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Understanding Chinese Investment in Africa 

Chinese Investment in Africa
China’s rise to economic prominence is unparalleled in modern history. In just 40 years, China has become the manufacturing center of the world, built an enviable infrastructure system and created a robust middle class by lifting 800 million people out of poverty. The regime has also expanded Chinese investments abroad, funding a wide range of projects in far-flung corners of the globe. China’s international strategy has met with skepticism from the West due to allegations of corrupt business practices and sketchy dealings between often authoritarian states. This article will explain the effects of Chinese investment in Africa specifically, exploring the impact through the perspective of the international community, China itself and the receiving African nations.

The Extent

The value of Chinese investment in Africa since 2005 has passed $2 trillion. Chinese investment has many dimensions but primarily focuses on infrastructure and resource extraction. The regime’s plan to extract and ship resources through Chinese-built infrastructure connects more foreign markets to China as part of an ambitious megaproject called the Belt and Road Initiative. In doing so, China benefits by ensuring its supply of material needed to further economic growth and receiving nations benefit through job creation and economic diversification. Additionally, Chinese entrepreneurs own over 10,000 businesses on the continent.

One can only accomplish a proper understanding of foreign influence in Africa comparatively. Chinese interests in Africa are primarily commercial, but raise alarm bells in the West due to the scale of China’s acquisition of hard assets. Meanwhile, the West has had cultural and political interests in Africa for centuries, interests that continue today through the presence of Western military bases, political boundaries and cultural footprints of language and religion.

The Benefits

The ease and effectiveness of Chinese investment have provided many benefits for African nations. From its perspective, China provides fast access to capital and prompt delivery of services and workers. Additionally, Chinese loans do not need receiving nations to meet the ethical restrictions that organizations like the IMF require. The nature of Chinese investment often produces tangible results. Infrastructure projects increase access to transportation, healthcare, education and telecommunication services for ordinary Africans. Resource extraction diversifies the economy and can immediately sell to China’s booming market, as Chinese trade to Africa generally eclipses $100 billion every year.

Outside of investment, China plays an active role in addressing poverty on the continent. In 2018, the regime approved a $60 billion aid package and currently participates in five U.N. peacekeeping missions in Africa. In general, African nations view China as a valuable ally with no history of colonialism, but also as an avenue for successful economic development.

The Concerns

While the economic benefits of Chinese investment are numerous, allegations about the regime’s business practices and intentions are of justifiable concern. The lack of accountability measures and regulatory mechanisms on the continent have led corrupt actors to hijack many Chinese-funded projects. In many cases, extraction and infrastructure markets are more concerned with connecting resource markets to China than considering the needs of the population. The influx of Chinese entrepreneurs and cheap goods have also decimated domestic industries such as the Nigerian textile market.

Additionally, Chinese investment projects often lack sustainability regulations and native Chinese laborers frequently dominate them. In fact, every million dollars of Chinese investment only creates 1.78 jobs for African citizens. Chinese lending practices have also received criticism for creating trade imbalances and debt for countries unable to pay them back in time. Finally, Chinese intentions are hard to ascertain, and as their economic influence grows, so does their ability to influence Africa’s diplomatic and political landscape.

The Solutions

Despite the shortcomings of Chinese investment in Africa, there are policy and organizational solutions actively addressing these issues. The findings of international organizations such as the U.N. and WHO can influence the state of Chinese business dealings. In particular, the Ease of Doing Business Index and WHO influence provides international awareness and transparency to Chinese investment projects. African nations have also realized the need to implement more effective regulatory mechanisms in order to combat corrupt dealings.

Additionally, nations such as Nigeria and South Africa have accepted deals from the U.S. and E.U. as a way to mediate Chinese diplomatic influence. China has also sought to improve its image, improving procedural transparency and establishing NGOs throughout Africa. The Beijing Gender Health Education Institute has opened a division in Africa, where it seeks to empower LGBTQ individuals by producing documentaries and spreading visual works. Transnational NGOs with Chinese offices such as the Bill and Melinda Gates Foundation and the “Free Lunch for Children” campaign have started operating in Africa as well.

