China’s Investments in Africa: What’s the Real Story? (Knowledge@Wharton – January 19, 2016)

In December, Chinese president Xi Jinping offered a whopping $60 billion loan and aid package to Africa, according to Voice of America. Xi said that China aims to develop infrastructure, improve agriculture and reduce poverty on the continent.

This is only the latest example of China’s burgeoning economic presence in Africa. Its investment there has skyrocketed in recent years from $7 billion in 2008 to $26 billion in 2013, according to figures cited at a Wharton Africa Business Forum held last fall. But the relationship is fraught with controversy.

Opponents assert that it is exploitative for China to finance African infrastructure projects in exchange for the continent’s natural resources. Some accuse China of “neo-colonialist” behavior as it acquires the raw materials like oil, iron, copper and zinc that it urgently needs to fuel its own economy.

Supporters, on the other hand, say that China’s initiatives to build and improve infrastructure such as roads, railways and telecom systems have been a boon to Africa’s manufacturing sector; have freed up domestic resources for other critical needs such as health care and education; and have aided everyone doing business on the continent.

Three experts from the front lines of the China-Africa relationship offered their views on this complicated issue at the Forum. (The panel was provocatively titled “China in Africa: The Real Story.”)

Looking at the Numbers

Wenjie Chen, an economist in the African Department of the International Monetary Fund (IMF), said there are widespread misconceptions about China’s involvement with Africa. She presented data reported by China’s Ministry of Commerce, which also appeared in a paper Chen recently authored with David Dollar of the Brookings Institution and Heiwai Tang of Johns Hopkins University.

While acknowledging that Chinese investment on the African continent has been on the upswing since 2009, Chen said that nevertheless, “there’s not really this pattern where you see more deals going into natural-resource-rich countries.” According to her data, the top 20 African nations in which China is involved include not only commodity-rich nations such as Nigeria and South Africa, but commodity-poor nations like Ethiopia, Kenya and Uganda.

For the rest of this article, click here: