Introduction to China–Africa and an Economic Transformation
Introduction to China–Africa and an Economic Transformation
Abstract and Keywords
This introductory chapter outlines the aims, analytical perspectives, and the organization of the volume. It sets the scene by describing China’s place in the changing dynamics of global economic order, the increasing role of China in Africa’s economic transformation, and the unevenness of the China’s economic footprint in Africa. It introduces the four thematic sections that primarily focus on the progress, foundations, challenges, and future trajectory of China–Africa cooperation. Part I: ‘China’s Rise and the Changing Global Development Discourse’ examines the meanings and global externalities of China’s economic emergence in an era of globalization. Part II: ‘Evolving China–Africa Relations: Context, Perspectives, and Framework’ examines China–Africa ties in their historical context, the institutional and policy frameworks for promoting cooperation. Part III: ‘The Dynamics of China–Africa Economic Ties’ describes the Chinese approach to doing business in Africa, while the last section Part IV: ‘China and Africa’s Economic Transformation’ discusses the conditions under which Chinese engagement in Africa can play a catalytic role in Africa’s industrialization and structural transformation.
1.1 The Context of China–Africa Ties
The last quarter of the twentieth century brought tremendous advances in the way human beings organize production, work, trade, and many aspects of social activities. Accelerated advancements in science and technology, the balance between the relative roles of states and markets, transformations in global trade and investment regimes, and the global compacts on environment and social policies have been far reaching. A developing country that has successfully taken advantage of the opportunities from globalization’s tidal wave to achieve structural transformation has been China. In a relatively short four decades, China has emerged as the second-largest economy in the world with a huge industrial complex and manufacturing base; it has lifted more than 700 million of its population out of poverty in just a generation and established itself as one of the most influential countries in global affairs.1 China has become an engine of global economic growth. Since the global financial crisis of 2008, China’s annual contribution of at least 30 per cent to global growth has been far more than that of any other economy (see Chapter 2). China is also the largest global trader and net exporter of outward foreign direct investment (FDI) (see Chapter 2). China’s economic rise can, therefore, be viewed as a ‘global public good’, with enormous positive impact on the economic fortunes of many countries across the world, including Africa.
(p.2) China was trapped in poverty for centuries before its recent rise and the series of reforms launched by Deng Xiaoping at the end of 1978. China’s rise from a country with less than one-third of sub-Saharan African countries’ per-capita GDP in the late 1970s has been an inspiration, showing that poverty is not a destiny and transformation is possible. The historical example of China certainly has some unique features, but it is not exceptional. China’s industrialization has in many ways reproduced historical patterns, especially from other East Asian latecomers, at fast speed and greater scale, and has followed a pattern of ‘directed development’ or ‘pragmatic experimentation’ (Ang, 2016). Thus, besides China, other historical experiences offer important lessons for African economies; most share the Chinese trajectory of experimentation and show that its fundamentals—fast infrastructure building coupled with careful FDI management, among other ingredients—are common to other Asian experiences.2 In the African context, Ethiopia is one country that has followed the Chinese and other East Asian model of industrialization (see Chapter 14).
Over the past decade and a half, China has emerged as Africa’s largest trading partner, as among its top five major investors, and as a major source of development finance and contractor of major infrastructure projects for the continent (see Chapters 2, 3, 8, and 9). Chinese demand for African oil and other raw materials has had a huge impact on the performance of African economies over the past decade. In addition, expanded Chinese investments in the infrastructure sector—roads, power generation, ports, and new airports—have opened up opportunities for African producers to increase production and move goods to local, regional, and global markets relatively quickly, resulting in increased incomes to Africans (Brautigam, 2009; Cheru and Obi, 2010; see also Chapters 8, 9, 14, and 15).
It is, however, important to establish at the outset that China is not a newcomer to Africa; indeed, it never left the continent in the first place. While Chinese foreign policy in the 1950s and 1960s was primarily focused on supporting African countries in their struggle against colonialism and imperialism, in the post-Cold War period pragmatic pursuit of mutually beneficial economic cooperation has become the centrepiece of Chinese policy towards Africa (Shinn and Eisenman, 2012) (see Chapter 4). Since the introduction of opening and reform by Deng Xiaoping in 1978, China has pursued its dream of becoming a leading industrial power by embracing globalization and global integration as a development strategy.3 China’s emergence as the (p.3) leading player in FDI outflow from emerging economies is linked to the pursuit of its ‘Going Global’ strategy and its vision for a different kind of international system. China’s foray into Africa must, therefore, be understood within this wider context.