Despite uncertainty dominating it, Chinese investment in Africa has provided undeniable benefits to ordinary Africans. Ensuring that Chinese actions receive mediation will take the concerted effort of international institutions and accountability mechanisms. With concentrated reforms and an open diplomatic dialogue, Chinese financial support will be instrumental in helping the international community alleviate global poverty.

– Matthew Compan
Photo: Flickr

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The New Frontier: China’s Investment in Africa

china's investment
For those seeking investment, look no further than the continent of Africa. While the continent has had a tumultuous couple of decades, plagued by health crises such as Ebola, and political unrest is it also gushing with economic, diplomatic, and political potential – and China is taking notice.

Government Involvement

Just last year (August 2018), President Xi of China, speaking at the Forum on China-Africa Cooperation, has pledged to invest a major sum of $60 billion in commercial loans to the African continent. This investment in Africa, as well as a plethora of other nations scattered across the Middle East, Eastern Europe and Asia, are all apart of China’s overall global strategy – what they are calling the Belt Road Initiative (BRI). Under this daring economic, political and diplomatic strategy, China is investing large sums of money to mainly developing nations as a way to not only benefit China’s economic interests but to cement its role in the world as a dominating global superpower.

A Welcoming Environment

Also, when it comes to large Chinese investments, Africa is more than welcoming. In addition to the overall loans that China is dedicating to forming some friendships, these investments, especially in infrastructure, may be a godsend. At the time of this writing, Africa has a $900 billion infrastructure deficit. The much-needed cash flow from China will not only allow many African nations to lay the groundwork for basic infrastructure projects, but it will also afford children the opportunities required to gain an education and for local businesses to trade.

In addition to the major pillars of the BRI, China is also establishing what it is calling a “Maritime Silk Road” – a chain of seaports from the South China Sea to Africa. With the construction of these ports will come: oil refineries, industrial parks, and fiber optic networks, all designed to make a trade with China easier and mutually beneficial – and thus far it seems to be accomplishing China’s goal of breathing new life into its infamous ancient Silk Road.

And while these projects are beneficial to the recipient countries, China does add that part of the developments will be helped by Chinese labor and companies, thus allowing China to take a slice of the economic cake as it were. But while many Chinese companies are profiting off BRI contracts, the projects being funded are benefiting local communities and provide steady work and cash flow to otherwise struggling areas of Africa. Economic benefits aside, this partnership is allowing many African nations to forge diplomatic relations with a world power as well.

Economic and Political Ramifications

China’s investment in Africa does, however, come with a few pitfalls. While Chinese companies become more prominent in Africa, so will “Made in China” products. This will come with some obvious knock-on effects, for example, for the last couple of decades these products have had a devastating effect on what was once a thriving South African textile industry. But, the pendulum does swing the other way as well. Ethiopia has seen positive outcomes from Chinese investments.

Investment in Africa began as an opening of windows of opportunity around the globe for China. The United States has been the worlds primary loan superpower for the last several decades – investing billions of dollars in foreign aid and development projects through USAID and starting working establishment programs in various nations. But with loans from the West coming with strings attached – mainly strict ethical standards – China saw a chance to offer billions in loans with fewer conditions.

Due to China’s willingness to loan large sums of money to nations torn apart by conflict and instability, the global community has raised concerns. These nations will eventually need to pay back these loans, and the worlds less than reliable recipients could threaten global economic stability if they default.

However, China isn’t necessarily concerned if these countries can’t pay them back, in the literal sense. In exchange for the economic clout that comes with Chinese investments, nations such as South Africa’s Djibouti are lending naval ports as a means of reciprocation – forming a “String of Pearls” which gives China a foothold in the naval Indian ocean. But while some of these loans may be risky investments on the continent of Africa, China understands the cost-benefit analysis and is treating Africa as a new frontier.

