The Presence of China in Africa The Impact of China’s outward FDI on the Economic Development in AfricaBenbraham khadidja

【Abstract】This paper explores and investigates the importance of the presence of China in Africa over its investment.It focuses on the impact of China’s outward investment on the economic development in Africa.It tries to reply on whether the involvement of China in Africa through its investment is beneficial.In this purpose，a descriptive analysis will be held through three subsections.

【Key words】China；Africa；Outward FDI；Economic development

0.Introduction

Over the past few decades，China has achieved phenomenal economic growth，with GDP rising on average by 9.5 percent per year over the last thirty years.China now is a prominent economic power in the world economy with its overall share in world trade rising from less than 1 percent in 1979 to about 8.4 percent in 2009.The stock of FDI in China in 2010 is up to US$578.8 billion from US$25 billion in 1990.China is the top recipient of FDI in developing countries and the 2nd largest recipient after United States.Outward FDI by Chinese companies has also taken off spectacularly in recent years.According to the Ministry of Commerce， outward FDI net flows by Chinese enterprises reached US$ 68.8 billion in 2010 increasing by 21.7 Percent compared to the last year.The rapid development of China’s outward investment activities with the incredible combination of trade and FDI reflects not only its economic maturation but also that the country is already well integrated into the global economy，indeed so more than other developing countries.

One of the major markets that China has penetrated is the African market;the later represents a big opportunity for her.The Chinese presence on the African continent takes a multiple of forms ranging from development aid，trade，and investments.Trade between China and Africa is expanding swiftly;it has increased ten times in the last ten years.China has become the main trading partner of Africa(exports plus imports)， bypassing the United States and the European Union.Chinese investment in Africa has also increased.In 2009，China has become the 5th largest country of origin of foreign investment in the continent.The amount of its outward FDI reached more than $13 billion by 2010，with a presence in 48 African countries.Almost every African country today bears examples of China''s emerging presence;China operates oil fields in the west，owns farms in the south，and mines in the center of the continent.So，trade， investment and aid mutually reinforce each other in the case of China’s strategy in its involvement in Africa.

However， the growing Chinese presence on the African continent has attracted increasing academic，media，and government attention and has a mixed reaction， whether China’s interests in Africa will benefit Africans or no.In order to have an answer on this question，we will explore and investigate the importance of the presence of China in Africa over its investment.We will focus on the impact of China’s outward investment on the economic development in Africa.We try to reply on whether the involvement of China in Africa through its investment is beneficial or no. We explore these issues in the following subsections，firstly we see an overview on China-Africa trade and economic relations，then we examine the Chinese outward investment in the continent and finally we assess the impact of this investment the on economic development in Africa.

1.China-Africa trade and economic relations

China was present in Africa already in the 1950s and 1960s， through its aid and support to African countries during their independence movement.In 2000，China and Africa created the Forum on China-Africa Cooperation(FOCAC) in order to further strengthen their relations under a category of south-south cooperation.There are two main objectives behind the presence of China in Africa;the need of natural resources and the research of a new market for its exports.China now is the major trading partner for Africa with total bilateral trade of US$ 160 billion in 2011. There is a concentration of trade in primary products in China’s imports composition with 79 percent in mineral products in 2010.However，its exports to Africa are more diversified with 29 percent for machinery and electrical，18 percent for textiles，and 14 percent for transportation in 2010.There is also a concentration in China-Africa trade by country. From 2006 to 2010，the top ten trading partners took a share of 76 percent in total China-Africa trade，with almost being oil exporters.These countries are:Angola，South-Africa，Sudan，Nigeria，Egypt，Algeria，Libya，Congo D.R，Morocco，and Benin.In order to improve its trade relations with Africa， China has emphasized on a balanced and enhanced trade，with an improvement in their trade policies and a maintained participation in trade negotiations under the framework of the WTO.China has also stressed on providing favorable trade policies towards imports from Africa， the most important are duty free treatments.In 2009，China announced a zero tariff treatment to 95 percent of products imported from African LDC being phased in two parts until 2013.China has also promised to help to develop Free Trade Areas (FTAs) with African countries，where a very low or no import tariff applies.

