China in Africa
Foreign companies have been doing business in Africa for centuries. Much of the trade
history of past centuries has been colored by European colonial powers promoting and
preserving their economic interests throughout the African continent. After World War II and
since independence for many African nations, the continent has not fared as well as other
former colonial countries in Asia. Africa remains a continent plagued by a continued
combination of factors, including competing colonial political and economic interests; poor
corrupt local leadership; war, famine, and disease; and a chronic shortage of resources,
infrastructure, and political, economic, and social will. And yet, through the bleak
assessments, progress is emerging, led in large part by the successful emergence of a free and
locally powerful South Africa. The continent generates a lot of interest on both the corporate
and humanitarian levels, as well as from other countries. In particular in the past decade,
Africa has caught the interest of the world's second largest economy, China.
At home, over the past few decades, China has undergone its own miracle, managing to
move hundreds of millions of its people out of poverty by combining state intervention with
economic incentives to attract private investment. Today, China is involved in economic
engagement, bringing its success story to the continent of Africa. As professor and author
Deborah Brautigam notes, China's "current experiment in Africa mixes a hard-nosed but
clear-eyed self-interest with the lessons of China's own successful development and of
decades of its failed aid projects in Africa.
According to CNN, "China has increasingly turned to resource-rich Africa as China's
booming economy has demanded more and more oil and raw materials. Trade between the
African continent and China reached $106.8 billion in 2008, and over the past decade,
Chinese investments and the country's development aid to Africa have been increasing
steadily. China-Africa Trade up 45 percent in 2008 to $107 Billion. "Chinese activities in
Africa are highly diverse, ranging from government to government relations and large state
owned companies (SOE) investing in Africa financed by China's policy banks, to private
entrepreneurs entering African countries at their own initiative to pursue commercial
Since 2004, eager for access to resources, oil, diamonds, minerals, and commodities, China
has entered into arrangements with resource-rich countries in Africa for a total of nearly $14
billion in resource deals alone. In one example with Angola, China provided loans to the
country secured by oil. With this investment, Angola hired Chinese companies to build
much-needed roads, railways, hospitals, schools, and water systems. Similarly, China
provided nearby Nigeria with oil-backed loans to finance projects that use gas to generate
electricity. In the Republic of the Congo, Chinese teams are building a hydropower project
funded by a Chinese government loan, which will be repaid in oil. In Ghana, a Chinese
government loan will be repaid in cocoa beans.
The Export-Import Bank of China (Ex-Im Bank of China) has funded and has provided these
loans at market rates, rather than as foreign aid. While these loans certainly promote
development, the risk for the local countries is that the Chinese bids to provide the work
aren't competitive. Furthermore, the benefit to local workers may be diminished as Chinese
companies bring in some of their own workers, keeping local wages and working standards
In 2007, the UNCTAD (United Nations Conference on Trade and Development) Press Office
noted the following:
Over the past few years, China has become one of Africa's important partners for trade and
economic cooperation. Trade (exports and imports) between Africa and China increased
from US$11 billion in 2000 to US$56 billion in 2006 with Chinese companies present in
48 African countries, although Africa still accounts for only 3 percent of China's outward
FDI [foreign direct investment]. A few African countries have attracted the bulk of China's
FDI in Africa: Sudan is the largest recipient (and the 9th largest recipient of Chinese FDI
worldwide), followed by Algeria (18th) and Zambia (19th).
Observers note that African governments can learn from the development history of China
and many Asian countries, which now enjoy high economic growth and upgraded industrial
activity. These Asian countries made strategic investments in education and infrastructure
that were crucial not only for promoting economic development in general but also for
attracting and benefiting from efficiency-seeking and export-oriented FDI.
CHINA'S FOREIGN DIRECT INVESTMENT IN AFRICA (2005)
LIBERIA IVORY COAST
Over $300 million
Over $100 million
Over $50 million
Over $40 million
Over $30 million
Over $20 million
Over $10 million
Under $10 million
No FDI data
Total investment in Africa: $1.6 billion
Source: "China in Africa: Developing Ties, BBC News, last updated November 26, 2007, accessed June 3, 2011,
Criticized by some and applauded by others, it's clear that China's investment is encouraging
development in Africa. China is accused by some of ignoring human rights crises in the
continent and doing business with repressive regimes. China's success in Africa is due in
large part to the local political environment in each country, where either one or a small
leaders often control the power and decision making. While the countries often
open bids to many foreign investors, Chinese firms are able to provide low-cost options
thanks in large part to their government's project support. The ability to forge a government-
level partnership has enabled Chinese businesses to have long-term investment perspectives
China even hosted a summit in 2006 for African leaders, pledging to increase
trade, investment, and aid over the coming decade. The 2008 global recession has led China
to be more selective in its African investments, looking for good deals as well as political
stability in target countries. Nevertheless, whether to access the region's rich resources or
develop local markets for Chinese goods and services, China intends to be a key foreign
investor in Africa for the foreseeable future.
Please respond in detail to the following questions. Further research into the case is required.
1. Describe China's strategy in Africa.
2. If you were the head of a Chinese business that was operating in Sudan, how would you
address issues of business ethics and doing business with a repressive regime? Should
businesses care about local government ethics and human rights policies?
3. If you were a foreign businessperson working for a global oil company that was
favorable government approval to invest in a local oil refinery in an African country,
how would you handle any demands for paybacks (i.e., bribes)?
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction
of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice.
Unethical use is strictly forbidden.
China’s strategy in Africa is using government to government relations and encouraging large state-owned corporations to invest in Africa. The government-to-government relations allow China to provide African nations with low-interest loans and subsequent long-term investments. China is also using policy banks and private entrepreneurs to invest in Africa on own initiative. The Chinese strategy in Africa allows the former to access critical resources like oil, mineral, and other commodities while improving Africa’s economic growth through investments in infrastructure and investment...