China is currently investing enormous amounts of money into Africa in the form of both foreign aid and foreign direct investment, discuss how this is a) beneficial to and b) problematic for the countries involved.
China is currently investing enormous amounts of money into Africa in the form of both foreign aid and foreign direct investment, discuss how this is a) beneficial to and b) problematic for the countries involved.
14 thoughts on “Honors World Regional Blog Posts Africa 2”
Unlike the United States, China has a diverse portfolio of countries in which it invests significant money. While the U.S. prefers to invest in countries that are politically stable, China does not have as many reservations about doing so. For this reason, China has invested substantial amounts of money in Africa (and Latin America). My immediate reaction is that foreign direct investment and, to a much lesser extent, foreign aid is beneficial for countries who have not received much interest or investment from other countries. Why might this be beneficial for African countries? These countries that are now receiving investments can develop sectors of their economy that previously had been underutilized or underdeveloped which has the potential to increase local employment, local investment and expenditures, and even a country’s participation in international trade. Foreign Direct Investment leads to higher growth rates and increases in the standard of living. The investments are quite strategic on the part of Chinese investors, who are investing in areas with rare or increasingly rare minerals and resources. Additionally, China is investing quite heavily in the service and manufacturing sectors in several of these countries, which more directly benefits both parties.
Why might this FDI be problematic for these countries? While China’s investments in Africa have increased the local employment, most of the higher level positions within Chinese companies in Africa are held by Chinese workers (this is a similar pattern among all of China’s FDI, especially in Latin America). This lack of advancement is a potential downside to the current arrangement. Furthermore, those employees that are local hires tend to be paid much less than their Chinese counterparts, which can create tensions between populations of the two countries. For countries where China’s greatest investments are in natural resources, those countries risk becoming dependent on a volatile commodity that, although fueling economic growth today, might change in the long-run. Additionally, Chinese companies health and safety standards are not as strict as other investors (say countries in Western Europe or the United States), so the effects of increased pollution, threats to the environment, and the overuse of natural resources is now a distinct possibility due to this arrangement.
In regards to foreign aid, unless the local infrastructure and governance is built in a way that encourages foreign aid to be utilized in the correct manner, it isn’t doing much for the local population. No matter the source of foreign aid, unless it is through sustainable development projects or education, the dependence of many countries on foreign aid (and the negative consequences of such a dependence) is, in my opinion, more damaging than effective.
I find it really interesting that China is pouring money into Africa. In a way, I can’t help but to think about the many political commentators who like to stir up fear about China overtaking the United States in various categories. I can just hear someone saying we need to out-invest China in Africa before “all of Africa turns communist red!” In my opinion much of the fear stirred up by China is simply fear-mongering, but it does pose a question; how much does investment correlate to global influence? Like it or not, the truth is the two are closely related. The world likes money and tends to listen to those who have it, especially if they’re willing to share some of it. Thus, in this light, Africa stands in a positive position. Obviously there are many places that simply need investment in order to jumpstart latent economic potential. Africa stands in a position to benefit from an influx of capital from China in order to ignite these areas. Furthermore, if another world power such as the United States felt threatened by China’s increasing African investments, Africa could stand to gain more. If the United States decided to join in, and in some way out-invest or out-develop Chinese assets, Africa would be receiving even more capital and from a greater variety of sources. This, in turn, would more than likely genuinely improve economic and living conditions in significant swaths of Africa. Despite these positives, there would be inherent dangers. Africa would run the risk of entering a new form of colonialism, one of economic subservience. In its growing affinity and dependence on foreign aid it could enslave itself to the wills of its investors. Obviously, this scenario would not be beneficial to Africa. Especially if the United States and China were trying to exert greater influence upon the continent in order to counter or negate the other’s control. Some sort of mini-Cold War could ensue, which could stand to polarize Africa and sow the seeds of further discord at the eventual end of the said mini-Cold War. Even if there is not a miniaturized Cold War at stake, these nations would likely be played upon by either China or other major investors for their ability to sway international situations through their respective United Nations votes. It doesn’t take a stretch of the imagination for one country or another threatening to withhold investment unless its recipients vote along its wishes. This has already been occurred in various areas of the world, and increasing the investment will likely result in similar situations in Africa. Despite this, I believe Africa has more to gain than it has to lose. While it may be forced to align itself against its wishes, it’s economic improvement will give it a chance to greater exert its own power in future eras. Given the proper time, it could have the chance to divorce itself form its old investors, or remain with them, however it saw fit. Furthermore, even in a mini-Cold War scenario, Africa would become the world’s stage. Countries would likely go from only being seen on a map to prominence in global events, projected across billions of TV screens and newspapers. Of course this doesn’t necessarily equate to success, but it would most certainly open up a world of opportunities for the countries to explore.
