Amount of inward FDI has a positive effect on people’s perception

Two of our three independent variables measuring the amount of inward FDI had a positive effect on how people perceived China’s growing economic and political influence in sub-Saharan Africa. As the amount of inward FDI relative to the country’s GDP increased by one million dollars, the value of people’s support for China’s engagement increased as well – by 0.536. The effect is significant on the 0,01 level (p ≤ .01). Less strong but still positive and significant was the effect of the regional FDI amount variable on people’s attitudes toward China. The regression coefficient is 1.40e-05 and the effect is significant on the 0,01 level (p ≤ .01). No significant effect was observable for the FDI per capita variable measuring the investment amount relative to a country’s population. The regression coefficient was close to zero and not at all significant. However, as the regional FDI variable and FDI and GDP variable had a positive and significant effect, it confirmed the assumption that the amount of inward investments from China can positively shape public opinion toward China. This positive effect can be explained by two different argumentations. The first reason can be the visibility of economic improvement.

People perceive China more positively in African countries and regions where more FDI flows because they see direct positive economic changes in their daily lives. In other words, Chinese investments deliver what they promise in the eyes of citizens in sub-Saharan Africa. Following neoclassical growth theories, FDI can lead to economic growth in developing countries (Adams 2009). Additionally, FDI (or, more precisely, MNEs) are able to transfer knowledge, which can then swap over to their domestic counterparts and lead to more productivity there (Borensztein et al. 1998).

However, these abstract effects may be only unconsciously noticeable for ‘normal’

people. Much more visible and thus more promising in explaining the positive effect between the amount of inward FDI on people’s perceptions of China’s engagement are infrastructure projects – the numerous Chinese-built power plants in many African countries, for example. Two hundred and forty two energy projects have been tracked, which corresponds to an investment value of about $313.1 billion (Power Links 2019). These power infrastructure projects built by Chinese SEOs make up a large part of all Chinese investments. As access to electricity is directly noticeable to people affected and can even be key to reducing poverty in these regions, it is very likely that such investments can explain the positive effect of FDI on people’s attitudes toward China. The same is true for transport infrastructure, as is it incredibly visible to African people as well. The numerous railroad projects,

mostly operated by Chinese SEOs, are important to the economy but also to the overall mobility of many citizens in these countries. These projects are able to solve some of the logistic difficulties of the African continent. However, it is also possible that only the fact that China invests large amounts of money in sub-Saharan Africa is what leads to more positive perceptions about China in African populations. That is the second possible explanation for these results. The foreign aid literature, more specifically the study by Goldsmith et al. (2012), has shown that foreign aid ‘can serve an important strategic goal for those countries that give it: fostering positive perceptions among foreign publics. By doing good, a country can do well’

(Goldsmith et al. 2012: 1). In other words, no direct effect needs to be noticed by people in recipient countries in order for them to feel positively about the donor country and its spending or investing in their countries.

Graphic 11: Fitted plot – effect FDI/GDP on people’s perceptions about China

Not es: Left y-axis covers people’s support for China’s influence. The right y-axis shows how FDI/GDP is distributed. The x-axis covers the amount of inward FDI/GDP.

Table 2: Multi-level regression table

However, the argumentation, which fully neglects visible economic or social impacts on the daily lives of African people, does not extend far enough. The fact that it is not only the FDI amount relative to the country’s GDP that has a positive effect on people’s perceptions about China but the amount of FDI on the regional level as well increases the probability that these investments somehow affect people’s daily lives.

For instance, is it because they work for a Chinese company or because they benefit from infrastructure in their province – built or even operated by Chinese state owned enterprises in their province. Capello and Perucca (2018) argued that people must be aware of European cohesion policy projects to feel part of the European project. By measuring the effect on the regional level, this research approach increases the probability of the visibility of Chinese FDI. Even if the effect measuring FDI on the regional level is weak but significant, the results are a pattern to suggest that the amount of FDI positively affect people’s attitudes about China’s engagement.

Graphic 12: Fitted plot – effect FDI regional on people’s perceptions about China

Notes: Left y-axis covers people’s support for China’s influence. The right y-axis shows how regional FDI is distributed. The x-axis covers the amount of inward FDI in millions.

Interesting conclusions can also be made by looking at different investment sectors separately. Regression models 4 and 5 analysed the effects of inward FDI in the energy, transport, real estate, agriculture, and metal sectors – in model 4 relative to the country’s GDP and in Model 5 relative to the country’s population (per capita).

