Regulating FDI in weak African states: a case study of Chinese copper mining in Zambia

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. Reprinted by permission of Cambridge University Press. An electronic version of this article can be accessed via the internet at http://journals.cambridge.org