This paper intends to provide an assessment, based on fractional information, of China’s economic involvement in Africa and to identify the forces shaping burgeoning China-Africa economic relations. The study is undertaken against the background of a rapidly changing landscape of international trade and finance that has eclipsed traditional aid flows to middle-income countries, making Africa ever more central for development finance.Meanwhile, Newsweek has an interview with Yang Guan of the state-sponsored Chinese Academy of Social Sciences. To no one's surprise, he strikes an upbeat tone on China's involvement in the region. Below are some excerpts. Reiterating a point made in the IMF report, he says that Chinese investment in the region is not as large as some make it to be. Irksome to me is his legalistic excuse for selling arms to Sudan as in "selling arms is allowed by international conventions, and Darfur isn't the point of arms sales." What's legal isn't moral, but don't get me started on this...
For Africa, China has been a market, a donor, a financier and investor, and a contractor and builder. While aid historically was of major importance, two significant changes have occurred since the turn of the new century. Because trade and investment have become much more significant in volume than aid flows, economic relations between China and Africa are clearly commercial rather than aid-driven. Meanwhile, the private sector has stepped to center stage. Here China’s foreign economic relations mirror changes in its domestic economy. China-Africa economic exchanges have become much more decentralized and broad-based.
The paper identifies four factors associated with recent changes in China’s economic engagement with Africa: Chinese government policies, growing Chinese and African markets for each other’s exports, Africa’s demand for infrastructure, and China’s approach to financing. China’s state financial institutions have been instrumental in cementing the new, commerce-based economic ties. In the process, they are helping correct chronic undervaluation of Africa by investors and helping fund new investments in Africa’s export and infrastructure sectors.
Africa will become an increasingly attractive market as incomes rise and progress in regional integration makes its markets even more attractive. It will also become a key destination for FDI, and it will continue to need infrastructure. Together these powerful market forces may put Africa-China economic relations firmly on a commercial footing. Both public and private sectors have a part in ensuring that the expanding trade and investment ties are mutually beneficial and contribute to sustainable growth and development in Africa. The impact of possible changes in Chinese demand on African terms of trade, trade patterns, and the economic prospects of countries in Africa are worthwhile topics for further research.
Lastly, Newsweek also has an article on the challenges of Sino-African economic interaction. If you had the impression that things were all hunky-dory as long as China waved wads of cash, you'd be mistaken. Here are excerpts concerning cross-cultural communication issues. I get on my knees and pray we don't get fooled again?
The media likes to talk about China's thirst for African oil, but oil investments are just one part of China's investments on the continent. What other areas are Chinese firms involved in?
Chinese investment is involved in many sectors. At the beginning it was concentrated on a few sectors, such as resource development, including oil, agriculture, and fishing. But nowadays you can see Chinese investment in many manufacturing industries, such as textiles, consumer electronics, and China has also invested in tourism, telecommunication, and construction of roads. So it is much broader than it used to be.
China is a latecomer in the investment market in Africa. Chinese enterprises began investment in Africa in the late 1980s, but the value of investment has increased rapidly. So by the end of 2006, the accumulated amount of Chinese investment in Africa totaled 11.7 billion U.S. dollars. This is not a big number, if you compare it with the total direct investment or inflow into this continent. If you look at the 2005 figure, the total Chinese direct investment in Africa was 400 million U.S. dollars, but that made up only 1.3 percent of the total inflow of direct investment in Africa that year. The amount of Chinese investment in Africa should not be overestimated.
There have been quite a few reports saying that Chinese firms sell military equipment to the Sudanese government, and some people say that equipment is being used for violent purposes in Darfur.
China is an exporter of conventional arms, but this is done in the framework of international law.
I don't think China has provided conventional arms to the Sudanese government in order to fight against the tribes in Darfur. China has not done that. You can see weapons made in China in many places of the world, and it is very hard to say how they get these weapons. I don't know if the Sudanese government got the weapons directly from China, they may have gotten them from anywhere. So it is hard to say—if you find a weapon made in China, it doesn't mean that China supports this kind of war. This is not logical, because there are a lot of transfers of weapons worldwide.
Western executives—hidden behind the walls of their villas—have bred a certain kind of resentment in Africa. In Angola the much more numerous and adventurous Chinese are suffering from another. Perhaps as many as 100,000 Chinese workers have spread out across the country, many breaking rock on highways or pouring concrete at construction sites. Most live in isolated camps. Few speak English; fewer still speak Portuguese.
State-owned Chinese companies prohibit any type of fraternization between their employees and Angolans. If a worker becomes romantically or sexually involved with a local, he's quickly hustled back to China. "Africans and Chinese think differently," says Xia Yi Hua, a regional director for China Jiang Su, a massive construction conglomerate with offices across Angola. Xia has been in the country for four years, and his company still sends him shrink-wrapped packets of Chinese food from back home, along with regular sets of chopsticks. Everything in his office comes from China. One coffee table is made of Angolan wood, he admits, but he flew in a Chinese carpenter to fashion the table.Racist stereotypes are common: both sides accuse the other of looking or behaving like monkeys or pigs. The Angolans claim (without good evidence) that the Chinese eat their dogs. At most work sites Chinese supervisors oversee black laborers, which has created friction. "You Chinese come to Angola and order us around, but in your own country you are suffering," says an Angolan who works for a Chinese company. (He asked not to be named for fear of losing his job.) At one Chinese-run construction site NEWSWEEK visited, hungry workers begged for food, saying their Chinese bosses never fed them. (The bosses say that's not their responsibility.) Angolans laying fiber-optic cable for Huawei near Benguela say they must dig 16 feet a day, or else they won't be paid their $5 daily wage. They claim their Chinese bosses only use one Portuguese word, cavar, which is repeated again and again: dig, dig.