China's Long-Term Approach to Africa
A South African scholar shares her perspective on China's investments in the continent.
Published: Monday, November 12, 2007
Africa has absolutely no idea what it wants from China.
It's no secret that resource-hungry China is interested in Africa. According to the Council on Foreign Relations, trade between the two countries reached $50 billion dollars in 2006.
China's interest is not a passing one, according to Lucy Corkin, who holds a master's degree in international politics and is projects director at the Centre for Chinese Studies (CCS) at Stellenbosch University in South Africa.
"A lot of people think China is going to come in, sell their cheap goods, and disappear. That may be true for the small entrepreneurs who come in to make a buck or two, and they move off somewhere else. But when you're looking at the state-owned enterprises that are dealing with natural resources, they are in it for the long haul," said Corkin at a lecture hosted by UCLA Center for Chinese Studies and UCLA African Studies Center on Oct. 30, 2007.
It will take 20 years for any Chinese enterprise developing oil and iron-ore fields in Africa to see a return on its investment. But the companies can wait because they are state-owned and don't have to worry about shareholders looking for quick returns. China is content to wait for its African investments to mature, said Corkin.
Corkin said that a key aspect of China's long-term resource strategy in Africa is infrastructure. China often stipulates that money lent from state-owned The Export-Import Bank of China (China Exim Bank) be used for infrastructural development. Chinese companies usually do the construction work. While projects vary, China has built railroads and roadways that reach previously inaccessible resources, connect oil and iron-ore to the coastline for quicker shipment to China, and expand markets for Chinese products in the African interior.
The importance China places on infrastructure matches the mindset of African leaders, said Corkin.
"As a developing leadership, [Chinese leaders] understand that tangible assets and large-scale infrastructural projects are very important for African leaders because they want to show their people they're doing something," although some of the construction projects were football stadiums rather than schools.
China's interest is not limited to resources, either.
Corkin cited research by her CCS colleague Christopher Burke about China's access to labor. He found that 60 percent of Chinese investment already in East African countries was used to develop the manufacturing sector.
According to Corkin, China views Africa not only as a place to secure resources "at source" but also as a huge market for Chinese exports since 800 million Africans earn the same amount of disposable income as Chinese nationals. Africa is also a less competitive ground for Chinese companies to test international projects before moving into western markets.
The most competitive sectors for Chinese companies in Africa are oil acquisition, mining, construction, banking, telecom, textiles, and light consumer electronics.
Africa is seen as a much more healthy investment than 10 years before, and although companies must have a lot of money to invest, according to Corkin, returns are the highest in the world.
China also recognizes the important political capital of African countries at the United Nations, Corkin said. And China will still invest and offer loans to "resource-poor" countries in order to garner good will from countries like Ethiopia, where the African Union is headquartered, and Uganda, viewed as an "access point" to investments in the Democratic Republic of Congo, Burundi, and Rwanda.
The World Bank and the International Monetary Fund question whether China's loans are good for Africa, given a lack of transparency in financial transactions, and whether China and African countries can sustain these huge debts. But African leaders are not inclined to listen to the two organizations in light of the adverse impacts of their structural adjustment programs in the 1960s and '70s, Corkin said.
At the moment, China is the winner in its relationships with African countries. All but 13 of more than 50 African countries are running a trade deficit with China.
"China is very clear about what it wants from Africa and it knows how to do it," said Corkin. "Africa has absolutely no idea what it wants from China."
Not only must African countries figure out what they want, Corkin said, but—given trade deficits and generally weak bargaining positions—they must also figure out how they will go about getting it.