Does China’s Investment in Africa Have Ulterior Motives?

In December 2015 the Chinese promised a $60 billion aid package to boost infrastructure and economic development in a wide range of African nations. While Chinese investment in the region is not new, the price tag certainly is. In 2008, the Chinese sent only $7 billion, ramping it up to $30 billion in 2013. This increase is even more significant is more astounding given uncertain economic times in China due to a well-covered slow down. While China sends foreign aid to South East Asia and the Middle East, those figures dwarf its recent African investment. While China makes no direct efforts to conceal exactly what this money is going to, it also isn’t forthright with its intentions through some central plan, data tracking, or grand presentation on its goals. That can only leave those of us in the Western world to hypothesize.

http://www.diplomaticourier.com/wp-content/uploads/2015/12/Photo-by-REUTERS-Christopher-Herwi.jpg

So, what is driving China’s decision to inject this much capital into diverse areas of the continent. Some would be quick to say humanitarian aid. While China’s targets have been economic stimulation and not specific aid initiatives like food for areas facing famine or aid in the recent ebola outbreak, even a socialist state would admit a rising tide lifts all boats. China is potentially trying its hand at creating a little capitalist growth by investing in individual firms to lift entire areas. This could be purely a selfless exercise on the part of the Chinese government, however experts are cynical.

Then there is the other extreme believing China is attempting to buy influence in the region. 63% of African nations approve of Chinese influence in the region. Most of the African nations targeted specifically by investment initiatives prefer the Chinese economic model to the American. There are dozens of conspiracy websites laying out why specifically China would be amassing influence in Africa, however no matter the reason, the investment has certainly upped its esteem in the region. Maybe China is planning to amass allies for political and economic gain in the future in the case of a trade war or other economic tension that could arise between China and the West.

http://www.chinaafricarealstory.com/

The theory with the most traction is a somewhat middle ground between the completely altruistic view and the influence buying view, believing that China is targeting its investments to produce a reliable source of cheap resources.  While some would call buying coal mining operations and access to oil and gas a form of modern colonialism, firm level investments have aided both Chinese investors and African business owners. Africa also hosts many rare resources such as metals used as semi-conductors in technological manufacturing carried out largely in China. As the Chinese learned through their own rural development initiatives, cheap resources and products are nothing without the infrastructure to move them from point A to point B. African infrastructure let’s China transport the resource it acquires more efficiently. By investing in ways to make raw materials cheaper, China helps cut some of the costs of manufacturing, which have been rising as of late.

While the Chinese are not necessarily open with their intentions in Africa, this will be important to watch in the next few years, particularly as China continues to develop into a service oriented economy and away from sole reliance on manufacturing.

 

Sources:

http://knowledge.wharton.upenn.edu/article/chinas-investments-in-africa-whats-the-real-story/

https://www.brookings.edu/wp-content/uploads/2016/06/Why-is-China-investing-in-Africa.pdf

http://www.cnn.com/2016/11/03/africa/what-africans-really-think-of-china/

 

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13 Responses to Does China’s Investment in Africa Have Ulterior Motives?

  1. feldsteinp18 says:

    I think that whenever a country becomes involved with another country in terms of involvement and investment there is generally an ulterior motive. The US is very guilty in this, both in South America as well as The Middle East among numerous other examples. It is interesting that the Chinese have identified Africa as a hot target for investment, as it doesn’t seem like a modern hotspot for investment spending when compared to countries such as India.

    • Alden Schade says:

      I think the reason for that may be that India is already experiencing high levels of investment and growth. Africa is further behind in its development process, which likely makes Chinese investments less expensive and more meaningful. By investing early, China is creating influence and relationships that will serve them well for whatever needs they might foresee Africa as being able to meet.

    • march zheng says:

      I am going to have to agree with Peter on this one, and it is usually individual incentives that drives a course of action. Yes, it is interesting why China would choose Africa, and I feel like this is a move made by China that is overlooked by the general US public. China historically is a regional power that is known more for their defensive mindset in warfare, and China may see foreign investments in Africa as a new way of utilizing for the offensive (business as war these days). Remains to be seen what their true objectives are, etc.

  2. sackettm18 says:

    Interesting question: a political realist approach to this hypothesis would suggest that China’s motives aren’t necessarily “ulterior” at all. As Peter noted, whenever there is foreign intervention by one nation with another, the motive is generally a power grab. Africa could be the next great region of explosive growth, and China wants to get in early with this investment.

