School Papers

1. on multiple occasions. For instance, in 2016,

1.  
Introduction

China’s increased presence in the African
continent has been of interest to many, and is considered to be a crucial
player in Africa’s political and economic development. Indeed, Chinese
investment skyrocketed in the past decades. In 2005, the volume of Chinese aid
amounted to $800 million, which increased to a commitment of $10 billion
between 2009 and 2012. In terms of infrastructure, Chinese investments
increased seven-fold from $1 billion in only three years during the 2003-2006
period (Ayodele & Sotola, 2014). The main drivers behind this increased
involvement include diplomatic, energy-related, and market-seeking reasons.
However, the interests of China in Africa have been heavily debated. On the one
hand, advocates of the Chinese model of investment argue that it has brought
growth to African economies, and has provided its citizens with affordable
goods. On the other hand, critiques believe that China’s non-interference
policy with recipient countries is damaging good governance and the rule of law
by increasing the leverage of African autocratic leaders (Broich & Szirmai,
2014). Thus, the aim of this paper is to assess the key motivations behind
China’s increased involvement in Africa, and to discuss its implications for
economic and institutional development.

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The remainder of the paper is structured
as follows. Section 2 reviews the key drivers of Chinese investment in African
economies, and contrast its approaches with the Western model. Section 3
assesses the implications for economic and political development while considering
both advocate and opponent views of Chinese involvement. Section 4 offers concluding
remarks.

 

2.  
Motivations
and Approaches of China’s presence in Africa

a.    
Drivers
of Chinese Investment

One of the main goals of China in its
involvement in Africa is a diplomatic one. Indeed, China is seeking Africa’s
support for its “One China Policy”, and the absence of ties with Taiwan is a
pre-requisite in order to receive Chinese aid (Broich, 2017). Furthermore, African
governments which receive Chinese investments are then more likely to provide
political support to China in the United Nations General Assembly and other
major institutions (Strüver, 2016). AidData determines that for every 10
percent increase in voting support within the United Nations, Chinese aid is
increased by 86 percent on average (Manero, 2017). As a result, African
countries have proved their support to China’s foreign policy matters on multiple
occasions. For instance, in 2016, Kenya deported 50 Taiwanese nationals to
China (Mareno, 2017). In addition, by establishing its presence in Africa,
China aims to demonstrate its global power and its ability to compete on the
world stage, along with European countries and the United States (Ayodele &
Sotola, 2014). This strategy has been heavily criticized by Western observers,
and sometimes characterized as an effort to promote non-democratic political
regimes on a global scale.

 

Another crucial interest of China is the
rich natural resource endowment of Africa. The rapid growth of the Chinese
manufacturing sector has led to an increased demand for oil, gas, precious
metals, aluminum, copper, and iron ore, all of which are abundant in Africa. As
a result, a large share of Chinese financing in Africa relates to securing its
natural resources (Ayodele & Sotola, 2014). Using the so-called “Angola
Model”, China provides low-interest loans to nations depending on commodities.
Oil and mineral resources and thus used as collateral for the loan. These types
of loans are welcomed by African countries, as most of them experience
difficulties obtaining funding due to low credit ratings (Sun, 2014).

 

The African population is a potentially
important market for Chinese goods. Previously, many industries were excluded
from the market as African economies were under monopolies and heavy protection
from competition. When these economies liberalized, it opened the door for new
players to enter the market, including Chinese firms. As the Chinese economy
relies on manufacturing sectors, the African continent provides a new and
dependable market (Ayodele & Sotola, 2014). Furthermore, Chinese low-cost
manufacturing products such as electronics and textile are heavily welcomed by
price-sensitive African countries (Broich, 2017).

 

Finally, China is currently promoting its
“One Belt One Road” initiative, which calls for spending billions of dollars in
infrastructure investment in countries along the Silk Road, linking China to
Europe (The Economist, 2017). Africa is of crucial importance to this project,
as the Maritime Silk Road will go past the coast of East Africa, where China
has invested in several ports. Hence, countries such as Egypt, Ethiopia and
Sudan have an important strategic stake in the completion of the initiative.
However, the Chinese infrastructure projects are not limited to ports and
coastal countries, and roads and railways are working their way through the
inside of the continent (Breuer, 2017). As a result, China is heavily investing
in infrastructure projects in many African countries.

