Many people see China’s investment in Africa only as positive point of view. We believe descovering the negative impacts of China’s investment in Africa should be studied for long term development of Africa.
China had rapidly expanded its presence and widened its trade activities in Africa over the past two decades. In the Sub-Sahara region of Africa, China steadily intensified its business operations and consequently the demand for oil, minerals and various other commodities from this region had rapidly gone up.
While China is in the process of strengthening its businesses, investments and diplomatic relationships with countries in the Sub-Sahara region of Africa, for the countries throughout the African continent, China now plays the role of a major partner for economic development.
In the year 2015, though China accounted for just 3% of the total FDI projects in Africa, it was identified as the second job creator based on the fact that in the same year, China created above 14000 jobs across Africa.
More than half of the direct investment by China in the Sub Sahara region was trade-related. In the year 2012, the total China’s investment in Africa was $20 billion. Africa has benefited a lot because of the ODI from China.
This graph below shows the comparison of China and USA trade with Africa.
Unique methods of China’s investment in Africa.
Just like its investments in various other parts of the world, in Sub-Sahara Africa also China had invested more in energy as well as extraction.
In West Africa, China is concentrating in transportation sector. Major portions of China’s investment in Africa are directed towards transportation, mining and metallurgy sectors.
It is difficult to compare China’s investments in Africa to those made by other countries since China’s economic activities in Africa are in various forms. China provides development assistants in the forms of concessional loans, loans without interests and grants.
Also, China makes use of various mechanisms like export-credits, subsidies for investment by private sector, natural – resources – backed credit lines and mixed credits for which market-rate loans and concessional loans are combined.
The other side
It is a fact that the higher investment flow from China has benefited Africa. However, it is surprising to note that in spite of the huge investments by China, Africa failed to get more attention when compared to various other regions of the world.
The policy makers in Africa are now desperately searching for the ways to ensure maximum benefits from China’s investment in Africa. While the natural resources sector has expanded rapidly, the agricultural as well as industrial sectors face stagnation which really worries the policy makers of Africa.
Today China is the largest trading partner for many countries in Africa and at the same time China relies on Africa for natural resources to make its industries sustainable. China imports huge quantities of oil, iron ore, copper and timber from Africa.
China’s exports to Africa mainly consist of cheap manufactured products. Apart from that, China builds the infrastructure needed by Africa, provides FDIs and loans amounting to billions of dollars. More than half of China’s foreign aid goes to Africa.
A new colonial power is rising?
Those who justify all trade activities of China in Africa say that China’s investment in Africa accelerates development of Africa. However, the critics of Chinese economic activities in Africa highlight the trade imbalances and they caution that the trade policies of China are for the advantage of China at the expense of Africa and its people. They even suspects that China’s motive is to be a new colonial power.
China is funding various infrastructure programs in which the maximum opportunities go to Chinese workers and Chinese corporations. The Chinese corporations are making huge profits from the contracts in Africa. By way of flooding the African markets with cheap Chinese made goods, China is making it very tough for the local manufacturers.
African workers who are employed in Chinese owned copper mines in Africa often complain about unbearably long working hours, tedious and unsafe working conditions and severe threats to those who make complaints.
This map below shows the major Chinese industrial zones in Africa countries.
China’s heavy investments in the transportation sector in Africa is also directly connected to the “One Belt One Road” (OBOR) initiative for connecting China with Europe as well as Africa. Plans for heavy investments in transportation infrastructure projects are included in the OBOR initiative.
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