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What Drives China’s Growing Role in Africa?

Written by: International Monetary Fund

Article Overview: China’s fast-growing economic ties with Africa are attracting considerable attention. The relationship came into the spotlight during the summit of the Forum on China-Africa Cooperation (FOCAC) in Beijing in November 2006 and the Annual Meetings of the African Development Bank (AfDB) in Shanghai in May 2007. While the expansion of trade and investment between Africa and China has been generally welcomed, concerns have been expressed about how China’s growing presence might affect African development.2 But what roles exactly has China played?

What Drives China’s Growing Role in Africa?

China’s fast-growing economic ties with Africa are attracting considerable attention. The
relationship came into the spotlight during the summit of the Forum on China-Africa
Cooperation (FOCAC) in Beijing in November 2006 and the Annual Meetings of the African
Development Bank (AfDB) in Shanghai in May 2007. While the expansion of trade and
investment between Africa and China has been generally welcomed, concerns have been
expressed about how China’s growing presence might affect African development.2 But what
roles exactly has China played? What drives China’s trade and financial involvement in
Africa? What are the implications of the relationship for Africa’s other development
partners? This paper aims to shed light on these questions, particularly the first two, by
examining evidence available that relates especially to China’s state financial institutions.
There have been relatively few systematic studies of the resurging economic relations
between China and Africa. Alden (2005) reviews the evolution of Sino-African economic
relations since the 1970s; Edwards and Jenkins (2005) study trade-poverty links; Kennan and
Stevens (2005) attempt to identify possible winners and losers among African countries as
China becomes more prominent in world trade; Jenkins and Edwards (2006) examine the
direct and indirect trade impact of China and India on sub-Saharan Africa. A recent study by
an OECD staff team emphasizes trade and foreign direct investment (FDI), focusing on
China’s and India’s role in specific commodity and energy markets (Goldstein et al., 2006).
A World Bank study investigates constraints or policy challenges “at the border,” “behind the
border,” and “between the borders” for increasing Africa-Asia trade and investment
(Broadman, 2007).
This paper differs from previous studies. By putting together merchandise trade, statesupported
trade credit, official development assistance, debt relief, FDI, and contract labor
services, it paints a broader picture of Chinese-African economic relations and highlights the
changing roles of China’s public and private sectors. In seeking to explain the recent rise in
China-Africa trade and capital flows, the analysis hopes to contribute to a better
understanding of the forces shaping China-Africa relations.
The remainder of this paper is organized as follows: Section II presents information on the
multiple dimensions of China-Africa economic relations beyond merchandise trade, which
has been relatively well documented. The role of government policies and China’s public
sector, particularly state financial institutions, is examined in Section III. Section IV then
discusses how China’s private traders and investors and its corporate sector in general are
expanding China-Africa economic exchanges. Section V assesses other factors behind
China’s growing role in African development, with special attention to the complementary
trade pattern and growing markets for each other’s exports, Africa’s demand for
infrastructure, and China’s differential approach to financing social needs and business development—and the possible implications for the future of China-Africa economic
relations. The last section summarizes the main findings of the paper.

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

Related Articles
  V. D. The Future of China-Africa Economic Relations: FACTORS INFLUENCING THE GROWING TIES
  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
  CONCLUSION: What Drives China’s Growing Role in Africa?

Article Tags: afdb, africa asia, african development bank, asia trade, contract labor services, development partners, economic relations, economic ties, energy markets, financial institutions, financial involvement, indirect trade, kennan, merchandise trade, policy challenges, staff team, sub saharan africa, systematic studies, trade impact, winners and losers



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