Chinese Investment in Africa: What is the Economic Impact?

Chinese investment in Africa has increased in the last decade. Ten years ago, China invested $90 million into four production projects. In September 2018, P[wiki]resident Xi Jinping[/wiki], the leader of China, announced plans for a further $60 billion in financial support for Africa. The economic impacts have been positive in many areas, providing [wiki]Sub-Saharan[/wiki] countries with a global partner interested in their development. Some countries and organizations have argued that there may be problems in accepting this level of investment.

THE ORIGIN OF INVESTMENT

The recent increase in interest from China is related to China’s Belt and Road Initiative. This initiative was unveiled in 2013 as a strategy for fostering the 21st Century Maritime Silk Road (a sea route connecting the east with the west through Africa). The project includes China supplying direct investment and infrastructure projects undertaken by Chinese government owned businesses, to countries around the world. Investment started in Kenya and Ethiopia, although it has since spread westward.  

THE ECONOMIC IMPACTS

Chinese investment has helped fund large infrastructure projects. One example is the [wiki]Madaraka Express railway[/wiki] which received $3.2 billion in financial assistance. This has linked the port city of Mombasa with Nairobi, connecting two significant economic zones together. In the future this could help to link South Sudan, Ethiopia and Rwanda to the Indian Ocean, a significant development since these countries are landlocked. However, complaints have been made about the cost of projects and politicians who have been accused of paying compensation to private companies.

Elsewhere, China’s investment has helped boost exports in fuels, metals and mineral products. These products now account for 70% of Africa’s exports to China. They have also helped diversify industries across the continent. For example, Chinese companies have contributed to the development of IT and telecommunications in countries like Ethiopia. [wiki]Huawei Technologies[/wiki] and [wiki]ZTE[/wiki] operate in 50 countries and have created 40 mobile networks. These allow people to conduct business more effectively. However, since 2014 exports from Africa have declined because China now wants to rely more on domestic production, decreasing the number of imported resources and products.

CONCLUSION

Chinese investment in Africa has had many positive economic impacts. Primarily, it provides a source of funding which is often difficult to obtain. It can also act as a trading partner and develop services and infrastructure. Africa is likely to continue to grow and be an attractive continent for investment.

Marwin Ramos

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