SCHOOL OF LAW AND FEDERALISM

REGULAR PROGRAM
department of international law
International and African Economic Law
2019
Individual Assignment

China in Africa- opportunities and Challenges

Ewunetu Abdisa
Ethiopian civil service university
2019
 China in Africa: Opportunities and Challenges

Abstract

In this paper am going to investigate opportunities and Challenges of China African relation which
was said to be established a very long time ago. Particularly my concern will be the trade,
investment and the loan aspect of relationship between Chinese and African countries. For the
purpose of this paper I have used both quantitative and qualitative research approaches. The
quantitative data are collected from different institution that collected data on china- African
relations and the qualitative data are collected by reviewing different articles, writings of different
scholars and also commentaries on different medias and internet sources. In this paper I found
that, Chinese policy towards Africa is more complex and dynamic in nature and Chinese are well
heard the heartbeat of most African leaders, able to attract them by the non-interference policy
which is in fact tend to be proved to be reverse. The interconnection between the trade, investment
and development aid by Chinese and reinforcement tactic between these engagements proved that
Chinese are more concerned with giving priority to development of their own and failed to bring
development and transformation of African economy despite promise of win-win approach.

Key words

Non-interreference, Investment, Trade, Loan, Aid

1. Introduction

The China African relation has long history of economic, political, diplomatic, cultural and etc.
relation. Under Chinese in Africa- opportunities and challenges I am going to deal with the
opportunities and challenges brought by the vast involvement Chinese in Africa in trade,
investment and Aid. In this paper, I will discuss, first the historical background of the Chinese
African relation in brief. Then the opportunities and challenges of china Africa trade relation,
investment relations and Aid/loan relations will be investigated in a detail. Lastly, I will end by
giving concluding remarks.

2. China African Relation: Brief Historical Overview

Ancient relations between China and the African continent was not exactly known though there is
some evidence of early trade connections. The Somalis from the Ajuran Empire was said the first

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African peoples whom Chinese made a contact.1 According to Richard Pankhurst, Chinese coins
during the Song, the Ming and Qing Dynasty were found in Mogadishu in Ajuran Empire and
Kilwa, Tanzania by Archaeological excavations2 evidencing the long trade relation between Africa
and china. Somali merchants were exported giraffes, zebras and incense to the Ming Empire of
China, marking the commerce between Asian and Africa. Historically, trade relations between
China and Africa date back to the first Han emperors of the Second Century B.C when Chinese
navigator, Zheng He, who reached the coast of Africa four times, disembarking in Somalia and
Kenya, in the early 15th century.3

Modern political and economic relations commenced in the era of Mao Zedong, following the
victory of the Chinese Communist Party in the Chinese Civil War. Starting in the 21st century, the
modern state of the People's Republic of China has built increasingly strong economic ties with
Africa.4 In 1949 China showed renewed interest in other developing countries, in particular after
the Bandung Conference which was aimed at promoting Afro-Asian economic and cultural
cooperation and opposition to colonialism.5 Relations at that time were often reflective of China's
foreign policy in general: China "began to cultivate ties and offer ... economic, technical and
military support to African countries and liberation movements in an effort to encourage wars of
national liberation and revolution as part of an international united front against both superpowers.
6
In the post-colonial period, China sought to extend its influence in other developing countries
especially Africa and spread the communist ideology, and able to be seen by newly independent
countries as an alternative to domination by the former colonial powers.7 For example, China
signed an economic and technical cooperation agreement with Guinea in 1960, a year after
independence; subsequently in 1960, provided an interest-free loan of $20 million to Ghana, the
first African country to establish diplomatic relations with China; and recognized Mali upon

1
https://en.wikipedia.org/wiki/Africa–China_relations visited on May 16, 2019
2
Ibid
3
Richard Schiere, Léonce Ndikumana and Peter Walkenhors, China and Africa: An Emerging Partnership for
Development? https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Anglaischina.pdf, visited on
May 16, 2019
4
Supra note 1
5
Richard, supra note 3
6
Supra note 3
7
Ibid

2| Ewunetu Abdisa
independence and sent a trade mission the following year.8 China continued doing the extending
relationship with other African countries around the four corner.