 

b.   
Approach
and Comparison with Western Investment

The Chinese aid and investment systems
markedly differs from the Western model for two key reasons. First and
foremost, China employs a “non-interference” policy towards the countries it
invests in. This means that aid is not conditional to factors such as good
governance, fiscal discipline, the rule of law, property rights and human
rights. The only exception to this policy is the condition that recipient
countries have no ties with Taiwan, and recognize the People’s Republic of
China as the only legitimate government of China. Historical examples have
shown that China suspended economic aid whenever a country recognized the
Taipei government as representing China (Broich, 2015). By contrast, the
Western model of aid is typically characterized by conditionality on sets of
guidelines represented in the Washington Consensus or the European Consensus.
Indeed, Western countries expect recipients of their aid to show records of
good governance and rule of law in exchange for their support. Furthermore,
Western countries have been known to selectively target their aid to democratic
countries, so that resources will be used more efficiently and maximize total
society welfare. This particular characteristic of Chinese investments abroad
is the key reason why Western countries are increasingly suspicious of China’s
presence in Africa. The non-interference policy is believed to promote
authoritarian political regimes on a global scale. As a result, many African
governments tend to welcome the Chinese model of aid, as it comes with very few
strings attached compared with the Western model.

 

Secondly, the Chinese approach to
promoting economic growth differs from the west in that it is associated with
China’s specific commercial interests, but also the ones of the recipient
country. Hence, the aid projects are usually mutually beneficial, and projects
are designed to be in the interest of both nations. In contrast, the West is
usually aiming at raising income and welfare in the recipient country.
Generally, China tends to avoid lending money upfront to recipient countries.
Instead, Chinese construction and engineering companies provide jobs to Chinese
and local workers, while being funded by Chinese banks (McKinnon, 2010).  Furthermore, Chinese companies are willing to
invest where Western firms are less prone to, such as physical infrastructure,
industry and agriculture, which are crucial to African development. According
to Ayodele & Sotola (2014), since the 1970s, the United State Agency for
International Development (USAID) has not funded heavy infrastructure projects
in Africa. In addition, the World Bank and USAID drastically reduced support
for agriculture in the 1990s, and the World Bank stopped supporting palm oil
farmers because of environmental pressures. Finally, while both the West and
China are heavily investing in resource related industries, the West tends to
invest more in services than China. Moreover, Chinese SMEs are rather characterized
by market-seeking FDI throughout Africa (Broich, 2014).

 

3.  
Implications
for Development

a.    
The Opposing
View

As previously mentioned, the West is
increasingly suspicious of China’s relations with Africa. A key reason for that
suspicion is China’s non-interference policy with African government, which
tends to be perceived as a way to promote authoritarian regimes. As much of the
current Western aid in Africa focuses on improving governance and the rule of
law, China’s presence could undermine the efforts of the West by providing
authoritarian leaders with more leverage to stay in power (Broich &
Szirmai, 2014). For instance, when American and Canadian companies were forced
to leave Sudan as a result of their governments’ sanctions against the Sudanese
regime, Chinese companies stepped in to fill the gap. In response, the West
accused China of supporting an authoritarian regime (Lammers, 2007). According
to Broich (2017), this situation is similar to the foreign aid game between the
United States and the Soviet Union during the Cold War. Along these lines,
while the US and the Soviet Union attempted to influence recipient countries
not to switch to the rival ideology, China may be influencing African countries
not to switch to democracy in the same manner. Although Broich (2017) does not
find a statistically significant relationship between the democracy level of a
recipient country and Chinese development finance, many Western observers still
believe that the lack of conditionality of Chinese aid on governance standards
may further strengthen poor rule of law, accountability, and human rights in
African countries, as it gives governments no incentives to improve, while
still providing them with much needed aid.

