top of page
Search

Why Is China Doing So Much Business in Africa?

The Forum on China-Africa Cooperation (FOCAC) this week may reveal more about China’s objectives on the continent.


China has massively expanded trade with Africa over the last two decades, pouring billions of dollars into building roads, railways, and ports across the continent.


These investments have been made through the Forum on China-Africa Cooperation (FOCAC), a conference held every three years to determine how African countries and China can collaborate more effectively.


The most recent meeting took place in Beijing, China’s capital, from September 4 to 6 last year, with President Xi Jinping in attendance.


How extensive is China’s business with Africa?


Over the past 20 years, China has become Africa’s largest trading partner, the single biggest investor in African countries, and its largest creditor.


Trade between China and African countries totaled $250 billion in 2022 (the latest year with complete records). China primarily imported raw materials like oil and minerals while exporting mostly manufactured goods.


In 2022, Beijing invested $5 billion in African economies, mainly to build new transport links, energy facilities, and mining developments.


That same year, Chinese companies earned around $40 billion from these projects.

The World Economic Forum reports that there are currently 3,000 Chinese companies operating in Africa. Recently, China has shifted its strategy to offering Africa its advanced technology and products for the "green economy."


China also holds $134 billion in outstanding loans to African countries. These loans were issued for development purposes, and China accounts for roughly 20% of Africa’s total debt to the rest of the world.


However, there has recently been a reduction in Chinese loans and investments in Africa. This is due to many African states struggling to repay loans for infrastructure built by China, according to Professor Steve Tsang of the School of Oriental and African Studies (SOAS) at the University of London.


“China has been willing to lend money for projects in Africa, like railways, that Western countries and the World Bank wouldn’t fund because they didn’t make commercial sense,” he explains. “Now, many African countries have realized they are not generating enough revenue from these projects to repay the loans.”


“Today, Chinese investors in Africa are more selective,” says Alex Vines from Chatham House, a London-based think tank focused on foreign affairs. “They are looking for more financially viable projects.”


China is also moving away from offering African nations large infrastructure projects, such as highways, railways, and ports. Instead, the country is providing high technology like 4G and 5G telecom networks, space satellites, solar panels, and electric vehicles.

“China has been accused of dumping electric vehicles into the African market,” according to Vines. “For China, this is a way of exporting its cutting-edge green technologies.”


Has trade with China helped or harmed Africa?


China began establishing strong trade relations with African countries in 1999, when the Chinese Communist Party launched its globalization strategy. The first FOCAC meeting was held in 2003, and the organization is now a platform for partnerships between China and 53 African states.


Initially, China focused on importing as much raw material as possible from Africa to provide export goods to the rest of the world, according to Vines.


“China lent large sums for infrastructure construction in Angola in exchange for oil supplies,” he explains. “These projects also provided jobs for Chinese professionals. At one point, there were over 170,000 Chinese workers in Angola.”


China describes its investments in Africa as a win-win initiative.


But Chinese construction projects in Africa have brought very few benefits to local residents, according to Tsang. This has created resentment.


“Chinese companies primarily bring their own workers and don’t offer many local jobs,” he explains. “There’s also a perception that they employ locals in roles with poor working conditions.”


Loans to African countries soared after 2013, when China launched its Belt and Road Initiative to increase trade networks across Africa and Asia. The peak was in 2016, with over $28 billion in loans.


China has been accused of offering predatory loans to Africa, convincing governments to borrow large sums and demanding concessions when repayment issues arise.

Angola has accumulated $18 billion in debt to China, Zambia more than $10 billion, and Kenya $6 billion, according to Chatham House data. All these countries have found it very challenging to repay these loans.


In several cases, China lent money to African states with repayments tied to their raw material exports. These agreements have helped China gain control of numerous mines in countries like Congo.


The president of the African Development Bank, Akinwumi Adesina, told the Associated Press that governments should avoid such loans.


“They’re simply bad because you cannot properly price the assets,” he stated. “If you have minerals or oil underground, how do you set a price for a long-term contract? It’s a challenge.”


However, Vines argues that “China’s so-called ‘debt-trap diplomacy’ doesn’t really exist.”


“China sometimes acts opportunistically when negotiating with weaker states,” he explains, “but stronger governments can make deals with the country without accumulating high debt.”


What are the plans for the future?


FOCAC is the most comprehensive and established partnership platform between African nations and any global power, according to Shirley Ze Yu from the London School of Economics. The forum sets new goals and priorities every three years.


For Yu, FOCAC “is largely a strategy for better positioning China as Africa’s external partner.”


“By the end of the century, 40% of the world’s population will be living in Africa. It’s easy to see that Africa holds the future of the global economy.”


But China’s interests in Africa are not solely commercial. They are also political, according to Vines.


“There are over 50 African nations in the UN,” he notes. “China has already convinced almost all of them not to recognize Taiwan as a state.”


“We are now seeing a clearer picture of what China wants from Africa,” explains Tsang. “It wants to position itself as the defender of the Global South and use this position to increase its influence at the UN and other international organizations. China wants African countries to be its ‘supporting cast."


The professor emphasizes that FOCAC is not a meeting of equals.


“There is a significant power disparity. If you agree with China, you’re welcome. No one will say they disagree with what it plans to do.”


Translated by Artificial Intelligence

1 view

Comments


Escritório moderno

For any request, please fill in the fields in the form below:

Obrigado! Mensagem enviada.

seal4-d4s.png
bottom of page