Chinese Investment in Africa: A Double-Edged Sword for Low-carbon Industrialization
Introduction
China’s economic ties with Africa have grown significantly since the early 2000s. China is currently the largest bilateral trading partner and top export destination for most countries in Africa, and since 2013, China has become the largest bilateral provider of foreign direct investment (FDI) to Africa.
Exploring Chinese FDI in Africa
Our new working paper published by the Boston University Global Development Policy Center examines the dynamics of Chinese FDI in Africa, with a focus on its impact on low-carbon industrialization. We also analyze the carbon intensity of Africa’s industrialization, sectoral heterogeneity, and the role of environmental regulations in moderating the outcome. Additionally, we compare Chinese investments with those from OECD countries and discuss strategies for achieving sustainable industrialization in Africa through FDI.
Chinese FDI and Industrial Carbon Emissions
Our evaluation of China’s FDI pattern in Africa reveals a concentration in light manufacturing, natural resource extraction, and construction sectors, with a smaller share allocated to knowledge-intensive sectors. We also find that Chinese FDI is associated with a significant increase in industrial carbon emissions, whereas this is not the case with FDI from OECD countries. Environmental regulation analysis suggests the role of environmental regulations in affecting these outcomes.
Knowledge-intensive Sectors and Sustainability
Our study shows that there is no significant increase in emissions when Chinese FDI is channeled into knowledge-intensive manufacturing sectors. This highlights the potential of high-tech industries and research and development to support sustainable industrialization in Africa.
The Role of Environmental Regulations
The research highlights the role of environmental regulations in shaping the impact of foreign investment on the environment. Countries with stronger environmental regulations tend to see lower increases in emissions from Chinese FDI, emphasizing the necessity for robust regulatory frameworks to address environmental challenges.
A Global Comparison
Chinese FDI has a distinct impact on industrial carbon emissions compared to other major investors in Africa. FDI from OECD countries does not lead to a statistically significant increase in emissions, despite similar concentrations in resource-intensive sectors. This discrepancy may be due to differences in the implementation of environmental, social, and governance (ESG) standards.
Balancing Growth and Sustainability in Africa
Africa’s industrialization prospects depend on managing the climate transition effectively. The shift to low-carbon industrialization presents an opportunity for Africa to invest in climate-smart manufacturing and enhance competitiveness. This requires prioritizing the development and enforcement of robust environmental standards, encouraging investment in high-tech industries, facilitating technology transfer, and improving data collection and reporting on the environmental impacts of foreign investments.
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SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 7: Affordable and Clean Energy
- SDG 8: Decent Work and Economic Growth
- SDG 9: Industry, Innovation, and Infrastructure
- SDG 12: Responsible Consumption and Production
- SDG 13: Climate Action
- SDG 17: Partnerships for the Goals
2. What specific targets under those SDGs can be identified based on the article’s content?
- SDG 7.2: Increase substantially the share of renewable energy in the global energy mix
- SDG 8.9: Devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products
- SDG 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product
- SDG 12.2: By 2030, achieve the sustainable management and efficient use of natural resources
- SDG 13.2: Integrate climate change measures into national policies, strategies, and planning
- SDG 17.17: Encourage and promote effective public, public-private, and civil society partnerships, building on the experience and resourcing strategies of partnerships
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Indicator for SDG 7.2: Share of renewable energy in the total energy consumption
- Indicator for SDG 8.9: Number of jobs in sustainable tourism industries
- Indicator for SDG 9.2: Industry’s share of employment and gross domestic product
- Indicator for SDG 12.2: Domestic material consumption per capita
- Indicator for SDG 13.2: Number of countries with climate change strategies and plans
- Indicator for SDG 17.17: Number of partnerships promoting sustainable development
SDGs, Targets, and Indicators Table
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 7: Affordable and Clean Energy | 7.2: Increase substantially the share of renewable energy in the global energy mix | Share of renewable energy in the total energy consumption |
| SDG 8: Decent Work and Economic Growth | 8.9: Devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products | Number of jobs in sustainable tourism industries |
| SDG 9: Industry, Innovation, and Infrastructure | 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product | Industry’s share of employment and gross domestic product |
| SDG 12: Responsible Consumption and Production | 12.2: By 2030, achieve the sustainable management and efficient use of natural resources | Domestic material consumption per capita |
| SDG 13: Climate Action | 13.2: Integrate climate change measures into national policies, strategies, and planning | Number of countries with climate change strategies and plans |
| SDG 17: Partnerships for the Goals | 17.17: Encourage and promote effective public, public-private, and civil society partnerships, building on the experience and resourcing strategies of partnerships | Number of partnerships promoting sustainable development |
Source: bu.edu
