How China is shaping Africa's future? An analysis of pros and cons of Chinese direct investment in Africa

In this article, Professor Klaver and Professor Trebilcock tackle the hotly-debated topic of the growing China’s (not only) economic presence in the African continent, its motivations, direct and indirect benefits and pitfalls, advantages and disadvantages, as well its reasons and consequences on many factors (specifically) and global order more generally, and on the possibility of a sustainable growth. This topic is particularly timely – China’s foreign direct investment (hereinafter FDI) are a crucial part of China’s foreign policy and it has become a key factor in the new global order that is emerging. On the first hand, the article tackles China’s driving motivations for promoting FDI, and African investment particularly. These motivations are found (I) in China’s hunger for oil and raw materials (minerals) and (II) to access African markets for low-cost producers. The article goes on then to explain, in detail, the benefits of this kind of investments in promoting Africa impressive growth, such as: (I) the raising of commodity prices, (II) the supply of extractive capacity, (III) the development of infrastructures, manufacturing and employment. On the side of market access, it is pointed out how China’s FDI provide benefits for consumers. The drawbacks of this policy are also underlined – essentially in terms of (I) costs, and (II) limited technological transfer. As to the costs, as a key example, it is remembered the Congo–China Agreement of 2007, one of the biggest, if not the biggest, agreement China had signed in Africa. In that case, the Congolese government signed a bilateral investment and trade agreement with Chinese State-Owned Enterprises, by which China’s Export Import Bank gave Congo access to a USD 6.5 billion concessional loan to finance infrastructure projects. Chinese companies would build 3,500 km of tarred roads and 3,200 km of railways, and 32 hospitals, 145 health centers, 2 universities, and 5,000 houses. It is evident the burden on the African state. Here, the key questions are: how could these defects be minimalized? The feasibility of tax reform is, thus, assessed (for example, by increasing tax on resource deals and so on). The same reasoning is, then, applied to the improvement of domestic investment, infrastructures, and employment skills. The conclusion is in the main positive: Chinese direct investments are changing Africa for the better. Yet, many unintended and unexpected consequences of them must be taken into consideration. If these negative impacts will be “cured”, then for sure Chinese FDI in Africa represent an important factor for promoting sustainable development and sustainable economic growth in Africa. This article, that provides many concrete examples and real cases, is a comprehensive analysis of China’s investment policies in Africa and is helpful for anyone interested in the role China is playing in the continent, from a multitude of perspectives.