"In this study Chinese investment in Ethiopia is investigated. The impact of trade, aid and related relations between the two countries are investigated in terms of its effect on Chinese investment in Ethiopia. In the last five years it was found that the Ethio-Chinese relations has grown quite strongly both in terms of trade and investment. This is found to be, in particular, important in the areas of road construction, supply of manufactured goods from China, telecommunications and installation of big electric power stations by Chinese companies as well as engagement in Chinese firms in the Ethiopian manufacturing sector. The success of Chinese firms in this area is explained by the political ties their government created with the government of Ethiopia, low initial bidding price offered by Chinese firms in bidding for such projects, the self financing options (sometimes referred to as ‘vendor financing’) that they give to the Ethiopian government owing to the support they get from the Chinese government, as well as the relatively lower level of skilled Ethiopian personnel (in terms of negotiation, technical and managerial skill) as well as poor institutional capability of the Ethiopian experts in various ministries who are dealing with the Chinese firms, are few among many. Chinese firms cost and technological advantages over Ethiopian counterparts are also found to be important for Chinese investment success in Ethiopia."