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China's Growing Role in Africa

         Date: 2012-03-02

           Tag: China Africa, China Role in Africa

Summary: Though the EU saw its share of Africa’s exports decline from nearly 36 percent to 23 percent, the U.S. share increased slightly.

China’s emergence as a major player in Africa’s trade, investment, and aid has led many to question the nature of its involvement. Critics say that China is only interested in resources, its exports to Africa threaten local industries, and it is displacing Africa’s traditional partners, like the United States.

True, China is a large user of commodities and has a vital interest in developing Africa’s natural resources, but it is not just on a resource hunt. Moreover, the adverse impacts on Africa of China’s increased exports, both in internal and external markets, appear to be limited to specific industries such as garments. And despite their differences in priorities and approaches, China and the United States can complement each other in some areas. Africa has much to gain if it uses its leverage wisely.

The Rise of China in Africa

While the United States and European Union (EU) still remain Africa’s leading trade, investment, and aid partners, over the past decade China has emerged as an influential player in Africa. Starting from a low level, Africa’s goods exports to China increased more than 60-fold between 1998 and 2010, compared to a fivefold and threefold increase to the United States and EU, respectively.

As a result, China’s share of Africa’s exports has increased from a mere 1 percent to about 15 percent in just one decade. Though the EU saw its share of Africa’s exports decline from nearly 36 percent to 23 percent, the U.S. share increased slightly.

China’s investments in Africa have also surged, reaching $5.5 billion in 2008, up from just $70 million in 2003. However, since 2005, China has on average accounted for only 5 percent of annual foreign direct investment (FDI) flows to the continent, considerably smaller than investment from the United States and EU, which together accounted for more than 30 percent of annual FDI flows to Africa, the rest includes intra-regional flows.

But China’s total investment in Africa is likely higher than what the official figures suggest, as Chinese investment involves state-owned enterprises that use a range of financing instruments, such as export credits, which are not included in FDI figures.1

China has also become a major source of foreign aid to Africa, complementing its trade and investment activities. The volume of Chinese aid is undisclosed, but according to some estimates, its concessional loans to Africa have grown from a cumulative total of $800 million in 2005 to a commitment of $10 billion between 2009 and 2012. By contrast, the World Bank’s annual lending to Africa has averaged $4.5 billion a year since 2006.

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