China’s Economic Impact on Africa
Summary and Keywords
China’s economic impact on Africa in the 21st century has been enormous. China became Africa’s largest trading partner in 2009 and has subsequently widened the gap with Africa’s second largest trading partner. China is Africa’s largest bilateral source of loans and an important provider of Organisation for Economic Co-operation and Development (OECD)-equivalent aid, although well behind the European Union and the United States. Annual foreign direct investment flows by Chinese companies are growing and are now in the same league as companies from other major investing nations. Increasingly, African leaders are focusing their economic relationships on China and, because of China’s economic success, some of them are also looking to China as an economic and political model. The future in Africa of China’s Belt and Road Initiative and the use of the renminbi (RMB) as an international currency are less clear.
China’s influence on African economies comes with challenges. China has developed a significant trade surplus with Africa. Although resource-rich African countries have sizable trade surpluses with China, most African countries, especially the resource-poor ones, have trade deficits, some of which are huge. The influx of inexpensive Chinese products is also stifling Africa’s ability to produce similar goods. African governments welcome Chinese loans, which are usually used for infrastructure projects, but there are signs these loans are contributing to a debt problem in an increasing number of countries. Most Chinese aid to Africa consists of the concessionary component of these loans. Small Chinese traders have flocked to Africa, competing head-to-head with African counterparts. This has led to growing antagonism with African market traders, although African consumers welcome the competition.
While Western countries collectively are much more important to African economies than is China, Beijing has become the single most important bilateral economic partner in a number of countries and is challenging the United States and Europe for economic leadership across the continent. China’s most significant competition in the coming years may be less from the United States and other Western and Western-affiliated countries such as Japan and more from developing countries such as India, Brazil, the Gulf States, Turkey, and Indonesia.
The rapid growth, especially during the 21st century, in all aspects of China’s economic engagement with Africa’s 54 countries has been one of the most significant developments on the continent. This expansion was driven to a considerable degree by China’s need to obtain oil, minerals, and other raw materials to sustain its domestic economic growth (Taylor, 2016, p. 193). As a result, there was a remarkable increase in trade, although by dollar value China–Africa trade peaked in 2014 and has been in decline since (IMF, 2017, pp. 160–161). Many African countries have long-standing and large trade deficits with China. This raises questions about the sustainability of the trade relationship. China’s aid to Africa has continued to grow modestly. Chinese outward direct investment and financing, mostly for infrastructure projects, vary from year to year in Africa. They continue to be significant but have witnessed a softening since 2014.
China’s increased economic engagement and influence in Africa has resulted in numerous benefits and challenges for both Africa and China. One of the issues going forward is the degree to which the economic relationship will continue to be driven largely by China’s desire to obtain African raw materials. This has implications for the future of industrialization in Africa and the relative emphasis that China places on support for African manufacturing versus modernizing agriculture. As Africa attracts trade and investment from a growing list of emerging countries, China will face a new and different kind of competition. Finally, there is an ongoing discussion in both Africa and China about the applicability of the Chinese economic model. The outcome of this debate has important implications for Africa’s relations with the rest of the world.
From the Chinese side, this interaction is occurring in the context of Xi Jinping’s global vision of a “community of shared future” enunciated at Davos in 2017. This is China’s effort to improve the existing international order by encouraging cooperative security, common development, and political inclusiveness. It is based on the belief that China is prepared to learn from others while upholding its own principles and adhering to its own path (Fu, 2017).
At the continental level, China’s interaction is coordinated by the Forum on China–Africa Cooperation (FOCAC), which meets every 3 years at the ministerial or summit level. The 7th FOCAC met in Beijing in September 2018 when President Xi Jinping pledged a financing package of $60 billion. It consisted of $15 billion in grants, interest-free loans, and concessional loans; $20 billion in credit lines; a $10 billion special fund for development finance; a $5 billion fund for financing imports from Africa; and encouragement to Chinese companies to invest at least $10 billion over the next 3 years. This package follows a $60 billion finance package announced at the 6th FOCAC meeting in Johannesburg in 2015. Although China has not detailed publicly how this funding has been distributed, Xi Jinping said at the 7th FOCAC that the money announced in 2015 “has been either delivered or arranged” (Xi, 2018).
