China's Presence in Africa: A Boon or a Bust?

This article published in the Africa Economic Brief, a scholarly publication of the African Development Bank, provides commentary on China's activities in Africa and the impact it has had on the continent. Find the full reading here: https://drive.google.com/file/d/13ojPBdxZ-OwGHGM2sKx-GBeWk9luHjmf/view

Introduction - The Strategic Challenge

While an increasing number of people agree that the major challenge facing humanity today is global warming, the defining geo-political challenge is who will dominate the planet economically, politically and militarily in the decades

to come? Will it remain a unipolar world with the United States the sole superpower, as it has been since the fall

of the Soviet Union? Or will it be displaced by a rapidly emerging China seeking to dominate its closest neighbors,

while replacing the West as the dominant rule-setter globally, including within multilateral institutions. Will it move from

following the rules to making the rules? This is the question that scholars, policy makers and the business community

are asking themselves today.

In seeking to answer the question, we need to recognize at the outset that one of this century’s defining characteristics

is the unprecedented growth of the global middle class, in 2017 estimated at 3.2 billion people or 42% of the world’s

population (Kharas, Brookings 2018). Nowhere has this growth been more impressive than in China where levels of absolute poverty have fallen dramatically and per capita incomes have increased at unprecedented rates. The middle

class in 2002 was estimated at 4% of China’s population while in 2012 at 31% or 420 million people becoming

780 million by 2025. This will result in a growing demand for natural resources, new technologies, and the human

capital needed to sustain high levels of economic growth and satisfy the expectations of an increasingly educated and

interconnected population.

Failure to meet those expectations is what the Government and the Communist Party of China seek to avoid at all costs.

They recognize that for their survival as the governing party, economic development, the creation of jobs, and political

stability are critical. With 43% of China’s population still living in rural areas and 20% of the urban population having “hukou”status (that is, no permanent residency rights in cities), hundreds of millions find themselves in a permanent caste-

like system with income inequality higher than in the USA. As “The Economist” has recently noted, the emergence of

Marxist thought and protest among young people, students seeking to align themselves with China’s constitution and

with the plight of workers and the indigent (“The Economist”, Feb 16, 2019), is disconcerting to the Government and

underlines how vital it is for China’s economic growth to satisfy both the expectations of its growing middle class and

the disenchantment of those aspiring to be part of it.

Moreover, the Party is all too familiar with the transition of their neighbor, South Korea, from a repressive dictatorship

under General Park Chung-Hee during the 1960s and 70s – a regime deploying Confucian values and state-directed

industrialization to ward off western-style democracy (as is the Xi Government today). This ultimately resulted in the

assassination of General Park, and the replacement of his “Korean-style democracy” with a multi-party system that

over time replaced central planning with a market-based economy (Halm Chaibong, “China’s future is South Korea’s

present”, Foreign Affairs, Sept/Oct. 2018) that has helped to catapult South Korea into the position of one of the world’s

leading economies and most robust democracies.

China's Response

It should come as no surprise, therefore, to read the decision of the “Rule of Law 4th Plenum” from the 2012 China Communist Party Congress presided over by Hu Jintao that China will “vigorously participate in the formulation of

international norms ... strengthen our country’s discourse, power and influence in international legal affairs, use legal

methods to safeguard our country’s sovereignty, security, and development interests.” (CCP Central Committee Decision concerning some major questions ... Oct 23, 2014, China Copyright and Media (Oct 30, 2014).

From this preoccupation with its “sovereignty, security” and a selective adaptation of international standards, we see in Xi Jinping’s speech to the 19th Party Congress in Oct. 2017 a more assertive policy of changing, rather than adapting to, existing western-inspired legal norms and institutional arrangements. He stated, “China champions the development of a community with a shared future for mankind and has encouraged the evolution of a global governance system. With this, we have seen a further rise in China’s international influence, ability to inspire, and shape a China that has made great new contributions to global peace and development”(Xi Jinping’s Report at the 19th CPC National Congress, China Daily, Nov. 4, 2017). Speaking in 2014 Xi asserted that China should be capable of “constructing international playgrounds and creating the rules” of the games played on them (Elizabeth Economy,“China’s New Revolution, Foreign Affairs, May/June, 2018).

