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Take a night-time drive down Addis Ababa’s main thoroughfare Bole Road and you can’t help noticing the multiplying number of Chinese restaurants, distinctive illuminated Chinese characters on signs bright against the Ethiopian night and signaling Chinese interest in developing markets.

A significant Chinese presence in Ethiopia – as across much of Africa – has resulted from investment in massive infrastructure projects. But now Chinese firms are increasingly outsourcing production to African countries in the face of China’s (and Asia’s) steadily mounting average wage bill. Hence the likes of Ethiopia, which, with a population predicted to exceed 100 million by 2018, offers a massive potential factory workforce. Plus, factory wages in Ethiopia can be about US$40 a month, less than 10% the level in China. And it’s a huge market for Chinese goods.

Millions of outsourced manufacturing jobs have already moved from China to Vietnam and Bangladesh, while sub-Saharan Africa is well placed to also take advantage of this trend if the required infrastructure is put in place, observers say. In addition to Ethiopia, African countries such as Tanzania, Rwanda and Senegal are vying to become production bases for labour-intensive products.

“China is now at a stage like that of Japan in the 1960s and the four Asian Tigers in the 1980s, to begin relocating its light manufacturing to other countries because of its rapidly rising labour costs,” says Helen Hai, chief executive of the Made in Africa initiative and a United Nations industrialisation ambassador. “Africa can become the next manufacturing hub for global markets.”

Previously Hai was at the vanguard of Chinese manufacturing coming to Ethiopia when serving as vice president of Chinese footwear manufacturer Huajian Group, which in January 2012 opened a huge factory on the edge of the Ethiopian capital Addis Ababa. The factory now employs 4,000 Ethiopians, with the intention of employing 40,000 by 2022. The light manufacturing zone around its factory could eventually create 100,000 jobs. Such industrialisation, those such as Hai claim, can allow African countries to escape entrapment in the ebb and flow of the global commodities cycle. “By capturing this opportunity, Africa will achieve sustainable, dynamic and inclusive growth,” Hai says.

Chinese investment comes of age

“Now more experienced abroad, Chinese businesses can advance into operating investments, not just constructing them,” says Kai Xue, a Beijing-based lawyer and Africa expert at DeHeng Law Offices.

China’s investment stock in the manufacturing sector in Africa accounted for 15% of Chinese foreign direct investment in 2013, according to the World Bank. And at last year’s Forum on China Africa Cooperation in Johannesburg, an eye-watering $60bn of Chinese financial support – including $35bn of preferential loans and export credits – was pledged, much of it to manufacturing, part of a global shift toward focusing on economic transformation in developing countries.

“For Africa, over $100bn in roads, telecom, water, power and light industry has been financed by China over the last 15 years,” Kai says. “This lending has been a critical component of the African economic renaissance.”

Ethiopia has ambitious plans to turn the country into Africa’s biggest car manufacturer over the next 20 years. Chinese carmakers based in Addis Ababa and the northern city of Mekelle already produce around 8,000 vehicles a year from kits, assembling brands such as Geely, FAW, BYD and Lifan.

South Africa has also proved particularly popular for Chinese investment. Hisense Co., a Chinese multinational white goods and electronics manufacturer, chose to shift some manufacturing to Cape Town in 2013. Chinese carmakers FAW and Automotive Industry Holding Co. have plans to establish manufacturing plants in South Africa, while Foton Motor Group has already set up shop in Kenya. Nigeria has also seen significant numbers of private Chinese factory investors relocate from the coastal regions of the mainland such as Zhejiang, Shandong and Jiangsu.

But as more Chinese investors come to Africa they are likely to also become more discerning in their choices. “Poor energy reliability, weak transport and logistics infrastructure, and a difficult regulatory environment obliterate most of the labour wage advantages that manufacturing investors would get in a market like Nigeria,” says Elias Schulze of Africa Group, an advisory and venture capital firm focused on economic growth and investment across Africa. “There is a different and much more positive story in a market like Ethiopia, where the government has made a definitive effort to attract global manufacturing firms for the purpose of manufacturing goods.”

Infrastructure investment not going away

China isn’t giving up on infrastructure projects yet – aptly evidenced in Ethiopia, where Chinese involvement in infrastructure expansion is close to omnipresent. Even Ethiopia’s ruling party’s authoritarian one-party developmental state style of leadership is heavily influenced by China’s governance model.

Chinese banks are providing $3.4bn in funding for landlocked Ethiopia’s new 750km railway from Addis Ababa to the port in neighboring Djibouti. The line, due to open this year, is being built by Chinese contractors. Expansion of Addis Ababa’s Bole International Airport is also being financed and constructed by Chinese banks and companies, as will a planned new airport to increase capacity further. And while Ethiopia is self-funding construction of its Grand Ethiopian Renaissance Dam (GERD) – Africa’s largest upon completion – the Export-Import Bank of China is providing about $1bn in financing for a 619km transmission line from the dam to Ethiopia’s capital.

“There are concerns that lending has created too large of a debt burden for Africa, but since the borrowed sums go toward the most critical projects for economic growth, I don’t think increased debt has been much of a drawback,” Kai says.

GERD’s predicted 6,000MW of hydroelectricity generated by the abundant waters of Ethiopia’s Blue Nile could guarantee the country’s energy security, many say.

Major Chinese infrastructure projects elsewhere in Africa include the likes of the Anhui Foreign Economic Construction Company’s more than $100m expansion of Maputo International Airport northwest of the center of Maputo, the largest city and capital of Mozambique. China is also funding a $700m new airport for Khartoum in Sudan – among others around the continent.

And don’t forget Djibouti, receiving more than $12 billion of investment from Beijing for new ports and airports rising from the sands, and what is being touted as the biggest and most dynamic free trade zone in Africa being developed over the next 10 years.

Chinese investment bulldozer

But the narrative of China dominating investment in Africa oversimplifies the reality, according to some – the EU is still the continent’s largest investor.

“European companies and banks have also been doing infrastructure – there are British, French, German and Portuguese companies involved in building things across Africa,” says Deborah Bräutigam, director of the China Africa Research Initiative at Johns Hopkins University in the U.S. “So they’ve gotten the head start, it’s the Chinese who have been catching up.”

Perhaps. Either way, the Chinese certainly aren’t going about it half-heartedly. Recently China grabbed headlines by beginning construction in Djibouti of its firstever overseas military base, a means of force projection to help secure those billions of dollars of investment throughout East Africa and beyond.

But there are limits to the appeal of African countries like Ethiopia. Although Huajian stands as an apparently conspicuous success story, the bureaucratic complexity of Ethiopia makes it difficult for other companies to follow its lead. Ethiopia is ranked 146 out of 189 economies by the 2016 World Bank Group’s Ease of Doing Business survey. And true manufacturing success for Huajian will depend on trade volumes increasing, not helped by Ethiopia’s lack of membership of the World Trade Organisation. Hence, despite China’s apparent commitment to Ethiopia and Africa, neither should be taken for granted.

“The challenge for Africa is to remain an appealing place for China to lend and invest considering the launch of the One Belt, One Road initiative, which aims to direct the lion’s share of state-backed lending and investment resources toward connecting Asia and Europe,” Kai says. “Africa could become a low priority.”

This article was originally published in the DHL Delivered magazine.