Sino-African relations were maintained in 1960s, and China engaged in bilateral relations which
was at the time mainly affected by the Cold War and the communist ideology. 9 China used African
countries support to join UN and retake the seat of Taiwan. Many African countries, such as
Algeria, Egypt, Ethiopia, and Zambia have stressed their support to "one-China policy" except
Swaziland.10 Since 1997, around 40 African heads of state have visited the PRC.[34] The
ministerial meeting, Forum on China-Africa Cooperation (FOCAC), held in Beijing in October
2000 was the first collective dialogue between the PRC and African nations11 which renewed by
three years. The areas of cooperation covered under FOCAC include everything from economic,
cultural, social, military, agricultural, financial and educational programs.12

In 1980, the total Sino-African trade volume was US$1 billion and 1999, it was raised to US$6.5
billion and in 2000, US$10 billion.13 By 2005, the total Sino-African trade had reached US$39.7
billion before it jumped to US$55 billion in 2006, making China the second largest trading partner
of Africa next to the United States, which had trade worth US$91 billion with African nations.14
Not only trade but also china involves in investment and Loan and aid with many African countries
and the was also showing tremendous changes. China is now a donor nation and in January 2006,
it released its policy toward Africa dubbed, China Africa Policy, aims at carrying forward the long
tradition of China-African friendship involving enhancing solidarity and cooperation with African
countries.15 Under the policy document Part IV, China devised the framework of its strategy for
engaging with Africa in political field; economic field; education, science, culture, health and
social field; and peace and security field, which was said already implemented far before the policy

8
Ibid
9
Ibid
10
Ibid
11
Ibid
12
Lina Benabdallah, Towards a Post-Western Global Governance? How Africa-China relations in(form) China’s
Practices, Rising Powers Quarterly, Volume 1, Issue 1, 2016, 135-145
13
Supra note 3
14
Ibid
15
Ajakaiye, Olu (2006) : China and Africa: Opportunities and challenges, AERC Scoping Studies on China-Africa
Economic Relations, African Economic Research Consortium (AERC), Nairobi, available online at
http://hdl.handle.net/10419/93163 , visited on May 19, 2019

3| Ewunetu Abdisa
document was inaugurated.16 The opportunities and challenges of China African relation is not an
easy tasks to be explained without deep investigation and it involves dynamic interpolations.

3. China in Africa- Opportunities and challenges

China’s recent emergence as a major trading partner presents a singular opportunity for many
African nations to achieve higher and sustainable levels of economic development as result of
increasing volumes of trade and economic integration between China and Africa are particularly
significant, since china created partnership with Africa at the time of Africa’s overall percentage
of exports in the global market is in steady decline.17 But the china African relation carries
opportunities and challenges with itself and on 2006 World Economic Forum on Africa , some
African leader argued that they realized African china relation will not bring development to
Africa. The prominent Leader in raising such an opposite perspective to China is Jakaya M.
Kikwete, President of the Republic of Tanzania quite inspiring as he rightly stated that China and
India will not transform Africa; Africans will transform Africa.18 Such an opposite perspectives
will pose a shadow on China African Policy which Chinese propagate that it was based on the
strategies of “win-win” arrangements and enhance the fact that Chinese are in Africa for resources
and markets not to advance African economy.19 Next I will look at the china African trade,
investment and loan and aid in respect to opportunities and challenges in a detail.

3.1. China African Trade- Opportunities and challenges

China has far surpassed Africa’s longstanding trade partners such as France, Germany, India, and
the United States by making total goods trade between China and Africa amounted to $188
billion—more than triple that of India, Africa’s next-biggest trade partner in 2015.20 China made
up 20 percent or more of 16 African countries’ exports in 2014; for Angola, China is the destination

16
Ibid
17
Callisto Enias Madavo, China and Africa: Opportunities, Challenges and Forging a Way Forward, available
online at https://www.bpastudies.org/bpastudies/article/view/42/105 visited on May 19, 2019
18
Ajakaiye, supra note 14
19
Callisto, supra note 16
20
Irene Yuan Sun, Kartik Jayaram and Omid Kassiri, Dance of the lions and dragons
How are Africa and China engaging, and how will the partnership evolve? JUNE 2017 available online at
www.mckinsey.com/africa-china visited on May 19, 2019

4| Ewunetu Abdisa
for half of exports while Africa imports largely manufactured goods from China, its exports to
China consist of resources such as oil and minerals, as well as semi processed raw materials.21

Figure 1. Trade between China and Africa (2002-2017)

China-Africa Trade
250

200

150
US$ bn

100

50

0
2015
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

2016
2017

China Importing from Africa

March 2019

The graph showing the growing trends of China African trade relations from 2002-2017. China is
in the top five partners for Africa on all five dimensions. This is true for no other country. Neither
the Western partners such as France, the United Kingdom, and the United States, nor major
developing countries such as India and Brazil, match China in the depth and breadth of its
involvement in Africa.22

