Chinas trade with Africa has increased dramatically
over recent years. By 2008, it surpassed the USD 100 billion mark
to reach USD 114 billion. Despite the 2008 global financial crisis,
China-Africa trade nevertheless totalled USD 93 billion in 2009.
A new book
from the African Development Bank (AfDB) analyses and details
this rapid and continuing growth of trade between China and Africa.
and Africa: An Emerging Partnership for Development?
is a collection of studies by AfDB experts and others, which details
and comments on this recent phenomenon from various aspects.
The collection looks
at the future of this emerging partnership; views the relationship
from a post-financial crisis viewpoint; details both Chinas
trade with Africa and its foreign direct investment into the continent;
reviews Chinas manufacturing and industrialization policy
in Africa; looks at Chinas aid and assistance program in
Africa; discusses Chinese infrastructure investments and their
implications for African regional integration; and analyzes the
China-Africa relationship in the context of international aid
The following are
summaries of each of the studies contained in China and
Africa: An Emerging Partnership for Development?
1. China and Africa:
An Emerging Partnership for Development?
This introductory paper summarises the dual purpose of this new
publication as to analyze the economic exchange between
China and Africa, and to outline policy recommendations to improve
the benefits to both parties.
It notes that trade
between China and Africa reached USD 100 billion for the first
time in 2008, and that foreign direct investment (FDI) from China
into Africa was USD 5.4 billion. By that same year, almost 10
percent of Africas trade was with China.
with Africa goes beyond trade and investment and includes development
assistance. At the 2009 Forum on China-Africa Cooperation (FOCAC),
China pledged USD 10 billion in concessional loans to Africa.
with the African continent is currently imbalanced, concentrating
on a small number of countries, given the emphasis on oil and
About 70 percent
of Africas exports to China come from Angola, South Africa,
Sudan and the Democratic Republic of Congo (DRC), and are heavily
dominated by raw materials (e.g. oil, copper, cobalt and cotton).
Some 60 percent of imports from China, largely manufactures, go
to South Africa, Egypt, Nigeria and Morocco.
the rapid growth in trade with China, the European Union (EU)
and the United States at the moment remain the largest trade and
investment partners for many African economies. The EU accounts
for 30 percent of Africas exports.
The paper notes that
Chinas intense competition in manufacturing and its rising
demand for oil highlights the risk that Africa may remain specialized
in raw materials in remain vulnerable to volatile commodity prices.
could threaten African countries that export manufactures, such
as tobacco products from Benin, refined oil products from Egypt,
Algeria and Kenya, wood products from Cameroon and processed food
On the other hand,
China is supporting export diversification in Africa through the
establishment of Special Economic Zones (SEZs) located in Zambia
and Mauritius, with future sites being considered in North and
The paper notes Chinas
commitment to large infrastructure projects in Africa, but points
out that the investments could be more supportive of African regional
integration. The bilateral nature of Chinas infrastructure
investments limits such support for regional integration across
countries, which is considered important for African growth and
As in other papers
in the publication, it also notes that unlike western donors,
China has a different perspective on the encouragement of good
governance in Africa.
It states: China
considers intervention in aid recipients domestic politics
as an infringement of sovereignty, while traditional donors emphasize
that aid is more effective in countries with good governance.
However, it goes
on to say recently it appears that Chinese companies are
becoming more sensitive to corporate social responsibility and
are starting to focus on the triple bottom line (profit,
It brings up the
possibility that China could create jobs in Africa. Africa
is not only a source of
but also a future
investment destination for labour intensive manufacturing
because wages are rising faster in China than in Africa.
prospects for China-Africa relations
This paper focuses on the impact of the recent global financial
crisis on China and Africa, and also explores the relationship
between the two regarding development challenges.
The 2008 crisis had
a severe impact on Africa, and by the first quarter of 2009 it
was clear that economic activity would be severely depressed due
to lower remittances from the African diaspora and reduced demand
from rich countries.
China was also affected.
Chinese officials in December 2008 reported the 670,000 closures
of small firms with the loss of 6.7 million jobs, for instance.
However, the paper
notes, Chinas substantial current account surplus,
large international reserves and strong fiscal position provided
ample scope for measures to compensate for the fall in external
demand, and clear signs of recovery were evident by 2009.
grew by 8.9 percent in 2009, retail sales rose by 16.9 percent
and FDI grew by 30 percent. This recovery was a boon to global
markets, particularly to Africa.
