China's Continued Investment in Africa is Concerning

China's Continued Investment in Africa is Concerning

In the last two decades, China has emerged as Africa's most important economic partner. No other country has such a broad and deep engagement in Africa regarding commerce, investment, infrastructure financing, and aid. Chinese companies of all sizes and sectors contribute capital, management expertise, and entrepreneurial spirit to every corner of the continent. As a result, they are assisting in the acceleration of Africa's economic advancement.

Yet, due to China's institutional opacity around its government-to-government ties, it has been difficult to determine the exact magnitude of the Africa-China economic relationship.

Chinese enterprises dominate many sectors of the African economy. Manufacturing employs over a third, services employ a quarter, and commerce, construction, and real estate employ about a fifth each.

Chinese companies manage approximately 12% of Africa's industrial production, worth $500 billion annually. China's dominance in infrastructure is even more obvious, with Chinese firms accounting for roughly half of Africa's globally contracted construction sector.

The China-Africa Business Council (CABC) makes no secret of its expectation that the economic relationship between China and Africa will strengthen in the future years. According to the report, if Chinese enterprises maintain their current level of engagement, Beijing will become the region's largest investor by 2024. 

Furthermore, although other countries reduced their investment in Africa during the pandemic, China continued its partnership. Moreover, foreign direct investment on the continent grew by nearly 10% last year, reaching a total stock of $47 billion.

The CABC initiative lays the foundation for the Forum on China-Africa Cooperation (FOCAC), which will be held in Dakar in November. Chinese officials will meet with African leaders at this summit, which occurs every three years, to discuss expanding China's Belt and Road Initiative (BRI). Africa is already the largest beneficiary.

UNADDRESSED QUESTIONS

Now that we've looked at these useful resources, some significant concerns arise.

  • The first concern is that Beijing's strict COVID-19 controls on the movement of people in and out of China make it extremely difficult for Chinese investors to undertake reconnaissance missions in Africa.

  • In addition, China's policymakers have yet to state clearly how private sector finance will be integrated into Africa to make up for a possible reduction in concessional loans.