Africa, China, US, IMF

Chinese investment in Africa meandered ahead of the US since the turn of the new century. Interaction between China and Africa, conveniently enough, and reflecting on the Chinese induced narrative of its investments into Africa has been termed as a partnership between two ‘developing’ regions. On a policy note, CFAC (The China Africa Cooperation Forum) has played its role in the trade relationship as the epitome of Chinese engagement in Africa since 2000. The spread of Chinese soft power, taking note of the gaps of Western engagement with developing countries, has supplemented Chinese trade practices across the African continent.

The CFAC propelled Chinese Foreign Direct Investment volume from $5.6 billion to $32.2 billion from 1994 to 2004, eventually reaching $160 billion in 2011, which is a significant representation of the success that the Chinese structural and economic growth in Africa has enjoyed. Since its establishment, CFAC has helped increase Chinese economic influence in Africa adding its role as serving as a launching platform for 77 Chinese companies in Africa, in its portfolio. China’s engagement with Africa has expanded beyond a traditional political alliance as social and communal challenges persistent in Africa have been met head on by China, as means to expanding their legitimacy. China has over the years invested in healthcare and the provision of treatments to HIV patients. It has also invested in infrastructural development including the construction of roads and railways as the primary sources of transportation used within the continent.

The CFAC propelled Chinese Foreign Direct Investment volume from $5.6 billion to $32.2 billion from 1994 to 2004, eventually reaching $160 billion in 2011, which is a significant representation of the success that the Chinese structural and economic growth in Africa has enjoyed.

The battleground for the monopoly on oil resources in Africa has led to increased competition for its resources. While, its total share of oil is drastically lower than the amount in the Middle East, it has been expected that production will jump to a staggering 91% between the first three decades of the 21st century. What distinctly puts African oil ahead of the Middle Eastern demand is the reduced quantity of Sulphur which has added benefits for industrial use. Nigeria, Angola, Sudan and Equatorial Guinea have the most abundant oil resources on the continent. Chinese engagement in all oil rich African states accounting for 80% of its trade within Africa has been matched by an increase in US oil imports from Africa which have risen to 22% in the last decade.

The unparalleled investment in the service sector by China has helped its acceptance among communities, regardless of the nature of national governance in African states. Out of the 25 different areas of investment overseen by China, the majority are associated with skill development within the service provision sector. Not only has this paved the way for social cohesion among the Chinese and African business classes in light of the Chinese foreign policy principle of peaceful existence but has led to a counter American narrative on Chinese engagement in Africa which sees the Chinese policy as inefficient with little focus on hydrocarbon extraction.

Chinese engagement in all oil rich African states accounting for 80% of its trade within Africa has been matched by an increase in US oil imports from Africa which have risen to 22% in the last decade.

The same American narrative is simultaneously expounded upon through the Pew Center poll wherein Kenya, Ghana, Tanzania, Senegal, South Africa, Uganda and Nigeria, have reflected a gradual but minor decrease in Chinese acceptability within the African community at large. However, Chinese trade volume in the mentioned countries has been relatively low compared to Angola, Sudan, Guinea, Congo and Ethiopia where the economic and social balance has always inclined more towards China. Neither has the poll taken into account the business class which monitors and oversees trade agreements.

The nature and modes exercised for investment by China and the West differ in narrative and implementation based on the source of investment. The Chinese mandate in Africa is based around the ‘aid, trade, invest’ policy. The provision of interest free loans to foster and achieve economic parity, fulfilling the promise of mutual benefit is backed by economic assurances of comparative advantage between China and Africa. The provision of loans without interests has helped increase the African trade volume, helping to reduce trade deficits between Africa and the West. On the contrary, the IMF’s condition laden loans based on structural adjustment ventures set out to alter the political and economic situation within Africa.

Chinese loans with guarantees provide African states with greater incentives to skip IMF regulations altogether. Furthermore, Chinese enterprises operating in Africa are regulated through state sponsored Chinese banks namely the ICBC and the China Export Import Bank which adds to the convenience in establishing official economic corridors among African countries that carry out the bulk of the trade between China and Africa. The convenience in interaction between markets and suppliers form either ends has boosted the demand for Chinese products in Africa reciprocally. However, America pursuing a domestic and now an international policy of deregulation has seen greater investment flowing into Africa on part of privatized corporations which not only conduct businesses on their own terms, but at certain occasions clash with the national interest of the state, clouding national judgement on Africa.

Although the numbers speak for themselves, Chinese foreign policy principles have affected the global order and provoked an increased American response in greater intellectual volume. China, following a pattern of ‘peaceful coexistence’ has established grounds for Chinese investment based on respect for African sovereignty, no meddling within domestic affairs of any African state and guaranteed exponential growth in the economy for all states in partnership with China.

However, America pursuing a domestic and now an international policy of deregulation has seen greater investment flowing into Africa on part of privatized corporations which not only conduct businesses on their own terms, but at certain occasions clash with the national interest of the state, clouding national judgement on Africa.

The American view on investment in Africa is rounded structurally and based on setting a conducive environment for investment, political, social or economic whereas China attempts to shape its foreign policy based more on the domestic requirements of people on the grass roots level. It does not take into account structural settings and regulations that obstruct the flow of foreign direct investment. Their policies are designed to meet social requirements which in the longer run translate into mutual trust in their economic relationship. China’s effective transportation mechanisms are an added advantage to an already strong trade relationship.

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