Chinese Investment in Africa: How Not To Mix Apples and ... Elephants

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Today the South China Morning Post published an “Infographic” with the title Chinese Investment in Africa (below). A colleague sent me a link, noting that the numbers looked odd, so I took a look. The data is mainly drawn from the American Enterprise Institute’s China Investment Tracker. 

Two points about this data:

(1) It is NOT all FDI. Note the small print which says “Chinese investment and contracts in Africa. What these people have done, bless their souls, is to add the CIT’s database on Chinese FDI projects with the database on Chinese engineering contracts. This is like adding apples with elephants. In 2014, Chinese companies signed engineering contracts in Africa valued at $70 billion. These are for things that they will build, like bridges or railways or airports. But this has no relationship with the FDI numbers. 

(2) The China Investment Tracker collects the projected value of FDI projects. This is OK for an acquisition, which is paid upfront, but for other FDI projects, which often begin on a pilot project basis, and may never get bigger, this can grossly overvalue the figures.

(3) The China Investment Tracker only collects information on projects valued at $100 million and above. This is going to skew toward natural resource investments which are more expensive, and is unlikely to pick up much if any manufacturing, which is usually less than this. So the sectoral breakdown will be distorted.

(4) It’s also not the case that there is no Chinese FDI (or engineering contracts) in 8 African countries. There is a lot of Chinese manufacturing investment in Lesotho, for instance, and FDI also shows up in The Gambia and the Central African Republic. BTW: Somaliland may work better than the rest of Somalia, but as far as I know, it is not a country …

h/t to Heiwai Tang