Impact of China-Africa Investment Relations: Case Study of Ethiopia


  • Alemayehu Geda

    Atenafu G.Meskel



  • African Economic Research Consortium

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As the Chinese economy booms, Chinese presence in Africa is becoming an obvious sight. The scene is similar in Ethiopia. To our knowledge there is no study about Ethio-Chinese investment. Two relevant studies in this regard are (Asayehgn Desta 2009) and (Tegegen G.Egiziabher, 2006). We have briefly summarized their major findings in this sub-section.

Asayehgne’s study is based on four Sino-Ethiopian Cooperative Investment case studies that analyzed the terms of their effects on 1) Ownership and Human Capital 2) Production Management and Operations, 3) Export effects 4)Technological Transfers 5) Efficiency 6) Foreign Exchange effects7) Local Content requirements and spillover effects, and 8) Environmental. Though the analysis is somewhat anecdotal and difficult to generalize about the Sino-Ethiopia investment relations, as the author himself noted, it has highlighted that given the Chinese investors in Ethiopia are unfamiliar with cultural makeup of the local situation and the Ethiopian labor laws, Ethiopian employees seemed to be in charge of the human resources management in these companies. (Asayehgn, 2009).

This study further noted that since the Chinese marketing officers are well versed in some aspects of the international marketing, they might have trained local employees in export management and foreign marketing strategies. Based on the three cases, the author noted that the Chinese wholly owned companies don’t seem to act as a platform for exports and their goal is to seek for themselves efficiency and market in their production process. The wholly owned Sino-Africa produces leather products that are designed to compete in the international market—it does not seem to crowd out the low quality local products. The Sino- Ethiopia pharmaceutical joint venture enterprise is of higher quality base and is more efficient; therefore, it is complementary and generates foreign exchanges indispensable for the country.

Nonetheless, since the Ethiopian employees do not receive the necessary training in international marketing, the leather products seem to be totally dependent on the Chinese joint venture partners in order to promote and distribute their products in overseas markets. However Asayehgn, (2009) noted that the skill transfer is very limited in his case study. He noted, ‘even in the Sino-Ethiopia Associate Africa joint firm, research and product design is forged in the headquarters rather than basing it on an equity ratio to include the Ethiopian partner. In terms of efficiency, since more than 50 percent of input materials executed by the Sino-Ethiopian firms come from China, it is very difficult to ascertain the contribution of efficiency to the new products made by the Sino- Ethiopian investments’.

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