“The Southeast Asian market is effectively saturated. It has [almost 700 million] people, with too many Chinese investors, while Africa has more than 1.4 billion people, and the market still has a lot of unmet needs.”

Africa has managed to elevate its status among Chinese traders seeking to expand their overseas business, and it has become a strong candidate when China’s labour-intensive manufacturers consider relocating factories overseas.

This sort of supply-chain shift has become increasingly common as domestic production costs rise, competition intensifies, and US-bound shipments are hindered by tariffs and non-trade barriers.

Many producers in China say they are afraid of being removed from American supply chains and replaced by counterparts in Southeast Asia or India, owing to the rivalry between the world’s two largest economies.

“Chinese companies have to bite the bullet now – first we were cracked down on by the US, soon we will be targeted by Europe,” Feng said, adding that the writing is on the wall, and it has already forced their hand. “Were we to wait until after we were targeted, to come up with a plan?”

And where does Africa factor in? Well, it “is not the optimal market, but it is a market where we could survive”, she added.

In the coming days, Changsha, the capital of Hunan province, will kick off the third China-Africa Economic and Trade Expo, with at least 50 African countries and eight international organisations expected to take part from June 29 to July 2, further deepening trade ties between China and the continent.

“Investing in Africa is a much longer-term business strategy,” said Janson Huang, chairman of the Sinotan Industrial Park located on the outskirts of Dar es Salaam, in the East African country of Tanzania.

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Construction on the park broke ground last year. When finished in the next five to eight years, it will span nearly four square miles, and it has set lofty goals of attracting more than 200 companies, creating 500,000 jobs and bringing in about US$3 billion worth of direct investment, with an annual yield of US$6 billion.

When it comes to industrial chain shifts, Huang says Southeast Asia is the region to watch over the next five years, and that Africa will boast great potential over the coming decade, in terms of economic development.

Southeast Asia has its advantages, such as its proximity to China, with more mature infrastructure and industrial chains, but “building industrial parks in Southeast Asia now would already be considered late to the game, and all the costs have already gone up pretty high”, Huang attested.

“We have toured some industrial parks there,” he explained. “The land is about US$150 to US$200 per square metre, while it is US$15 per square metre here in Dar” – or at least 10 times cheaper.

A multitude of factors have made the African continent more attractive, both as an emerging market and as a relocation destination.

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China-funded infrastructure across Africa force difficult decisions for its leaders

China-funded infrastructure across Africa force difficult decisions for its leaders

With a relatively young and rapidly growing population, Africa offers a vast consumer market with immense potential – by 2050, one out of every four people on Earth is projected to be African, according to a projection by the United Nations. Currently, it accounts for one out of every 6.5 people.

The relatively low labour costs and rich natural resources, including minerals and energy reserves, also present lucrative investment opportunities.

As trade ties between China and Africa continue to strengthen, Chinese investors are leveraging these favourable factors to forge mutually beneficial relationships and seize on the vast potential that Africa has to offer.

Back in 2009, China surpassed the US to become Africa’s biggest bilateral trade partner. And last year, bilateral trade rose to a record of US$282 billion, more than 26 times the total in 2000, according to official Chinese figures.

China’s share of direct investment in Africa at the end of 2020 stood at US$47.35 billion, data from the Chinese Ministry of Commerce showed. However, a 2021 report by the China-Africa Business Council estimated that the actual Chinese business investment in Africa should not be less than US$56 billion, given that some companies were not registered and some investment was not counted.

And among Chinese investment, more than 70 per cent was from the private sector, noted the council’s report. Most of that money has gone into industrial parks and factories, which have helped facilitate the industrialisation of host countries.

“Africa welcomes Chinese investment with open arms,” said Martin Mpana, dean of the African Diplomatic Corps in China and the Cameroonian ambassador to China, in April, adding that the African side eagerly anticipates more Chinese enterprises visiting the continent to explore opportunities.

Aside from the private sector, the most notable Chinese investment in Africa has come via Beijing’s Belt and Road Initiative – a decade-long government effort to link economies into a China-centred trading network, including many African nations.

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Meanwhile, some private Chinese businesses have expressed concerns about security and policy matters on the continent.

Dai Jufeng, a new-materials manufacturer in Foshan who joined the delegation to Africa in May, said that security concerns and policy matters are the most crucial considerations when it comes to exploring the African market. And if he does decide to do business on the continent, he would prefer to collaborate with a Chinese-funded industrial park.