China–Africa Trade and the Role of Small Traders
Growth of Trade and Traders
China–Africa trade barely registered from 1949, when Mao Zedong took power in China, until the late 1990s. The beginning of China’s growth in trade with Africa coincided with its “Going Out” strategy, which was initiated in 1999 to encourage outward direct investment. Throughout the 21st century, trade increased dramatically except for a dip during the 2008–2009 global financial recession and another decline that began at the end of 2014 (Shinn & Eisenman, 2012, p. 101). China surpassed the United States in 2009 as Africa’s most important trading partner and continues to hold and extend the lead over Africa’s number two trading partner, India. The value of Africa’s exports to China have historically about equaled its imports from China. Africa even had modest trade surpluses with China from 2011 through 2014. This pattern turned to an African trade deficit beginning in 2015 due to the sharp fall in oil and commodity prices and a slowdown in China’s economy. About 85% of Africa’s exports to China are raw materials. In 2016, Africa exported $57 billion worth of goods to China, but imported $95 billion worth from China (IMF, 2017, pp. 160–161).
Any discussion of China–Africa trade needs to take into account China’s trade with individual African countries. In 2016, well over half or $36 billion worth of Africa’s exports to China originated in South Africa and Angola while half of China’s exports to Africa went to five countries: South Africa, Egypt, Nigeria, Algeria, and Kenya. Resource-rich African countries tend to do well in the trade relationship with China while resource-poor countries struggle. It is also important to keep China–Africa trade in perspective. Africa accounts for less than 5% of China’s global trade, although China accounts for about 15% of Africa’s global trade.
There has also been a growth of small Chinese traders residing in Africa and communities of African traders in China who contribute in a modest way to China–Africa trade. Numbers are elusive for both communities. There are an estimated one to two million Chinese living throughout Africa but only some of them are small traders; the largest group consists of contract laborers (Park, 2016). Many of the estimated one-half million Africans residing in China are traders. They are concentrated in Yiwu, Shanghai, Beijing, Hong Kong, Macau, and especially Guangzhou, where they are estimated to number 100,000 (Bodomo, 2015, pp. 1–3; Haugen, 2018).
The main sources of China–Africa trade statistics are IMF Direction of Trade Statistics, UN Comtrade, China’s Ministry of Commerce, and numbers released by individual African governments. The statistics from these sources rarely agree; while they are frequently similar, the bilateral trade figures are sometimes widely different.
Positive Impacts for Africa
The one thing Africa has in abundance that the rest of the world, especially China, wants is natural resources. As long as oil and minerals are plentiful, the African countries that have natural resources want to sell them. China purchases about 22% of its imported oil from Africa and even larger percentages of select minerals such as cobalt (Liu, 2017, pp. 35–40). China’s global purchases of raw materials help keep commodity prices high. This is advantageous to those African countries that are commodity exporters. During periods of high African commodity exports to China, a positive effect occurs on the GDP growth rate of Africa’s exporting countries, which promotes technology improvement (Borojo & Yushi, 2016, pp. 425–426). This, in turn, increases African employment and personal income. To the extent that China’s manufactured and value-added products are of reasonable quality and low cost, the African consumer benefits.
African traders in China and Chinese traders in Africa increase the flow from China to Africa of manufactured goods, often at lower cost than locally produced products or those imported from other countries. More competition benefits the African consumer. Chinese traders are sometimes willing to serve rural African markets that are underserved by African traders. For those Africans doing business from China, the trade provides another employment opportunity.
