China's rising influence on the African Economy

Hello everyone!

This week, I will be looking at the growing influence of China on the African economy and the opportunities as well as consequences it faces as a continent by giving way to China's 'investment drive'.

Introduction:

Africa is a hub to more than half of the world's natural resources, controls around 50% of the world's gold supply and is now growing as a region of great economic importance. The US and other developed economies are rushing to gain control of these African resources through increased investments, employment opportunities and infrastructure projects. However, China, the world's second-largest economy has remained at the forefront of 'the race for Africa'. In recent years, China's influence on the African economy has been growing more and more as China attempts to gain control over the precious resources Africa possesses. Around 30% of all infrastructure projects in Africa as of 2020, are either backed or funded by Chinese firms. The continent's longest railway line running between Ethiopia and Djibouti is also constructed by China which has now built 6,200 Km of railway lines all across Africa. The African Union headquarters in Addis Ababa was also constructed by Chinese firms. China, at present, is the largest investor in the African economy leaving behind the United States. China's ambitious Belt and Road initiative has also made it to Africa, with Beijing providing loans to finance huge infrastructure projects such as railways, expressways, seaports, hydropower plants etc.

China's investment drive in Africa :

One of the key reasons for China's growing influence in the continent is its deliverance on the proposed projects. Chinese firms are involved in a number of infrastructure projects in Africa that have positively impacted the region. It has resulted in a number of employment opportunities for the youth, the railway projects have provided key routes for greater integration of East Africa. Local railroads have brought up many business opportunities and have made transportation for people easier. China is currently Africa's biggest trading partner with $200 billion worth of trade between the two each year. Since 2005, China has invested a staggering $2 trillion in Africa and currently, around 10,000 Chinese-owned firms are operating in Africa. Infrastructure is the most that the African people currently need and China has been the perfect source of it. China is known for its highly mechanised and world-class infrastructure ranging from high-speed railway networks to its world-class building capacity. In 2021, China committed itself to invest $60 billion in Africa by 2035 directed towards agriculture, manufacturing, digital economy and blue economy.

What are China's main goals in Africa?

What China really needs from Africa is access to its precious natural resources. China imports half of its oil and 20% of its cotton from Africa. The continent sits on World's half natural resources and it's exactly what China is eying at. China is one of the world's leading economies and access to Africa's rich natural resources can further boost Beijing's economic progress. A third of China's total investments in the region are aimed at its mining sector. Other than, its natural resources, Africa acts as a strategic location as it provides Chinese exports with access to larger markets thus bolstering China's economic growth. Africa has also been able to provide itself as a potential market for made-in-China products as the country exports a wide range of manufactured, transportation and communication goods.

Fears of Debt traps?

Recently nations such as Sri Lanka have fallen prey to China's policy of debt traps and fears are growing for the same in many African nations. Many fear that Africa could end up in the same way as these countries, with some even calling it 'China's economic colonialism'. Some economists have pointed out that the Chinese deliberately offer large amounts of loans to those economies which cannot afford to pay them back even in the long term. This resultantly ensures 'unsustainable debt' for the continent and thus helps China acquire key assets such as ports and exercise control over their governments, the same way it did in Sri Lanka. However, following the developments in Colombo, China cancelled 23 loans to African nations to shrug off accusations of 'debt-trap diplomacy' and also to maintain its long-term economic and political relationship with the continent.

Analysis:

China's rising investments and projects in Africa may be beneficial for the people and might create employment opportunities for the youth but what China did in many other countries like Nepal, Sri Lanka or Bangladesh by following its 'debt-trap diplomacy' and pushing countries to the brink of debt default cannot be ignored. The example of how China acquired Hambantota port on a lease for 99 years by pushing the Sri Lankan government to a point where they were unable to repay their debts and were thus forced to lease the port, should remain a concern for African policymakers and thus they should be vigilant to prevent themselves from becoming a prey to Beijing's debt-trap.

Conclusion

Beijing's growing investments and its rising influence on the African economy have 'raised eyebrows' in many western economies which fear China's complete control of Africa. Although, China may have achieved numerous infrastructure projects in Africa given the growing concerns about its debt-trap policy, can 'the Dragon' ensure a long-term economic partnership with Africa?

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References:

TheAfricaReport. (2022, August 15). Is Africa undercutting its sovereignty with China's debt-trap diplomacy? The Africa Report.com. Retrieved October 9, 2022, from https://www.theafricareport.com/230524/is-africa-undercutting-its-sovereignty-with-chinas-debt-trap-diplomacy/

Council on Foreign Relations. (n.d.). China in Africa. Council on Foreign Relations. Retrieved October 9, 2022, from https://www.cfr.org/backgrounder/china-africa

Mourdoukoutas, P. (2021, June 28). What China wants from Africa? everything. Forbes. Retrieved October 9, 2022, from https://www.forbes.com/sites/panosmourdoukoutas/2019/05/04/what-china-wants-from-africa-everything/?sh=63361b1f758b

Adeshokan, O. (2021, December 22). China's investment drive and Africa's disjointed infrastructure. – The Diplomat. Retrieved October 9, 2022, from https://thediplomat.com/2021/12/chinas-investment-drive-and-africas-disjointed-infrastructure/

Africa's rising debt: Chinese loans to continent exceeds $140 billion. The Economic Times. (n.d.). Retrieved October 9, 2022, from https://economictimes.indiatimes.com/news/international/world-news/africas-rising-debt-chinese-loans-to-continent-exceeds-140-billion/articleshow/86444602.cms

Fall, R. (2022, March 17). China Infrastructure Projects: The Myth of 'Debt Trap' Diplomacy in Africa. Bloomberg.com. Retrieved October 9, 2022, from https://www.bloomberg.com/news/articles/2022-03-17/the-myth-of-chinese-debt-trap-diplomacy-in-africa