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Research Report

China-Africa investment treaties:: do they work?

Lorenzo Cotula
Xiaoxue Weng
Qianru Ma
Peng Ren
Copyright Date: Dec. 1, 2016
Pages: 64
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Table of Contents

  1. (pp. 11-16)

    China-Africa economic relations have received extensive attention in recent years. Today, China is Africa’s largest trading partner (Sun 2014) and its investments in the continent increased 60-fold between 2003 and 2014.¹ Although conventional wisdom suggests a close connection between China’s policy of South-South cooperation and China-Africa trade and investment, there are continuing misperceptions about China-Africa economic relations. There is also little empirical evidence on the policy tools that underpin China’s economic diplomacy in Africa and how they affect the conduct of Chinese companies.

    International treaties to promote foreign investment are a prominent policy tool in contemporary economic diplomacy, including in...

  2. (pp. 17-22)

    Drawing primarily on the literature review, this chapter finds that China-Africa economic diplomacy configures the BIT as a tool to promote foreign investment in the context of South-South cooperation. The analysis also identifies the potential users of the treaties in the infrastructure and natural resources sectors.

    Investment flows between China and Africa have soared in recent years, with Chinese FDI stock in Africa jumping from US$500 million to 32 billion over 2003-2014 (SAIS China-Africa Research Initiative 2016).⁸ These evolutions are part of a wider global geoeconomic restructuring that is changing the place of China in the world economy, and has...

  3. (pp. 23-33)

    Having set the context for understanding China-Africa investment relations, this chapter examines the content of the BITs. Despite considerable diversity, the China-Africa BITs pursue the FOCAC policy goal of promoting investment through political risk mitigation via investment protection. This contrasts with the approach recently adopted by some other emerging economies.

    After an initial phase of resistance in the 1960s, African states signed many investment treaties with main capital exporters outside Africa and among themselves. Evidence suggests governments signed the treaties in the expectation that doing so would promote FDI, while often underestimating the potential liabilities the BITs could entail (Poulsen...

  4. (pp. 34-47)

    This chapter explores whether the China-Africa BITs fulfil their stated policy objective of promoting investment. It draws on interviews with representatives from Chinese businesses investing in Africa. The chapter sets out some methodological issues, presents interview findings and outlines preliminary conclusions based on those findings.

    In terms of number of BITs signed, China has been one of the most active BIT negotiators worldwide. But Chinese investors have only brought five known treaty-based arbitrations worldwide, none of which involves an African state.²⁹ As an extreme comparison, US investors are believed to have brought 145 known arbitrations around the world.³⁰ The few...

  5. (pp. 48-52)

    The previous chapters developed detailed analysis of the China-Africa BITs, their economic and political context and how effectively they promote Chinese investment in Africa’s natural resource and infrastructure sectors as part of wider South-South economic cooperation. This brief conclusion brings together key findings and offers pointers for follow-on research, policy and practice.

    This research documented both alignments and misalignments between the South-South cooperation policy that informs China-Africa economic diplomacy and the content of the China-Africa BITs. Compared to many North-South investment treaties, the China-Africa BITs present some notable specificities that make them more deferential to national regulation.

    But ultimately, the...