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How Does Chinese High-Tech Fdi Choose Location in Africa?

Essay by   •  May 13, 2019  •  Research Paper  •  7,892 Words (32 Pages)  •  30 Views

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How does Chinese high-tech FDI choose location in Africa?

Abstract

China started investing in Africa in the last century. China’s outward direct investment is developing rapidly nowadays, and it is expected to grow. Following the trend of economic transformation: from traditional resource-intensive industries to high value-added industries, the high-tech industry has gradually become the focus of attracting foreign investments in Africa. Meanwhile, China’s investment & cooperation in Africa is increasingly diverse. Based on the status quo and characteristics of China's investment in high-tech field in Africa in terms of regional distribution, this paper mainly analyzes the important factors that affect the choice of location. In their FDI decision making process, based on their strategy intent, they consider not only the institution environment, the market size, the labor and productivity, but also the industry cluster.

Key Words: China, FDI, Africa, High-tech Industry, Location


Content

1.Introduction        1

2. Theoretical background        2

2.1 Strategic intent        2

2.2 Institution environment        3

2.3 Market size        4

2.4 Labor and productivity        5

2.5 Industry cluster        6

3. Hypothesis        6

3.1 Strategic intent        6

3.2 Institutional environment        7

3.3 Market size        7

3.4 Labor and productivity        8

3.5 Industry cluster        9

4. Research design        9

5. Data Analysis and Findings        10

.5.1 Strategic intent        11

5.2 Institution environment        11

5.2.1 home country        11

5.2.2 Host country        11

5.3 Market        12

5.4 Labor and productivity        12

5.5 Industry cluster        12

6. Case study        13

6.1 Huawei training center in Africa        13

6.2 Alibaba launches Africa's first electronic trade platform in Rwanda        15

6.3 The occupation and expansion of Transsion holdings in African mobile industry        17

6.4 ZTE strategic localization in Africa        18

7. Conclusion        20

References        22

Exhibit        27


1.Introduction

With the rapid economic globalization of the world, countries in the world are getting closer and closer. The huge international market is both an opportunity and a challenge for all industries. In recent years, with the rapid development of China's economy and the implementation of the strategy of "going out", China has acted more importantly as a new investor of foreign markets and has participated more actively in the international market. Outward direct investment (ODI), as an important way to participate in the international market for China, is developing rapidly in recent years. It started late, but it is developing fast and have achieved some results.

Africa is the second largest continent in the world with a population of 1.2 billion with extremely rich natural resources. Since the 1950s, the African countries and China have been closer in both politics and economy. In the new century, leaders of China and African countries attached great importance to bilateral economic and trade cooperation. China's direct investment in Africa has grown rapidly as China's "go global" business strategy boomed. Since 2000 China has emerged as Africa’s largest trading partner. China’s direct investment in African countries has grown rapidly as well. A large number of Chinese workers, which is estimated to be one million, have moved to Africa in recent years. (Dollar, 2016) China’s engagement in Africa has no doubt led to faster growth and poverty reduction on the continent.

In recent years, there have been two major changes in the economic growth momentum of Africa, namely, the decline in the role of energy and mineral products exports to economic development, and the new growth momentum has played a significant role in economic development. On the one hand, the economic development of traditional energy and mineral exporting countries is generally suppressed. On the other hand, non-resource-intensive countries continue to maintain good performance. Under this circumstance, African countries are forced to follow the trend of economic transformation: From traditional resource-intensive industries to high value-added industries. The high-tech industry has gradually become the focus of attracting foreign investment.

At the same time, China’s investment & cooperation in Africa is increasingly diverse. Under the “Ten Major Cooperation Programs”, China has established and upgraded a number of economic and trade cooperation zones in Africa. Equipment manufacturing, finance, medicine, science and technology have become emerging fields in Africa, and private enterprises have become a new force.

Given China’s position as a leading and rapidly accelerating technological superpower in the world, making strides especially in the fields of logistics (smart cars, drones, e-commerce) and energy (solar panels, smart metering, etc.), it makes sense that the most logical industry for the next stage of Sino-Africa collaboration is technology (Zoo, 2018).

        Actually, Chinese high-tech companies began to explore African continent since more than 20 years. Nowadays, Chinese high-tech companies, such as Tecno, ZTE, HUAWEI, STARTIMES etc. bloom everywhere in Africa.

In summary, the factors that influence the location choice of Chinese high-tech companies in Africa would be studied in this paper. This paper is organized in 6 sections as follows. Section 2 explains the theoretical framework of FDI and gives empirical evidence of earlier studies on the determinants of FDI. Section 3 set up hypothesis based on the determinants in section 2. And research design is explained in Section 4. Related data and findings are shown in Section 5. In the following section, we demonstrate and analyze 4 cases to apply the theory parts before into practice to see whether it works in reality. Finally, we conclude and give some suggestions.

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