Sino-African cooperation has contributed more than 20 percent of Africa’s development, with China becoming sub-Saharan Africa’s single largest trading partner and a key investor, according to an International Monetary Fund report.
But overall, fewer than half of sub-Saharan African countries have a trade surplus with China. This is because China’s trade with sub-Saharan Africa is highly concentrated in Angola, South Africa, the Democratic Republic of the Congo, the Republic of Congo, and Equatorial Guinea which account for about 75 percent of the subcontinent’s exports to China.
Trade with Africa accounts for a tiny percentage of China’s overall foreign economic activities.
The China Factor is larger for resource-rich countries because they account for a large share of the region’s exports to China. Africa’s exports to China are heavily concentrated in natural resource products, mainly oil.
“By 2008 (before the short-lived collapse in oil prices in 2009), mineral fuel and related materials accounted for about 45 percent of all sub-Saharan African exports to China, and for more than 84 percent of exports if we exclude South African exports,” notes the International Monetary Fund report.
Elsie S. Kanza, director of Africa at the 24th World Economic Forum in May, reported that China’s commitments resulted in $59 billion in increased investment for the continent. China claims these will create more than 230,000 jobs.
It was no surprise that is was China that stepped up big to the plate, expanding cooperation with Africa in building road, rail, telecommunications, power grid and other infrastructure to help the continent become better interconnected. It is the kind of cooperation China and Africa have been experiencing for the past five decades.
In 2009, China overtook the U.S. as Africa’s biggest trading partner, and some 2,500 Chinese firms operate on the continent, according to a May 6 report from UK-based Chatham House. Bilateral trade between China and African countries reached $210 billion in 2013. Angola was the second-largest source of imported oil after Saudi Arabia for China.
But according to the Chatham House report, “Angola aside, Africa accounts for only 5 per cent ($198.4 billion) of China’s global trade ($3.867 trillion) and $3 billion less than 4 per cent of foreign direct investment globally in 2012 ($77.2 billion).”
By comparison, U.S.-Africa trade in 2012 was $99.8 billion.
“Africa has seen accelerated growth in direct investment from China, despite the general decrease in foreign direct investment since 2009,” according to a recent report from Zhejiang Normal University’s Center for African Studies. “The rapid growth of Chinese capital in Africa is indicative of the continent’s development potential and investment appeal, and also points to the mutually beneficial nature of China-Africa cooperation. This trend is likely to continue to grow in the near future, and its role surely deserves more focused attention,” notes the report.
That focused attention came in an April report from the Brookings Institution’s John L. Thornton China Center, Africa in China’s Foreign Policy, which notes: “While China’s unique economic approach to Africa meets the African countries’ need for funding and infrastructure projects, the model has been widely criticized. In particular, China’s natural resource-backed loans raise questions about the continent’s future and its capacity for sustainable development.”
During his eight-day trip to Africa in May, China’s Premier Li Keqiang visited Ethiopia, Nigeria, Angola and Kenya, as well as the 2014 World Economic Forum on Africa in Nigeria’s capital Abuja. It was during this visit Li unveiled a plan to invest $42 billion in Africa, including $10 billion in investment financing; $30 billion extending credit lines; and an additional $2 billion into the China-Africa Development Fund. Still other commitments were provided by China’s private sector.
According to China’s Ministry of Foreign Affairs, China’s policy towards Africa will focus in the next year on industrial cooperation, financial cooperation, poverty reduction, environmental protection, cooperation on cultural exchanges, and supporting peace and stability on the African continent.
Li also visited the African Union’s headquarters in the Ethiopian capital Addis Ababa, a building which was financed by China as a gift, where he delivered a speech stating China and Africa should strive to reach $400 billion in annual trade and $100 billion of Chinese direct investment by 2020 to help spark Africa’s industrialization.
“Infrastructure is the precondition to industrial development. China will actively participate in projects such as roads, railways, telecommunications and power in Africa,” Li said in a statement posted on China’s central government website.