It is no accident that China became Africa’s most valuable partner in the post-1990 period at a time when prescriptions from neoliberal quarters and structural adjustment reform were coming to be seen as empty promises. Hence, China’s rise in Africa began at a time when Africans themselves were engaged in a major soul-searching exercise to find out why the continent’s development path had gone wrong after more than fifty years since the end of colonial rule (for most African countries) despite the continuous ties with Europe and North America since the end of colonial rule. The growing fatigue with neoliberal policy experiments that is driving a search for an alternative development model has led many African leaders to take a closer look at China’s recent development experience in the hope of drawing important lessons from it (see Chapter 14 on Ethiopia). China’s historical experience as a former semi-colony and its spectacular growth experience since the late 1970s under the guidance of a strong developmental state have raised African interest in the pursuit of an alternative development strategy that departs from the conventional neoliberal Washington Consensus policy prescriptions. Of interest to African policymakers have been the homegrown domestic policy lessons and the role played by the Chinese state in experimenting with ‘heterodox’ policies to accelerate economic growth, emerge as a manufacturing powerhouse and major exporter, and reduce poverty while gradually moving towards the expansion of the markets (see Chapters 2 and 13).
There are also non-material reasons for Africa’s attraction to China. In contrast to the paternalistic (and often pessimistic) view of Western partners towards Africa, segments within the Chinese state bureaucracy and varied private-sector groups hold the view that Africa is a dynamic continent on the threshold of a developmental take-off. Its pronounced position of partnership embraces the language of solidarity, mutually beneficial economic cooperation, ‘common prosperity’, and shared ‘developing country’ status. Such positive narratives are music to the ears of African policymakers who are wary of perceived Western paternalism and tired of losing policy space because of Western aid-induced policy recommendations. China makes no paternalistic pretence of being in Africa to help poor Africans develop, or to teach them how to govern themselves. China is in Africa to conduct business based on mutual benefit, cooperation, and non-interference in the internal affairs of African countries (People’s Republic of China, 2006).
The growing economic partnership between China and Africa has generated much excitement as well as anxiety in many quarters. On the one side stand the ‘China bashers’ in the West, who accuse China of ‘neo-colonialism’ (p.4) by engaging in exploitative economic relations with weak African states, contributing to their indebtedness while gorging on Africa’s oil and strategic minerals without having to abide by accepted international norms on human rights, labour, and environmental standards. At the other extreme stand African governments who see China as ‘Africa’s salvation’, pointing to huge Chinese investments in the long-neglected African infrastructure sector, increased access to low-interest loans, and higher returns from commodities as a result of the growing Chinese demand for Africa’s natural resources. The relationship between China and Africa is much more complex than that depicted by anti-China and pro-China camps. The contributors in this volume are all in agreement that China’s rise has been more of a blessing than a curse for African countries. The ‘China effect’ on Africa’s economic growth, economic diversification, job creation, improved connectivity, increased welfare, and integration into the globalized economy is hard to ignore. The direct contribution that Chinese finance and contractors are making to the economic infrastructure is a necessary condition for the industrialization prospects of African countries.
1.2 Analytical Framework and Aims of the Book
Although the literature on China–Africa relations has proliferated over the past decade, there is a paucity of empirically based literature on Africa’s economic development and even less on the potential catalytic role of China–Africa economic ties in Africa’s industrialization and structural transformation. In reflecting the rapidly changing dynamics, therefore, this volume makes an important contribution to filling the gap in the existing literature. A key theme of the book is the potential catalytic role of Chinese investment for Africa’s industrialization and structural transformation.
China’s engagement with African countries is uneven across the continent. Some countries (such as South Africa, Angola, Tanzania, Kenya, Ethiopia, Zambia, Democratic Republic of Congo, Nigeria, and Algeria) have multifaceted economic cooperation with China, while this is not the case for many other African countries. For instance, fewer than ten countries are major destinations of Chinese outward FDI, and the nature of FDI is different across these countries. While about two-thirds of Chinese firms in Ethiopia are in the manufacturing sector, only 30 per cent of all Chinese firms in Africa are, and their impact as driver and catalyst of economic transformation is uneven (McKinsey, 2017; World Bank, 2012).4 The book interrogates key factors (p.5) accounting for this variation and for development outcomes in different African countries. It also examines how lessons from China’s development experience can inform policy decisions on industrialization in Africa. African agency is indeed a major factor contributing to the variation of outcomes observed across countries. Included in the volume is a case study of Ethiopia’s successful industrialization strategy which demonstrates that it is possible to attract FDI and infrastructure finance from China to kick-start national industrialization, if African policymakers implement strategic actions in their engagement with China to steer the process of economic transformation.
