V.11.D The Emerging Role of China in Africa

1. V.11.D The Emerging Role of China in Africa ECON 3510 Arch Ritter June 10, 2014 Source: Class notes.

2. China has emerged as a huge economic presence in African countries: • Foreign Investment • Trade; Including land acquisition; • Financier; • Assistance Donor

3. 1. China’s Investment in Africa Major new participants in resource sector activity: China, India, and South Korea Concentrated in oil, minerals and now land for agricultural exports Major volumes of direct foreign investment Oil, minerals and agri. raw materials dominate African exports to Asia (86% to China in 2005) See The Economist, “Out-Sourcing’s Third Wave,” May 21, 2009 and African Development Report 2007. pp. 131-136

5. China’s African Investments • http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map

10. “Outsourcing's Third Wave“: Land Acquisitions Source: The Economist, May 2009

11. 2. Trade: New phenomenon: Asia, especially China has captured the production of labour intensive manufactures for the world. Has Africa been “marginalized” in the “globalizing” trading system Implementation of any development strategy aimed at developing manufacturing may pose difficulties especially with competition from China, Do past prescriptions regarding trade need reconsideration??

14. China’s advantages: • Industrious labor force; • Low cost labor; • Past emphases on human development • Relatively new industrial capital stock • Massive economies of scale; • Major agglomeration economies; • Undervalued exchange rate (“cheating at the “globalization game”??)

15. Digression on “Agglomerative Economies” (in large urban areas) providing cost advantages of large urban scale to producers, including • Developed infrastructure generally; • Lower transport costs for inputs and outputs; • diversified range of all economic activities • skilled labor pools; • availability of necessary inputs, repair services, etc. • proximity to major domestic markets; • government services and bureaucracy; • financial institutions, educational institutions • “amenities’ for citizens

16. Impacts of China’s “beggar-thy-neighbour” under-valued exchange rate, an unfair advantage • in domestic African markets • and in foreign markets that African countries could be cultivating. ;

17. 4. Development Assistance

18. China’s Impact on Africa: On the positive side??? On the negative side???

19. China’s Impact on Africa: On the positive side, • China has helped accelerateeconomic growth by contributing to commodityboom due to higher prices of oil and metals • Deepenedtrade and investment on a continent that has been marginalizedfrom flows of international trade and global capital, • Investing in Africa's transport and educationinfrastructure. • Given many Africans access tolow-cost consumer goods.

20. China’s Impact on Africa: On the positive side, 5. Low-transactions costway of doing business and noninterference in countries'internal affairs 6, More competition regarding aid; increasedrecipient countries' bargaining power with donors. 7. Generous development assistance 8. Major new investment China is contributingto the continent's economic development and acting as a force forchange in Africa.

21. China’s Impact on Africa: On the negative side: some challenges and risks. • Chinese investment is based on capital-intensive natural resource extractionwith minimal employment generation • China'sinfluence on global energy demand leadsto increased energy prices for net oil importers in Africa anda worsening of terms of trade.

22. China’s Impact on Africa: On the negative side: some challenges and risks. 3. A New “Scramble for Africa’s Resources”? 4. Is China “de-industrializing” Africa? Imports of cheap Chinese goods in Africa, plus competition between Chinese and African goods in third-countrymarkets, hinders economic diversification and manufacturing. 5. Allegationsof improper labor and human rights standards, may gather momentum.

23. China’s Impact on Africa, continued: On the negative side: some challenges and risks 5. Issues like corruption and governance, whichhad moved to the forefront of the development agenda, may slideback down again. 6. There may be some slippage in the progresswith regard totransparency and civil society participation.

24. China in Africa: Some References Chinese-Built Ghost Town In The Middle Of Angola Read more: http://www.businessinsider.com/chinese-built-ghost-town-kilamba-angola-2012-7?op=1#ixzz2yc1Qiu4R China in Africa: The Real StoryDigging into the myths and realities http://www.chinaafricarealstory.com/2011/05/chinese-in-africa-economist-gets-some.html China Is Africa's New Colonial Overlord, Says Famed ...www.ibtimes.com/china-africas-new-colonial-overlord-says-famed-prim...‎ Feb 18, 2014 - Animal activist and researcher Jane Goodall compared Chinese investment in Africa to British colonialism. http://www.theguardian.com/global-development/interactive/2013/apr/29/china-commits-billions-aid-africa-interactive Alex Vines, China in Africa: A Mixed Blessing? http://www.relooney.fatcow.com/SI_Oil-Politics/Africa-China_22.pdf Claire Provost and Rich Harris, China in Africa: soft power, hard cash, The Guardian, 29 April 2013 Land Grab and Human Rights in Ethiopia