The fact that China is the world’s largest energy consumer and producer in the world made it to
be attracted by African countries rich in natural minerals. Even though China relies on coal for
much of its energy needs, its oil consumption is second worldwide.23 While the majority of
Africa’s exports to China are comprised of mineral fuels, lubricants, and related materials, it also
exports iron ore, metals, and other commodities, as well as small amounts of food and agricultural

21
Ibid
22
Ibid
23
Christopher Alessi and Beina Xu, china in Africa, council on Foreign Relations, 2017

5| Ewunetu Abdisa
products. China exports a range of machinery, transportation, communications equipment, as well
as manufactured goods to African countries.24

China’s massive demand for resources and lack of conditionality for engaging in trade (in terms
of governance and transparency as well as sound economic management) makes China a
formidable and attractive trading partner for many African nations.25 The demand for commodities
has been supported by relatively strong growth in has been supported by relatively strong growth
in Asia, particularly in China where fiscal expansion was channeled through large construction
projects was channeled through large construction projects that use raw materials intensively.26
China’s oil imports from Asia’s oil producing states are not sufficient to meet either its current or
projected energy demands and Chinese officials seemingly believe there are limits to Middle East
oil and gas production, especially given its current primary allocation to Europe and the US.27 This
paved the way for shift of china from other Asian states to Africa and thereby the price of this
commodities has risen in significant change. A U.S. Department of Energy study projected that
African oil production would rise 91 percent between 2002 and 2025.28 China's energy policy in
Africa is thus seen, for now, by both parties as being more fully implemented in ways which yield
mutual benefits,29 as on aspect of major opportunity provided by the rising profile of China in
world trade is the arrival of another round of commodity booms occasioned by the increased
demand for mineral products and agricultural raw materials.30

Another, nature of exports from Chinese is their low prices and hence affordability, especially by
the poor. Generally, some Chinese imports can be 75% cheaper than ‘equivalent’ imports from
traditional sources and up to 50% cheaper than the locally produced substitutes.31 China has
demonstrated its commitment to furthering these trade relationships and increasing economic
cooperation by establishing a number of preferential trade agreements across the continent.32
Following the most recent FOCAC meeting in 2006, Beijing announced that it would open up

24
Ibid
25
Callisto, supra note 16
26
Richard, supra note 3
27
Hany Besada, Yang Wang and John Whalley, CHINA'S GROWING ECONOMIC ACTIVITY IN AFRICA,
available online at http://www.nber.org/papers/w14024 visited on May 19, 2019
28
Ibid
29
Ibid
30
Ibid
31
Ibid
32
Callisto, supra note 16

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China’s market to Africa by allowing 440 export items from the least developed countries in Africa
33
to enter China tariff free. This is also said; it helps African countries to achieve certain
microeconomic environment, such as reducing inflation, alleviating government fiscal posture and
balance government financial budget deficits.34

Even though China African relation has brought about economic changes to African countries, it
is not without challenges. The challenges include assurance that the Chinese imports meet the
various quality and safety standards.35 Another is the risk of emergence of Chinese monopolies in
the medium to long term after which they may also embark on collusive and predatory business
practices as well as extraction of monopoly rents just like the current operators.36 Possibly more
daunting is the challenge posed by cheap Chinese imports the already eroded industrial of many
African countries.37 Chinese imports are resulting in factory closures and the inevitable job and
income losses, Chinese imports may intensify the de-industrialization process initiated by the
liberalization policies embedded in the Structural Adjustment Programs.38 Perhaps more
fundamental challenge is the fact that cheap Chinese imports may actually discourage
diversification of the productive based of these African economies away from crude agricultural
and mineral products towards manufacturing and eventually service or knowledge intensive
activities.39 It is also worth mentioning that the trade between china and Africa is envisaged with
trade deficit.

