ç±³“ˆé‚£Mirana thesis FINAL

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Analysis of Chinese Investments in Madagascar and their Implication for African Countries

Rasamimanana Mirana

2

CNKI

2012

130012

0431-85168357

SynopsisUsing the case study of Madagascar and the embedded case studies of the textile industry and two extractive deals, this thesis shed some light on the Chinese way of doing business in Africa, uncovering the process by which Chinese big extractive firms, textile EPZs and SMEs have settled on the continent and especially in Madagascar as a case study, with network theory as a theoretical framework. It also presaged for the feasibility of an industrialization process a la flying geese model of Africa under the Chinese leadership, looking at Madagascar as a case study in particular. In this extent, the most important part is played by African leaders as they are to assure that the momentum given by Chinas development does not pass the continent by. This thesis answered the questions of how and why do Chinese investors come to Africa, especially in a non-resource rich country, politically unstable and lacking basic industrial infrastructure like Madagascar. - How does China invest in Madagascar in particular and in Africa in general? Mostly through state-owned enterprises in extractive industry; and when it comes to private multi-national corporations through branches and subsidiaries; same goes for small and medium enterprises. Guanxibusiness networks created between administrative officials throughout African countries and overseas Chinese business networks also play a preponderant role as investment medium. A particular aspect for Chinese businessmen in Madagascar is that they become residents of the host country) and are no longer accounted as foreign investors after a while. - Why does China invest in Madagascar in particular and Africa in general? The attractiveness of preferential trade agreements is a principal motive for the case of Madagascars textile industry, as well as low wages and resources untapped reserves of minerals and oil- for Africa in general.

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- Guanxi 1 20 50 1975-1991 1992 2009 29.2% 22%15.8%13.9%1 2006 83% 1% 15% 2 2003 2008 1% 50 1

EDINGER H., PICTORIUS C Aspects of Chinese investment in the Africa resources sector. [J/OL] The Journal of The Southern African Institute of Mining and Metallurgy,Volume 111, 2011:501-510.p.504. Accessible at http://www.saimm.co.za/Journal/v111n07p501.pdf last accessed 03.04.2012 2 Statistics presented in Chinese Trade and Investment Activities in Africa [J/OL], Policy Brief VOl.1 Issue 4, 29 July 2010, The African Development Bank Group, Chief Economics Complex, Accessible at http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Chinese%20Trade%20%20Investment %20Activities%20in%20Africa%2020Aug.pdf last accessed 04.03.2012

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BUCKLEY, P. J., CLEGG, L. J., CROSS, A.R., & LIU, X. The Determinants of Chinese outward foreign direct investment [A] in; VOSS, Hinrich; and ZHEN, Ping. Journal of International Business Studies, 38, 2007: 499518. p. 513

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KONIJN, PETER in China and the resource curse in Africa ;Workshop: Beyond the resource curse, new dynamics in the management of natural resources: new actors and concepts, 3-4 November 2011, Paris.. 2 Based on the estimation by Maddison (2010. Historical Statistics of the World Economy: 1-2008 AD (www.ggdc.net/maddison/Historical_Statistics/vertical-file_02-2010.xls)), Chinas per capita income (measured in purchasing power parity) was 6,725 international dollars in 2008, the same level as in Japan in 1966, Korea in 1986, and Taiwan, China, in 1983. These economies started to relocate their labor-intensive manufacturing industries at that income level, Japan to the East Asian Tigers and Korea and Taiwan, China, to mainland China.

