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CONCLUSION: What Drives China’s Growing Role in Africa?

Guest post by: International Monetary Fund

Article Overview: This paper intends to provide an assessment, based on fractional information, of China’s economic involvement in Africa and to identify the forces shaping burgeoning China-Africa economic relations. The study is undertaken against the background of a rapidly changing landscape of international trade and finance that has eclipsed traditional aid flows to middleincome countries, making Africa ever more central for development finance.

CONCLUSION: What Drives China’s Growing Role in Africa?

This paper intends to provide an assessment, based on fractional information, of China’s
economic involvement in Africa and to identify the forces shaping burgeoning China-Africa
economic relations. The study is undertaken against the background of a rapidly changing
landscape of international trade and finance that has eclipsed traditional aid flows to middleincome
countries, making Africa ever more central for development finance.
For Africa, China has been a market, a donor, a financier and investor, and a contractor and
builder. While aid historically was of major importance, two significant changes have
occurred since the turn of the new century. Because trade and investment have become much
more significant in volume than aid flows, economic relations between China and Africa are
clearly commercial rather than aid-driven. Meanwhile, the private sector has stepped to
center stage. Here China’s foreign economic relations mirror changes in its domestic
economy. China-Africa economic exchanges have become much more decentralized and
broad-based.
The paper identifies four factors associated with recent changes in China’s economic
engagement with Africa: Chinese government policies, growing Chinese and African
markets for each other’s exports, Africa’s demand for infrastructure, and differential China’s
approach to financing. China’s state financial institutions have been instrumental in
cementing the new, commerce-based economic ties. In the process, they are helping correct
chronic undervaluation of Africa by investors and helping fund new investments in Africa’s
export and infrastructure sectors.
Africa will become an increasingly attractive market as incomes rise and progress in regional
integration makes its markets even more attractive. It will also become a key destination for
FDI, and it will continue to need infrastructure. Together these powerful market forces may
put Africa-China economic relations firmly on a commercial footing. Both public and private
sectors have a part in ensuring that the expanding trade and investment ties are mutually
beneficial and contribute to sustainable growth and development in Africa. The impact of
possible changes in Chinese demand on African terms of trade, trade patterns, and the
economic prospects of countries in Africa are worthwhile topics for further research.

IMF Working Paper
African Department
What Drives China’s Growing Role in Africa?
Prepared by Jian-Ye Wang
October 2007

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  V. D. The Future of China-Africa Economic Relations: FACTORS INFLUENCING THE GROWING TIES
  What Drives China’s Growing Role in Africa?
  II.E. Contract Labor and Other Services: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA
  II.a Merchandise Trade: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA
  III. C. Commercial Policies: THE ROLE OF CHINA’S PUBLIC SECTOR

Article Tags: african markets, attractive market, center stage, chinese government, development finance, domestic economy, economic engagement, economic exchanges, economic ties, economy china, fdi, financial institutions, footing, foreign economic relations, government policies, incomes rise, infrastructure sectors, new century, new commerce, regional integration



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