While the natural resource and infrastructure sectors attract the largest share of Chinese foreign direct investment to sub-Saharan Africa, investment in manufacturing is increasing.

This is according to the October 2011 Regional Economic Outlook: Sub-Saharan Africa released by the International Monetary Fund (IMF) on Wednesday.

"In general, large state-owned firms tend to have a strong focus on resources and infrastructure, whereas private firms tend to concentrate on manufacturing and service industries.

"Therefore, although resource and infrastructure investment likely is the largest sector in value, the number of private projects in other sectors is high and growing, and likely well over 2,000," the IMF said.

A major non-natural-resource-related Chinese investment in sub-Saharan Africa was the US$5.4 billion purchase of a 20% stake in South Africa's Standard Bank (SBK) by the Chinese Industrial and Commercial Bank.

There were also some indications that Chinese companies were seeking growing domestic and regional markets in sub-Saharan Africa or taking advantage of preferential trade treatment of sub-Saharan Africa exports in advanced economies.

"For example, China's financing (FDI and loans) in non-resource-rich Ethiopia is driven primarily by a large and growing market (with more than 80 million people, the second-largest population in sub-Saharan Africa) and opportunities for involvement in large public investment projects, rather than by a search for resources.

"In fact, the manufacturing sector accounts for the largest amount of Chinese FDI in Ethiopia, attracted by low-cost labor and large-scale land leases, in addition to Ethiopia's market size."

The IMF said some southern African countries had also attracted FDI in the apparel sector from China thanks to the US Africa Growth and Opportunity Act, which gave eligible sub-Saharan African countries duty-free access to the US market.

"Even in resource-rich countries, Chinese FDI is not necessarily concentrated solely in the resource sector, as seen in Zambia."

Some evidence showed that private sector participation in Chinese investment in sub-Saharan African countries had increased, the IMF added.

The Export-Import Bank of China estimated that of the 800 Chinese companies operating in Africa in 2006, approximately 85 percent were privately owned and were small or medium-sized enterprises (SMEs).

The bank's survey suggested that most of these firms began their engagement with Africa by trading, leading to investment to tap into local markets. Because local supplies are often weak, these firms tended to get most of their parts and equipment from China and other countries (notably South Africa).

Most of the private SMEs had received little state support.

"Those firms have usually brought their own financial resources, and targeted local markets."

According to the IMF, the links of Chinese FDI firms with local economies appeared weak in the construction sector but were often stronger in manufacturing.

"Chinese firms win contracts on the basis of low cost and quick delivery, although there is a tendency to hire relatively little local labour. In the manufacturing sector, however, it seems that once Chinese firms are committed to establishing local operations, most of the employment is drawn from the local labour force."