Negative Impacts for Africa
There are huge disparities in China’s bilateral trade with African countries. In 2016, about 10 African oil–mineral exporting countries had trade surpluses with China while 42 had trade deficits, most of them large. Only two African countries had essentially balanced trade with China (IMF, 2017). Some of those countries with large annual trade deficits are getting concerned about the trade relationship, and a few African leaders are beginning to comment publicly on the situation. To its credit, China has tried to rectify this problem by extending zero-tariff treatment to 30 of Africa’s least developed countries (Otenia, 2017, p. 40). Unfortunately, this effort has not significantly increased Chinese imports from those African countries lacking natural resources. Beyond raw materials, Africa just does not have much that China wants to buy. Those African countries that import oil are also affected negatively to the extent that Chinese oil consumption drives up the global price.
Another important concern is the impact that inexpensive Chinese imports have on the ability of similar African-manufactured products to compete. Cheap Asian textiles exported to Africa resulted earlier this century in the closure of about one third of Africa’s textile industry. Chinese-made AA batteries, for example, sell for 67% less than similar batteries made in Cameroon, depressing sales of the local product in Cameroon and limiting its ability to export (Adekunle & Korzun, 2017, pp. 41–42). There are also complaints about unfair Chinese trade practices, including dumping, shoddy or adulterated Chinese products, and textiles using counterfeit African designs and made with Africa labels (Dawit, 2015, pp. 61–66; Getahun, 2017, p. 7). Finally, there is the potential for trade dependency with China, which has negative implications for African interregional trade (Casanova & Garcia-Herrero, 2016).
Chinese traders in Africa often compete head-to-head with African traders, resulting in different business and work ethic practices. There are growing numbers of complaints from Africans that the Chinese should not be allowed to sell in the marketplace; several African governments have begun to crack down on “foreign” (read Chinese) traders. African traders in China complain that it is harder for them to do business in China than it is for the Chinese to do business in Africa. For example, the African community in China routinely faces visa renewal issues.
China’s Direct Investment and Entrepreneurs in Africa
Growth of China’s Direct Investment and Entrepreneurs
Calculating China’s overseas direct investment (ODI) in Africa is more of an art than a science. Organizations that track China’s ODI stock and annual flows to Africa use wildly different numbers, although the trend lines are similar. The primary reasons for the different statistics are a result of different definitions of ODI, exclusion of ODI under a certain minimum, how the data are captured, and whether announced ODI is followed up to determine if it actually occurred. Official Chinese statistics tend consistently to use the lowest estimates, $40 billion of ODI stock in Africa as of 2016. The China Global Investment Tracker, a joint initiative of the Heritage Foundation and the American Enterprise Institute, offers numbers that are more than twice as high as official Chinese totals. As of 2017, the Global Investment Tracker put Chinese ODI stock in Africa at $83 billion. The official Chinese figure only records ODI that is reported to the government. It does not capture Chinese ODI to Africa that passes through tax havens such as Hong Kong, Macao, the British Virgin Islands, and the Cayman Islands. The Global Investment Tracker does follow ODI that goes through tax havens, but it excludes any investment less than $100 million. With all of the attention given in recent years to China’s direct investment in Africa, it is important to remember that it accounts (using the official Chinese government figure) for only about 5% of Africa’s global ODI stock.
Chinese ODI stock in Africa was almost non-existent at the end of the 20th century, and then in about 2005, it began to grow significantly. In recent years, flows of ODI to Africa have been running at about $3 billion annually according to China’s official statistics. As of 2015, Chinese ODI stock in Africa was invested by dollar value in the following sectors: mining and oil 28%, construction 27%, manufacturing 13%, financial services 10%, scientific research and technology services 4%, and other sectors 18% (Eom, Hwang, Atkins, Chen, & Zhou, 2017, p. 3). A study by McKinsey & Company estimates there are 10,000 Chinese companies, the overwhelming majority being private, engaged in Africa in the following sectors: manufacturing 31%, services 25%, trade 22%, construction and real estate 15%, and other sectors accounting for the remainder (Sun, Jayaram, & Kassiri, 2017, pp. 29–30).
