What are the true effects of China’s investment and aid flow into Africa?

3 May

China’s increasing levels of investment and aid into the African continent have been discussed widely, including in the posts of this blog, however China’s continued reluctance to reveal the precise level of development finance expended each year make it a difficult issue to analyse.

A study and database by the Center for Global Development and AidData has found over $75 billion in unrecorded development projects in 50 Africa countries financed by China and $6.3 billion in aid flows per year between 2000 and 2011. The study has found that the money ranges from direct grants funding projects such as dams, roads and other forms of infrastructure to the financing of natural resource exploration. Ghana, Nigeria and Sudan were the top recipients of the Chinese aid, receiving $11.4 billion, $8.4 billion and $5.4 billion over the 11-year period.

Most analysts believe that even these figures are conservative, not least due to China’s Ministry of Commerce’s continued unwillingness to openly discuss its foreign aid and investment policy. While the Official Development Assistance (ODA) levels of other countries are openly reported and discussed, Chinese aid is highly difficult to track.

China’s unwillingness to discuss its foreign aid program and reluctance to join the Development Assistance Committee (DAC), which promotes global standards for measuring and assessing development finance, shroud the growing superpower’s intentions in Africa with international scepticism. China states that it sees itself as a peer to the developing nations rather than a donor – a position that becomes increasingly difficult to endorse as the country continues to develop exponentially.

The secrecy surrounding the levels of Chinese financial assistance in Africa creates a wide variety of issues for discussion. China’s Central Bank boasts foreign exchange reserves of nearly $1.1 trillion dollars as of 2012, by far the world’s largest. Beijing is increasingly leveraging this cash, with low rates and very few questions, to advance China’s growing global influence.

Many commentators argue that China’s aid, given with a policy of almost ‘no questions asked’, damages the positivity of aid given by countries that provide assistance via regulated means, such as the DAC. They argue that it undermines good governance, debt relief and environmental and democratic policy reforms promoted by traditional Western donors. Critics site cases like Angola, whose government was able to turn down an IMF loan requiring transparency regarding oil revenue in 2010 due to the offer of an interest-free loan from China’s Export-Import bank.

It is argued that development assistance that is nondemocratic in origin and non-transparent in practice stifles real progress by ensuring that corrupt regimes, undemocratic governments and powerful dictators can gain financially, without having to cede power, control or opaqueness to Western powers by accepting their terms. The money escapes the independent regulatory control of most Western-administered aid and thus is more unlikely to fall into the hands of those that truly need it.

Perhaps the strongest argument voiced against the growing Chinese level of financial interest in Africa is that its primary function is to provide natural resource opportunities to a hungry, growing economy requiring vast such resources to maintain its rapid development. Some believe that it gives China’s state-owned companies the means to sideline and extract massive amounts of valuable natural resources to satiate its own manufacturing sector.

China’s flow of investment and aid into Africa also raises an ethical debate as to whether the country’s own levels of poverty should be addressed (the World Bank estimated that over 150 million people in China live below the poverty line of $1.25 per day) and poverty-stricken Chinese should be the foremost recipients of such finance. Although the Chinese economy is now the second largest in the world, the country’s per capita income is ranked 90th in the world – representing the struggle with poverty, particularly in rural areas, that must still be overcome.

Despite these issues, perhaps it is the West’s own fear that the current deepening of the economic activity between China and Africa is cementing a long-term economic and diplomatic relationship that is the true cause for the international scepticism.

Brad Parks, executive director of AidData and a research at the College of William and Mary, has said that, despite popular assumptions, “China do a lot in the health sector, they do a lot in the education sector, they do a lot in government and civil society sector too. It’s just striking the diversity of the work they do in the development arena in Africa.”

Are Western powers simply rueful of the growing Chinese influence in Africa or does the emerging superpower have questions to answer regarding its financial affairs in the continent?

  

Sources:

http://www.theglobeandmail.com/news/world/new-database-focuses-on-chinas-secretive-aid-to-africa/article11623828/?cmpid=rss1

http://qz.com/79355/revealed-75-billion-in-previously-secret-chinese-aid-to-africa/

http://www.foreignpolicy.com/articles/2007/02/14/rogue_aid

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One Response to “What are the true effects of China’s investment and aid flow into Africa?”

  1. rh25g10 May 4, 2013 at 4:43 pm #

    The topic surrounding China’s investment into Africa is very interesting and is certainly topical. On Monday the 29th of April 2013 the Guardian, in their Global Development section, reported that Chinese investment had flowed into Ghana for the construction of sport gyms and stadiums. Such an act is unseen within the Chinese/African relationship; the Chinese Government has previously donated a high amount of sports equipment to the country, and Ghana’s ability to host the 2008 African Cup of Nations was certainly supported by the $100m soft loan from the Chinese Government.

    However what is slightly worrying about this new apparent investment is that it has not come from the Chinese Government, but instead from the Chinese arms manufacturer, PTI. Critics of the company have claimed that PTI have exported weapons and arms to oppressive regimes in Zimbabwe and Burma which in turn paved the way for Chinese natural resource extraction. In 2011 Ghana commissioned weapons worth almost $40m from the company, whilst simultaneously entering loan agreements with the Chinese government.

    Although links in trade may be beneficial to both Ghana and China, one cannot wonder who is benefitting most from these linkages. And with the involvement of international arms, how sinister are these dealings? As the title from the article in the Guardian puts it “Ghana plays ball as China splashes cash and gyms and stadiums” thus illustrating the underlying power issues, whereby China’s growing international status is perhaps beginning to delve into the exploitation of African nations, under a seemingly ‘giving’ image.

    References:
    Ghana plays ball as China splashes cash and gyms and stadiums: http://www.guardian.co.uk/global-development/2013/apr/29/ghana-china-gyms-stadiums?CMP=twt_gu

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