Very nice…please think about paragraphs!
As the most underdeveloped region in the world, sub Saharan Africa hasn’t had the chance to develop strong or diversified economies, therefore the increase of Chinese investment in the region; will finally provide the region with the capital flow necessary to build long lasting infrastructure and trading relations. Ever since China became one of the top 2 largest economies, good trading relations with China have become a necessity for other economies; and in most Sub Saharan countries, it may represent the opportunity to escape their economic downturns. Yet the global opinion in this matter is divided as some view the increasing Chinese involvement in Sub Saharan Africa, as a movement reminiscent of the Cold War era, with the Chinese trying to edge out Western influence in the region. Some also claim that the Chinese are only trying to steal the resources of the region, and don’t care about the people, yet except for a few circumstances, the Chinese only use local labor, creating lots of jobs an generating a better source of revenue for the local population.
In contrast the increasing Chinese investment in Sub Saharan Africa could lead to dependence on the Chinese economy. If said dependence is developed it could really hurt the countries in the region, as their dependence could be used by the Chinese to force the countries in the region to back them up on political issues, or could face a depression if the Chinese were to decrease their investment due to economic downturns in their own economy. Regardless of the intentions of the Chinese, an increasing dependence in a foreign economy, never led to positive effects. More the less the increase of Chinese influence across the globe, has made western countries increasingly paranoid, which could eventually become a new cold war, but with China this time. Yet this situation will only come to happen, if the current flow of events keep ongoing. Yet critics are skeptical of this, as they believe the economic boom experienced by the Chinese is bound to come to an end in the near future, leading to an economic depression,that would make it extremely hard for the Chinese to keep their high levels of investment in the region. Yet the fact that the Chinese don’t reveal the exact numbers of the money they invest abroad, it is very hard to give a specific quantity of their investment, thus making it hard for economists to calculate whether or not the Chinese will be able to maintain the levels of investment.
Good discussion, especially the last section.
Chinese Investments in Africa
China is able to outbid African businesses on construction projects because China can do the jobs cheaper. African business enjoy the opportunity to learn from Chinese business; this is a huge benefit. But African business suffers because of Chinese involvements.
African government must protect the interest of local businesses or else Chinese industry will drive them out of business. Trade between China and Africa was almost $200 Billion last year. More and more Chinese move to Africa as the trade increases. Some in Africa are concerned that China is over exploiting Africa’s natural resources. Many claim China is “colonizing” Africa under the guise of raising Africa’s global status.
Another issue is that Chinese companies often bring in Chinese workers rather using locals. This of course hurts job security for locals, but with the influx of revenue, the area tends to become more urbanized and there’s more money in the region to help with local sustainability.
One good thing China is doing is loaning money to African countries. I believe this is the best option because then those countries can grow in ways they think best and the locals can thrive in new industries. A downside to this is that the countries end up owing millions to China. But apparently the loans from China are less binding than aid/loans from the West.
