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China’s Investments in Africa: striking a delicate balance.
By admin July 24, 2018

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China has emerged as Africa’s largest trading partner, providing a market for the continent’s energy and minerals. This week, the Chinese President Xi Jinping embarked on a four-leg tour of the African continent as part of China’s Belt and Road Initiative. President Xi has scheduled visits to Senegal, Rwanda, South Africa, and Mauritius all in an effort to consolidate China’s influence on the significant growth opportunities in Africa. Launched in 2013 as “one belt, one road,” the Belt and Road Initiative is the signature policy of President Jinping to boost trade and economic integration among the countries in the initiative through investments in roads, pipelines, ports, communication networks and other such infrastructure that promotes connectivity.

This latest visit by the Chinese President to Africa has reopened the debate on the role of China’s investments in Africa and what these investments mean for the continent. According to AidData Project (a research lab at the College of William & Mary), China has financed more than 3,000 critical infrastructure projects in Africa through an estimated $86 billion in commercial loans to African governments and state-owned enterprise between 2000 and 2014. Furthermore, in 2015 at the Forum on China-Africa Cooperation (FOCAC) held in Johannesburg, South Africa, China pledged US$60 billion to African states.

Proponents of China’s investment in Africa argue that China is a significant source of Foreign Direct Investment (FDI) in Africa. They assert that China offers concessionaire development loans to resource-rich African countries, invests in agriculture and has developed special trade and economic zones on the continent without interfering in domestic affairs. Those critical of China’s investments in Africa, however, suggest that the move by China is symptomatic to neocolonial land grab, in which companies acting as proxies for the Chinese state extract minerals in return for infrastructure and finance that will saddle governments with massive debts.

A 2017 McKinsey report revealed that there are more than 10,000 Chinese-owned firms operating in Africa, with about a third of who are involved in manufacturing and that Chinese Investment in African increasingly contributes to Job creation, skills development, and transfer of new technologies, practices more generally associated with Western business norms. Hence, while there is validity to the arguments on both sides, Africa can benefit from the best of both worlds by “striking a delicate balance” between attracting the right types of investments/financing not only in exchange for granting resources rights to China, but also ensuring that Chinese private capital is channeled to manufacturing and sustainable agricultural projects in which African entrepreneurs and institutions can have an increasing equity participation.

For Further Reading:

China’s President Xi underlies Africa ties in Senegal visit

Where Africa Fits into China’s Massive Belt and Road Initiative

Council on Foreign Relations: China in Africa

Competing in Africa: China, the European Union, and the United States

China Pledged to invest $60 billion in Africa. Here’s what it means

Chinese Investment in Africa: Beijing’s Testing Ground

McKinsey & Co.: The Closest look yet at Chinese economic engagement in Africa

 


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