sustainability Article China-Angola Investment Model Liviu Stelian Begu 1, Maria Denisa Vasilescu 1,2,*, Larisa Stanila 2 and Roxana Clodnitchi 3 1 Faculty of Economic Cybernetics, Statistics and Informatics, The Bucharest University of Economic Studies, 010374 Bucharest, Romania; [email protected] 2 The National Scientific Research Institute for Labour and Social Protection, 010643 Bucharest, Romania; [email protected] 3 The Faculty for Business Administration in Foreign Languages, The Bucharest University of Economic Studies, 010374 Bucharest, Romania; [email protected] * Correspondence: [email protected]; Tel.: +40-721-924-441 Received: 7 July 2018; Accepted: 14 August 2018; Published: 18 August 2018 Abstract: In the aftermath of Angola’s civil war, strong economic relations developed between the country and the People’s Republic of China. Our study addresses China’s investment risks in Angola, considering an infrastructure-for-petroleum partnership between these two countries. The main working hypothesis is that the recovery of Chinese investments made in Angola is has translated into thousands of barrels of petroleum being imported daily from Angola. We analyzed the main economic, social, and political indicators that describe the situation in Angola that could impact the recovery of Chinese loans in the form of oil exports. Data processing implied involved regression-based imputation, MinMax data normalization, the use of the Analytical Hierarchy Process (AHP), and econometric analysis, next to the construction of a composite risk indicator. The results of the econometric analysis highlighted that an increase in the composite risk indicator of 1% leads to a decrease in the quantity of petroleum exported by almost 6377 barrels per day. Because, at least in the short run, the economic diversification in Angola is weak, and the most important asset is its oil, the partnership with China will continue to exist. This cooperation model represents a source of economic growth and infrastructure development for Angola and a source of energy that fuels China—one of the most powerful economies in the world. Keywords: Angola; PRC; China; investment risk; risk; Africa 1. Introduction Currently, Africa is perceived by the world’s powers as a huge distribution market with good development potential. Also, the rich resources of the African continent have increased the interest of the world’s major economies in this region. China has become the most important economic partner of the African states after the massive investment it has made in many countries on the continent. China’s main economic partners in Africa are Angola, South Africa, Nigeria, and Egypt [1]. Through bilateral and multilateral relations with these countries, China seeks to make vital raw materials available to sustain its own economy. At present, economic growth in China is facing development constraints to their energy supply [2]. Among the energy resources, the supply of petroleum is a major concern. China became the world’s largest importer of petroleum in September 2013, surpassing the United States, as depicted in Figure1. China also surpassed the United States in annual gross crude oil imports in 2017, importing 8.4 million barrels per day (b/d) compared with 7.9 million b/d for the United States [2]. Sustainability 2018, 10, 2936; doi:10.3390/su10082936 www.mdpi.com/journal/sustainability Sustainability 2018, 10, 2936 2 of 17 Sustainability 2018, 10, x FOR PEER REVIEW 2 of 18 FigFigureure 1. NetNet importsimports of of petroleum petroleum and and other other liquid liquid fuels fuels for Chinafor China and theand United the United States. States Data. source. Data source.EIA [3], EIA authors’ [3], authors’ own calculation own calculation and representation. and representation. AtAt present,present, China China is theis the world’s world' largests largest importer importer of petroleum; of petroleum; therefore, therefore the substantial, the substantial petroleum petroleumdemand has demand driven has China driven to China engage to in engage trade in relations trade relations with many with countriesmany countries and to and import to import huge hugequantities quantities from variousfrom various sources. sources. China China has implemented has implemented an oil import an oil import diversification diversification strategy strategy that can thatmeet can the meet short-term the short demands-term demands of the domestic of the domestic market, but market this does, but notthis reduce does not the reduce risk of the oil importing,risk of oil importing,making it difficult making forit difficult China to for guarantee China to itsguarantee long-term itsoil long import-termdemand oil import [4]. demand [4]. WithinWithin this paper, we focus on the relations between China and Angola with the the objective of of analyzinganalyzing the the evolution of China's China’s invest investmentment risk risk in in Angola. Angola. Angola Angola is is the the first first petroleum petroleum exporter exporter toto China China after after Saudi Saudi Arabia Arabia,, with with more more than than half of the petroleum exported by by Angola Angola in in 201 20166 being importedimported byby China,China, accountingaccounting for for 12% 12% of of China’s China’s total total petroleum petroleum imports. imports. In this In way,this way, in recent in recent years, yearsthe Chinese, the Chinese investments investments made in made the industry in the industry and infrastructure and infrastructure of Angola, of destroyedAngola, destroyed in the aftermath in the aftermathof the 27-year of the civil 27- war,year arecivil being war, recovered.are being recovered. IInvestmentnvestment risk risk analysis analysis takes takes into into account account those those factors factors that that could could have have an an impact impact on on the the recoveryrecovery ofof thethe investment. investment. These These factors factors represent represent economic, economic, social, social and, political and political indicators indicators of Angola, of Angola,the evolution the evolution of which of correlates which correlates with the with export the of export petroleum of petroleum to China. to China. TheThe strategic partnership between China and Angola relies heavily on oiloil cooperation.cooperation. Both countriescountries are are interested interested in in maintaining maintaining and and developing developing this this partnership partnership by developing by developing trade trade and investmentand investment relationships relationships with with multiple multiple benefits benefits in inkey key areas areas such such as as industry, industry, infrastructure development,development, urban construction, energy and mineral resources exploitation [[55].]. AlthoughAlthough Angola Angola is is currently one one of Africa's Africa’s richest richest countries, countries, this this does does not not apply apply to to the the population as well. Thus, Thus, despite despite its its natural natural resources, resources, Angola’s Angola’s GDP GDP per per capita capita remains remains one one of of the lowestlowest,, and and subsistence subsistence farming farming is is one one of of the the most most important important economic economic activities activities with with approximately approximately 85%85% of the po populationpulation involved. Given Given that that the the economy economy of of Angola Angola is is closely closely linked linked to to petroleum exportsexports and and implicitly implicitly to to its its price, price, a a decrease decrease in in petroleum prices prices could could have have a a strong strong impact impact on on governmgovernmentent expenditure.expenditure.In In this this context, context, the the importance importance of the of strategic the strategic relations relations with China with becomes China becomeseven more even obvious, more as obvious China provides, as China financial provides resources financial for theresources development for the of constructiondevelopment and of constructioninfrastructure and projects. infrastructure projects. TheThe Chinese Chinese-Angolan-Angolan Partnership Partnership has has bee beenn debated debated in in many many articles articles and and publications, publications, most most of theof thetime time doubting doubting its morality its morality (for example, (for example, [6], [7], [6– [8]9]). and This [9]). strategic This strategic link has link been has seenbeen by seen some by someanalysts analysts as a marriageas a marriage of convenience of convenience [10 ].[10 China’s]. China's interest interest is is centered centered on on petroleumpetroleum and ot otherher mineralmineral resources, resources, and and Angola's Angola’s plan plan is isto torebuild rebuild the the country country which which was wasdestroyed destroyed by civil by civilwar. The war. questionThe question that thatarises arises in this in thiscontext context is to is towhat what extent extent Chinese Chinese investments investments really really aid aid in in the developmentdevelopment of of Angola Angola [1 [111]].. Some Some economists economists are are optimistic optimistic and and state state that that the the development development of ofa state is based on a profitable primary sector, and that exports are currently a way to pay for projects to improve infrastructure and investments in human capital to sustain this growth in the future. Sustainability 2018, 10, 2936 3 of 17 a state is based on a profitable primary sector, and that