An overarching theme of this volume is economic development in core areas relevant to Africa’s economic transformation and where major shifts are observed, such as international trade, investment and industrialization, and infrastructure development and financing. Contributors to the volume interrogate the conditions under which Chinese trade, investment, and infrastructure loans can have a catalytic role in Africa’s transformation, as well as the instructive lessons that African countries can draw from the Chinese development experience of the past forty years. Contributors to the volume agree that the Chinese experience shows the importance of writing one’s own script in the global political economy, designing a homegrown strategy, instilling self-confidence, selectively dialling into the world system and sequencing openings, investing in human resources, and responding to challenges in a creative manner and with clear vision.
Moreover, as China undergoes major economic rebalancing to enter the fourth industrial revolution and upgrade to an innovation-driven economy, this is bound to affect China–Africa relations in multiple ways offering both opportunities and challenges (see Chapter 2). For example, China’s new internationalization strategy—the Belt and Road Initiative (BRI)—covers not only Africa, but other continents, reflecting China’s ‘Going Global’ strategy, greater emphasis on ‘industrial cooperation’, and the potential to attract manufacturing FDI in light manufacturing. Reaping the opportunities offered by China’s economic rebalancing and the ‘going out’ of Chinese enterprises will primarily depend on the capacity of African actors to make the most of these opportunities. Considering China’s global ambitions, African policymakers need to understand the contributions as well as the limitations of the economic ties with China in a rapidly changing context. This will distinguish the scope of this volume from other books that largely address governance, international diplomacy, and social issues (Alden and Large, 2019).5
(p.6) China–Africa economic relations cannot be understood in isolation from the dynamics and operations of the global economy, and the position each occupies in the global division of labour. While China has been able to transform itself from the relatively poor and underdeveloped country of forty years ago to become one of the leading industrialized economies in the world today, the African continent has lagged far behind notwithstanding the impressive economic growth registered in many African countries in recent years and the rise of a sizeable middle class as a result of globalization. To account for the variation in development outcomes between China and Africa, and to understand the lessons African countries can draw from China regarding the ‘pathways’ to industrialization and structural transformation, requires a heterodox political-economy approach, with a clear focus on the changing global division of labour and power. This framework requires an understanding of the shifting political-economy conditions currently shaping China’s development trajectory, which affect the way China’s ties with Africa impact on the prospects for African structural transformations. Likewise, structural and shifting conditions in African settings also influence how opportunities for social and economic transformations are reaped (or not). Such an approach to the book seeks to bind chapters together without constraining individual contributors into an inflexible framework.
The shift in manufacturing to the global South and the ‘global business revolution’ (Nolan et al., 2007) in the second half of the twentieth century has had an enormous impact on national economies and the international division of labour. Driven by differences in comparative advantages and by the technological and communications revolution, a global manufacturing system has emerged, linking different regions and countries of the capitalist economy.6 A system of flexible accumulation has given rise to global production networks that coordinate supply chains across multiple frontiers, incorporating both capital and labour from an ever-growing number of developing countries. The unfurling global division of labour creates variations in the regional division of labour, together with distinctive development possibilities (Fröbel, Heinrichs, and Kreye, 1980).7 The East Asian economies—South Korea, Taiwan, and Japan—were the first to benefit from the new global economy, with China following in their footsteps after 1978. African countries, by and large, have failed to benefit from the unfolding global division of labour. The aim of this book is, therefore, to interrogate what Africa can learn from East Asia and China to embark on a path of industrialization and (p.7) structural transformation, and whether emerging ties with China can contribute to this path.
1.3 The Structure of the Book
The fifteen chapters of the book are structured in four thematic sections which primarily focus on the progress, foundations, challenges, and future trajectory of China–Africa cooperation. Under the overarching theme of economic development, core areas are examined that have long-term implications for Africa’s economic transformation, such as trade, investment, industrialization, infrastructure development, and financing.