Large state-owned enterprises have much larger dollar investments in oil, mining, and construction while the more numerous smaller private companies focus on manufacturing, services, and trade, thus accounting for the percentage differences. The top recipients of Chinese ODI are Kenya, Nigeria, Zimbabwe, Zambia, and South Africa (Atkins, Brautigam, Yunnan, & Hwang, 2017, p. 4). Chinese companies have also faced some challenging situations in Africa: the China National Petroleum Corporation (CNPC) invested billions in Sudan, where it had to operate during a civil war; the independence of South Sudan, which received 75% of Sudan’s producing oil fields; and then civil war in South Sudan. China Sonangol came under scrutiny for unfulfilled promises and opaque deals in Zimbabwe and Angola (Morrissey et al., 2011).
Positive Impacts for Africa
Most countries actively seek foreign direct investment, which is widely seen as positive. China’s ODI to Africa is no exception. To the extent that China–Africa trade is good for Africa, China’s ODI plays a vital role in increasing Chinese exports to Africa and imports from Africa, especially oil and raw materials (Kabia, Ji-Zhong, Yuan, & Dumbuya, 2016). Most studies dealing with the employment impacts of Chinese ODI in Africa conclude it has led to significant job creation, technology transfer, improvement of management techniques, and performance cultures that benefit African managers (Sun et al., 2017, pp. 42–43; Munalula & Matildah, 2016, p. 104). Chinese companies have been especially active in promoting renewable energy, especially solar and wind, in Africa (Wei & Power, 2017).
Negative Impacts for Africa
While China’s ODI in Africa has been mostly positive, there are criticisms. China has signed at least 35 bilateral investment treaties with African countries, but studies suggest they may not be fulfilling their stated goal of promoting overseas investment (Cotula, Xiaoxue, Qianru, & Peng, 2016, p. 8; Ofodile, 2013, pp. 206–207). One study goes so far as to suggest that the bilateral investment treaty program is outdated, incoherent, and appears to be serving no meaningful purpose (Won, 2016, pp. 175–176).
Some Chinese companies have developed a reputation for encouraging poor health and safety standards, especially in mining operations, ignoring local labor laws, and paying low wages. Cultural and work ethic differences between Chinese managers and African workers have resulted in disagreements. Although Chinese managers put African corruption at the top of their list of concerns, African leaders also complain about corruption by Chinese businesses. The language barrier hinders effective Chinese–African communication (Munalula & Matildah, 2016, pp. 105–106; Muriithi, 2017, pp. 10–11; Sun et al., 2017, pp. 65–66). Chinese companies continue to face criticism for the manner in which they handle environmental issues, although the government of China has made serious efforts to encourage its companies, especially state-owned companies, to improve their practices (Shinn, 2016).
China’s Aid to Africa
Management and Focus of China’s Aid
While China–Africa trade statistics are readily available but inconsistent and China’s direct investment numbers in Africa depend on who does the counting, the amount of China’s aid allocated to individual countries is a state secret. There is some agreement on China’s annual aid allocations to the entire continent in recent years. China’s State Council announced that from 2010 to 2012, China provided $14.41 billion in aid globally, with 52% going to Africa (State Council, 2014; Kitano, 2016). For this 3-year period, that suggests that Africa received about $2.5 billion annually. Subsequent analyses that use the Organisation for Economic Co-operation and Development (OECD) definition of aid suggest this annual flow to Africa is about right. Some analysts report significantly higher aid flows to Africa, but they appear to include financing that does not qualify under the OECD definition of foreign aid (Sun et al., 2017, p. 23). Only about 23% of China’s overseas development program is financed by aid that meets the OECD definition; the bulk of it is considered other official financing, which is discussed in the section “China’s Loans and Winning of Infrastructure Contracts” (Dreher, Fuchs, Parks, Strange, & Tierney, 2017, p. 27).