“We are not familiar with the local environment,” Dai said. “And the industrial parks, having been there for a long time, must have more resources and channels. If we venture out there and want to make headway, we must use their resources and connections to expand our business.”

The investor said he has also been hesitant to make such a move because his factory is largely automated, and it mainly serves Chinese construction contractors and interior-design firms.

“It might make more sense for clothing and shoe manufacturers” to invest in Africa, he said. “It is also unrealistic to move the whole industrial chain all the way over. The procurement of raw materials, as well as the replacement and storage of equipment parts, would be a huge challenge.”

Nonetheless, Dai said he has felt compelled to consider overseas options, particularly as his business was severely impacted by the property and economic downturn in recent years. But while acknowledging that Africa seems like a promising market, he is more interested in mature markets such as Vietnam or Saudi Arabia.

“Electricity would be a big issue – the power went out three, four times a day in the hotel we stayed at in South Africa, indicating serious electricity shortages,” he said. “Also, the [electricity] expenses go up 20 per cent every year – that would be demanding for a high-energy-consumption enterprise like us.”

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Over the past two decades, Chinese investments in such industrial parks in Africa have increased significantly, and special economic zones have long been promoted as opportune instruments to emulate the development trajectory seen in China, noted Tim Zajontz, a research fellow with the Centre for International and Comparative Politics at Stellenbosch University in South Africa.

“Beijing actively promotes Chinese investments in industrial parks and special economic zones as part of wider efforts to ‘export’ its own development experience to Africa,” Zajontz said.

“Many African governments have incentivised investments in such zones in the hope that they would kick-start economic diversification, create jobs [and have] spillover effects in other sectors of the economy.

“However, the results have been mixed across the continent. Some zones have added production capacity – for instance in Ethiopia’s leather-processing industry – while other zones were criticised for underperforming in terms of boosting manufacturing and creating jobs, although tax holidays and regulatory exemptions were granted to investors.”

Many African governments have offered Chinese investors loose regulations, tax incentives and public land, or have set up necessary facilities inside such zones and built transport infrastructure linking them with other parts of the country or neighbouring and overseas markets.

But Zajontz suspects that “future policy support will likely depend on the success of existing industrial parks and special economic zones”.

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Among the notable Chinese-funded industrial parks in Africa, several stand out for their size and significance.

The Lekki Free Trade Zone in Nigeria, backed by substantial Chinese investment, is making significant strides in promoting industrialisation and attracting foreign businesses. This expansive industrial park covers an area of 155 sq km and is strategically positioned near Lagos, Nigeria’s economic hub. Its integrated infrastructure and favourable investment environment have enticed a wide range of industries, including manufacturing, logistics, and energy, contributing to Nigeria’s economic diversification and job creation.

The Eastern Industrial Zone in Ethiopia has also facilitated the transfer of technology, skills and employment opportunities to the local population, with a focus on sectors such as textile and garment manufacturing. The park has played a pivotal role in enhancing Ethiopia’s manufacturing capabilities and positioning the country as a regional manufacturing hub.

“Chinese-funded industrial parks will bring much-needed FDI, as opposed to ‘hot money’,” said X.N. Iraki, an economics and management professor at the University of Nairobi. “They will also bring competition, which could improve the quality of goods and services, as well as lower prices.

“It’s a win-win situation. The Chinese make money and we get jobs. The government welcomes Chinese investors, as they will bring technology, new skills, competition and link Africa to the bigger Chinese market.”

Alongside the growing number of Chinese industrial parks in Africa, businesses from other countries are also building industrial parks on the continent. India, Turkey, Germany, Japan and South Korea, for example, have shown a rising presence in Africa via their own industrial parks.

“Chinese investors are very well networked, which allows them to set up new supply or value chains rapidly,” Zajontz said.

“They have also proven to be highly adaptive to local political and economic context factors.

“African governments, for their part, hope to see further Chinese investments in sectors that are deemed essential for Africa’s industrialisation. Expectations are obviously high that Chinese industrial parks create jobs in the so-called formal economy and boost manufacturing and processing in Africa.

“Yet, their actual impact on local economic development very much depends on how well such investments are integrated with local businesses and suppliers. Industrial parks and investment zones aren’t magic bullets. They require comprehensive industrial policies that focus on maximising local value-added [industries] and creating spillover effects beyond certain investment enclaves.”