1.3.1 Part I: China’s Rise and the Changing Global Development Discourse
The contributors in this section set out to understand the meanings and global externalities of China’s economic emergence in an era of globalization—in a period which has witnessed economic integration and interdependence among nation-states to a hitherto unprecedented degree. Linda Yueh (Chapter 2) and Célestin Monga (Chapter 3) explore the drivers of China’s emergence as an economic superpower and its global impact. They argue that while globalization has assisted China’s rise, the government’s pragmatic economic experimentation with an East Asian-style development strategy and its success in the global quest for prosperity constitute an important chapter in the world’s intellectual and political history.
As African countries see China more and more as an example to emulate, the contributors agree that African countries must focus more on learning from China’s past domestic reforms process rather than trying to replicate it uncritically and without considering the local African context. Understanding the industrial policy framework is critical to understanding China–Africa economic ties as China moves upwards towards an indigenously driven innovation-led economy.8
1.3.2 Part II: Evolving China–Africa Relations: Context, Perspectives, and Framework
The contributors in this section examine China–Africa ties in their historical context, the institutional framework for promoting cooperation, and key policy instruments (trade, investment, loans, and technical assistance) that (p.8) the Chinese state deploys to cement its economic ties with Africa. It must, however, be noted that the Chinese way of catalyzing trade and investment in Africa is not exceptional although the scale may be different, given China’s deep pockets. The strategy is clear: to create a paradigm of globalization that is favourable to China while benefiting partner countries.
In Chapter 4, David Shinn methodically presents the evolution of China–Africa interaction from the 1950s to the present, corresponding roughly to China’s changes of leadership. From Mao Zedong’s seizure of power in 1949 until the early 1990s, China focused more intensely on its political relationship with Africa than on its economic ties. During this period China was more concerned about support for African liberation movements, competition with Taiwan, the ‘One China’ principle, and dealing with internal challenges such as the Great Leap Forward and the Cultural Revolution. Major economic engagement such as construction of the Tanzania–Zambia railway in the 1970s, was the exception. The Jiang Zemin period in the mid-1980s set the stage for significant advancement. With Hu Jintao’s arrival early in the twenty-first century, the China–Africa relationship came to be based predominantly on economic interests, especially China’s desire to access African raw materials. It began with trade and expanded into Chinese outward investment in Africa, financing and construction by Chinese companies of infrastructure projects, increased foreign aid, and the movement of Chinese entrepreneurs and small traders to Africa. By 2009, China had overtaken the United States as Africa’s largest trading partner. So far, the Xi Jinping era has resulted in a greater focus on deepening China–Africa economic ties, and greater support for African peace and security efforts.
In Chapter 5, Chris Alden traces the evolution of China–Africa economic ties over time, from the tentative commercial engagements of the early 1980s to the comprehensive infrastructure loans and increased foreign direct investment being pursued across all sectors today. As African economies came to demonstrate sustained patterns of higher rates of growth and two-way trade with China grew proportionally, the debate shifted towards one that focused on economic complementarities between them and Africa’s integration into global value chains. This marks yet another stage in the progressive development of economic relations between China and Africa. The relentless dynamism of Chinese economic prowess, coupled with Africa’s own rapid development, is promising a new cycle of growth and change in both economies. The Belt and Road Initiative, for example, aims to increase economic integration both within Asia and between Asia, Europe, and Africa through a variety of activities, with infrastructure connectivity at its core. This new initiative is bound to have an impact on the future of China–Africa economic relations. It will be up to individual African countries to do their homework in order to take advantage of this new opportunity.
(p.9) In Chapter 6, Ian Taylor details the institutional framework within which Sino-African relations are constructed and identifies the maze of competing Chinese government institutions involved in shaping China’s policy towards Africa. The multiplicity of institutional actors has created major coordination challenges that are often associated with the operations of Africa’s Western development partners. Taylor’s chapter contradicts the ideas of Chinese exceptionalism. The establishment of the Forum on China–Africa Cooperation (FOCAC) was expected to address problems of coordination and serve as a permanent dialogue platform. Eighteen years on, however, FOCAC has not yet achieved its stated objectives; the time has now come to restructure FOCAC so that it can become both a dialogue forum and coordinator of China–Africa economic ties (see Chapters 4 and 8).