China’s aid comes in the form of grants (usually turnkey construction projects, humanitarian aid, or tangible goods), interest-free loans, and concessionary loans, which account for most of the aid (State Council, 2014). As is the case with China’s ODI, its aid to Africa is linked to an increase in trade with Africa. Lacking political conditionality except for insistence on the “One China” principle, larger African recipients of Chinese aid correlate with the importation of more Chinese products and exportation to China of more natural resources (Ailan & Bo, 2017, pp. 22–23; Shajalal et al., 2017, p. 5). There tends to be a close connection between China’s aid and Chinese business. It is instructive that until 2018, the Ministry of Commerce (MOFCOM) managed foreign aid grants and interest-free loans. In 2018, China created a new bureau for international development to integrate the aid responsibilities of MOFCOM and the Ministry of Foreign Affairs. China’s Export-Import Bank continues to provide concessional loans. The Ministry of Finance is in charge of China’s multilateral aid, including contributions to the World Bank and UN aid agencies (Carter, 2017, p. 5; Denghua & Smith, 2017, pp. 2332–2338). Studies on China’s Agriculture Technology Demonstration Centers emphasize that they combine aid and business in the belief that a profit-driven business is a more sustainable way of engaging in agriculture (Lu, Harding, Anseeuw, & Alden, 2016, pp. 27–28; Zhang, Zheng, Liu, Li, & Jingyi,2016, p. 4; Xiuli, Xiaoyun, Qubo, Lixia, &Mukwereza,2016, p. 89).
Although there are wide fluctuations from year to year, China’s humanitarian aid continues to increase. Globally China has never risen above the 19th largest donor of humanitarian aid, and it tends to focus on one or two major crises each year such as the 2011 food crisis in East Africa and the 2014 Ebola crisis in West Africa. Humanitarian assistance constitutes only 2% of its overseas aid and gives priority to those countries such as Kenya and Ethiopia, with which it has close political relations (Hirono, 2018, pp. 15–18).
Positive Impacts for Africa
China’s OECD-equivalent aid to Africa responds to requests from African governments and has generally been well received. African leaders are especially grateful that it comes without political conditions and they often make invidious comparisons with Western aid conditionality. China gives African governments an alternative source of aid and the ability to bargain with or even turn down aid from Western countries (Xiaojun, 2017, p. 217). China also has a reputation for minimizing red tape and completing projects quickly. A study by AIDDATA found that Chinese aid boosts economic growth in recipient countries and that it does not inhibit the economic growth effects of Western assistance (Dreher et al., 2017, p. 26; Swedlund, 2017, pp. 407–408). Contrary to common belief, another study concluded that Chinese development finance in Africa does not systematically target more authoritarian countries (Broich, 2017, pp. 34–35).
Negative Impacts for Africa
If African governments welcome the absence of political conditionality, civil society organizations in some African countries regret that Chinese aid, unlike much Western aid, does not encourage better human rights practices and more democracy. One must also be careful with the argument that China imposes no political conditionality. If an African government were, for example, to criticize strongly China’s policy in Tibet, the South China Sea, or take exception to its human rights practices, there would be pushback and probably a cut or even elimination of its aid program. Hence, African governments do not criticize internal Chinese policies even if they were inclined to do so. In addition, China does impose economic conditionality. China ties nearly all of its aid projects and loans to construction by Chinese companies and the use predominantly of Chinese materials. One study in a journal whose managing editor was based in China was mysteriously retracted after publication. It concluded that Chinese aid projects tended to favor the birth regions of African leaders, who earmark substantially more resources to their home constituency, even to the detriment of regions that face greater economic need (Omoruyi, 2016).
China’s Loans and Winning of Infrastructure Contracts
China as Africa’s Builder
China has been indisputably the single most important builder of infrastructure in Africa since the beginning of the 21st century. In some cases, Chinese financial institutions provide the financing for the project, while in others the financing is provided by international financial organizations and African governments where Chinese construction companies win the contract. Chinese companies are well ensconced in Africa and often willing to take a lower profit margin. As a result, they compete effectively against companies from other nations. China gets the credit for building roads, dams, ports, and railways even when it has no role in financing. In 2015, for example, gross annual revenue of Chinese contractors in Africa was almost $55 billion. Algeria, Ethiopia, Angola, Kenya, and Nigeria accounted for about 48% of all Chinese construction revenue in Africa that year (Atkins et al., 2017, p. 5).
