2010 has been a Cinderella story for China and Africa. The rise in China’s aid and economic engagement in Africa has more than ever emphasized the changing landscape of aid. CGP previously blogged about China’s expanding telecom industries in Africa and aid packages that come with telecom deals. This blog will take a look at China in Africa throughout 2010. Although the year has come to an end, this is just the start of China in Africa.
A Foreign Affairs article explains China’s purpose of intervention and the results in the African countries.
“While the West supports microfinance for the poor in Africa, China is setting up a $5 billion equity fund to foster investment there. The West advocates trade liberalization to open African markets; China constructs special economic zones to draw Chinese firms to the continent. Westerners support government and democracy; the Chinese build roads and dams.”
In 2010, we saw China’s increasing interest in Africa and the launch of multiple aid projects.
Prior to 2010, the US showed little concern about Africa’s preference of Chinese aid, but in early 2010 the US’ attitude started to change. A Washington Post article cited the results of a news poll asking Americans if this century would be an “American century” or “Chinese century”. The answers basically favored China. Early 2010 showed increase in China’s technology, investments, and economy. The Washington Post article indicated that it was time that Washington kept a closer eye on China.
February 2010 was also the time of major investment deals made in Africa by China:
From Febraury 24 to March 4, 2010—Zambian President Rupiah Banda visited China to confirm a mining deal with Hu Jintao. Zambia, Africa’s largest cooper producer, saw this as an opportunity to bolster its economy. As of September 2010, China has invested $1.2 billion into Southern African states, the mineral goldmine. This investment led to the construction of economic and technical projects like a major road and industrial center.
China’s $7 billion investment in Africa spanned multiple sectors: petroleum, iron, steel, manufacturing, agriculture, fisheries, and pharmaceuticals. Mr. Rong Yanson, Nigerian Economic and Commercial Counsellor, stated that Chinese investment has helped Nigerian firms. Yanson indicates that after the construction of the Millenium City infrastructure, construction projects, water supply, and hydro-powered projects will be on the forefront.
Deborah Brautigam on her blog, links the list of 454 zero-tariff products exported to Africa from China. Wondering how it’s development related? Africa’s least developed countries (LDCs) have access to these tariff free goods. African companies have strategically tailored their markets and products to the Chinese market, giving African companies incentive to diversify their economy and re-orient their priority products.
Peter Bosshard writes about the controversial construction of a dam, Gibe III, in Ethiopia. The earlier criticism of former Chinese environmental regulations were rebuked by recent environmental reforms by Chinese firms in Africa, earning China international recognition. The world may have applauded a little too soon. Chinese companies and the Industrial and Commercial Bank of China (ICBC) have overlooked China’s environmental progress and are now supporting a highly controversial hydroelectric dam in Ethioia, Gibe III. The dam, scheduled for construction, poses a threat to the surrounding communities and already weak ecosystems. The project implementation is a major hurdle for the reputation and support of Chinese firms in Africa.
Aluminum Corp of China Ltd (Chalco) invested $1.35 billion with Rio Tinto in Guinea home to the world’s largest undeveloped iron ore deposit. Concurrently, China’s Shandong Iron & Steel confirmed a $1.5 billion contract to invest in African Minerals’ Tonkolili project in Sierra Leone. The result of these deals was the construction of railway and port facilities by China Railway Construction Corp and China Communications Construction Company.
Ghana signed a multi-billion dollar contract with multiple Chinese banks to fund 19 infrastructure projects. The agreements are linked to Ghana’s gas and oil resources. A press release from October 2010 praises China’s investment in Ghana and blueprints a plan for development projects. Though these agreements prove China’s primary commercial interest, Ghana benefited as well by recieving a foreign aid package with zero-interest and an export credit of $250 million at 2%. The same export credit was also given to Mauritius, Namibia, and other middle income countries in Africa.
The rise of the Chinese telecom industry in Africa ensues. An earlier CGP blog states:
“According to ComputerWorld Uganda, China has started handing out development packages that sound much like a Payless annual BOGO sale: “buy telecommunications equipment and get a development loan free!” The gimmick? To receive development aid from China, African governments can only purchase telecom equipment from China.”
“In Nigeria and Kenya, 90% of those surveyed thought that China’s growing economy was a good thing for their country, compared with only 40% who thought so in the United States.”
These are just milestones of China’s investment in Africa. Close your eyes, now think ‘development in Africa’… you’re thinking medical supplies, children, trucks of food. The Chinese see roads, port facilities, bridges, and infrastructures. African nations prefer China’s investment over American development because they see progress. These African nations are able to diversify their economies, use their resources efficiently, and develop programs and institutions with the profits acquired from Chinese investment deals. This is development of the 21st century.