1.3.3 Part III: The Dynamics of China–Africa Economic Ties
The Chinese approach to doing business in Africa is no different from those pursued by advanced capitalist countries of the West. However, the focus is quite different from the objectives and goals of Western partners. China focuses to a much greater extent on economic infrastructure and there is deliberate promotion of industrial investments, something that has been completely absent in the dominant Western approach at least until recently. And this has implications for prospects for structural transformation. The Chinese government employs a variety of means to promote FDI to Africa, and to create a more secure climate for Chinese investors in the continent. These include infrastructure loans, preferential trade, and the establishment of special economic zones (SEZs).
Chinese loans to Africa for infrastructure development have played a critical role by removing binding constraints on growth. In Chapter 7, Deborah Brautigam examines the changing actors involved in lending to Africa and the different types of loan instruments over the period 2000–16. The Bank of China, the Export-Import Bank of China, and the Agricultural Development Bank are key institutions that provide such loans, including syndicated loans and resource- or commodity-secured finance. The chapter details the trends in loan finance, regional distribution of loans, and sectors financed by Chinese loans, and examines the degree to which African borrowers have used these loans directly or indirectly to support structural transformation projects. The chapter concludes by examining the implications of rising debt levels in several African cases and the modalities of crafting debt work-out mechanisms between African debtors and Chinese creditors to avert default.
Complementing Deborah Brautigam’s chapter on Chinese loans, Richard Carey and Jing Gu (Chapter 8) examine China’s financing of Africa’s (p.10) infrastructure development. Carey and Gu argue that China brings a ‘public entrepreneurship’ model to bear in its state–market relations, combining vision, action, and learning in a governance structure with a vertical and horizontal component in the form of decentralization via provinces and cities, including both state-owned enterprises (SOEs) and private companies. China’s capacity to supply large amounts of infrastructure financing and project implementation services in Africa and across the world is explained by three factors: (a) the public entrepreneurship approach of China’s ‘policy banks’; (b) the strengthening of the BRI programme; and (c) the importance of FOCAC as the overarching policy framework for China’s multifaceted relations with the African continent. While the volume of funding is important, it is the ‘public entrepreneurship’ approach linking visions, action, and learning processes, and the co-evolution of state and market through directed improvisation that make the real difference.
In Chapter 9, Cyril Obi focuses on China’s search for oil in Africa, and the strategies used by three Chinese oil corporations—China Petroleum and Chemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC), and China National Petroleum Corporation (CNPC)—to establish their presence in Nigeria, Angola, and Sudan. The chapter details the structural challenge these Chinese corporations have faced in operating in these countries and how, through trial and error, they came to reach an accommodation with influential local political elites who were prepared to block any oil exploration and drilling contracts unless they were given their fair share of the revenue from oil or other forms of compensation by the corporations involved. While the hard bargaining by local elites was often conducted under the pretext of protecting the national interest, revenues from oil rarely benefit ordinary citizens. The chapter clearly shows that, despite the often-assumed powerful influence of giant oil companies, they exert little control over the decisions of powerful local elites regarding strategic resources such as oil and gas. In short, Chinese oil corporations are also learning in Africa and they do not yet have a clear advantage in the extractive sectors.
The role of SEZs in promoting industrialization is discussed in Chapter 10 by Omolade Adunbi and Howard Stein. To reduce Nigeria’s dependency on oil, the government entered into several economic agreements with Chinese firms to increase investment in enterprises that will help generate a growth-oriented diversified economy. The chapter specifically looks at the construction of Free Trade Zones in Lagos and Ogun states and assesses the nature and impact of Chinese investment projects in different regions of Nigeria. The authors conclude that Nigerian zones have performed poorly in terms of attracting Chinese manufacturing capital with the potential to generate jobs, foreign (p.11) exchange through exports, technological spillovers, management and labour training, and forward, backward, and demand linkages. This is largely attributed to poor infrastructure, especially electricity, bureaucratic gridlock, and corruption.
In Chapter 11, Won Kidane critically appraises China’s use of international trade agreements and dispute settlement mechanisms in its economic relations with its African counterparts. The term ‘agreements’ is used in its broadest sense to include not only state-to-state international treaties, but also transnational commercial and infrastructure contracts concluded between Chinese state-owned enterprises and African governments or other African-owned interests. The chapter further discusses China’s agreements and dispute settlement in three broadly classified areas: trade, investment, and commerce. In trade relations, China and most of its African trade partners operate within the multilateral trading system of the GATT/WTO legal regime, sharing not only the fundamental substantive rules and principles but also the mechanisms of dispute settlement under the Dispute Settlement Understanding. More importantly, however, it is fair to assume that China’s bilateral trade agreements with more than forty African states provide more favourable trade terms and concessions than required under the WTO on reciprocal terms. It also appears that China routinely offers unilateral trade concessions to many African states beyond the bilateral treaties. The current flexible institutional arrangement can potentially facilitate manufactured exports from Africa to China in the future.
