china is investing in africa

Why China Is Investing Heavily In Africa

Globally, Africa has long been seen as a target for foreign aid, not investment. Here’s why China is investing heavily in Africa.

In the ‘90s, trade between China and Africa increased by 700%, according to Le Monde.

In the following decade, trade grew more than 1000%, from $10 billion in 2000 to an estimated $200 billion in 2012, according to the Council on Foreign Relations.

China is currently Africa’s number one trading partner. But as some nations are finding out, dependency on China can has downside risks when China’s economy stumbles.

An economic growth area

In contrast to China’s trade with Africa, U.S. trade with Africa is typically about  half  – according to the U.S. Census Bureau.

Chart courtesy of The Hill.
Chart courtesy of The Hill.

This is despite a push from President Obama to increase American investment in the region.

Here’s why China is investing heavily in Africa:

Home to six of the world’s 10 fastest growing economies in 2013, according to Bloomberg, Africa is on its way to claim its rightful status as continent deserving investment, not foreign aid.

In fact, according to the International Monetary Fund, the three African countries of South Sudan, Sierra Leone, and Libya have the highest projected growth rates for 2013 – 32%, 17%, and 20%, respectively – in other words, they’re ripe for investment.

A one-sided relationship?

Critics have said that China is engaging in neo-colonialism, attempting to exploit a vulnerable continent for its resources in the same way Western powers divvied up the continent in the 19th century.

The main resources exported from Africa to China are oil and minerals, which total almost 80% of exports, according to The Economist.

Exports back to Africa are a mixed bag of manufactured goods, however:

Chart courtesy of The Economist.
Chart courtesy of The Economist.

Analysts and think tanks such as the conservative Jamestown Foundation also say one of the reason why China is investing heavily in Africa is to export the notion that political liberalization are not necessary components for sustained, long-term economic growth.

This projection of soft power validates the Chinese model of autocratic rule to the rest of the world, critics say.

While China has been accused of turning a blind eye to human rights, they have so far not undermined democratic institutions in the nations they influence through trade, The Economist says.

African leaders have also not been afraid to be assertive against their investors, clamping down on illegal Chinese businesses such as rogue oil traders and sellers of ivory and rhino horns.

Nations such as Chad, Gabon and Niger have also rejected major oil deals they saw as being heavily in favor of the Chinese, the New York Times reports.

In late 2015 China announced a new investment initiative for Africa totaling $60 billion in loans to fund large rail, power and industrialization projects.

However, as China’s economy has faltered, some African  countries have suffered  related setbacks. For instance, the value of South Africa’s currency, the rand, plunged along with China’s stock market in early 2016.  China is South Africa’s largest trading partner.

This article was updated to reflect new developments. Curiousmatic regularly updates its content.

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Ole Skaar