Buy our book here.

cupro_nickel_tubes1

Investments are not only made by individual companies but countries also.  Countries like China have invested in other emerging economies to establish good trading agreements, which will improve the overall GDP of their own countries.  In Chapter 15, we examined how capital budgeting can be used to analyse the financial consequences of investing in new projects.  However, although the economic consequences are very important to investments before the economic rewards can be achieved the investments must consider the political and social consequences of the projects also.

 

China has been investing heavily in Africa for some years now; building roads, construction of buildings and exporting goods and this has been made possible through the Chinese government providing grants and loans to Africa, smoothing the way to establish good trading agreements.  The investment China is making in this continent is not just about making pure profit from the types of contracts already discussed; in fact one of the most important results of this good relationship is the access to the raw material Africa holds. China requires a good supply chain management system of raw materials so these can be used in the manufacturing processes back in the home country.  Access to materials like copper, nickel and iron is essential to maintain the competitive pricing that is achieved in the manufacturing industry in China.