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HART-LANDSBERG, MARTIN and BURKETT, PAUL Contradictions of Capitalist Industrialization in East Asia: A Critique of "Flying Geese" [J] Theories of Development Reviewed work(s): Economic Geography74(2) 1998:87-110. Published by: Clark University Stable URL: http://www.jstor.org/stable/144277.Accessed: 23/11/2011 09:49 P89. 2 According to Brautigams argument, the Mauritian case can be seen as an extra-Asian example of the global reach of Chinese business networks, and even evidence of the growing transnationalism of domestic capital in the Third World (as Mauritian investors expand their investments in nearby Madagascar). BRAUTIGAM, DEBORAH Close Encounters: Chinese Business Networks as Industrial Catalysts in Sub-Saharan Africa [J]. Royal African Society, 102.2003:447-467. P449. 3 While states material power is determined by the relative size of their material capital, social power is determined by the relative social capital created by and accessed through ties with other states in the international system such as ties through mutual membership in PTAs. HAFNER-BURTON, E., MONTGOMERY, A., Globalization and the Social Power Politics of International Economic Networks [A] (November 24, 2008). p25.Available at SSRN: http://ssrn.com/abstract=1306648 or http://dx.doi.org/10.2139/ssrn.1306648

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AbstractThe purpose of this dissertation is to introduce and demonstrate a new approach to China-Africa international relations, focused on investments. The methodology used is that of the case study, as a case study is suitable as a research strategy when a how or why question is being asked about a contemporary set of events, over which the investigator has little or no control. It is suitable when the case constitutes a unique case, i.e. a case that provides a rare opportunity to study a specific problem of high scientific interest, but where researchers have not yet been able to establish common patterns. Madagascar provides such a unique case: as demonstrated in length in the Introduction (chapter 1.3) Chinese investments in Madagascar have become more well established than in most African countries because of the kinship ties formed with the local population but where no flying-geese-like model of industrialization has arisen. It is also one of few countries of Africa classified as resource-poor that attracted MNCs in extractive industries and SMEs alike. This single case study is furthermore an embedded case study, where the embedded units of analysis are the studied SMEs and explorative MNCs as well as textile EPZs. Using the case study of Madagascar and the embedded case studies of the textile industry and two extractive deals, this thesis shed some light on the Chinese way of doing business in Africa, uncovering the process by which Chinese big extractive firms, textile EPZs and SMEs have settled on the continent and especially in Madagascar as a case study, using network theory as a theoretical framework. It also presaged for the feasibility of an industrialization process a la flying geese model of the continent under the Chinese leadership in Africa, looking at Madagascar as a case study in particular. In this extent, the most important part is played by African leaders as they are to assure that the momentum given by Chinas development does not pass the continent by. With regards to investment, the Chinese way of doing business in Africa can be beneficial to Africa if the African leaders are willing it to be Africa is changing. China is developing and the time is ripe for China to be a leading goose for Africa in the next wave of globalization.

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As for foreign policy in general, the difference between Chinese and Westernnamely American way of reacting to political crises in Africa is a matter of norms, and the norm of non-interference is more beneficial to Africa for the time being. The consistency of Chinese foreign policy and the respect of the norm of noninterference sketch a hope for some industrialization in Madagascar. While the preferential trade agreements from the United States is the instrument for this, as it comes with strings attached, Madagascar can politically get away from the influence of the United States and other traditional donors or at least find leverage in the scramble for resources playing on her own comparative advantages - and turn to China as Chinas rise is giving momentum to an alternative model of growth industrialization a la flying-geese model So can the rest of Africa. This thesis answered the questions of how and why do Chinese investors come to Africa, especially in a non-resource rich country, politically unstable and lacking basic industrial infrastructure like Madagascar. - How does China invest in Madagascar in particular and in Africa in general? Mostly through state-owned enterprises in extractive industry; and when it comes to private multi-national corporations through branches and subsidiaries; same goes for small and medium enterprises. Guanxi business networks created between administrative officials throughout African countries and overseas Chinese business networks also play a preponderant role in investment medium. A particular aspect for Chinese businessmen in Madagascar is that they become residents of the host country (Madagascar) and are no longer accounted as foreign investors after a while. - Why does China invest in Madagascar in particular and Africa in general? The attractiveness of preferential trade agreements in a principal motive for the case of Madagascars textile industry, as well as low wages and resources untapped reserves of minerals and oil- for Africa in general. The following list of findings emerges from this research on Chinese FDI in Madagascar.Findin