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China’s impact on Africa – the outcome of the cooperation

With the beginning of 2016, Chinese officials released updated data on China’s trade with Africa. There is no surprise that, in the day of a slowing economy, the trade fell by almost 40% in 2015. For Africa, China is the biggest single trading partner, and the continent is a recipient of large-scale investments that aim to boost the African economy. These developmental projects are a result of high demand for natural resources. The current situation of China strongly affects African economies and their currencies. Recently, the value of currencies is falling rapidly[1]. The spokesman of China customs office, Huang Songping, announced that African exports to China summed up to $67 billion, which means that the exports declined by 38% comparing to 2014. The demand for African metals, minerals, and oil have decreased sharply, which resulted in price cuts of commodities around the world. What is more is that amount of Chinese money that has been pumped into African continent seems to be smaller, just like direct investments, which were reduced by 40% in the first half of 2015. On the other hand, the demand for Chinese goods in Africa is increasing. In the last year, China has sent $102 billion worth of goods to the continent, which is 3.6% more than the previous year. The question is: What are the advantages and disadvantages of the cooperation between China and Africa as well as the economic prospects for the next years[2]?

China, as the biggest player in the African continent since 2009, has pledged to invest $60bn in the next three years in various development projects in Africa[3]. Chinese expansion in the region initiated a debate over whether African countries are beneficiaries of this help or are simply being used. Some voices, like Noble laureate Wole Soyinka, think countries have the right to seek and seize the best agreements they can have regardless of the country with which they are signed. One must bear in mind not to substitute a colonial master with another. Some people are concerned about the intrusive expansion of China in Africa. President Stephen Hayes from the Corporate Council on Africa wrote that the dominance of China in the continent ‘has the feel of the Borg in Star Trek assimilating all, or Amazonian army ants, conquering everything in their path[4]. Going further, the Chinese exploitation of not only natural resources but also low-skilled workers in the continent casts shadows on their intentions in Africa. However, it seems that no better commercial partner exists for poor and underdeveloped African countries. There is no doubt that even this solution offered by China is far less advantageous for Africans, because of the simple reason. In many cases, Chinese bosses prefer to hire Chinese citizens rather than hire indigenous people[5]. Former president of Zambia, Michael Sata, was the public opponent of Chinese interference in the economy of his country. He condemned China’s role in the continent, saying that China with its investments is in no way an added value for the economy of the country. China’s involvement in the country’s issues didn’t bring any improvements to the citizens. Sata said, „Instead of creating jobs for the local workforce, they bring in Chinese workers to cut wood and carry water. We do not want Zambia to be a dumping ground for their human beings[6].”

On the contrary, there is no doubt that increasing the role of China in Africa has reduced poverty and brought a faster growth of economies. Furthermore, the demand for natural resources improved the conditions of trade and caused higher export volumes. Sino-African relations stretch across finance, health and education collaboration, as well as general aid[7]. It is worth mentioning that since 2010, China has been present across the region and engaged in various projects. It is worth to mention that, in the last several years, China was the largest source of FDI in Africa’s 54 countries. Of course, there is a series of tangible evidence that China contributes to the development of the Dark Continent. For instance, the deal made by the Democratic Republic of the Congo (DRC) and Sicomines, a Chinese corporation, resulted in the exchange of the mineral rights in Katagna for infrastructure investments. DRC has been among the poorest countries in the world with scarcely developed access to drinking water and the lowest rate of per capita electrical consumption, so the projects in the critical infrastructure have been prioritised[8]. Another example in favor of the Chinese giant contribution to the development of the continent is the investment in the new roads and railways funded by China’s Export-Import Bank. Going further, China’s activity in the field of natural resources, with investment in oil rigs and copper mines in countries like Angola and Zambia, might be a game-changer for all of Africa. The airports built by China in Addis Ababa, Luanda, and Kinshasa are thriving thankfully to the Chinese language[9]. It is worth to mention that in spite of these examples, in the last several years, more than 2,000 Chinese enterprises decided to invest in the region[10]. The investments are mostly made in the construction, manufacturing, and mining sectors. It must be noted that Chinese participation in Africa isn’t a problem except for the size of Chinese humanitarian aid. If we compare the aid provided by Western countries with that provided by China, it is noticeable that resources from the West come with conditions linked to the progress of human rights and gradual democratic transformations whereas China’s support does not[11]. A study conducted by AidData proves that African leaders favor certain tribes depending on their ethnic ties, the aid that their favored citizens receive being three times bigger than that for the rest of the population. More frightening is the fact that political violence in beneficiary countries is rising whereas the countries that receive aid from the West are not following this trend[12]. Some people say that the problem is not that China is subsidizing violent countries, but providing aid unconditionally gives governments a free hand to commit crimes. This unrestricted aid is very harmful, so we ought not to support Chinese efforts in Africa publicly[13].

