China in Africa: Opportunities and threats

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China in AfricaOpportunities and threats

• Peter Kragelund, DIIS

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A new scramble? Recent headlines

• The Chinese are coming
• The Chinese are in Africa This time to stay
• A new scramble
• China in Africa the new imperialism?
• A Tsunami of investments
• Red Star, Black Gold
• Forget Mao, lets do business

• No questions asked
• Chinas trade safari in Africa
• Africa untapped market
• China a new force in Africas development?
• Friend or forager? How China is winning the
  resources and the loyalties of Africa
• The Emperors New Clothing Deals

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Outline of presentation

• Chinas presence in Africa
• Why is China interested in Africa?
• Africas trade with China
• Advantages and drawbacks for Africa
• Chinese investments in Africa
• Opportunities and threats for local producers
• Responses to China in Africa

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Chinas presence in Africa

• Pre-Tiananmen relationship btw. China and Africa
• Support to liberation movements
• A gradual marginalisation of Africa
• The 1989 Tiananmen crackdown
• Overheated relationship btw. China and the
  Western world
• China turned to an old friend, Africa
• The 1990s strengthening the relationship
• 2000? a new upturn leading to the official
  Africa Policy (2006)

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Why is China interested in Africa?

• Energy dependence
• A desire to expand national representations
  abroad
• A concern with western, especially American,
  hegemony
• A search for new markets and investment
  opportunities

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Energy dependence

• 20 years largest East Asian oil exporter ?
  worlds second largest importer of oil (after the
  US)
• Changing sources of oil imports
• 1994 ME (40), Asia-Pacific (55), and Africa
  (4)
• 2004 ME (45) Africa (28.7)
• Nigeria, Angola, Sudan, Equatorial Guinea, and
  Gabon
• Strategy diversification of supply lines via
  e.g. aid-for-oil
• Economic growth is the cornerstone of social
  stability
• Not only oil but natural resources in general
• And food in the future

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Expansion of national representations abroad

• Chinas symbolic diplomacy rests on two factors
• Its desire to demonstrate its international
  political power
• Its One China Policy
• Means of securing diplomatic relations
• Development aid
• Infrastructure projects, stadiums, parliament
  buildings (contracted by Chinese firms)
• Debt forgiveness
• Military cooperation
• Humanitarian assistance

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A concern with western, especially American,
hegemony

• China fears that the US may prevent
• Chinas rise to superpower
• Chinas One China Policy
• China pursues multi-polarity rather than
  uni-polarity
• Chinas dual stance gives her considerable power
• The torchbearer of the developing world
• A seat in the UN security council

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A search for new markets and investment
opportunities

• Africa is a growing market for Chinese-made
  consumer goods
• State-led investments target resource extraction
  activities
• Guided by the Ministry of Foreign Trade and
  Economic Cooperation via 11 trade promotion
  centres
• Sudanese, Nigerian, and Angolan oilfields, and
  South African and Zimbabwean platinum and iron
  ore
• Private investments target manufacturing,
  logging, and construction
• Qualification no distinction between Chinese,
  Hong Kong-based and overseas Chinese investments

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Impacts of Chinese imports from Africa

• Increased reorientation of trade
• 1990 0,4 of African exports to China
• 2003 4,7 of African exports to China
• Potentials for the African economies
• Higher commodity prices
• Drawbacks for the African economies
• Pushes African producers back into primary
  commodity dependence
• Increased rents will only benefit the elite, not
  the population at large

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Share of China in exports of 21 African countries
in 2003
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Impacts of Chinese exports to Africa

• Advantages
• Improvement of local welfare
• Only little overlap between African exports and
  Chinese exports
• Disadvantages
• Cheap Chinese goods flood local markets
• Displacement of local products or compete with
  other imports?

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Chinese investments in Africa

• Chinese FDI represents 6 of FDI to Africa (2004)
• 17 of all FDI projects in the textile and
  clothing sectors (2002-2004)
• 674 Chinese state-companies in Africa (mid-2004)
• Resource extraction
• Infrastructure, construction and
  telecommunication
• China Road and Bridge Cooperation currently has
  500 projects in Africa under way
• Quota hopping in the textile and clothing sectors
• Chinese enterprises tend to vertically integrate
  production

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Impacts of Chinese investments

• Positive impacts for the African economies
• Willingness to take risks
• JVs may support the rise of local entrepreneurs
  via
• Technology transfers
• Transfer of capital
• Negative impacts for the African economies
• Vertically integrated businesses
• FDI is coming but jobs are not.
• (FDI is diverted away from Africa)
• Especially in low-tech activities (textiles,
  footwear)

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African reactions to the Chinese presence

• The elite reaction
• The official reaction a model of modernisation
  better suited to African needs
• The unofficial reaction no political strings
  attached (but the acceptance of One China)
• Local reactions
• Consumers cheap consumer products
• Trade unions jobs are lost
• Entrepreneurs Chinese capital goes to Chinese
  entrepreneurs
• NGOs
• undermines environmental, labour and human rights
  standard