Li also highlighted an ambitious project of connecting African capitals with high-speed rail by using China’s world-leading rail technology to improve pan-African development.
In all, China reportedly signed some 60 agreements with African nations on petroleum, agriculture and infrastructure during Li’s trip, including providing $10 million of free aid for wildlife preservation, as well as promoting research in biological diversity, controlling desertification and promoting modern agriculture practices.
In fact, Li’s eight-day visit to Africa left a trail of financial commitments from China that continue to make China Africa’s biggest trading partner.
China has been Africa’s largest trading partner for five consecutive years and the “China Factor” has become increasingly evident in Africa’s economic growth.
China-Africa trade expanded to $210.3 billion in 2013, soaring from the $250 million in 1965. Chinese direct investment in Africa amounted to $25 billion by the end of 2013, with more than 2,500 Chinese companies doing business in Africa and creating more than 100,000 local jobs in finance, telecommunication, energy, manufacturing and agriculture.
Africa is also China’s second largest contracting market overseas. By the end of 2013, Chinese companies had won nearly $400 billion in contracts, including building some 1,367 miles of railways and 2,175 miles of roads.
Other noteworthy economic activities include:
• China is the largest source of foreign direct investment to Kenya and its second largest trade partner, reaching $3.27 billion in 2013.
• According to the Chatham House report, Angola is one of China’s biggest oil suppliers, with crude exports reaching 10.6 million tons in the first quarter of 2014, second only to Saudi Arabia. There are also more than 258,000 Chinese working in Angola.
• Nigeria is one of China’s major trading partners in Africa, reaching more than $30 billion in 2013. The China Railway Construction Corporation Limited has now signed a contract for a $13-billion, 860-mile railway project that will stretch across 10 Nigerian states and include 22 train stations.
While speaking in Africa, Li said trading with China comes with no political strings attached, noting that neither side seeks to impose its will on the other or interfere in the other’s internal affairs. Some saw this as a jab at western funding sources.
“Generally most of the other grants or loans or whatever, have a number of strings attached to it — often incentive tools for improvement,” said Stephen Hayes, president and CEO of the Washington, D.C.-based Corporate Council for Africa, in an AFKInsider interview.
Nevertheless, the Chatham House report notes that China’s expanding investments in Africa do carry some political headaches for Beijing. There are an increasing number of complaints about Chinese companies, ranging from poor labor conditions and pay to lack of respect for social and environmental regulations. In a statement released before his departure to Africa, Premier Li urged Chinese companies in Africa to abide by local laws and regulations to protect the interests of local communities and the environment. He also called on Africans to protect the lawful rights and interests of China’s companies and the safety of Chinese employees.
Trade with Africa accounts for a tiny percentage of China’s overall foreign economic activities.
“Considering the low priority of Africa in China’s overall foreign strategic mapping, a disproportionate level of international attention, publicity and scrutiny is paid to China’s Africa engagement,” said Yun Sun in the April 2014 report from the Brookings Institution’s John L. Thornton China Center. The center spotlights largely unexamined internal elements of China’s Africa policy.
Rather than seeing Africa as “key” or a “priority,” Beijing sees it as part of the “foundation” for China’s broader strategic ambitions, according to the report. Sino-African relations have been relatively smooth and free of major disturbances, “thanks to a shared sense of historical victimization by Western colonial powers and a common identity or affinity as developing countries.”
China touts the success of the “China model” in non-democratic African countries as offering indirect support for China’s own political ideology and says it offers evidence that Western democratic ideals are not universal.
The report concludes that “Beijing’s inability to cope with the rapidly expanding Chinese presence in Africa is exacerbated by the lack of political risk assessment and the absence of a comprehensive commercial strategy for Africa. The resolution of these issues will determine the nature and content of China’s future policy toward Africa while exerting critical influence over the future development of the continent.”
