China’s Growing Presence in Africa

20 Feb

With the ‘open door’ policy implemented from 1988 onwards, an explicit and planned process of increasing the scale and scope for utilising foreign capital was implemented. This inward FDI was a keystone in the aim to become a more market orientated economy and thus grow economically. Since opening up it has since become a critical driver for further economic growth. Currently stock of FDI at home is $1.344 trillion, the 3rd largest stock in the world.  (CIA, 2014)

Since the success of Chinese economic growth man Chinese firm have prospered and there for are looking for investment opportunities. This along with the growing complex development needs of China has led to increasing supply of outward FDI. Stock of FDI abroad is $509 billion. (CIA, 2014)

The most watched of these flows is between China and Africa. In 2012, Chinese firms 40% cooperate contract compared to 2% of US firms (Frost, 2011). US foreign Secretary of State, Hilary Clinton, has warned against what “new colonialism of Africa” where by raw materials sourced from Africa are used to fuel China rapidly growing economy. (Ighobor, 2013)

Chinese rapidly growing industry and vast population with rising standard of living are both creating an increase in demand for raw materials that China simply cannot domestically satisfy. This has resulted in searching for these materials overseas. Africa is a continent abundant in natural resources, but often without the resources to utilise them. Fuel resources are one of Chinas largest need, which has led to many Chinese mining and oil-related projects.

These investments in principle should be beneficial for both countries, with China gaining the needed raw materials while the African nation benefitting from the jobs created, infrastructure built as well as a stronger GDP (Caulderwood, 2014). In practise however these benefits do not always occur. Often many Chinese workers are brought over, limiting the job creation particularly in the high paying managerial roles. The extraction of these raw materials for export to china means they are unable to be used for the domestic development. There are environmental issues created through this extraction, which is furthered through improper practises, which greatly impact on the African host nation but little direct impact on China as a nation. This is shown with the Zambia Environmental Agency suspending the licence of a Chinese mining company halfway through a $832 million project. (Caulderwood, 2013)

Africa also creates an important trading partner for China, with the world market currently somewhat saturated, new market for Chinese products are needed. China is now Africa’s largest trading partner, with $114 billion of trade occurring in 2011 (Frost, 2011) Many African nations are currently progressing through development stages and likely many of them to become emergency economies in the next few decades. It has been observed that China are positioning themselves is key position in order to benefit when Africa goes through the growth phase.

This trading relationship has benefited African consumers as Chinese products are cheaper than those offered by the European counterparts.  However most worryingly, as has been seen with the textile factories in Nigeria, it has led to the collapse of local markets which are unable to compete with the cheap Chinese products. (Ighobor,2013)

Despite potential benefits, Africa needs a strategy to deal with emerging giants such as china and also India and Brazil. The current model of export raw materials and import cheap goods is unstainable and likely to hinder rather than help African development as stated by South African President Jacob Zuma (Ighobor, 2013). Many African nationals are to join together “grand free trade area” to give a greater collective power and voice. Bilateral forums such as Forum on China-Africa Cooperation(FOCAC) established in October 2000, aim to strengthen this strategic relationship.  

The relationship is not just about money and goods it is the exporting of governing and developing methods (Frost, 2011). Most worryingly for the western world to the exportation of the “Beijing Development Model”  which broadly states that a country can achieve successful economic growth without full-scale political and democratic liberation like the western economies BBC(2012)  This is often supported by African nation such as Ethiopia, where by the prime minister Meles Zenai criticized western “Band-Aid” approaches to development (Wonacott, 2011) It is predicted the Chinese-African relations will only get stronger as African development require vast foreign investment.

This is a key Challenge to the international community and has the potential to cause a fundamental change. Summarised in a desperate plea from the BBC (2012) “Our core argument to our Chinese friends across the world should be to strengthen the existing order rather than allow it to become increasingly dysfunctional, let alone replace it with something else”

BBC (2012) Viewpoint: China and the world. Available from: http://www.bbc.co.uk/news/world-asia-china-20217333 [Accessed 19 February 2014]

CIA (2014) The World Factbook: China. Available from: https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html [Accessed 20 February 2014]

Caulderwood, K. (2014) China is Africa’s new colonial overlord, says famed primate researcher Jane Goodall. International Business Times, 18 February. Available from http://www.ibtimes.com/china-africas-new-colonial-overlord-says-famed-primate-researcher-jane-goodall-1556312 [Accessed 20 February 2-14]

Caulderwood, K (2013) Chinese Copper Mining Operations Haulted by Zambia’s Enviromental Agency. International Business Times, 9 December. Available from http://www.ibtimes.com/chinese-copper-mining-operations-halted-zambias-environmental-agency-1501396 [Accessed 20 February 2014]

Ighobor, K. (2013) China in the heart of Africa. Africa Renewal, January 2013. P.6  

Frost, P. (2011) United States Watching China in Africa. Foreign Policy Association, 14th September. Available from http://foreignpolicyblogs.com/2011/09/14/united-states-watching-china-in-africa/[Accessed 20 February 2014]

Wonacott, P. (2011) In Africa, U.S. Watches China’s Rise. The Wall Street Journal, 2 September.  Available from: http://online.wsj.com/news/articles/SB10001424053111903392904576510271838147248 [Accessed 20 February 2014]

 

 

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