Projecting China's Standards Internationally

Although the Government’s past activism had been targeted primarily at China’s political and civil rights - under President

Xi the activism has been extended to challenge the very political, economic and legal norms that inform international human rights rules and standards. Though China’s constitution explicitly includes the protection of human rights, and it was a signatory to the Universal Declaration of Human Rights and both the International Covenant on Economic, Social, and Cultural Rights, and the International Covenant on Political and Civil Rights in 1966, the Government has not ratified the latter and has made clear in the pursuit of “Socialism with Chinese Characteristics” that individual rights are subordinate to the collective rights embedded in economic, social and cultural rights both within China, but more ominously, in countries benefitting from a Chinese presence through aid, investment, trade and security support. Indeed, in 2012 President Xi, while giving supremacy to the constitution, stressed the supremacy of Article 1 of that same document asserting that, “Disruption of the socialist system by any organization or individual, is

prohibited.” In 2018, the constitution was amended to allow Xi to remain President for life.

With the “America First” policies of Donald Trump and his instinctive sympathy for autocrats over liberal democracies

and multilateral institutions, established principles of the rule of law and the pursuit of a normative consensus on individual rights (political and civil) and on trade and commerce, are being increasingly challenged by authoritarian models of governance. China’s model – because of the country’s economic might and military potential – poses the greatest challenge. Last year’s PEW global poll in which a substantial majority of those surveyed express a preference for China’s economic model of development over the US model is an illustration. Under such conditions of increasing US unilateralism, the new-found policy assertiveness of an emboldened China has until now faced little concerted pushback from democratic states. And perhaps nowhere does this US unilateralism, combined with China’s insatiable demand for resources, have greater consequence than in Africa.

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China's Presence in Africa

China is primarily a mercantilist state and Africa’s resource wealth is critical to sustaining China’s GDP growth which

needs to be at least 8% annually if the economy is to employ its growing urban population (Ncube and Fairbanks, 2013)

and maintain social and political stability. This will prove increasingly difficult as the country’s population ages and the

tax base shrinks demographically (by 2030 it is estimated that 25% of the population will be over the age of 60 and

by 2050 spending on education and social benefits will be at 32% of GDP).

Since the establishment in 2000 of “The Forum on China-

Africa Cooperation” (FOCAC), Chinese-African trade has risen from $2 billion to $170 billion in 2017 (including a

14% increase from 2016) making China Africa’s largest trading partner for the ninth consecutive year (though the

EU as a whole is larger). FDI from China has stabilized at about $3 billion annually over the past three years (China

Daily, Aug. 29, 2018). Although China is only the fourth largest investor on the continent (behind the US, the UK and France), its investments are growing much faster than others. Over the 2003-2017 period, the stock of Chinese FDI increased from $491 million to $40 billion, with flows peaking at $5.5 billion in 2008 (Brookings, Africa in Focus, 2019/07/25).

Significantly, in 2014, 50% of China’s FDI stock was invested in only 6 countries all of which were mineral resource rich

(South Africa, Algeria, Nigeria, Zambia, DRC and Sudan). South Africa had the largest share at 18%. Today there is

a much more equitable distribution amongst the top 20 of the 45 recipients of China’s FDI. This is partly due to the

diminishing share of Chinese State Owned Enterprises (SOEs) that traditionally focus on petroleum and non-ferrousmetals, and a growing number of privately-owned Chinese companies (in a 2017 study, McKinsey estimates that more

than 10,000 privately owned Chinese firms were operating in Africa), many of which have diversified China’s presence by investing in infrastructure, renewable energy, services, tourism, agro-processing and light manufacturing – in other

words into more local-value added, more jobs, and linkages to global value chains (Hille and Jacob, 2012).

Using the provisions of the European Union’s Cotonou Agreement, Chinese investors are increasingly establishing

joint ventures with local African investors and in the process helping to build local capacity, boosting technology transfers

and raising export levels for many of the countries in which they invest. During the 2003-2012 period, 65% of China’s

investments in Africa went to more diversified medium growth economies rather than those that are oil and single

commodity-dependent, which suggests that in addition to wanting to access Africa’s mineral and agricultural riches, China is interested in gaining long-term access to larger markets for its products and gaining experience in establishing and managing what has at times proved to be a tarnished brand (Classen et al, 2012). A study of the CEOs of 25 major Chinese companies conducted in 2009, then suggested that they are acutely cognizant of China’s brand being put at risk through poor corporate behavior and a single-minded focus on extractives, and that it could be damaging to their long-term competitiveness in Africa (Zadek et al., 2009)."

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