From an economic perspective, the effects of the Chinese slowdown include the contraction of the economies of China’s main African partners, like South Africa, Angola, Zambia, Republic of Congo, and Equatorial Guinea. These countries account for more or less 70 percent of all Chinese imports from Africa[14]. The slower pace of development of China is more visible in infrastructural projects, which are supported by Chinese lending. Uganda was meant to be one of the biggest Chinese commercial investments in Africa. On the western edge of the lake, in 2008, China created the Lake Victoria Free Trade Zone. Investment, which is a partnership established by one of the largest Chinese companies and Ugandan investors, should cover proposed manufacturing facilities, solar-powered airport and distribution hub and also the new agribusiness and homes that would create an innovative, smart city. The Chinese government also pledged $1.5 billion to invest in the poorest parts of the country. Currently, these courageous promises are difficult to fulfill. A typical problem for Chinese companies is that they assume that it all works like in their country. Back at home, the company comes in, makes an arrangement with the local government, and the government delivers but not in Africa. The firms discover that the promises made by the governments are not as dependable as they think. Usually, African governments don’t keep the terms of the agreements. It takes them years to build an infrastructure, or the public land might be used by squatters, who can occupy it for generations. It also turns out that private land can be sold to people who do not own it. The main problem is that local officials do not approve deals made by national politicians[15]. One thing is certain. China does not build a unique strategy that would allow the country to make the projects in Africa more effective than their Western counterparts. That might be a relief for some Western politicians who used to predict that the role of China in Africa would be imperialistic, but for desperate African governors, it brings a dose of a disappointment. The slowing pace of the Chinese economy and the newly started activities of new players in Africa might lead to the end of China’s outsized foreign direct investment being transferred to the continent. Difficulties with the projects in Kordofan located in the southern part of Sudan or Ethiopia’s Ogaden region are forcing China to recalculate a degree of risk that it is willing to take in Africa. Whether the economy is shrinking or the investments are unsuccessful, China will persist as a main player on the continent[16].

References

BBC. (2016). Africa-China exports fall by 40% after China slowdown. Available: http://www.bbc.com/news/world-africa-35303981. Last accessed 21st of March 2016.

BBC. (2015). China pledges $60bn to develop Africa. Available: http://www.bbc.com/news/world-africa-35005048. Last accessed 21st of March 2016

David Volodzko. (2015). China and Africa: The Great Debate. Available: http://thediplomat.com/2015/12/china-and-africa-the-great-debate/. Last accessed 21st of March 2016.

The Telegraph. (2014). Michael Sata – obituary. Available: http://www.telegraph.co.uk/news/obituaries/11195960/Michael-Sata-obituary.html. Last accessed 21st of March 2016.

Valentina Romel. (2015). China and Africa: trade relationship evolves. Available: https://next.ft.com/content/c53e7f68-9844-11e5-9228-87e603d47bdc. Last accessed 21st of March 2016.