“A project-level database – based on different sources such as media reports – released last week by the Washington-based Centre for Global Development and the AidData group, features information on 1,673 Chinese-backed projects across 51 African countries from 2000 to 2011. Most of the projects, valued at US$75 billion, went to transport and storage sectors, as well as energy generation and supply, while about US$676 million went into the health sector.” (South China Morning Post, 2013)
China is investing money that benefits African countries and helps with healthcare and infrastructure. This can be seen from the quote above. Maybe China is focusing on extracting mineral resources, but they are also investing long term in the lives of local peoples. I hope that as trade and business between China and most of Africa increases, ideas and practices can be taught and shared so that African countries can continue to prosper and expand. As industry continues and as more and more of the global North becomes dependent upon African business, the countries will rise on the global stage by their own doing.
South China Morning Post . (2013, July 5). AFRICAN COMPANIES IN FEAR OF CHINA’S CORPORATE INVASION. Retrieved from Africa Progress Panel: http://www.africaprogresspanel.org/african-companies-in-fear-of-chinas-corporate-invasion/?gclid=CNbmkv6wyMsCFZSEaQodH3wAqA
Nice little bit of external research!
China’s direct investment and involvement into Africa is very clever by the Chinese. They get to expand markets into these areas which other countries (most notably The US) are unwilling to invest in. While this is clearly a gamble from China, it is a sensible one, in that Africa is clearly replete with natural resources. By investing heavily in Africa now, China could be very close to finding an area filled with resources that no one has invested in before them. If this did occur, those areas would surely skyrocket into global trade and China would be the most tied to them economically. All around the direct investment into Africa by China is a calculated gamble that only the financially stable Chinese can risk.
While it is clear why China are involving themselves with Africa, it is a little harder to see why Africa would allow it. In many ways, a partnership with China would help Africa. The economic funds can be used to help develop regions that have never experienced such attention. On top of this, any money used to develop regions would likewise up the standard of living, disease control, and ability to trade for countries.
With that being said, however, China’s involvement in Africa is bad for Africans for the same reason it is good for the Chinese. If expensive resources are found in Africa, China is going to have some say over them, they are going to fight for the resources. Also, China are implementing an infrastructure that helps them in Africa. They are allowing their workers to lead the Africans and push them in the direction they desire. While this has the benefit of allowing Africans a better standard of living, in the long run it will be bad for them as they will always be tied with China.
As seen by the pictures given, however, Africans seem to be embracing the attention given to them by the Chinese. In the top left, we see an African man holding a Chinese flag as if it were his own. So there seems to be a sense of pride and loyalty to the Chinese building as a result of their involvement. The map on the right shows the primary places China are investing. It is clear that they are going after areas with the least infrastructure. They want areas that have been least invested in. On the middle left, we again see flags of China next to flags of Tanzania. The loyalty between the two seems almost equal, they are pleased with Chinese intervention.
The bottom right, however, helps to show the problem with this intervention addressed earlier. While the Chinese workers are in button-ups (probably leading), the African is not. It is probably that the Chinese are the leaders over the area with the Africans the workers. While it is by no means racism, it is creating a system slowly in which the Chinese are the leaders over the areas. The last image simply shows the overall trade and investment into Africa from China.
Clearly, China believe that Africa is a gamble investment worth capitalizing on. The US, in comparison, are not stable enough to endure such an investment without a sure fire return. In this way, Chinese investment may lead to a massive return for China. Africa is benefiting short-term from these investments in standard of living. This shows in their loyalty to the country locally. In the long-term, however, the system being implemented by Chinese investors may prove to be one sided and not really help the Africans like they currently hope.
Very good discussion.
