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
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