African Economy: China Flashcards
Introduction
1949-1979 – China’s strategy in Africa was influenced by the cold war where they tried to increase face competition between USSR and US. China’s growing presence within Africa offers a new dynamic in the continents relations with the outside world.
China’s government has been motivated by Africa’s abundance of natural resources and new markers which has fuelled its economy. Beijing’s diplomatic relations with Africa have challenged the western foreign policy.
Despite radical changes to African society, African governments have welcomed the new sources of investments. Year 2000 saw $10bn worth of trade, 2016 saw $200bn. China invests where It may appear dangerous to do so. It has therefore acted as a positive poverty reduction tool
Positvie and Negative perceptions
Negative view:
o China is only interested in extraction
o Chinas Aid is undermining attempts to promotes democracy and accountability
o There is a lack of transparency
Positive view o Win-win based on equality o China gets infrastructural work and investment done o Lower prices for consumer goods o Technological transfer
The process of Chinese Aid
Investment in aid since the 90s where over 44% of Africa’s aid comes from China. Comes in the form of grants, interest free loans and debt forgiveness based on non-interference and chosen aid schemes where there is mutual benefit such as tech transfer. Focus of aid is on building infrastructure which is entirely different strategy from the west.
The Chinese are willing to invest in areas where the initially profit margins are very low and the supply chains are week.
The Chinese follow a three-jump pattern in entering the African market:
o Establish a trading post
o Invest in Africa to build a local manufacturing factory
o Create an industrial park (the textile park that Yuemi Group aims to complete will have 15 firms, 3000 employees and will attract African firms. in Nigeria)
Chinese Interests
1 - Minerals
2 - food security
3- low value consumer good and bypass WTO restrictions
China’s ever-expanding economic growth means an appetite for energy and strategic minerals. As a result, China is attracted to Africa relativity underexploited petroleum and other natural resources. Since the 90s, China has increased interests in minerals such as iron ore, titanium. To assert its dominance within the continent China has used a range of economic instruments such as financial assistance, construction projects and arms sales to cement ties within the oil-producing states.
Food security in China is also a reason for close ties with African nations as the increase in population is leading to agricultural land loss and is struggling to sustain the food production for their population.
China has found a partner who is interested in buying low value consumer goods which is sold through informal networks across urban and rural Africa. For example, China is able to mass produce low cost and basic products at satisfactory quality. With many WTO restrictions, China has managed to aggressively outbid Western firms for large projects using lower costs and Chinese labourers. In 2005, there were around 74,000 Chinese labourers in Sudan.
African Interests
1 - New opportunities and fall in foreign aid create genuine enthusiasm
2 - Tourism
3 - Symbolic attraction
African interests in China complement the agenda being promoted by Beijing. African governments see new investment opportunities, ways to create regime stability and to develop strategic relationships. The fall in foreign investment in Africa compared to Asia is a significant cause of their low development rate. Therefore, there is genuine enthusiasm at the prospects of Chinese investments.
The growth in the Chinese middle class has spurred many to have holidays in Africa as the government has used its policy of promoting official approved travel destinations as a means of rewarding friendly governments. South Africa has benefited greatly with Chinese tourists more than tripling in 2003, Chinese tourism can be a life line to countries which are ostracised by the west.
China has a symbolic attraction which is that it was once a victim of western imperialism clearly resonated with African elites looking for positive development.
African Interests: Examples
Examples: Ethiopia got a 470 mile electric railway system from Addis Ababa to Djibouti, military base. This was the second metro to ever be built in sub-Saharan Africa and financed by 85% of Chinese Aid.
The projects issued by China are practical and efficient and in contrast would have taken the West far longer to achieve. Decades of previous Western developmental aid projects have resulted in entrenched development which in turn had created great enthusiasm at the prospect of an alternative form of investment.
Is China acting as a colonial power?
Neo-colonialism: whether African governments are able to maintain their sovereignty while China seeks to influence economy and governmental relations.
Are Sino-African relations just a mere flex of muscles for China to claim back its rightful place as a great power in the international order?
Is it a relationship of asymmetry between the economic giant and politically vulnerable African governments?
Disadvantages for Africa
1 - local industries harder hit and Chinese contract workers
2 - environmental damage
3- bottom up two way approach
4 - debt in Djibouti
5 - Tibet and UN
6- propping up dictatorships - Sudan and CAR
1- Local industries are harder hit due to the flood of cheap Chinese imports and have become edged out of business. But there are concerns with the economic balance for example the use of Chinese contract workers instead of employing local workers in projects such as Ethiopia, Sudan and Namibia mean that unemployment levels remain the same. The increase in the nature of its closed society and relative wealth breeds resentment and even conflict.
2 Chinese companies are contributing to environmental damage, but this would be the same as if they were to invest elsewhere in the world and it is argued that western companies are doing the same.
3There needs to be a bottom up and interactive two-way street approach to policy where African society needs a stronger relationship with the companies.
4 Non-interference means that China plays little role in the development and welfare of communities and it is argued that they are propping up dictatorships
5 The national public debt in Djibouti is swelling from 50% to 85% within just two years.
6 China is well known for opposing and denouncing their human rights violations records. African states have been known to systemically block UN resolutions on the situation with Tibet and this has prevented the placement of sanctions on China. Worrying sign that African countries do not condone behaviour.
7 China has been a significant supported of the Darfur crisis in Sudan through the illicit sale of military weapons and threats to block any UN resolutions dictated towards Sudan on the basis of maintaining a foothold within their oil industry.
8 Support to the Francois Bozize’s dictatorship in CAR in 2003 by financial investments and building telecommunication infrastructure which helped maintain the regime.
Conclusion
There are a variety of different outcomes resulting from Chinese investments which need to be examined on a global, national, community and individual basis.
The rise of China has changed the global economy and which has complex implications for Africa politically and economically.
While there are clear examples that China has significantly contributed more to African development than the West, there are also arguments to suggest the aggressive nature of China is negatively impacting on Africa for example propping up autocratic governments.