 

The Chinese model of aid has also been
heavily criticized by the West as it is perceived to be overly advantageous to
China compared with recipient countries. These critiques even characterize
China’s involvement with Africa as “neo-colonialism”. For instance,
infrastructure programs funded by the Chinese government are mainly carried out
by Chinese workers. As a result, local companies and workers are not given an
opportunity to grow experience and capital, as these contracts are mainly
benefiting Chinese companies (Manero, 2017). Furthermore, there has been
instances of human rights violations of local workers and local communities.
For example, for the construction of the Kribi deep sea port in Cameroon, local
houses were pulled down and people had to relocate, complaining about weak
compensation (Breuer, 2017). In addition, Human Rights Watch (2011) released a
review of treatments of Zambian workers in Chinese mines, revealing unsafe
working conditions, exploitative hours, and threats to those who complained.
Finally, the overflow of cheap Chinese goods into African markets provides
overwhelming competition to local producers, who are unable to follow.

 

b.   
The
Advocate View

Although the Chinese model of aid has
been heavily criticized, it does seem to provide results. The African continent
desperately needs investments in infrastructure, as its infrastructural
backwardness is a key factor holding development back. Infrastructure projects
funded by Chinese development assistance have built needed roads, bridges,
railways, schools, and hospitals in an attempt to close this gap (Manero,
2017). Furthermore, China has contributed in developing Africa’s human capital
by providing trainings to many African professionals, and offered scholarships
to study in Chinese universities for African students. In addition, machinery,
electronic equipment and high-tech products have been heavily exported to
African countries, providing much needed access to new technologies (Ayodele
& Sotola, 2014). Although these products may represent fierce competition
for local producers, they are more suitable for African demand, and are
affordable to a large number of people. Furthermore, Chinese aid has provided
relief to many African government struggling with low credit ratings. According
to Ayodele & Sotola (2014), Chinese concessional loans are subsidized
through aid budget, which allows for lower interest rates than for commercial
loans. Moreover, China regularly engages in debt forgiveness for heavily
indebted countries. The authors further point out that China also offers
advantageous terms of trade to many African countries, and has exempted 440
African products from Chinese tariffs. In addition, the high volume of trade
between the two regions has largely contributed to a record economic growth of
5.8 percent in 2007.

 

We know that the West does not perceive
Chinese aid in Africa in a positive light. But what about Africans themselves?
According to the Afrobarometer (2017), 63 percent of respondents believe that
China’s economic and political influence in their country was positive. When
asked what factors contributed to their positive image of China, respondents
mainly mentioned China’s investment in infrastructure (32 percent), and the low
cost of Chinese products (23 percent). However, many Africans (30 percent)
still consider the United States as the most popular model for national
development, followed by China (24 percent). In addition, the former colonial
powers are perceived as having the greatest influence (28 percent) compared
with China (cited by 23 percent) and the United States (cited by 22 percent).
Nonetheless, it seems that the “China way” of aid represents a welcomed
alternative to the traditional model of aid advocated by the West.

 

4.  
Discussion
and Conclusion

The aim of this paper was to investigate
the motivations behind China’s increased presence in Africa, and its
implications for development. It appears as though the key drivers behind
Chinese aid in Africa are of diplomatic, natural resources related, and
market-seeking nature. In addition, the approaches used by the Chinese model of
aid markedly differ from those of the West, in that China employs a
non-interference policy with the recipient countries. Moreover, the Chinese
approach to promote economic growth resides in the design of mutually
beneficial contracts with the recipient countries. In contrast, the West
employs a more “selfless” approach, aiming at raising per capita income.

 

The question whether Chinese investment
is beneficial or harmful for the economic and political development of African
economies is a heavily debated one. In my opinion, these are the two faces of
the same coin, and this situation cannot easily be described as black or white.
On the one hand, China does help spur African economic growth by heavily
investing in infrastructural projects, by offering favorable terms of trade,
and by providing African citizens with low-costs products. Furthermore, the
majority of the African population perceive China’s economic and political
influence in their countries as positive. As a result, the “China way” of
economic growth challenges the ideas of the Washington Consensus, by offering a
model of development that doesn’t necessarily require Westernization. On the
other hand, these short-term benefit cannot substitute for the lack of strong
institutions, property rights, and the rule of law in many African countries.
Although evidence suggests that China does not seek to actively support
authoritarian governments, its non-interference policy with recipient countries
may undermine Western efforts to improve governance. Furthermore, authoritarian
governments receiving Chinese aid are offered the opportunity to stay in power
without the need to improve weak governance. As a result, African economies
will only enjoy sustained economic growth and political stability if they
improve their institutions and rule of law, and provide their citizens with
stronger property and political rights. 

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