Will China’s Slowing Economy Derail Its Africa Strategy?
African demands are growing, but Beijing's resources-for-infrastructure model is losing steam.
On Dec. 2, after a two-day visit to Zimbabwe, Chinese President Xi Jinping arrived in Johannesburg, South Africa, to attend the Sixth Forum on China-Africa Cooperation (FOCAC), a multilateral meeting held every three years which guides cooperation between China and African states. The continent has served as a major partner for Chinese trade and investment; in 2014, Chinese trade with Africa reached $200 billion. But this year, the summit comes as Chinese investment is slowing alongside its cooling economy, which in 2014 grew 7.4 percent, its slowest pace in decades -- prompting concerns that African economies may falter as well. And leaders in some African nations have criticized Chinese business and investment practices, demanding that China do more to promote local economies and offer technology transfers. In this ChinaFile conversation, experts discuss these new challenges, and how they will shape the future of China-African relations.
On Dec. 2, after a two-day visit to Zimbabwe, Chinese President Xi Jinping arrived in Johannesburg, South Africa, to attend the Sixth Forum on China-Africa Cooperation (FOCAC), a multilateral meeting held every three years which guides cooperation between China and African states. The continent has served as a major partner for Chinese trade and investment; in 2014, Chinese trade with Africa reached $200 billion. But this year, the summit comes as Chinese investment is slowing alongside its cooling economy, which in 2014 grew 7.4 percent, its slowest pace in decades — prompting concerns that African economies may falter as well. And leaders in some African nations have criticized Chinese business and investment practices, demanding that China do more to promote local economies and offer technology transfers. In this ChinaFile conversation, experts discuss these new challenges, and how they will shape the future of China-African relations.
Eric Olander, founder of the China Africa Project and co-host of the weekly China in Africa Podcast:
When Xi arrives in Johannesburg to lead FOCAC, he will be greeted as an old friend by his African counterparts. There will be smiles, the customary toasts to “win-win development” and a projection of confidence from both sides that all is well in China’s engagement strategy in Africa.
But all is not well. Lurking behind the diplomatic niceties is real worry that Africa’s fate is now dangerously intertwined with that of China’s. While Beijing may capably manage its own economic transformation from an agrarian to manufacturing to a consumer-driven economy, Africa’s largely commodity-driven economies are far more vulnerable.
From Angola to Zambia to Uganda, the once promising resources-for-infrastructure deals are creating severe liquidity crises when these countries export natural resources to China but do not receive payment in cash. The problem is compounded by the ongoing slump in global commodity prices, so that even when clients do actually pay for their raw materials, there is little financial benefit.
Fear of China’s deepening engagement in Africa is also spreading across the continent’s manufacturing sector. With the Chinese economy slowing, Chinese manufacturers are now looking farther afield for new markets, which presents a direct challenge for Africa’s budding industrial sector to compete with the “China Price.” If Chinese imports further undercut local prices, that could lead to real problems in markets where unemployment is already a serious issue.
Xi should be well-advised to take these economic concerns seriously. African leaders across the continent want to see China as a positive force for economic development, but if their populations begin to link their own economic hardships to China, this could present a grave challenge to Beijing’s strategy on the continent. These are volatile economic times in Africa, China, and around the world, and that calls for a far suppler Chinese policy that both acknowledges this new reality and responds as genuine partner whose engagement benefits all Africans.
Kemo Bosielo, masters candidate in international relations at Tsinghua University in Beijing, China:
The current state of the China-Africa relationship is being scrutinized with arguably more doubt and trepidation than at any time during recent history. The success of the China-Africa relationship was built on the seemingly simple convergence of interests: the Chinese need for minerals and the African need for investment, infrastructure, and an alternative trade partner. Currently China-Africa relations appear to be struggling to deal with a divergence of interests. Chinese demand for raw materials is decreasing steadily as China manages its economic slowdown. Furthermore, the Chinese government has implemented measures to transform the Chinese economy from one based on investment to one based on domestic consumption, which has caused a drastic drop in Chinese investment in Africa. Coupled with a sharp decline in global commodity prices, the current situation does not bode well for African countries. How Africa and China deal with the shifting and seemingly conflicting interests will be a crucial question at FOCAC.