At face value is seems that China’s investment in African nations is a great idea. African countries need a lot of investment in order to catch up with the rest of the world, and China has money to invest. Most countries in Africa are in a position where they cannot be effective without collecting money, but you cannot tax the people when they just do not have it; it would cripple any economy there already is. So countries like China come in and either loan money to governments or invest directly in the private sector. The increase in exports and imports between China and Africa in the last couple of decades has been drastic. China’s outward investment has increased 10 percent overall. The picture of African and Chinese people working exemplifies how the investment builds up infrastructure, jobs, and economy. China gets profit and goods, but they also get influence. If another nation is holding your economy together, you do not have the privilege of voting and acting however you choose. China can use their influence to sway African countries to vote with it in multi-national organizations. It can persuade countries to pass certain laws of sell goods to only certain countries. This is a great problem with Chinese investment in so many young countries. Especially if you’re a country like us who does not always agree with China. We benefit from developing African nations because they can provide new, cheaper, and/or better goods more and more as they grow. We also, as a nation bound to our morals, want to see these countries rise out of devastating poverty, and make up for the messes left by western colonization of Africa. Heavy Chinese investment in Africa can also be problematic though. As the proud leaders of the free world we generally do not like it when any one gains too much power, and China is gaining more and more alliance with each investment. Furthermore, China’s economy has been instable as of late. With so many African nations reliant of China’s economy that creates a lot of room for devastating loss of progress in Africa. China has also had little regard for pollution, climate change, their existence, and their relationship. Moving into African countries with industry means a great amount more of pollution, and since the Chinese government has done little to control pollution in their own country, we can hardly expect them to make the environment a priority in Africa. Lastly, while it seems Africa is kind of helpless on their own, we have seen time and time again though out history how foreign intervention can seriously damage indigenous culture. China intervening runs the risk of erasing the culture of all the African nations.
Good discussion of the implications of Chinese investment
Over the past decade, China’s interests in Africa have skyrocketed. More and more Chinese workers spotted at African construction projects is becoming a common sight. Chinese foreign investment in Africa has increased for $7 billion in 2008 to $26 billion in 2013 to offering a $60 billion loan and aid package in December 2016. At first glance, one might think how beneficial this relationship might be especially for African countries severely struggling economically, but upon closer review, this Chinese investment and aid is laden with controversy and potential repercussions.
Those who support Chinese investment in Africa say that China’s initiatives to create/improve infrastructure, such as roads, telecommunications, railways, ect. , which will have a purely positive impact on Africa’s economy. Also, China investing money into much of Africa’s outdated or nonexistent infrastructure has freed up government resources for more humanitarian pursuits such as health and education. Supporters use the fact that China is investing in both resource rich and poor countries as evidence that China’s motives are not purely exploitative. They also point out that a lot of Chinese investment comes in loan form as well as not just government to government loans but also businesses to business. Africa receives the benefits of China’s competitively priced technology and construction allowing for more difficult projects to be completed. While Africa gains much needed structural updates and loans, China obtains trade benefits from these deals. China recently announced expectations of $400 billion in trade volumes with Africa by 2020. These trade benefits are a huge gain to China because of the fact that China is in great need of African resources. Another benefit to China is that along with their investments comes political power as the African people, governments, and businesses look to China for progress. China’s investments can raise the standard of living in certain areas because Africa’s economic can increase once needs for potable water, access to energy, and adequate communications are met. These kinds of improvement can lead to major increases in trade and education while will lead to further economic expansion.
The opposition to Chinese investment sees it as exploitative or a kind of neo-colonial pursuits. They believe that China’s goal is to use these investment as a form of control over the African continent in order to exploit its resources. Another problem being seen as a result of this relationship, especially with South Africa, is Chinese imports hurting domestic manufacturers. Challengers say the Chinese workers on these project are detracting from potential jobs for the African people. Feelings of exploitation have arisen when the Chinese have seemed to get the better side of their trading system. China imports many of Africa’s natural resources while Africa’s Chinese imports consist of mainly of finished products which in turn can mean cheap resources traded for more expensive goods. Some say this is creating a damaging dependency of Africa on China which could hurt its potential competitiveness and growth in the market place for the future.
The question becomes will the future paint a picture of Chinese investment as a driving force in help to stabilize the African economy or be revealed as an exploitative force on the continent.
Very nice discussion.