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The Us Government Makes Its Big Push For Investment In Africa

14.04.2021Investing

Chinese Invest In Africa

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In the early nineteenth century, another wave of immigrants came to South Africa as workers brought by the British to work in agriculture, infrastructure building and mining. In recent years, there has been an increasing presence of Chinese in Africa with one estimate numbering Chinese nationals at one million. More recently, China has sent troops to the continent to participate in peacekeeping. In 2004, China deployed around 1,500 military personnel under the UN umbrella, dispatched between Liberia and the Democratic Republic of the Congo, though only since 2011 has it sent infantry troops describable as ‘combat’ forces. In July 2007, China supported the passage of UN Security Council Resolution 1769 and contributed troops to UN-AU hybrid peacekeeping force . China also has fourteen attachés in fourteen different African countries as of 2007, while eighteen African countries maintain attachés in Beijing.

Total trade was roughly $100 US billion in 1990, 500 billion in 2000, 850 billion in 2004, 1400 billion in 2005, and 2200 billion in 2007. That computes to an over 20-fold increase in under 20 years and an annualized growth rate of nearly 18%. More remarkably, the vast majority of China’s growth has taken place in the past decade; in other words, not only is the size of China’s trade growing, the rate of the growth is accelerating. Thanks to the decades-old Chinese diaspora, the economic dynamism of PRC embassies, China’s low-cost manufacturing industry, an efficient export engine, and an exchange rate that until 2010 has been held deliberately low, China’s global trade has thrived. As China awakened from its decades-old period of semi-isolation, the country was boosted by internal reforms, growing Taiwanese and foreign investments, and the dramatic expansion of its workforce.

According to statistics from the General Administration of Customs of China, in the first half of 2019, China’s total import and export volume with Africa was $101.86 billion, up 2.9% year-on-year. But the combined total value of African trade with the U.S. in 2017 was just $39 billion, making it Africa’s third-largest trading partner behind China and the European Union, according to figures compiled by the U.S. agency USAID. Nevertheless, Lee’s book is important because it departs from generalisation to interrogate actual practices of Chinese capital. Lee shows that Chinese capital hardly behaves differently in employment practices from those prevailing in the rest of the private sector in Zambia. She argues that the terms frequently used in the discussion about Chinese capital in Africa – such as empire building, colonialism and hegemony – are limiting. They don’t allow for the interrogation of the actual behaviour, practices and possibilities of Chinese capital. The rise of China in Africa has triggered an ongoing debate about whether Chinese capital is a barrier that entraps African governments in practices that hinder poverty reduction.

Synoptic Economics: Foreign Investment Decisions

Accordingly, both Zaire and China covertly funnelled aid to the FNLA in order to prevent the MPLA, which were supported and augmented by Cuba, from coming to power. China and Safari Club sent assistance to support the Mobutu regime during the Shaba I conflict, 1977. The Somali Democratic Republic established good relations with the Soviet Union throughout the Cold War era. When Somalia sought to create a Greater Somalia, it declared war on Ethiopia and took the Ogaden region in three months with the help of Soviet aid. But when the Soviet Union shifted its support from Somalia to Ethiopia, the latter retook the Ogaden. This angered Somalian President Siad Barre, who expelled all Soviets advisors and citizens from Somalia. China and Safari Club supported Somalia diplomatically and with token military aid.

Although massive quantities of ores have been mined and shipped worldwide, Chinese investors know that there is still a great deal of deposits to be explored and discovered in Africa. Despite uncertainty dominating it, Chinese investment in Africa has provided undeniable benefits to ordinary Africans.

Sall and other African leaders expressed a desire to work with the U.S. to attract further investments. First, it must develop new modes of engagement that better reflect the continent’s changing reality.

Economics

In fact, China is the only one of the three blocs that has seen continuous net positive flow into Africa in each of the past three years. In any event, M&A continues to be a relatively small part of Africa’s inward FDI, with greenfield investment dominating the scene. When both greenfield and M&A are accounted for, the EU continues to be the largest investor in Africa, not only in terms of stock but even in terms of flow.

Government assistance to alleviate the risk would change their prospects and concerns. President Xi Jinping himself called “Mask Diplomacy,” a primary issue in fighting Covid-19 at the Extraordinary China-Africa Summit in early June. The Alibaba foundation has already led much of the PPE relief efforts for several African countries. Alibaba has also benefited in regular business as a global key supplier of PPE throughout Africa and beyond. Chinese-led infrastructure building will be needed to complement healthcare delivery. Electricity capacity, a long-term issue for many African countries, must increase to facilitate new equipment. The primary Chinese partners in this sector have been the China National Petroleum Corporation and Sinopec.

The increased involvement of Chinese interests in Africa has intensified the debate on the benefits, modes and risks linked to these investments. Chinese state-owned companies have directed large amounts of expertise and resources to African ports, not only to deliver benefits to the investing parties, but also to contribute to a more effective and efficient African port industry. This paper presents an analysis of Chinese investments in and operation of African port infrastructure. The EPC + F + I mode (Engineering Procurement Construction + Finance + Investment) is the most common arrangement adopted by Chinese enterprises in view of port investment in Africa while also PPP type of arrangements are frequently used. China’s enterprises are challenged to choose suitable modes when investing in African ports by taking into account their own attributes, the development status of the host countries and the port characteristics.

If China Builds It, Will They Come?

