ADDIS ABABA - Chinese investment in Africa is increasingly shifting towards the manufacturing sector as the Asian nation diversifies out of primary sectors such as agriculture and mining, the World Bank (WB) said Tuesday.
Africa therefore needs to exert conscious effort to create a conducive environment to attract Chinese investment to help develop the continent's under developed manufacturing sector, according to the report released Tuesday at the Investing in Africa Forum jointly held by WB, China and Ethiopia at Addis Ababa.
The WB noted in its report that while a large share of China's investment in Africa has traditionally been in extractive industries and construction, investment in manufacturing had increased in recent years.
According to the multilateral financial institution, China's cumulative investment stock in the manufacturing sector in Africa grew 10 percent year-on-year to $2.4 billion as at the end of 2011 and accounted for 15 percent of Chinese foreign direct investment (FDI) in 2013.
In terms of greenfield projects during the period 2003-2014, both the largest share of Chinese capital investment and the largest number of projects were in the manufacturing sector.
"There is also a shift in FDI from China within the manufacturing sector towards higher value-added activities," the WB said.
China's growing interest in Africa's manufacturing also dovetails with the continent's long-held call for an increase in foreign investment that enhances employment creation and technology transfer to the under developed continent.
The WB said more Chinese companies were likely to outsource labor-intensive manufacturing operations in the face of increased competition and costs, and a more highly skilled labor market at home.
Africa thus stands to benefit from this development if it creates a favourable investment climate for Chinese manufacturing companies to set up plants on the continent.
Apart from industrial rebalancing, the Chinese government is also encouraging outward investment and African countries could attract this investment, provided they have the right policies and a conducive business climate, the WB said.
As China-Africa economic ties continue to expand, the WB said Chinese investment in manufacturing would help Africa to diversify its exports from predominantly primary goods to processed, value added goods.
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