China's growing economic activity in Africa

Under the backdrop of China’s increasing trade with Africa, this paper evaluates claims that China is now a dominant influence in Africa and assess what factors underlay this phenomenon.

The authors suggest that while the annual growth rates of trade and investment flows are high (around 30% per year sine the late 1990's), the levels are still considerably smaller than such claims might suggest. China in 2006 accounted for only $520 million of inward Foreign Direct Investment (FDI) compared to a total from all sources of $36 billion, around 1.4% of total FDI inflows to Africa; and only 8.6% of African exports and 9.6% of African imports. African interdependence with China thus remains proportionally smaller than that for most other geographical areas, but is growing rapidly. Factors behind this growth are discussed in the text.

Key concluding points include:

• Africa has clearly gained, and most likely significantly from this interaction with China - somewhat paradoxically, China with GDP per capita of perhaps US$1,800 (rather than the OECD with incomes per capita of around US$30,000) is now poised to become a major source of new developmental finance in Africa
  
• China’s growing presence is also co-mingled with responses to attempts to discipline corrupt practices at home and this amount to exported corruption - stories of Chinese enterprises approaching African governments offering reserve financed low interest loan infrastructure projects on conditions that contracts are awarded to specified Chinese enterprises tend to underscore such concerns
  
• another argument used to suggest negative consequences follow for Africa from a growing Chinese presence are claims by local unions of low wage employment of local workers on the continent by Chinese enterprises, and even displacement of local labour by arriving Chinese labour
  
• however, the bottom line would seem to be that large trade and investment benefits have already accrued to Africa from China’s growing presences, and more seem poised to follow. China in Africa is thus seemingly a highly positive story for Africa and also offers an even more promising future for the continent.