At the same time, China has in recent years provided more financing to Africa than any other single country (Sun et al., 2017, pp. 23–24). The primary funding sources have been the Export-Import Bank of China, the Industrial and Commercial Bank of China, and the China Development Bank. From 2012 through 2016, Chinese infrastructure financing in Africa averaged $11.5 billion annually but ranged from a high of $21 billion in 2015 to a low of $3 billion in 2014. The principal sectors were transportation and energy (ICA, 2017, p. 57). The primary African beneficiaries of Chinese financing have been Angola, Ethiopia, Sudan, Kenya, and the Democratic Republic of the Congo (Hwang, Brautigam, & Eom, 2016, p. 1).
To put the issue in perspective, in 2016 China provided only 10% of Africa’s total infrastructure funding. African governments financed 42% of the projects. The Infrastructure Consortium for Africa, which includes the World Bank, International Finance Corporation, European Commission, European Investment Bank, and the G-8 countries, financed 30% of the projects (ADB, 2018, p. 85). The terms of China’s financing are often not known. As a result, it is difficult to determine if the concessionary component of the loan qualifies as aid or is simply better than what most commercial banks offer. From 2004 through 2007, Angola obtained from China several loans ranging from $500 million to $2 billion for 17 years at LIBOR plus 1.5% or 1.25% with a 5-year grace period. In 2011, Ghana received two loans for $1.5 billion each, one for 10 years at LIBOR plus 2.85% and the other for 15 years at LIBOR plus 2.95% and a 5-year grace period (Gholz, Awan, & Ronn, 2017, p. 45).
Positive Impacts for Africa
Chinese companies have established a track record for low-cost, on-time, and reasonably good-quality construction projects. More importantly, China has often filled a financing void left by Western governments and international financial institutions. The loan terms are almost always better than those offered by commercial banks. This situation began early in the 21st century in Angola where Western governments wanted to impose political conditionality that Angola rejected. Instead, Angola turned to China for financing in exchange for oil. The trend has continued across Africa. Chinese-built infrastructure, whether financed by China or not, results in local employment opportunities and generates spillover effects such as skill development, management experience, and technology transfer (Wu & Bai, 2017, p. 16).
Negative Impacts for Africa
The degree to which Chinese financing contributes to African debt is perhaps the issue of most concern. The International Monetary Fund (IMF) identified in mid-2018 six African countries (Chad, Mozambique, São Tomé and Principe, South Sudan, Sudan, and Zimbabwe) in debt distress and 10 at high risk of debt distress (IMF, 2018). While China is only one source of loans for Africa, it is a major provider in several of these countries. Chinese officials are sensitive about any public criticism of the impact of their loans to Africa and are quietly scaling back loans and focusing on projects with a good market return, such as ports and electrical grids.
There are also concerns about the possible non-sustainability of Chinese infrastructure development. The 1970s Tanzania–Zambia railway project is often cited. It fell into neglect following insufficient maintenance and funds, loss of technicians, reduced transport capacity, and loss of revenue (Wu & Bai, 2017, p. 17). More recent Chinese-financed and built railways from Djibouti to Addis Ababa and Mombasa to Nairobi come with Chinese maintenance contracts. It remains to be seen, however, if this will ensure their long-term viability. African civil society has criticized China for using excessive Chinese labor on infrastructure projects; China is sensitive to this criticism and is scaling back on the percentage of Chinese labor.
