Beyond Trade? Chinese Private Capital under the African Continental Free Trade Area (AfCFTA)

Since the early 2000s, imports from China have largely substituted imports from Europe; since the 2010s, Chinese firms are also localizing production activities in African economies.

Increasing Chinese investment raises the question of whether the localization of Chinese private capital supports Africa's structural transformation and development objectives, especially as the African Continental Free Trade Area (AfCFTA) is implemented.

The policy paper details the evolution in the presence of Chinese private capital in Ghana, where Chinese traders have considerable market presence and where more than 400 Chinese-owned manufacturers registered operations between 2004 and 2024.

The shift from trade to manufacturing creates opportunities for employment and regional value chain development, but challenges remain around uneven value capture and uncoordinated regulatory frameworks.

To harness Chinese private capital, policy should prioritize the embeddedness of investment to support industrialization and broader socio-economic development.

The paper offers two sets of recommendations:

Ghana: forming a dedicated trade regulatory body to clearly define trading activities and developing a milestone-based incentive regime to link foreign investment to local business development and capacity-building.

AfCFTA: harmonizing trade and investment policies to prevent regulatory competition, and ensuring growing labour and environmental standards to avoid a ‘race to the bottom’ and capital flight.