africa, can be used by governments and their donor partners to determine which kinds of policies and approaches might prove most useful, not simply to attract Chinese (and other) manufacturing enterprises, but to assist African firms, workers, farmers and institutes to take advantage of the learning opportunities presented by these new investors.
We have shaped this proposal for maximum impact, on the basis of multiple discussions with potential stakeholders, including Agence Française de Développement, Danida, GIZ, USAID, the World Bank, UNDP, NORAD, the EU, the IMF, CIDA, AusAid, JICA, and DFID and numerous NGOs, including WWF, Revenue Watch, World Resources Institute, and Transparency International. We have also discussed the issue of Chinese technology transfer with African governments, including the Minister of Industry in Ethiopia, Bureaus of Investment in Tanzania, Zimbabwe, and Nigeria, and Ministers of Agriculture in Sierra Leone. These meetings have already provided important inputs into the proposed research.
A variety of communication tools will be used to maximize impact. Workshops in country, a website and blog, a major conference, policy briefs and social media, and continued advisory work by the PI and team members will ensure that the lessons of our research are broadly shared. Approximately 12% of our total budget has been allocated for these efforts. The China Africa Research Initiative at SAIS has its own website, which will publish the working papers and policy briefs outlined blow. We use Twitter and an extensive listserv to engage the policy community on China-Africa research. Team members write regularly for the Financial Times, The Guardian, and Foreign Affairs, which will also serve to disseminate our findings to a broad audience. In addition to the journal articles and book outlined in the Academic Beneficiaries section, we will produce, and publish online, a database of commercial agriculture and agro-industrial investments, working papers for the field scoping studies, cluster surveys, and comparative case studies, and at least eight policy briefs. The PI for this effort, Prof. Brautigam, has an extensive scholarly and practical track record of impact, having helped shape the agenda for research on China-Africa and economic development, accumulating over 2000 citations on Google Scholar since 2009, with over 600 of these for her recent book on China's African aid and economic engagement: The Dragon's Gift. Co-PI McMillan is also widely cited. Her 2011 NBER paper on structural change has already garnered over 250 citations. Team members have given dozens of interviews to news media, spoken at the World Economic Forum, debated the impact of China in Africa on television, radio, and news media websites, and given over a hundred public lectures since 2007. An asset for the project is the popular blog on China and Africa run by PI Brautigam, which receives over a thousand hits daily, and has accumulated nearly a million hits since it was launched.