Industry Versus Agriculture
One of the issues facing China’s engagement in Africa is the emphasis it places on supporting industrialization versus improvements of agriculture. Many African leaders are emphasizing industry over agriculture in the apparent belief that this will allow their countries to follow the example of Asian tigers such as South Korea (Sun, 2017). China accepted this African priority at FOCAC 2015 when it agreed to ramp up support for industrialization, possibly at the expense of assistance to agriculture. Some Chinese and African economists were concerned that this was the wrong approach and argued that a greater focus on agricultural modernization should be the priority. They asserted that historically agricultural modernization has preceded industrialization. This is especially important on a continent that remains a net importer of food. China decided in 2015 to focus its industrialization support programs in four countries: Ethiopia, Tanzania, Kenya, and Congo-Brazzaville. The argument was made that as manufacturing operations move out of China as a result of higher wages and market saturation, many will go to Africa. The evidence so far does not support this argument. These companies are more likely to move to South Asia, Southeast Asia, or even lower-cost regions of China (Xu, Gelb, Li, & Zhao, 2017, pp. 33–39; Gelb, Meyer, Ramachandran, & Wadhwa, 2017, pp. 28–29).
Although the amount and quality of Africa’s uncultivated land is often overstated, the fact remains that there is considerable land that could be put into production and even more that could be better utilized through improved farming techniques, land reform, and government policy reform. The idea that infrastructure-challenged and skill-deficient, not to mention numerous land-locked African countries will become the next South Korea any time soon is a fantasy. A few may succeed, but most are better advised to focus on improving agriculture. While China’s past record on assisting African agriculture is mixed, it has learned a great deal over the years and can probably make a more useful contribution in this sector in most African countries rather than focusing on support for manufacturing (Zeng, 2016; Lawther, 2017). In his speech at FOCAC 2018, Xi Jinping seemed to return to a greater focus on modernization of agriculture (Xi, 2018).
China’s Belt and Road Initiative
Xi Jinping’s 2013 Belt and Road Initiative (BRI) is one of China’s principal foreign policy programs, but Africa appears more of a last-minute addition than a core part of the initiative. Initially, the African component of BRI was aimed at northeast Africa from Kenya to Egypt, especially the maritime passage through the Red Sea and Suez Canal. China subsequently began including in the BRI African countries all over the continent (Nallet, 2017; Melaku, 2017). After five years into the BRI, it is still not clear what it means for Africa. Many of the projects in Africa that China now associates with the BRI were conceived before it was announced in 2013. Construction had even begun on a few of them. In many respects, the BRI in Africa looks like a continuation of past support for infrastructure projects (Breuer, 2017). It may herald an increase in financing for infrastructure projects and Chinese investment in Africa, but much depends on African leaders seizing the initiative (Johnston, 2016, p. 17; Nunoo, 2017, p. 692).
China’s Evolving Economic Competitors in Africa
China’s traditional competitors in Africa have been North America, Europe, Japan, and South Korea. While these regions and countries will continue to challenge China’s efforts to increase trade share, expand direct investment, and win contracts, several developing nations will become relatively more important economic competitors. Leading this list is India, which has already become Africa’s second largest trading partner (Nowak, 2016). Although well behind China, India has become a player in infrastructure financing and is expanding its aid program. South Africa is now a major source of foreign direct investment for the rest of Africa. The Gulf States, especially the United Arab Emirates and Saudi Arabia, are increasingly important sources of investment and aid (Sun et al., 2017, p. 20). Turkey competes head-to-head with China in North Africa and several countries in East Africa, especially Somalia and Ethiopia. Brazil has a strong economic presence in Africa’s Lusophone countries and a few others in West Africa. In the coming years, the expectation is to hear more from Vietnam, Indonesia, Malaysia, and Singapore.
Future of the Renminbi in Africa
China is increasingly using its own currency, the renminbi (RMB) or yuan, in African countries and a few now include it in their basket of currencies. While the RMB accounts for only 2.5% of global transactions, it has made more headway in Africa. South Africa, Angola, Ghana, Nigeria, Mauritius, Kenya, and Zimbabwe use the RMB in some capacity (Graceffo, 2017). South Africa’s Standard Bank, which is 20% owned by a Chinese bank, authorizes trade regulations in RMB in 16 African countries. South Africa and Kenya have established clearing houses for RMB transactions and the infrastructure is in place to increase RMB-denominated trade, reducing the need for dollar transactions (Corkin, 2016).