The second instrument of China in its presence in Africa is aid or assistance to the continent.By the end of 2009，China has provided a total of US$37.7 billion in aid to foreign countries，nearly half(45.7 per cent)of this aid was committed to Africa.China provides Official Development Assistance(ODA) to the African countries through three instruments which are grants，no-interest loans，and concessional(fixed-rate，low-interest)loans， in addition to debt relief. China also provides equity funds that assist Chinese companies investing in Africa through the China-Africa Development Fund，and has established a fund to on-lend up to US$1 billion to African small and medium enterprises(SMEs)through local African banks.The main reforms in the Chinese aid system were embedded in the policy shift “from aid donation to economic cooperation for mutual benefit”，as Premier Li Peng put it during its trip to Africa in 1997.The logic of the Chinese aid system has therefore moved from mainly political motivations to a mix of political and economic drivers， where the latter are however definitely predominant.With the going global strategy and in order to foster the internationalization of Chinese firms and their expansion in new markets，Chinese government use aid as a support to these firms to invest abroad and to outbid foreign companies without excluding the development of recipient countries.

2.China’s outward investment in Africa

China’s outward FDI is the third instrument of its presence in the continent.Africa is one of major recipient of Chinese investment.In 2010， the total Chinese investment in Africa was more than US$ 13 billion with a flow of US$ 2.11 billion.The investment is mainly in the forms of equity joint ventures，cooperative joint ventures and leasing.Most Chinese enterprises investing in strategic sectors，such as oil，minerals or infrastructure，are state-owned.Chinese medium-to large-sized enterprises are found mainly in the manufactured goods，telecommunications and wholesale trade sectors.While small firms are found mostly in the light industry and retail sectors.China’s outward FDI to Africa is dominated by a few resource-rich countries.The main recipients of Chinese investments for the period 2003-2010 were South Africa(49.2%)，Nigeria(9.3%)，Algeria (6.8%)，Zambia(5.3%)，and Congo D.R(5.1%).We can say that，about 75 percent of total Chinese FDI flows into Africa were absorbed by these countries.Chinese investment in Africa covers a wide range of sectors，in 2010 the main FDI stock involved the mining sector(29.2 percent)， manufactured goods(22%)，construction(15.8%)，and finance(13.9%).China’s investment in Africa is seemingly different from those of the traditional partners of the continent，it is more heavily undertaken by either partially or wholly state-owned enterprises，it does not only focus on short term profits，but also forming long-lasting relationships with countries，and it can be found in countries and in projects considered too risky，like Burundi.However one common feature with Africa’s traditional investors is that china is seeking natural resources in its investment in the continent.The Chinese government encourages and supports Chinese enterprises with strength and good reputation to expand their investment in Africa，and has adopted necessary measures to guide them in this respect.These measures are mainly:the signing of bilateral investment treaties，the establishment of China-Africa Development Fund，and the implementation of economic trade cooperation zones.

3.The impact of China’s investment on Africa’s economic development

Since the Chinese firms began heavily investing in Africa，the continent’s citizens have witnessed many changes in the economic，social and cultural spheres of their countries.China has brought concrete benefits to the continent through its investment.The infrastructure is the main sector to improve the economic development of African countries. Only after building more infrastructures can African countries develop and improve their trade structures，and then more products can be exported to China and other countries.China has doing huge efforts in this context，comparing to Western donors which turned away from infrastructure long ago.China has built bridges，hydroelectric power plants， ports，highways and even railroads.China has also contributed to Africa’s information and communications infrastructure.A second important sector to African economic development is manufacturing.China is already ratcheting up its manufacturing investment in Africa，where new industries are sorely needed to counter two decades of deindustrialization.(Chinese factories making batteries in Mozambique，shoes in Nigeria，ethyl alcohol in Benin，and a host of other products across the continent).In addition to Chinese industrial zones that are already planned or underway in Liberia， Zambia， and Sierra Leone.Human resource is the third main source to the economic development of African countries.Chinese companies are encouraged to transfer technology to local companies and help increase employment rate.China has also conducted fruitful educational cooperation with Africa.(By the end of 2009，107 schools had been built in Africa with Chinese assistance，and 29，465 African students had received Chinese government scholarships to study in China).

However，Chinese expansion into Africa has raised many questions， especially in areas as environmental protection，respect for human rights， workers’ rights and the protection of local labor markets.Chinese investments are mainly concentrated in the most environmentally sensitive industries， such as crude oil exploration，natural gas，and mining of coal and precious and semi precious minerals.For human rights;Zambia provides one of the best case studies of Chinese labor rights violation in Africa.There are often accidents in the Chinese-owned copper mines in this country due to lax safety standards.In addition to bad working conditions and low pay.

We can conclude that，everything has the pros and cons.China’s huge demand for Africa’s commodities is creating new opportunities for African governments to realize the hopes of their people for a better life.However， African countries have to improve their governance regimes and their investment environment in order to better use and benefit from the Chinese investment and even from foreign direct investment in general. [科]