  3. masonw17 says:

    I agree with the above comments that no one invests in another country, particularly on the scale of Chinese investment in Africa, without the hope realizing tangible benefits in the future. The political ideology behind Chinese investment in Africa might seem a bit opaque, particularly given the Chinese government’s vocal criticism of Western interventionism. However, economically, there’s no question that this is a good move: China is opening up a new, affordable natural resource market and getting into a host of new production opportunities before other developed nations have a chance to.

    • Matts says:

      China did not come to Africa with blazing guns to force Africans to trade with it, nor does it have much historical influence over Africa. Therefore, it should be easy for Africans to get rid of the Chinese and only work with the old and well known masters, after all, Africa benefited a lot from the West colonialists in the past centuries.

  4. gristt18 says:

    China has been investing in Africa since 2000. I think others have made good points here about ulterior motives: Africa seems ripe for investment, as others have noted. But at the same time, why would China decide to amp up is investments now, given their move to service-sector jobs? A topic worth exploring would be private microfinance projects, which the UN has pushed in previous years.

    • choia18 says:

      After the talk with Mr. Leland Miller, I am more interested as to China’s own economic security, especially with upcoming 19th Congress that will happen later in the year. Perhaps they are increasing investments now in order to find other sources to fund their own economy? Maybe Africa really is the next place for a booming industry. As it stands right now, China needs more options that just the service sector to maintain not just economic prosperity but also to keep the population happy. These investments may help sustain this.

  5. tylerc18 says:

    Interesting take on the motives of Chinese firms investing in Africa. I found a relatively insightful article that articulates Beijing’s statements regarding the recent rise in FDI in Africa by Chinese firms. As China transitions away from a largely manufacturing economy into a service economy, they are looking toward countries like Egypt, Zambia, and Ethiopia. The Deputy China International Trade Representative, Zhang Xiangchen, has expressed that the Chinese government will actively support Chinese business’ motives to outsource cheap labor to Africa. As China moves away from manufacturing, they will continue to manufacture sophisticated products while the country seeks to outsource its textile production. Eventually, the Chinese government may explore outsourcing more sophisticated manufacturing, as Africa is home to myriad precious metals, as you illustrated in your post.

    http://english.cctv.com/2016/08/12/ARTIurXVIZZO1JTRdAvsLKwx160812.shtml

  6. hendersonn17 says:

    My parents lived in Mozambique for several years and it was very interesting to see the increasing Chinese influence in the country. From my perspective, it seems as if Chinese firms are completely taking advantage of African nations for their rich resources. For example, in Maputo, the capital of Mozambique, the Chinese were building the president’s new mansion. Many in the city believed that this was done as a favor in return for access to the rich natural resources in the north of the country. Not only does it seem like the Chinese are pillaging these nations for resources, but they are also importing Chinese workers to do the jobs, thereby bypassing the need to educate/use any African labor. While I’m sure this isn’t the case for all of the Chinese investment in Africa, it is definitely something to take into consideration.

  7. knapkes18 says:

    I am interested to see if there will be a backlash in Africa against Chinese influence on the continent. If developing African nations perceive that China is reaping a majority of the benefits resulting from this relationship, China could face a significant downturn in the favorable perception they currently enjoy. Hopefully, Chinese investment in Africa will benefit all parties and no backlash will occur. However, the history of Western involvement in African economics suggests that the warm relationship between African nations and China could be short-lived.

  8. the prof says:

    As Noah notes, there are lots of private firms involved, so we should be slow to call this “CHINA” imply government as opposed to chinese including both public and private.

    With $3 trillion in foreign reserves, $30 billion in a single year is not exactly small change, but spread across many countries is less than at first sight, and concentrated in a small number of sectors. (Lots of small Chinese traders, alongside those from India and Lebanon…but their scale is so small that they don’t add up to much in total investment terms.)

    CNOC (the natl oil company, “government” but not very obedient to official dictates) doesn’t have a position in the Persian Gulf fields or any other development. If they want to be in the game (however small their position) they have to go somewhere new. Which means Africa. That includes political maneuvering in unsavory places (the Sudan). Of course the US govt ultimately followed private oil companies. Let’s hope the Chinese govt is slower to move, Africa has enough challenges without a new wave of imperialist rivalries fueling civil wars.

  9. Charlie says:

    It would seem China is attempting to invest in a continent the US has neglected in this regard. While America continues to carry favor and invest heavily in other areas, Africa has seen much less US money, particularly of the private variety, flowing into the region.

    I would guess that the above assessment that there is an ulterior motive is correct; this appears to be an attempt at a geopolitical grab for allies in countries which largely have no strong allegiance to another world power yet. Clever indeed.

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