While there is no significant effect observable for all sectorial FDI and GDP variables, we found some significant and positive effects for two sectorial FDI per capita variables. In countries with higher amounts of inward FDI in transport infrastructure, people tended to be more positive toward China’s engagement (r=

0.0017). This effect is significant on the 0.05 level (p ≤ .05). A similar output was visible for the real estate FDI per capita variable. The regression coefficient was 0.00175 and the effect was significant on the 0.05 level as well (p ≤ .05). Even if these effects were weak, they suggest that people perceive China’s engagement as more positive when they directly benefit from these investments. The transport sector is likely the most visible and the one with the greatest impact on the daily lives of African people. China has participated in over 200 infrastructure projects in the transport sector. Chinese enterprises have completed, are building, or are helping to rejuvenate approximately 30,000 kilometers of highways and 2,000 kilometers of railway lines (Mareis/Labuschagne 2019). Such roads and railway lines lead to major economic and social changes in the affected regions in sub-Saharan Africa. Regions along the Ethiopia-Djibouti railway, for example, have experienced an economic renaissance: ‘Adama, a city of 300,000 people 60 miles down the rail line from Addis Ababa is preparing for a boom’ (Los Angeles Times 2017). With a better connectivity of long-neglected and isolated regions, the economy is able to grow because new firms and manufacture are built along these new traffic routes: ‘China’s infrastructure expenditures are an essential element in plans to emerge from a long cycle of drought, poverty, famine and war’ (Los Angeles Times 2017). Thus, it is quite obvious that such investments affect people’s perceptions about China’s economic and political influence more than other investment sectors – and not least because the transport sector is connoted more positively compared to China’s engagement in other economic sectors like agriculture or the raw material industry in sub-Saharan Africa. Chinese-owned and operated mines are particularly controversial because of bad working conditions and low wages in what are predominantly SEOs. The example of the Chambishi copper mine in Zambia where mining workers went on strike and threw stones to members of the management in 2008 shows that the Chinese raw material industry in Africa is not supported by every local. The outputs

of the regression presented below show that this impression may be true. The direction of the effect is not significant, though it is slightly negative. Surprisingly, no effect was observed regarding FDI in the energy sector. Following the previous argumentation, investments in energy infrastructure can lead to direct improvement to the living conditions of many citizens. China invested in energy projects delivering approximately 20,000 MW of power generation capacity (Mareis/Labuschagne 2019).

However, no effect from the greater amount of Chinese power investment on people’s perceptions of China’s growing influence in sub-Saharan Africa was visible.

It is likely that people are unable to assign these investments or improvements to China. Chinese FDI going to the fast-growing real estate sector, however, had a positive and slightly significant effect on people’s attitudes towards China’s role in their countries regarding the amount of FDI per capita. The real estate sector in particular contains the construction industry, as Chinese state owned constructions companies have pushed into the African market with the launch of the Chinese national ‘going out strategy’ (Chen/Orr 2009). These construction companies are building or have already completed several infrastructure projects in different areas:

railways, roads, hospitals, airports, ports, shopping malls, soccer stadiums, and government buildings (AEI data 2020). As for the transport sector, all these investments are visible and may affect or even improve the daily lives of local people. According to Sangare (2015), in Mali, a predominantly agricultural country, Chinese infrastructure investments have helped the state to industrialize. However, these Chinese construction activities have also been highly criticized by numerous observers. From a western perspective, China’s infrastructure engagement drives African states into debt. They portray China as a ‘pernicious lender that snares vulnerable states in a debt trap leveraging its loans in order to have its way with weak victims’ (Bräutigam 2020: 4). Another often criticized effect of Chinese construction in Africa is that it directly harms local people; for many of these projects, local inhabitants were displaced ‘to distant locations where the land was not suitable for farming’ (Chaponnière 2009: 75). This does not comply with international human rights standards, though. That said, as the results of this analysis show, these factors seem not to hinder North African people from supporting China’s engagement in their countries. The same accounts for the fear that most of African states will never be able to pay back these considerable loans. It seems not to negatively affect people’s perceptions of China negatively either.

Table 3: Multi-level regression table – sectorial FDI data

To summarize, the amount of inward FDI can positively affect people’s attitudes toward China’s growing political and economic influence. The FDI amount relative to the country’s population had a positive and significant effect on people’s

perceptions of China. The same was true for total FDI on the regional level even if the effect was less strong than for the FDI and GDP variable on the country level.

Additionally, transport and real estate investments tended to influence people’s perceptions the most positively. The hypothesis analysing the FDI effect on the macro level can thus be confirmed.