Amid the frantic reactions to China’s economic slowdown and the downturn in global commodities prices, it is essential to continue to analyze the China-Africa relationship with a sober mind. Given the unbelievably rapid increase in China-Africa trade witnessed from the early 2000’s, it is possible that we are witnessing a trade relationship still very much in its infancy. Should this be the case, the trade relations will surely develop a significantly greater level of complexity and depth. If anything the current shock should force African states to reassess what some have labeled an overdependence on China. This reassessment potentially could lead African countries to diversify their trade portfolios by seeking out other emerging economies also in need of raw materials. More importantly, it could prove to be the necessary catalyst in transitioning African economies away from a trade profile dominated by raw materials. This can only be beneficial for Africa’s development.
Fifteen years after the first FOCAC, the most pressing concern at this year’s FOCAC should still be the issue of African agency. It often has been argued that while China has an “Africa Policy,” Africa does not have a cohesive and unified “China Policy.” Africa seems to be a passive beneficiary of Chinese interests. The role of the African Union (AU) and other regional and sub-regional organizations in this regard is of vital importance. With agricultural reform; structural transformation of key economies; diversification of trade portfolios; and continued investment in infrastructure topping the agenda for African development, it is essential that a coherent policy position is presented to China which will ensure that African interests become decisive factors in the championed “win-win” cooperation.
Huang Hongxiang, founder of the Nairobi-based China House Kenya:
Today Chinese business has been everywhere in Africa. Along with many great successes, there are many challenges facing sustainable development of Chinese business in Africa: lack of local knowledge and localization which lead to business failure, labor relations challenges, environmental conflict, wildlife trade and the image problem it presents, the communication gap. There have been intensive conflicts in Ghana, in Zambia, in Kenya, in Tanzania. Many Chinese businessmen in Africa have expressed their concerns to me: they are afraid that one day Chinese may be kicked out of Africa.
Public diplomacy is the key to address such challenges. So far, China-Africa engagement is more on the government and business level; we do not have enough exchange in terms of civil society and media. Believe it or not, with 1 million Chinese in Africa, there are almost no Chinese NGOs on the continent.
Such Chinese non-governmental actors should be the ones who can build a bridge: they can speak to Chinese stakeholders, and can freely speak to local and international communities as well. Unlike companies who need to focus on earning today’s bread, Chinese NGOs could spend more energy and time studying the challenges that are more long term but more substantial. Unlike government, NGOs and media could quickly respond with more open conversation, and therefore would help people understand Chinese in Africa better. Unlike the old generation of Chinese in Africa, they would be more open, more internationalized, more devoted to community development, and wildlife conservation, and therefore could help build a different image of Chinese in Africa.
Yu-Shan Wu, foreign policy researcher at the South African Institute of International Affairs:
The FOCAC platform indicates how much China-Africa relations have evolved and expanded over time. Yet unlike the past, the relationship appears to be more of a crossroads scenario than ever before. Concerns are growing over a changing (and normalizing) Chinese economy, in particular the impact on Africa’s commodity exports. Yet this development also opens up the opportunity for relations to progress beyond the trade narrative.
China is already placing greater emphasis on multilateral relations. During Xi’s speech at the U.N. General Assembly in September, he pledged 8,000 troops to the U.N.’s peacekeeping mission. In early 2015, China and the AU also signed an agreement to connect major African capital cities through transport routes, and in May, China officially opened its permanent mission to the AU. These developments run against concerns that China-Africa ties essentially are a set of bilateral trade relations.
It is not just China’s domestic economy that could impact Africa. There is uncertainty about where FOCAC (and Africa) fits in China’s current global agenda. For example, since 2013 China has promoted the “One Belt, One Road” initiative, which is reviving a historical overland trade route between China and Europe that now includes a maritime component across the Indian Ocean. However, besides port and railway assistance in East Africa, there is a lack of understanding about how this drive would impact or include southern or western Africa. Of course, similar questions can be raised about FOCAC’s relationship with other platforms such as the BRICS New Development Bank and the Asian Infrastructure Investment Bank.
It is likely that FOCAC will also address new issues, such as the Chinese economy’s “new normal,” the recent Ebola outbreak in parts of Africa, the changing peace and security environment, and the seriousness of the global illegal wildlife trade. Of particular interest is how these issues will be approached, and what specific links are made between them and China’s broader global initiatives.
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