Can Chinese investment lead to knowledge and technology transfers? The case of Madagascar

Abstract

ABSTRACT Madagascar’s geographic location, large long-established Chinese diaspora, low labor costs, and abundant arable land and natural resources have made it an attractive destination for Chinese outward investment over the past two decades, as rising wages in China and domestic competition drove firms to ‘go out.’ Chinese investors have been particularly active in the Malagasy agricultural, manufacturing, and mining sectors. China generated its own economic boom with the help of foreign investment, which raised the question whether Chinese investors could play a similar role – through the fostering of skills and technology upgrading – in other low-income countries. Focusing on agriculture and manufacturing, this paper uncovers some evidence of limited skills and technology transfers occurring through Chinese firms operating in Madagascar. However, Chinese investment in Madagascar remains limited in scope and has been challenged by a problematic policy environment.