3.2. China and African FDI- opportunities and Challenges

A feature of Chinese investment in Africa is its concentration in a few sectors that are of strategic
interest to China, especially in the extractive industries.40 Chinese firms have invested billions of
dollars in foreign exchange and used Chinese engineering and construction resources on
infrastructure for developing oil, gas, minerals and other natural resources in several African
countries.41 Sino-Africa investment relations are generally uni-directional, with South Africa as

33
Ibid
34
Ibid
35
Ibid
36
Ibid
37
Ibid
38
Ibid
39
Ibid
40
Ibid
41
Ibid

7| Ewunetu Abdisa
the only exception as a few of the South African Companies are also wining contracts in China.
By far the largest proportion of China’s foreign direct investment in Africa is in the oil sector
followed by other sold minerals. A relatively small proportion are in manufacturing sector,
especially, agro processing, pharmaceutical and telecommunications sectors.42 Another feature of
China’s investment in Africa, as elsewhere in the world is that they are carried out largely by state-
owned enterprises or joint ventures or partner with state-owned enterprises or enterprises with
significant government equity holding in the host countries.43

Figure 2- China Africa Investment (2003-2017)

When we see the above figure, the investment undertakings by Chinese in Africa has reached its
peak in 2008 and 2017 accounting to 5.49056 and 4.10498 $ billion respectively. A country-level
view shows that the growth in Chinese investment has been uniformly high, at an average growth
rate of more than 52 percent a year in Ethiopia, 59 percent a year in South Africa, and 89 percent
a year in Angola from 2004 to 2014 (Figure 3).44 Extrapolated across the continent, there are
more than 10,000 Chinese-owned firms operating in Africa today and among other sectors, the
dominant sectors in with chines firms are investing are, 31 percent of Chinese firms in Africa

42
Ibid
43
Ibid
44
Irene Yuan Sun, supra note 20

8| Ewunetu Abdisa
are involved in manufacturing, 25 percent in services, 22 percent in trade, and 15 percent in
construction and real estate.45

Figure 3- Diversity and Sectors in which Chinese firms are investing

Chinese firms, particularly in manufacturing, identify ample pricing headroom in Africa as a key
factor in their profitability46 according to research conducted in 2015. According to the research,
early one-third of the Chinese firms surveyed reported 2015 profit margins of more than 20
percent. Chinese firms’ decisiveness is indicative of the relationship between the comparative
advantages of Chinese entrepreneurs and the opportunities in African markets indicates the high
returns earned by Chinese firms are symptomatic of a market failure: too little competition in
African markets.47 But in sectors such as manufacturing, only few African firms with the capital,
technology, and skills to invest successfully and too few Western firms with the risk appetite to do
so in Africa, thus the opportunities are reaped by Chinese entrepreneurs who have the skills,
capital, and willingness to live in and put their money in unpredictable developing-country
settings.48 Because of this, most Chinese firms in Africa have achieved healthy profits and rapid

45
Ibid
46
Ibid
47
Ibid
48
Ibid

9| Ewunetu Abdisa
revenue growth over the past decade and they felt optimistic about the future confident enough
that future African market will be uniformly high across all sectors and countries.49

As with long and complex relationship, the Africa-China engagement includes both benefits and
challenges, albeit that China’s growing involvement has been highly positive for economies,
governments, and workers in Africa, China’s fast-growing investments in Africa have built
factories and railroads and introduced new technologies, from low-cost smartphones to state-of-
the-art data-storage facilities,50 there are also strong impacts it pose on African countries.

Chinese firms use local labor at lower cost. In the research conducted in 2015, interviewing
different Chinese firms, it is found that “Chinese labor is so expensive these days.”51 Another
source indicates that huge amount Chinese are employed by companies investing in Africa. (figure
40.) According to the data there are more than 200,000 Chinese workers by average each year in
Africa, indicating there are low employment chance for local labor. For this we can conclude that,
there are few numbers of employment for local people available and the employment also accords
low wage.

Figure 4- Number of Chinese workers in Africa (2009-2016)

Another challenge that come as a result of Chinese engagement in vast investment in African
countries is the negative impact on local industries. Nascent textile and apparel companies in

49
Ibid
50
Ibid
51
Ibid

10 | Ewunetu Abdisa
Africa, however, are unable to compete with the overwhelming influx of cheap Chinese goods
(both legal, illegal and unauthorized) and have been forced to close.52 The resulting de-
industrialization and loss of employment has resounded with African leaders and textile workers.53
In Lesotho, which accounted for the largest textile and apparel industry growth under the African
Growth and Opportunity Act (AGOA), 25 textile factories closed down from 2004-05, leaving a
total of 23,000 workers unemployed.54 By the same taken, Nigeria has felt a similar impact of
cheap Chinese textile imports; over a two-year period, more than 35,000 textile workers are
estimated to have lost their jobs, seriously threatening the survival of domestic textile production.55
If African leaders do not address the current imbalances in their investment relationship with
China, they will be left with producing raw materials on with they have comparative advantage
while importing manufactured Chinese products, and the transformation of economy to industry
will remain untouched.