The global crisis
did not appear to dent Chinas enthusiasm for investing in
Africa. The authors note that surveys undertaken in early
2009 in Beijing indicate that entrepreneurs would continue to
invest in, and trade more, with Africa.
In fact, their study
found that Chinese companies exporting to Europe and America
have adjusted rapidly to the slowdown in these markets by finding
new markets, such as in Africa.
On development, the
paper notes that China is sometimes referred to as an emerging
development partner, although the country has had an aid program
since the 1950s.
is mainly allocated, it says, to all weather friends,
such as Egypt, Ethiopia, Mali and Tanzania. Due to different definitions
of aid, it is hard to quantify Chinas development assistance,
say the authors. Credit and aid data are fragmented over more
than 20 line ministries, public banks and other agencies, and
it includes a wide range of activities, including grants, scholarships
and infrastructure projects.
trade and FDI in Africa
The author of this paper notes that despite recent dramatic growth
Africa remains a marginal trading partner compared to Chinas
trade with other regions.
has grown rapidly because the growth of foreign trade and
investment over the past decade has been guided by the desire
to secure energy resources, leading to increased relations with
Australia, Latin America and Africa.
Even so, Africas
share of Chinas total exports and imports despite
recent increases remains less than 4 percent, and is even
smaller for manufactured goods. Trade with China is somewhat more
important for Africa, representing almost 10 per cent of exports
FDI to Africa is dominated by a few resource-rich countries, plus
South Africa. Between 2003 and 2007, more than half of Chinese
FDI into Africa was absorbed by just three countries Nigeria
(20.2 percent), South Africa (19.8 percent) and Sudan (12.3 percent).
In fact, the state-owned
China National Petroleum Corp is the leading foreign investor
Nigerias share is set to rise significantly. China is negotiating
the acquisition of 16.7 percent of Nigerias oil reserves.
in African oil stems from its wish to diversify supply away from
Middle Eastern countries to more stable African countries. Also,
among sub-Saharan countries, only Nigeria is a member of OPEC.
However, the author
points out the future FDI will diversify and focus more on the
private sector and the development of small and medium-sized enterprises
(SMEs) in sectors such as telecommunications, business services
and manufactured goods.
China is also using
some African countries as a platform for re-exports.
manufacturing and industrialization in Africa
The authors of this paper note that Africas economic growth
has been predicated on higher commodity prices while diversification
into manufactured production has been limited.
They look into why
this is so, what sort of manufactured goods that African countries
should be producing for successful export, and Chinas role
in that process.
A key question is
whether Chinas rapid growth in manufacturing combined
with Africas exports of natural resources is effectively
blocking off Africas ability to follow a manufacturing-led
The production of manufactures (value added as a share of GDP)
in Africa remained constant between 1995 and 2004, and is far
below the average of developing countries elsewhere.
for only 10.9 percent of the GDP of the 20 largest African economies
in 2006 9.6 percent if South Africa is excluded. In 2004,
a study found that manufactured exports equalled only six percent
of sub-Saharan Africas GDP not much more than half
of the 11 percent average for all low income countries.
In order to improve
this situation, one study suggests that Africa should follow a
land-abundant development path similar to the United States
rather than the land-scarce Asian economies, pointing the
way to adding value to the continents natural resources
The authors particularly highlight apparel as an opportunity.
It can be expected that the labour-intensive apparel sector
would play an important role in Africas manufactured exports,
given the continents abundant low-skilled labour and preferential
access to the United States and the European Union.
They note that production
of wearing apparel is being transferred rapidly to developing
countries. They accounted for only 28.2 percent of global
production in 1995, but 57.5 percent in 2006. Two-thirds of that
change took place between 2002 and 2006.
They observe that
.the clothing sector is the only manufacturing sector in
Africa that displays international competitiveness
countries need to keep an eye on costs. For instance, total
cost of a pair of pants made in China is about $1 while a similar
product produced in South Africa costs ten times as much.
On trade with China, the authors note that while Africa ranked
only 7th as an export destination and 8th as a source of imports
in 2008, Chinas trade with Africa is expanding more
rapidly than with most other trade partners.
Between 1995 and
2008, Chinas exports to Africa rose by 23 percent per year,
faster than exports to Europe, the United States or ASEAN countries.
The authors note
the lack of African success in manufacturing compared to Asia.
