China and the Troubled Prospects for Africa’s Economic Take-Off: Linkage Formation and Spillover Effects in Zambia

Abstract

Chinese investment in Africa has captured the interest of both academia and the wider policy world, with some postulating that Chinese firms have the potential to bring about a structural transformation of the continent. Some scholars have even gone as far as to claim that Africa may be turned into the ‘next factory of the world’. By focusing on spillover effects – arguably the most sought-after of foreign direct investment effects – this article seeks to challenge such celebratory assumptions. Drawing on over 80 interviews with Zambian institutions and Chinese firms, supplemented by surveys carried out in these firms, we provide empirical evidence showing that Chinese investment brings little in terms of linkage formation and spillover effects, and those rare linkages that do exist relate to low-technology inputs that offer little hope for long-awaited industrial upgrading. Rather than blaming Chinese investors, however, we turn our attention to the question of institutional capacity, arguing that Zambia has largely failed when it comes to building adequate local supply capacity. This leads us to conclude that the chances of Chinese investment leading to structural transformation are limited and that this will remain the case unless industrial policy plays a more transformative role in fostering linkages and facilitating spillovers.