Another challenge to the investment relation with china if the fact that Chinese firm gives little
consideration to local commodities, and they import necessary working equipment’s for their home
country. Callisto noted that, Chinese companies prefer to import building materials from China for
investment projects—failing to generate the local economy, limiting technology transfer, and
creating tension between local Chinese and African communities.56

3.3. China African Loan and Aid- Opportunities and challenges

From the figure blow, one can collect that, Chinese loan finance to African has showing an
increasing level by increasing rate. Different actors such as China’s official export credit agency,
China Export-Import Bank (Eximbank), China Development Bank and state-owned commercial
banks are playing an increasingly visible role. Besides, the Ministry of Commerce provides a
modest amount of zero-interest foreign aid loans, grants, and in-kind aid, while Sinosure offers
insurance against risks. Large Chinese companies also offer significant amounts of supplier credits
directly to African borrowers. The above figure shows that between 2000 and 2014, China
Eximbank has provided nearly US$59.0 billion in official, medium to long-term finance to African

52
Callisto, supra note 16
53
Ibid
54
Ibid
55
Ibid
56
Ibid

11 | Ewunetu Abdisa
governments and state-owned enterprises, China Development Bank has lent a further US$13.7
billion to official African borrowers and their SOEs, while ICBC has provided at least US$3.3
billion.

Figure 5- Chinese Loans to Africa (2000-2017)

It is said that china officially provides eight types of foreign aids: complete projects, goods and
materials, technical cooperation, human resource development cooperation, medical assistance,
emergency humanitarian aid, volunteer programs and debt relief,57in agriculture, education,
transportation, energy, communications, and health fields.

But there is confusion as to Chinese between development finance and aid. The Chinese
government encourages its agencies and commercial entities to “closely mix and combine foreign
aid, direct investment, foreign trade and exports, service contract and labor cooperation,58 which
mislead to identify the activities that amounts to development assistance and aid. Some argue that
Chinese development assistance and aid represents Chinese egoist approach towards Africa to
master its own development goals by capturing important resources in African countries under the
guise of aid. This indicates that the aid and assistance accorded by Chinese to Africa is not for free
as in the traditional sense raising the Tied Aid as an example. There are also other scholars how is

57
China foreign Aid, Xinhua News Agency, April 21, 2011, http://News.Xinhuanet.com/english2010/china/2011-
04-21/c-13839683-6.htm
58
Piao yingji, The Evolution and Future Trend of China’s Direct Investment in Africa, available at
www.eximbank.gov.cn/topic/hwtz/2006/1-19.doc. Visited on May 20, 2019

12 | Ewunetu Abdisa
the subject matter in positive manner estimating that the development assistance and aid will bring
long term economic development in future.

In fact, the non-interference policy of china towards Africa should be investigated seriously. This
made African leaders to massively look at china in resistance to the conditionality attached to the
loans from other Western countries. Chinese well devised its policies towards Africa well knowing
the heart beats of most African leading who does not care about democracy, transparency,
accountability, environmental concern etc. Once China's deputy foreign minister, Zhou
Wenzhong, explained China’s non-interference policy, saying “Business is business. We try to
separate politics from business,59which is in fact tend to be disproved and also which amounts to
mere verbal propaganda.

Concluding Remarks

China has become influential in world economy after the world financial crisis of 2008. Continent
of Africa are not exception to the influence by Chinese. African leaders are very ambitious for
development than other issues and friend Chinese which are ready know the facts of African
leaders and devised out going policy and specifically non-interference strategy for African
countries. Driven by energy needs and market needs, Chinese used different strategies to engage
with Africa. The economic, political and other relations of the two actors are not clearly distinct
as Chinese argue. Chinese engagement with Africa brought about certain developmental progress
to certain African countries specially those rich in crude oil.

Chinese link the trade, investment and loan activities in Africa so that these activities reinforce
each other and to meet chines development goal. Most certainly Chinese are not in Africa to assist
African development because Chinese themselves are very concerned with enhancing economic
development of their own. In such scenario, the probability of growing together will be more less.
The reality Africa are reviling that the development in Africa are in significant despite the vast
engagement of Chinese in number of economic activities. Rather African countries are facing
strong trade deficit, low local industrialization, unemployment, low wage, corruption, debt crisis,
environmental problems, cheap and low-quality products from Chinese are being dumped in
African market and other problems related to the non-adaptation international norms such as

59
Callisto, supra note 16

13 | Ewunetu Abdisa
human right issues, accountability and transparency. Therefore, African countries should better
seek the appropriate strategy to engage with Chinese.

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