a1 Department of Economics and International Development, University of Bath, Bath BA2 7AY, United Kingdom
China's engagement with African countries is growing rapidly, spanning trade, investment and development cooperation. Some observers have suggested that poor operating standards among Chinese investors may contribute to the social ills associated with extractive industries and undermine host countries' sustainable development. Drawing on case study data from the copper mining sector in Zambia, this paper argues that the economic and political context surrounding Chinese investment risks undermining the effectiveness of local environmental, social and fiscal regulation. The analysis first explores particular characteristics of large-scale Chinese investment, including the prevalence of state-led financing and the challenges of effectively monitoring overseas Chinese projects. It proceeds to place these characteristics within the host country regulatory context, which in the case of Zambia features significant capacity constraints, political interventionism and a pervasive lack of transparency. The paper argues that, within a weak regulatory setting, Chinese investment may pose significant challenges for effective business regulation. Yet the resulting state-firm dynamics are by no means exclusive to Chinese investment. Rather, it is host country regulatory characteristics, in combination with certain features of investors' corporate governance, that together herald a new set of challenges for business regulation in developing African countries.
* This article draws on interview data collected during PhD field work in Zambia from July to December 2007. I wish to thank my supervisors Dr James Copestake and Professor Anil Markandya for helpful comments on earlier drafts. I am also grateful for feedback provided by two anonymous referees and participants at the University of Bath EU-China Study Group 2007 seminar series, where an earlier version of this paper was presented.