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The future of China in Africa?

Beijing is now the largest trading partner of the continent. Despite the countless rumors about its methods and intentions, the reality is more different than the one we usually see.

If the Chinese presence in Africa is not a new fact, it became more and more important during the last decade. Trades with the Middle Kingdom were multiplied by twelve in ten years. After becoming the first African trading partner in 2009, Beijing won the title of first funder, announcing at the Fifth China-Africa summit (held in Beijing on the 19th and 20th of July 2012) that China would bring the amount of loans to the continent to $ 20 billion (€ 16.3 billion) for the next three years.

The emergence of the Asian giant also arouses mixed reactions, from the charge of robbery to the feeling of Hope. China has then been suspected of massively buying land in Africa; in fact, the appetite of this “ogre” does not exceed 4% of land grabbing south of the Sahara. So everyone has heard these stories of Chinese “prisoners” sent to build roads in Africa; stories that were not supported by any evidence, but still have a bright future ahead of them. This multitude of information on the “Chinafrica” often inaccurate, sometimes wrong, points out a major fact: the motivations of Chinese investors, their modes of action and the impact of their presence are still poorly understood.

The rise of a Partnership

The presence of China in Africa has first been politically-based on. As a fact, as says an adviser to the Benin Minister of Industry, “nobody in Africa will refuse the proposition of China, regardless of the interests it serves and the imposed conditions … There is much too much money involved and investors are rare. “A particularly relevant finding, considering the fact that Europeans and Americans, affected by the crisis, fold.

In some parts of the economy, China has been essential, especially winning a large share of construction contracts (roads, bridges, airports, housing estates …). Indeed, China is known to work fast and at great competitive price. In exchange for loans granted at concessional rates to its partners in order to fund projects, the Middle Kingdom signs supply contracts with prolific raw materials. This is what has been called a “win-win” strategy. In fact, the main Chinese investments in Africa are, to a large extent, focused on the most valuable natural resources. Sudan, Angola and Nigeria (petroleum), South Africa (coal, platinum), DR Congo and Zambia (copper and cobalt) have become the main partners of the Asian giant.

China will not hesitate to fulfil its ambitions, in disregard of the risk of renewed indebtedness of the countries concerned. 6 billion dollars loan granted by Beijing to Kinshasa in 2007 made the International Monetary Fund (IMF) and the World Bank thrill, as 80% reduction of the external debt of this fragile country – $ 12 billion – was in preparation. On the African side, China is often acclaimed as its business offensive breaks the monopoly of European firms, creating a profitable competition.

In some sectors such as textiles, the arrival of the Chinese, however, has almost destroyed the industrialization effort. Thus, South Africa, Lesotho and Nigeria, garment factories now face direct competition looms in Shanghai. In just one decade, the trade deficit with China in Africa in the field of textiles rose from $ 200 million to $ 1.35 billion. Despite the cost of transportation, Chinese products remain indeed more competitive.

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DATE November 28, 2014
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