V.11.D The Emerging Role of China in Africa

ECON 3510

Arch RitterJune 10, 2014

Source: Class notes.

China has emerged as a huge economic presence in African countries:

1. Foreign Investment2. Trade;

Including land acquisition;

3. Financier;4. Assistance Donor

Major new participants in resource sector activity: China, India, and South Korea

Concentrated in oil, minerals and now land for agricultural exports

Major volumes of direct foreign investmentOil, minerals and agri. raw materials

dominate African exports to Asia (86% to China in 2005)

See The Economist, “Out-Sourcing’s Third Wave,” May 21, 2009 and African Development Report 2007. pp. 131-136

1. China’s Investment in Africa

• http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map

China’s African Investments

“Outsourcing's Third Wave“: Land Acquisitions

Source: The Economist, May 2009

New phenomenon: Asia, especially China has captured the production of labour intensive manufactures for the world.

Has Africa been “marginalized” in the “globalizing” trading system

Implementation of any development strategy aimed at developing manufacturing may pose difficulties especially with competition from China,

Do past prescriptions regarding trade need reconsideration??

2. Trade:

China’s advantages: Industrious labor force; Low cost labor; Past emphases on human development Relatively new industrial capital stock Massive economies of scale; Major agglomeration economies; Undervalued exchange rate

(“cheating at the “globalization game”??)

Digression on “Agglomerative Economies” (in large urban areas) providing cost advantages of large urban scale to producers, including – Developed infrastructure generally; – Lower transport costs for inputs and outputs;– diversified range of all economic activities – skilled labor pools; – availability of necessary inputs, repair services,

etc.– proximity to major domestic markets; – government services and bureaucracy; – financial institutions, educational institutions– “amenities’ for citizens

Impacts of China’s “beggar-thy-neighbour”

under-valued exchange rate,

an unfair advantage in domestic African markets and in foreign markets that African

countries could be cultivating. ;

4. Development Assistance

China’s Impact on Africa:

On the positive side???

On the negative side???

China’s Impact on Africa:

On the positive side,1. China has helped accelerate economic growth by

contributing to commodity boom due to higher prices of oil and metals

2. Deepened trade and investment on a continent that has been marginalized from flows of international trade and global capital,

3. Investing in Africa's transport and education

infrastructure.4. Given many Africans access to low-cost consumer

goods.

China’s Impact on Africa:

On the positive side,5. Low-transactions cost way of doing business and

noninterference in countries' internal affairs6, More competition regarding aid; increased

recipient countries' bargaining power with donors.

7. Generous development assistance8. Major new investmentChina is contributing to the continent's economic

development and acting as a force for change in Africa.

China’s Impact on Africa:

On the negative side: some challenges and risks.

1. Chinese investment is based on capital-intensive natural resource extraction with minimal employment generation

2. China's influence on global energy demand leads to increased energy prices for net oil importers in Africa and a worsening of terms of trade.

China’s Impact on Africa:

On the negative side: some challenges and risks.

3. A New “Scramble for Africa’s Resources”?4. Is China “de-industrializing” Africa?

Imports of cheap Chinese goods in Africa, plus competition between Chinese and African goods in third-country markets, hinders economic diversification and manufacturing.

5. Allegations of improper labor and human rights standards, may gather momentum.

China’s Impact on Africa, continued:

On the negative side: some challenges and risks

5. Issues like corruption and governance, which had moved to the forefront of the development agenda, may slide back down again.

6. There may be some slippage in the progress with regard to transparency and civil society participation.

China in Africa: Some References

Chinese-Built Ghost Town In The Middle Of Angola Read more: http://www.businessinsider.com/chinese-built-ghost-town-kilamba-angola-2012-7?op=1#ixzz2yc1Qiu4R

China in Africa: The Real Story Digging into the myths and realities http://www.chinaafricarealstory.com/2011/05/chinese-in-africa-economist-gets-some.html

China Is Africa's New Colonial Overlord, Says Famed ... www.ibtimes.com/china-africas-new-colonial-overlord-says-famed-prim... Feb 18, 2014 - Animal activist and researcher Jane Goodall compared Chinese investment in Africa to British colonialism.

http://www.theguardian.com/global-development/interactive/2013/apr/29/china-commits-billions-aid-africa-interactive

Alex Vines, China in Africa: A Mixed Blessing? http://www.relooney.fatcow.com/SI_Oil-Politics/Africa-China_22.pdf

Claire Provost and Rich Harris, China in Africa: soft power, hard cash, The Guardian, 29 April 2013Land Grab and Human Rights in Ethiopia