China and Africa

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China and Africa

The Chinese economy has undergone phenomenal growth, which has in turn provided an opportunity for African countries to achieve similar levels of economic prosperity. In the year 2008, trade between China and Africa stood at an estimated $100 billion with foreign direct investments into Africa from china amounting to $5.4 billion. Concessional assistance and loans have been responsible for the various development projects evident in various African economies. In turn, China has been able to access raw materials, expanding their export markets and establishment of various investment relationships that have provided numerous benefits in terms of revenues and development for China and African countries respectively.

It is important to note that for Africa to maximize on its relationship with China there is need for strengthening the existing governance and domestic policies as a means of enhancing its bargaining position with China. This is paramount to ensure that Africa capitalizes on its relationship with China as a means of achieving sustainable growth and reduction of poverty levels in the continent. Africa has been plagued with issues such as poor governance, policies and rampant corruption, which impedes growth and poverty reduction despite the existence of vast wealth in the form of mineral resources and labor.

Chinese engagement with Africa can be traced to the 15^th Century when traders from the Chinese empire came to East Africa. The current Sino-African relationship can be traced to pre-colonial times, as China seeks to engage with Africa as it discovers its path of development and growth. Chin is seeking active means of enhancing Africa’s growth through provision of interest free loans. For instance, Tanzania was provided with a $400 million to rebuild anew the railway line running from Tanzania to Zambia that has become dilapidated given that it was built between the years 1970-75. It was also involved in the rehabilitation of various projects such as public buildings and stadiums.

China’s economic growth and change in ideology in terms of its foreign policy is estimated to have begun with Deng Xiaoping in the year 1978. The relationship between China and Africa evolved from an ideologically driven one into one that was driven by economic viability and partnership for mutual growth. In addition, the rise in living standards and growth of industrialization has increased the consumption of raw materials and energy. This has raised the levels of dependency of China on imports of oil and other minerals to drive its growth. In the year 2008, Africa’s trade accounted for 10% of all trade Africa has with the world. In addition, the external FDIs supported by China’s ideology towards international growth have assisted enterprises in China outwards attainment of global statuses.

The Chinese firms have been able to provide soft loans and other forms of assistance for investment projects in emerging markets. In addition, Chinese investments in Africa and other foreign countries are usually driven by the need to provide a competitive and profitable platform for their enterprises. Chinese banks have also become involved in African affairs as a means of promoting cooperation between Africa and the economic giant. The African China-Africa Development Fund (CADF) was launched in the year 2007 by China’s China Development Bank (CDB) as part of its $5 billion equity investment with an aim of providing assistance to Chinese firms seeking to expand into Africa. Such beneficiaries include Hainan Airlines, Sinosteel Corporation, and China National Building Material.

The CADF also provides support for entities in Chinese Economic Processing Zones in Mauritius and Zambia. In addition, similar export processing zones are currently being planned in Tanzania, Nigeria, Liberia and Cape Verde. Such investments have made significant contributions towards the development of African countries and eradication of poverty. This has also contributed towards China’s diversification of its $2 trillion assets.

China has sought to provide Africa’s small and medium enterprises (SMEs) through provision of $1billion in form of loans and grants. The 2009 Forum for China-Africa Cooperation (FOCAC) saw China pledge $10 billion in the form of loans and concessional agreements with an aim of emphasizing China’s commitment to Africa’s growth and attainment of the Millennium Development Goals (MDGs) such as climate change, food security, and energy security and diseases. China provides an estimated $1.5-2 billion yearly to Africa in the form of aid to countries that have had a longstanding relationship with China such as Tanzania, Ethiopia, Egypt, and Mali.

The video seems to illustrate that investment and trade relations between China and Africa are unbalanced. This is because it is assumed that Africa is a lesser partner to China than other trading partners are. China is proximal to Asia in terms of its trade components, which is an integral component of the export-manufacturing sector. Components of manufacturing are usually imported from other Asian countries into china for assembly and later exported into markets such as African economies. Research indicates that Asia accounts for more than 50% of Chinese trade as compared with a meager 4% for Africa.

On the other hand, African exports are limited by the numerous domestic constraints such as inadequate infrastructure, inadequate skilled labor, bureaucratic regulations that govern trade. In addition, Africa has also been faced with competition from various regions around the world seeking to engage in global commerce on a competitive level. This has provided China with a diverse source of raw materials to support growth for its burgeoning industries sector and economy as a whole. For instance, China has been actively engaged in trade with Australia, which has vast mineral resources.

China’s trade with Latin America amounted to over $144 billion in the year 2008 as compared to $104 billion. Latin America’s trade with China is similar to the Sino-Africa’s relationship given that it purely driven by the need to source for raw materials to drive the Chinese manufacturing sector and to support a growing economy with improving living standards. Hence, it is evident that Africa is competing with economies that can be termed as ahead in terms of development and maturity within their governance and policing structures as well as abundance of resources.

Such competition from different regions around the world is an indication of the importance of strong governance institutions, extensive and quality infrastructure, and improvements in the competitive nature of African enterprises. The growing level of engagement between China and Africa does not underscore the importance of Africa’s relationship with its traditional development partners namely the European Union and the United States of America. The European Union still accounts for more than 30% of African exports market. The Development’s Development Assistance Committee (DAC) and the Organization for Economic Co-operation provide an estimated $36 billion for Official Development Assistance (ODA) towards development in Africa.

China and Africa will continue to grow as Africa seeks funds to drive its development and poverty eradication agendas. In addition, the relationship can termed as purely economic given that both regions are seeking avenues to improve the lives of their citizenry. There is a need for Africa to reorganize its governance structures as a means of enhancing its competitive nature and sealing loophole that have been associated with rampant corruption and theft of resources.