Economic Analysis on the Motives of North Africa China’s FDI in Africa: A Case Study on North Africa

Abstract

Taking the Arab countries of North Africa as specific case studies, the author first describes the general situation of China's Foreign Direct Investment (FDI) in that region, and then makes a detailed analysis over the motives of such investment by an employment of methodology derived from fundamental principles of international economics. Finally, the author comes up with a proposal on the strategic options on the types of FDI that should be adopted by Chinese enterprises and the target sectors & industries that deserve more attention from Chinese investors. The author argues that China's FDI into Africa has been promoted mainly by a series of domestic factors, including adjustment of China's domestic industrial structure, a trend of pluralizing sources of procurement in its national strategies on energy and resources, and intent to avoid external trade frictions and barriers by domestic entrepreneurs and merchants. The Arab countries in North Africa now become the major targets of China's FDI in Africa, which can be mainly attributed to their relatively steady economic growth, good business environment, and strong national competitiveness.