Flor del Río Anas

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INDEX

1.        INTRODUCTION        2

2.        CHINESE INVESTMENTS IN AFRICA        4

3.        CHINA’S MAIN TARGETS IN AFRICA        8

4.        DIGITALIZATION        9

5.        CONCLUSION        10

6.        BIBLIOGRAPHY        11

1. INTRODUCTION

On may 11th 2000, the prestigious magazine The Economist unveiled its front page, where ‘Africa: The Hopeless Continent” could be read in yellow letters on a black background. Below, the silhouette of Africa with a young man carrying a grenade launcher in Sierra Leone, symbol of the instability of the region. By that time, according to a report of International Monetary Fund (IMF), Africa had a population over 786 million people. Following that paper, Africa covered 4,58% of the world’s GDP. The GDP per capita was only 847.36 dollars and it was following a decreasing trend.  

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At the same time, regarding to the same IMF report (2), China accumulated a population of more than 1.270 million people and their share of global GDP was 7,43%. Their GDP per capita at year 2000 was 958.57 dollars, but instead of going down like in the African case, the Chinese economy was about to boom.  

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But, what happened then? Why is China on the race to become economy in the world? Why everyone is ‘afroptimistic’? As explained by the deputy governor of the Nigeria Central Bank Kingsley Moghalu on the report ‘Africa: the continent of the future’ echoed by spanish newspaper La Vanguardia, China shocked the world with its high rates of growth during the 1990-2018 period. But in 2019, half of the fastest-growing economies in the world will be African: Ghana’s economy will raise by 8,8%, Ethiopia will do it by 7,7%, Ivory Coast 7,5%, Senegal 6,7%, Tanzania 6,6%…  

So what is the link between Chinese growth and –hopefully- the bright African future? On September 2013, president Xi Jinping introduced the One Belt One Road (OBOR) project. Academic Christina Müller-Markus on the report ‘One Belt, One Road: the Chinese dream and its impact on Europe’, “the truth is that it is not an institution with clearly defined norms, but rather a strategic vision: it refers to the ancient Silk Road, commercial and cultural link between East and West for more than two millennia. The “New Silk Road of the 21st Century” represents a connectivity network composed of maritime and land economic corridors between China, Eurasia, the Middle East, Europe and Africa. In this way, the route unites continents, oceans, regions, countries, cities, international and regional organizations, existing and newly created multilateral and bilateral financial institutions and treaties, going beyond national borders and geographical boundaries. It proposes multiple sectors of cooperation that focus primarily on the investment and construction of an infrastructure network and on trade through them. It also covers the areas of finance, R&D, medicine, science and technology, cultural and academic exchange, dialogue between political parties, parliaments and NGOs, among others”. 

The goal of the project is to reinforce the rising of the Chinese economy all over the world thanks to a sort of new Silk Road. China is deploying its infrastructures all over the world, but in order to feed their rapidly growing industry with raw materials. And here is where Africa shows up as a key part of the future of China. 

 This scenario makes Africa one of the main target of the Chinese foreign policy and could lift up the economic health of the ‘Hopeless continent’, plenty of raw materials like petroleum, copper, iron, uranium or cobalt.  

1. CHINESE INVESTMENTS IN AFRICA 

According to ICEX citing the newspaper GB Times, trade import and export between China and African countries reached US dollars 116 billions in the first seven months of 2018, an all-time record. This means that the imports and exports went up 18,7% compared to the same period of 2017. 

Regarding to the Department of African Affairs of the Ministry of Foreign Affairs of China, the annual trade between this country and the African continent has moved from 765 million dollars to widely exceed 170,000 million dollars in the last four decades – this means 200 times more. This data has turned China into the main business partner of the African region for the last eight years. And, following China’s premier Xi Jinping words of the last august during the China-Africa Cooperation Forum, China will grant 60,000 million dollars to finance and help the continent. Previously, since 2015 China invested another 60,000 million dollars in the region.  

But where are all these investments going? According to ICEX, near 15,000 million dollars will be headed to non-refundable assistance, another 20,000 will be going as credit and 5,000 million dollars will be directed towards the payment of imports which are not natural resources. ICEX also expect that in the Chinese companies invest over 10,000 million dollars in different African countries.  

According to the data published by the Bruegel Institute, the global financial crisis marked the beginning of a race for the China in Africa. In the following chart we can see that China’s outward direct investment in Asia reached over 4,000 million dollars in 2017.  We can also see that after a few years of slowing down, the Chinese investments in Africa are rising again.

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Following the Bruegel Institute data, in the period between 2013-2017 China focused their investments in a key area for the One Belt One Road project: the transport infrastructures- such as ports, roads. Almost half of the investments -47,80%- went to this area. Other scopes enhanced by the Chinese investments were energy and real estate, as it can be seen in this chart. Since the number of China’s investments in Africa are growing, infrastructures need to be improved.

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But even though Egypt, Ethiopia, South Africa, and Kenya are the only African countries having signed high-level One Belt One Road memorandum of understanding with China, the Asian giant have a large engagement in the continent building key infrastructures, especially ports.

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