In Chapter 12, Carlos Oya takes up the issue of labour regimes and workplace encounters between China and Africa in the context of Chinese FDI and building contractors. The chapter counters the most popular claims about conditions in Chinese firms in Africa—limited job creation because of reliance on Chinese labour, poor working conditions, and limited skills transfer—and offers a more empirically nuanced view of the realities of job creation and employment dynamics in Chinese companies across Africa than is usually recognized in mainstream media reporting. The chapter points out that labour practices and outcomes are fluid and that the frequent assumption of Chinese ‘exceptionalism’ in labour relations is misplaced. It is, therefore, crucial to understand and document the diversity of ‘Chinese capitals’ (state and private capital, large and small, in construction or manufacturing), the importance of the African labour market context, and the particularities and structural features of the different sectors in which Chinese firms are investing and operating. The evidence of this chapter suggests a potential transformative role of Chinese firms in creating new jobs in construction and manufacturing, as it contributes to the process of building an industrial workforce in Africa.
The contributors in this section discuss the conditions under which Chinese engagement in Africa can play a catalytic role in Africa’s industrialization and structural transformation. In Chapter 13, Justin Lin and Jiajun Xu examine the conditions under which Chinese light manufacturing transfer can help drive Africa’s industrialization from the historical perspective of the ‘flying geese’ pattern, the rising cost of labour in China and the likelihood of Chinese manufacturing firms relocating their production to Africa, and what African countries must do to seize this opportunity. Based on first-hand survey data, the authors explore how Chinese light manufacturing firms have coped with rising labour costs, what type of firms are more likely to relocate their manufacturing capacity to low-wage destinations, and where firms tend to relocate their production line. The authors estimate that about 85 million factory jobs will potentially move to other destinations as China loses its competitiveness in labour-intensive industries (see Chapter 14). In order to take advantage of new opportunities as a result of China’s economic rebalancing, Lin and Xu offer several recommendations on how to mitigate binding constraints to help African countries seize the window of opportunity of industrial transfer from China to achieve economic structural transformation.
In Chapter 14, Fantu Cheru and Arkebe Oqubay argue that China–Africa economic ties must be examined from a structural transformation perspective in order to adequately evaluate the catalytic effect of Chinese engagement on economic growth, diversification of African economies, the development of domestic capabilities, and Africa’s successful insertion into the globalized economy. This will primarily depend on the capacity of African actors to steer the process of economic transformation strategically. So far, the catalytic effect of China–Africa engagement on economic transformation of African countries has been uneven, due mainly to a lack of strategic approach on the part of individual African countries to harnessing the new opportunity, but partly also to the limited size of the Chinese manufacturing presence in Africa relative to China’s manufacturing power. Ethiopia is one of a few African countries that has taken a more strategic approach to engaging China while maintaining strong ties with its traditional Western development partners. This pragmatic approach has enabled Ethiopian policymakers to mobilize large amounts of investment from China, other emerging economies, and traditional partners to embark upon a process of industrialization and structural transformation. Unfortunately, the Ethiopian example is not yet replicated by most other African countries.
There is considerable room for enhanced China–Africa economic ties in the years ahead. China’s economic rebalancing and the ‘Going Global’ of Chinese enterprises will primarily depend on the capacity of African actors (p.13) to make the most of these opportunities. Therefore, African agency and the direction that African policymakers take to steer their process of economic transformation are the key mediators in Africa–China relations. In this regard, Ethiopia’s successful experience in attracting Chinese manufacturing firms can be taken as an example for other African countries, showing that it is indeed possible to act to direct Chinese engagement towards industrialization. If African countries fail to take a proactive and strategic approach towards China, many of the 85 million jobs could well go to other global destinations, such as India and, to some extent, China’s hinterlands.