An IMF paper suggests that the international monetary system has transitioned from a bipolar system consisting of the U.S. dollar and the euro to a tripolar system that includes the RMB. The dollar bloc has the largest share in global GDP (40%), followed by the RMB (30%) and the euro (20%). The Japanese yen and British pound play minor roles. The RMB has gained influence, especially among the BRICS (Brazil, Russia, India, China, and South Africa) countries (Tovar & Nor, 2018, p. 35). South Africa, a member of the BRICS, has been instrumental in expanding the role of the RMB in Africa. Although the RMB must accept some liberalizing features before it can compete with the dollar or euro, it will almost certainly be used more widely in Africa.
China as a Development Model for Africa
There is a good deal of confusion concerning the definition of the China model and whether it is the goal of China to encourage its adoption in Africa. Historically, Chinese officials have gone out of their way to tell African leaders that they should not try to copy China’s development model because the differences with African countries are too significant. The situation has become more nuanced. Xi Jinping says that China is offering the world an engine of development. Some experts argue that stability, security, and development are core to the China model and that China wants to be seen as an agent of economic development. But these terms are subject to interpretation. Others argue that there is no China model; China is still trying to determine what it has done that might serve as a model. For that matter, they suggest that there are different China models in different regions of China. And even if there is a China model, most Chinese officials still insist they are not trying to apply it to Africa. However, both third country experts on China and Chinese officials acknowledge that Africans can learn certain lessons from China’s experience. One example is the Chinese Agricultural Technology Demonstration Center that is being established across Africa (Scoones, Amanor, Favareto, & Qi,2016). Another is the concept of China’s development zone model for increasing industrialization and dealing with urbanization (Wang, Zhu, Li, & Xu,2017, pp. 873–874).
Ten years ago, few African states had any interest in China’s model. Ethiopia and Rwanda were exceptions. Over time, more African states have become impressed by China’s successful economy and its ability to move so many people out of poverty. This has sent a powerful message; many African countries now want to emulate China’s example even if they do not appreciate the important differences between their country and China. China seems conflicted by expanding African interest in its model and increasingly wants to share its experience with African leaders. China may be taking its first step in more actively promoting itself as a broader development model for Africa. It is now up to African leaders to determine what can be borrowed usefully from China and what should remain there (Mabasa & Mqolomba, 2016, pp. 79–81).
Each Chinese leader becomes associated with one or more global themes. Former President Hu Jintao was known for “Peaceful Rise,” which subsequently became the less threatening “Peaceful Development” (State Council, 2011). Xi Jinping has emphasized the “China Dream,” “Community of Shared Future,” and “Community of Common Destiny.” He has attached particular importance to the “Declaration on the Right to Development by the United Nations.” China issued a white paper in 2016 that declared: “China adheres to the Chinese socialist path and to the philosophy that development is of paramount importance. . . .The right to development must be enjoyed and shared by all peoples” (State Council, 2016). While none of these themes is exclusive to Africa, they all have been applied to Africa.
The China Dream is often defined as rapid development and is therefore directly relevant to Africa’s needs. More recently, it has taken a back seat to the Community of the Shared Future and Community of Common Destiny concepts. These themes are likely to continue and, perhaps, be added to throughout the Xi Jinping era. Taken together, they constitute an effort by China to reshape the global order. Africa is a key part of this Chinese effort.
China has a long-term interest in Africa and, to a greater extent than most world powers, treats the continent strategically. China offers serious economic competition to the West throughout Africa, and most African leaders now see China as an alternative to the West. To the extent that China’s influence in Africa has slowed down, it will be primarily as a result of its own policy mistakes and competition from a growing list of developing countries that are taking more interest in Africa.
As China’s interests and presence expand in Africa, China will encounter more challenges and pushback from Africans. For example, the fall of Libya’s leader in 2011 and subsequent chaos in that country led to the evacuation of almost 36,000 Chinese nationals. This was a wakeup call. China is facing growing security problems in Africa. This situation is contributing to a reassessment by China of its vulnerabilities on the continent.
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