A Positive Outcome

China’s investment in Africa, while risky, may end up paying off. With Africa’s willingness to accept loans from China, and listening with open ears to China’s overtures for stronger diplomatic relations, Africa is in a good position to begin funding its own economic and development programs. Programs that will address issues of poverty, inequality, and education.

– Connor Dobson
Photo: Flickr

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Foreign Aid to Africa: The United States vs. China

Foreign Aid to Africa
President Trump’s proposed foreign aid cuts have sparked a bipartisan effort in Congress to resist them. Among the proposed budgets, foreign aid to Africa has been affected the most, expecting a 35 percent reduction. On the other side of the world, China is constantly boosting its aid package to African countries. Here is a comparison between the U.S. and China’s foreign aid to Africa over the years.

In the past decade, U.S. foreign aid has maintained at a steady level of $32 billion distributed over 200 countries. The Official Development Assistance (ODA) focuses on three regions: Asia, Europe and Africa. From 1980-2012, almost $120 billion went to sub-Saharan countries like Sudan, Ethiopia, Kenya and Congo.

While the overall ODA budget underwent a 17-fold increase from 1960 to 2006, aid to sub-Saharan Africa increased by almost 3,000 percent, from $211 million to $5.6 billion. The U.S. gave out $97.67 billion over 18 years in ODA to sub-Saharan Africa, with infrastructure projects (48 percent of total aid) and humanitarian aid (26 percent) being the top priorities. The health sector was given $6 billion, the agriculture sector received $4.2 billion and $3.5 billion was committed to education.

China has generated tremendous impact on the aid landscape in Africa since its rapidly increased activities. Unlike countries in the Organization of Economic Cooperation and Development, China does not officially disclose its aid information. In a research published recently, AidData, a research lab at William & Mary, claimed China committed $350 billion to foreign aid between 2000 and 2014, running close to the U.S. total of $394.6 billion.

From $210 million in 2000 to $3 billion in 2011, Chinese investment in foreign aid to Africa experienced a dramatic increase. By 2009, China gave about RMB 250 billion of foreign aid to the world, with almost half (45.7 percent) of the total Chinese aid going to African countries.

Driven by natural resources and its own international economic development agenda, China drew an obscured line between investment and development assistance. Angola, Ethiopia, Nigeria, Sudan and many other countries rich in natural resources like oil, gas and minerals are on the top recipient list of Chinese foreign aid.

In terms of aid priorities, like the U.S., China committed aid to infrastructure development, but with different focuses. Between 2000 to 2013, nearly 60 percent of the total aid went to transportation ($29 billion), energy ($25 billion) and communication ($6.9 billion). After China’s arrival in Africa in early 2000, U.S. foreign aid also shifted to prioritize health and education. U.S. spending on the top three sectors for Chinese aid are only at 2.6 percent, 0.8 percent and 0.07 percent of the total ODA amount.

The emergence of China as a major player in the development of African countries did heat up the competition with the U.S., especially in terms of using foreign aid as a venue to strengthen the donor’s power among developing countries.

Chinese development assistance and other transcontinental infrastructure projects to Africa, like $900 billion to the One Belt One Road Initiative, are growing, but the Trump administration aims to slash the foreign aid budget in 2018, especially the aid to Africa, citing corruption as the main reason. The proposed cut encountered fierce opposition in Congress and was deemed simplistic and arbitrary by Senator Patrick Leahy, the Senate Appropriations Committee’s top Democrat.

On the other hand, China is seeking to establish an international development cooperation agency to coordinate its foreign aid, which “gives China an advantage over the U.S. in the approach to managing foreign aid to Africa,” said China Daily in an editorial on Secretary Rex Tillerson’s visit to China.

Congress will continue to challenge Trump’s proposed cuts and the fight against poverty in Africa will continue.

– Chaorong Wang

Photo: Flickr