by Abdoulkadre Ado
Abstract
China has become one of Africa’s top financiers through significant foreign direct investments (FDI). While Chinese investments vary across sectors and countries, this article proceeds to a comparative analysis of major receiving sectors of Chinese FDI in the top ten African destinations. It elaborates on why some African countries that are labeled risky by major institutional rankings still receive significant Chinese investments. One finding is that China invested often and successfully in risky African countries. The article thereby underlines the importance of informal institutions for Chinese investors in successfully navigating the African environment. It uses secondary data from various national and international organizations to categorize receiving countries through an informal institutional analysis perspective of Chinese investments in Africa. The aim is to understand how Chinese FDI deviates from mainstream institutional theory’s argument that stable and formal institutional settings are fundamental to attracting significant investments. Findings indicate substantial Chinese investments in places often labeled as risky based on international ranking standards. Some of the important FDI destinations are now considered strategic for China’s Belt and Road Initiative (BRI). Hence, Chinese businesses appear prosperous in those destinations, not only gaining more contracts but also successfully navigating the local environment. To understand such Chinese risk-taking approach and success in Africa, this article offers an alternative explanation based on informal institutions, China’s long-term agenda, and the goals behind BRI. Finally, this article suggests avenues whereby African countries can better redefine their partnerships with China.
Abdoulkadre Ado is an international business professor, Telfer School of Management, University of Ottawa. His research focuses on cross-border business partnerships, particularly on Africa-China settings, studying links between FDI, internationalization, knowledge transfer, power, and informality. He was a visiting doctoral scholar at UN Headquarters in New York (Office of the Special Adviser on Africa), where he provided research inputs on African development and multilateral cooperation.