The concluding chapter (Chapter 15) pulls together the underlying themes, analytical perspectives, and pathways to Africa’s economic transformation, and the catalytic role of Chinese investment and trade for Africa’s industrialization and long-term growth. It also reviews FOCAC VII (September 2018) as signalling new directions in China–Africa economic ties for the coming decades. China’s economic rebalancing as it enters the fourth industrial revolution can potentially offer new possibilities for African countries to become a preferred destination for Chinese firms planning to relocate to low-cost destinations. African countries must, therefore, take a strategic approach in their relationship with China.
1.4 The Pursuit of a Complementary China–Africa Economic Partnership
China–Africa economic cooperation is both dynamic and work in progress. It is not a marriage made in heaven and there is immense potential for improvement. There will always be areas of tension as is to be expected in any relationship between countries, particularly between countries with unequal power and strength. Some of the contentious issues are: limited spillover effects to the local economy either in the form of employment creation, knowledge transfer, or sub-contracting opportunities to African-owned firms; limited attention to social and environmental issues by Chinese investors; and relatively conflictive labour relations.
To its credit, the Chinese government has not been complacent in seeking remedies for some of these sensitive issues. It has put in place policies and strategies to improve the sustainability of its overseas trade and investment projects. Nevertheless, there is always a gap between what the government legislates in Beijing and the actual compliance of individual Chinese companies operating in Africa. The problem is exacerbated by the limited capacity of host-country African governments to monitor project performance and ensure that Chinese companies are complying with local laws and regulations.
(p.14) Contributors to the volume have also raised a red flag on two important areas that both Chinese and African governments must address through dialogue and careful review of the evidence. These are: (a) the unsustainable level of debt that countries owe to China and (b) the persistent trade imbalance with China. The debt issue is intrinsically linked to the trade deficit issue. The imbalance is unsurprising in the absence of sufficient structural change and given the liberal trade frameworks of most African countries. Measures to address the problem of indebtedness will not bear fruit unless they are linked to improving the trade imbalance, supporting the export sector, and expanding quality FDI investment in the productive sectors of the economy.
Despite these differences, the opportunities presented by evolving China–Africa relations far outweigh the threats. China presents an enormous economic opportunity for Africa, given its potentially large purchasing power, its links to export markets, its technological prowess, and its commitment to increase investment and trade. As the second-largest economy in the world, China is the top source for outward FDI in manufacturing, and the number one source of infrastructure finance, two pillars of the future structural transformation in Africa. For Africa, China’s economic rebalancing is opening up clear opportunities for economic transformation in sectors like light manufacturing. These sectors are critical for most countries because they help confront the two challenges that currently threaten the economic and political stability of the region: export performance and job creation. With increasing labour costs in China, African countries can become the best destination for manufacturing firms planning to relocate in low labour-cost economies. In addition, Africa’s proximity to markets in Europe as well as automation and technological advances are contributing to the quick turnaround of production processes. For example, speed to market is one top reason why Chinese manufacturing firms are investing in Ethiopia. In addition, Chinese finance and contractors are making a direct contribution to the economic infrastructure that is a necessary condition for the industrialization prospects of African economies. It is evident that African governments need to develop coherent national policies and an integrated regional/continental strategy for engaging China from a systematic, strong, and much better-informed long-term perspective. Part of this should include an African agenda for closing the technology gap and transforming the asymmetrical pattern of trade between the continent and China. There is also a need for Africans to study and understand the broad ramifications of Chinese history, culture, and engagement with the continent and the world. Likewise, there is a need for Chinese actors, and especially entrepreneurs, to understand the diversity of histories, local cultures, and social norms in Africa. Such knowledge will form the cornerstone for a long-term African strategic leadership and vision for its engagement with China. (p.15)
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(1) National Intelligence Council (2012) Global Trends 2030: Alternative Worlds; Linda Yueh (2013), China’s Growth: The Making of an Economic Superpower; Justin Lin (2012) Demystifying the Chinese Economy.
(2) We are grateful to James Mittelman and Carlos Oya for important comments and inputs to this section.
(3) Deng Xiaoping was a deputy prime minister in 1978, resigned from that position in 1980, and retained the position of chairman of the Central Military Committee until 1990. After that, Deng did not have any formal title. However, he was China’s supreme leader until his death in 1997.
(5) For an up-to-date compendium of research on Africa–China issues see Alden and Large (2019) New Directions in Africa-China Studies. This book contains two chapters (18 and 19) that are directly connected to the main focus of this volume.
(6) We are grateful to Professor James Mittelman for his insightful comments and suggestions for this section.