This is because the region has one of the largest high-grade copper and cobalt deposits in the world and these countries are seen to be relatively stable, posing less political and social risks for Chinese investors. Chinese investors have also shown interest in the West Africa region, which is well-known for its rich gold and aluminium resources. But compared to south and central Africa, the social and political instability of this region has created uncertainty, which has resulted in perceived higher risks for Chinese mining investors. The African continent is home to an abundance of high-grade natural resources, from gold and oil to copper and cobalt, that can meet China’s growing industrial needs.

The success of the BRI projects for Africa could depend on their ability to tap into the economic corridors of BRI economies. The inland, hinterland and naval connection could boost African countries’ logistical efficiency and export capacity, making the products of African countries available at lower shipping costs and higher turnover rates. In addition to the port, the Djibouti multipurpose free trade zone is financed by China.

According to McKinsey, over 10,000 Chinese-owned firms are currently operating throughout the African continent, and the value of Chinese business there since 2005 amounts to more than $2 trillion, with $300 billion in investment currently on the table. Africa has also eclipsed Asia as the largest market for China’s overseas construction contracts. Chinese investments into North America and Europe took an abrupt shift in recent years, growing steadily from $2.1 billion in 2005 to a peak of $119.1 billion in 2017, before falling sharply in the years since then. In 2019, Chinese FDI into North America and Europe stood at just $32.8 billion – the lowest point since 2013.

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China has become an increasingly important partner in terms of investment in new power generating facilities, and with that Chinese contractors are heavily involved in building this new capacity. Liberia and China established diplomatic relations in 1977, but were interrupted in October 1989 due to Liberia’s establishment of relations with the ROC. In August 1993, the PRC re-established relations with Liberia, with Liberia retaining its diplomatic ties to the ROC. However, in October 2003 Liberia ceased its diplomatic relations with the ROC, reestablishing its sole ties with the PRC.

The PRC has invested in various infrastructure projects in Cape Verde, such as a dam and a sports stadium. Cape Verde also takes part in the Forum for Economic and Trade Cooperation between China and Portuguese speaking countries in Macau.

Between 2016 and 2018, its total FDI outflows to African countries were12% greaterthan the combined figure for the European Union . Even if the history of China-Africa relations is longstanding, they have been mainly political and not necessarily economic. In the last eight years or so, though, China’s economic ties with Africa have ballooned. First of all, China has become the most important trading partner for many African countries. The rather unbalanced nature of Africa’s trade flows with China is well documented in the literature, but this is much less the case for the other major aspect in China-Africa economic relations, namely investment. However, there is a common misconception that all Chinese projects in Africa have the backing of Beijing. More often than not, Chinese SOEs are operating in Africa on purely for-profit ventures that don’t have the ambitions of their government in mind.

Economic Consequences Of Korean Reunification

This is particularly the case with Ivory Coast, with Chinese investments and loans also strong in French-speaking Mali, Niger, Senegal, and Togo. Large-scale structural projects, often accompanied by a soft loan, are proposed to African countries rich in natural resources. China commonly funds the construction of infrastructure such as roads and railroads, dams, ports, and airports. While relations are mainly conducted through diplomacy and trade, military support via the provision of arms and other equipment is also a major componentIn the diplomatic and economic rush into Africa, Taiwan, the United States, France, and the UK are China’s main competitors.

The need to protect China’s increased investments in Africa has driven a shift away from China’s traditional non-interference in the internal matters of other countries to new diplomatic and military initiatives to try to resolve unrest in South Sudan and Mali. Little is known about ancient relations between China and the African continent, though there is some evidence of early trade connections. Glass beads and porcelain from China have been discovered at Great Zimbabwe, an ancient city located in present-day Zimbabwe. Sino-African relations or Afro-Chinese relations refer to the historical, political, economic, military, social and cultural connections between mainland China and the African continent.

In assessing China’s approach to debt relief, CARI Research Manager Kevin Acker goes beyond China’s participation in the G-20 Debt Service Suspension Initiative and takes a look at the past two decades of Chinese debt relief. From these scenarios, Acker provides insight as to how China might handle the financial stress of the COVID-19 era. On November 10, the China Africa Research Initiative hosted a panel discussion on the evolving landscape of French-Chinese business cooperation on the African continent. The event, conducted entirely in French, featured experts on the subject from both academia and the private sector. The panel followed the publication of “French and Chinese Business Cooperation in Africa,” a CARI policy brief written by Professor Thierry Pairault, who was one of the featured speakers at the event. There are fears that Chinese FDI will accelerate the process of natural resource depletion for African countries relying heavily on these resources as a source of income and wealth.

And I’m very happy to see that Americans are concerned about the sovereignty of Africa. … The projects that we implement with our partners will not suffer from any encroachment on our sovereignty,” he said at the event, according to the live translation. The U.S. provides grants and transparent financing while China “pushes unsustainable and opaque loans,” O’Brien said.

Several large and technically complicated contracts have recently gone to Chinese firms thanks to recent cutting-edge advances in Chinese technology. Jérémy Rubel explored the BRT project in Dakar, Senegal as a case study of collaboration between Chinese firms, European firms, African government entities, and multilateral organizations. The BRT is organized as a public-private partnership between the World Bank, the private sector, and the Dakar government. In 2019, the World Bank awarded the contract for the infrastructure and systems portion of the project to Chinese firm CRBC , which went on to subcontract systems work to the French company FARECO and the Chinese Jiangsu Huimin Traffic Facility Co.