One problem is that Africas economic policies, governance
and institutions have been far weaker than in many of the successful
They go on to make
recommendations for the future. Africa needs to strengthen
the policy umbrella, through more stable macroeconomic
policies, more dependable provision of government services, and
expanded infrastructure investments, including support for regional
trade (e.g. improved roads and border post management).
engagement and aid effectiveness in Africa
In this paper, the author acknowledges that traditionally China
has focussed its assistance on countries with which it has good
political relations and countries with oil and mineral resources.
However, he notes that recent trends have seen some broadening
of Chinese assistance.
He also reports that
there has been some expansion of investment outside primary industries.
One study notes that there has been significant investments
in non-primary industries such as clothing, the food industry,
transport, building, tourism, power plants and telecommunications.
In recent years,
the author concludes, Chinas engagement with Africa
has expanded to cover most countries on the continent and beyond
natural resources to light manufacturing and services.
It also finds that Chinese enterprises have played a positive
role through transferring technology. As a result, trade
with China could contribute to the product and geographical diversification
of African exports.
On FDI, the author
points out, as other papers in the publication do, that Chinese
FDI is relatively insignificant. It was 1.1 percent of all FDI
into Africa in 2007. However, that compares to only 0.2 percent
in 2003, and Chinas FDI to Africa is growing much
more rapidly than FDI from other countries.
On the level of development
assistance from China to Africa, once again because of definitions,
it is hard to estimate. However, the paper quotes a study suggesting
that Chinas aid flows substantially exceeded the USD 731 million
reported by official sources. It may have reached USD 8.1 billion.
Another study estimates that Chinas overseas development
assistance to sub-Saharan Africa averaged between USD 1 billion
and USD 1.5 billion annually during 2004 and 2005.
The estimates suggest
that Chinese aid to Africa is growing rapidly, but remains
small compared to assistance from OECD/DAC members
Chinese aid differs
from western aid in that it is usually tied. Development
assistance is usually granted in kind, while financial assistance
is given to finance contracts that are implemented by Chinese
Infrastructure Investments and African Integration
In this paper, the authors emphasize the importance of regional,
integration if Africa is to reap the benefits of economies of
scale, access to globalized markets and to strengthen its position
in international negotiations.
It also discusses
the establishment of a core group of African countries with FOCAC
to promote regional integration.
Such a group could
pursue initiatives such as improving access to the Chinese market
and advancing regional infrastructure projects. In the longer
term, it could establish a coordinated approach to debt relief
and the untying of development assistance.
It emphasizes the
importance of improved transport infrastructure and integration,
particularly for Africas land-locked countries. Transport
costs impede trade growth for those countries. For instance, transporting
a container between Japan and Abidjan costs USD 1,500, but the
cost to a land-locked country is double.
It also underlines
the importance of China trading and dealing with Africas
various regional trading and economic groupings such as ECOWAS,
COMESA and SADC, and notes that such regional trade has been growing
over recent years.
in infrastructure in Africa has remained stable at about USD 5
billion a year. Recent examples of projects include roads and
bridges in the DRC, railways in Angola, and power stations in
Also, China is building
high-voltage power transmission lines to interconnect countries
in southern Africa, strengthening regional integration.
In the rail sector,
Chinas largest deals include the construction of mass transit
systems in Nigeria, and the construction of new lines linked to
mining developments in Gabon and Mauritania.
The largest ICT project
with Chinese involvement is the rollout of a national communications
network in Ethiopia.
China has also made
moves into the African financial sector. The Industrial and Commercial
Bank of China has acquired 20 percent of South Africas Standard
Bank for USD 5.6 billion, and the China Construction Bank has
entered into a strategic partnership with FirstRand of South Africa.
7. China, Africa
and the International Aid Architecture
This paper looks into the implications of Chinas rising
prominence in aid and assistance for the practices that govern
the international aid architecture.
As in other papers,
it notes that while China is often called an emerging donor,
it has had an aid program since the 1950s. Egypt was the first
recipient of Chinese aid in 1956.
Now, every country in Africa, apart from Swaziland, has received
some aid from China.
During the mid-1970s,
China had aid programmes in more African countries than the United
The paper concludes
that China will continue in its aid and assistance program. The
evidence suggests that Chinese finance will be a significant,
continuing source of capital for African countries. In 2009, the
Chinese pledged to commit USD 10 billion in new preferential loans
(a mix of export credits and concessional aid loans) to Africa