Dreher, Fuchs, Hodler, Parks, Raschky, Tierney. (2014). „Aid on Demand: African Leaders and the Geography of China’s Foreign Assistance”. Available: http://aiddata.org/sites/default/files/wps3_aid_on_demand_african_leaders_and_the_geography_of_chinas_foreign_assistance.pdf. Last accessed 21st of March 2016.

The Economist. (2015). Not as easy as it looks. Available: http://www.economist.com/news/middle-east-and-africa/21678777-western-worries-about-chinas-burgeoning-influence-africa-may-be-overblown-not. Last accessed 21st of March 2016.

David Shinn. (2012). China’s Investments in Africa. Available: https://africaupclose.wilsoncenter.org/chinas-investments-in-africa/. Last accessed 21st of March 2016.

Aaron Ross. (2015). China’s ‚infrastructure for minerals’ deal gets reality-check in Congo. Available: http://www.reuters.com/article/us-congodemocratic-mining-china-insight-idUSKCN0PI1UB20150709. Last accessed 21st of March 2016.

[1] BBC. (2016). Africa-China exports fall by 40% after China slowdown. Available: http://www.bbc.com/news/world-africa-35303981. Last accessed 21st of March 2016.

[2] Ibidem.

[3] BBC. (2015). China pledges $60bn to develop Africa. Available: http://www.bbc.com/news/world-africa-35005048. Last accessed 21st of March 2016.

[4] David Volodzko. (2015). China and Africa: The Great Debate. Available: http://thediplomat.com/2015/12/china-and-africa-the-great-debate/. Last accessed 21st of March 2016.

[5] Ibidem.

[6] The Telegraph. (2014). Michael Sata – obituary. Available: http://www.telegraph.co.uk/news/obituaries/11195960/Michael-Sata-obituary.html. Last accessed 21st of March 2016.

[7] Valentina Romel. (2015). China and Africa: trade relationship evolves. Available: https://next.ft.com/content/c53e7f68-9844-11e5-9228-87e603d47bdc. Last accessed 21st of March 2016.

[8] David Shinn. (2012). China’s Investments in Africa. Available: https://africaupclose.wilsoncenter.org/chinas-investments-in-africa/. Last accessed 21st of March 2016.

[9] Aaron Ross. (2015). China’s ‚infrastructure for minerals’ deal gets reality-check in Congo. Available: http://www.reuters.com/article/us-congodemocratic-mining-china-insight-idUSKCN0PI1UB20150709. Last accessed 21st of March 2016.

[10] The Economist. (2015). Not as easy as it looks. Available: http://www.economist.com/news/middle-east-and-africa/21678777-western-worries-about-chinas-burgeoning-influence-africa-may-be-overblown-not. Last accessed 21st of March 2016.

[11] David Volodzko. (2015). China and Africa: The Great Debate. Available: http://thediplomat.com/2015/12/china-and-africa-the-great-debate/. Last accessed 21st of March 2016.

[12] Dreher, Fuchs, Hodler, Parks, Raschky, Tierney. (2014). „Aid on Demand: African Leaders and the Geography of China’s Foreign Assistance”. Available: http://aiddata.org/sites/default/files/wps3_aid_on_demand_african_leaders_and_the_geography_of_chinas_foreign_assistance.pdf. Last accessed 21st of March 2016.

[13] David Volodzko. (2015). China and Africa: The Great Debate. Available: http://thediplomat.com/2015/12/china-and-africa-the-great-debate/. Last accessed 21st of March 2016.

[14] Valentina Romel. (2015). China and Africa: trade relationship evolves. Available: https://next.ft.com/content/c53e7f68-9844-11e5-9228-87e603d47bdc. Last accessed 21st of March 2016.

[15] Ibidem.

[16] The Economist. (2015). Not as easy as it looks. Available: http://www.economist.com/news/middle-east-and-africa/21678777-western-worries-about-chinas-burgeoning-influence-africa-may-be-overblown-not. Last accessed 21st of March 2016.

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