HomeBusiness DigestXi’s visit and China’s growing role in Africa

Xi’s visit and China’s growing role in Africa

Chinese President Xi Jinping’s visit to Zimbabwe last week was historic in that it is only the second visit to the country by a sitting Chinese president in almost 20 years. The first Chinese leader to visit the country was Jiang Zemin in 1996.

Ritesh Anand Column

The visit was significant for Zimbabwe and reflects the close ties between the two nations. China, the second largest economy in the world with GDP of US$10,4 trillion, accounts for over 16,7% of the world economy. China was once considered to be a poor country with a combined GDP of US$46,7 billion in 1962. China’s per capita GDP was less than US$100 in 1962 compared to over US$7 500 today. China’s success over the last 50 years has been phenomenal.

By contrast, Zimbabwe is considered one of the poorest countries in the world with per capita GDP of less than US$1 000 and GDP of around US$12bn. Nevertheless, China has maintained close ties with Zimbabwe and is an important trading partner and source of FDI.

China has invested over US$1,5bn in foreign direct investment (FDI) in Zimbabwe and has imported over US$1,7bn while exporting US$600 million. There is no doubt that China plays an important role in the development of Zimbabwe. The eventual outcome of the visit and the 12 mega-deals announced, remains to be seen.

Xi was en-route to South Africa to attend the sixth Forum on China-Africa Co-operation (Focac) Summit, a tri-annual summit jointly convened by China and the Africa Union.

The first Focac summit, held in 2000 in Beijing, focused on building political links between China and Africa and encouraging Chinese firms to invest in the continent. Only four African presidents attended the event, with most states sending ministerial representatives. Relatively few economic deals were concluded, though Beijing did agree to an aid forgiveness package.

Subsequent meetings, however, have been more focused on economic and financial ties. This is perhaps unsurprising, given the sixteen-fold increase in China-Africa trade that has occurred since the first Focac meeting. Trade between Africa and China has grown from less than US$2bn in 2000 to over US$30bn in 2015. The forum has since been upgraded to a full political summit, and 36 presidents were expected to attend this year’s event.

The summit model has been widely copied with New Delhi organising its own India-Africa Forum summits in 2008 — the most recent of which, held last month, attracted 48 heads of state and government. The first US-Africa summit was held in August 2014, while France, Japan and the European Union have also held similar meetings.

Beijing’s Focac remains, however, the most high-profile summit. At each forum since the 2006 meeting, China has doubled its financial commitment, which rose to US$20bn at the 2012 Beijing summit. This year Xi pledged US$60 billion of funding support, which comprises US$5bn of grant and interest-free loans, US$35bn of preferential loans and export credit, US$5bn each for additional capital for the China-Africa Development Fund and the Special Loan for the Development of African SMEs, and a China-Africa Production Capacity Co-operation Fund with an initial capital of US$10bn.

Last week Xi announced 10 priority programmes aimed at addressing three of the primary bottlenecks hindering Africa’s development, namely the lack of infrastructure, skilled personnel and funding. The 10 initiatives, specifically identified for co-operation over the next three years, include, industrialisation, agricultural modernisation, infrastructure, finance, green development, trade and investment facilitation, poverty eradication and people’s well-being, public health, people-to-people and cultural exchanges, and peace and security.

Whilst the Focac summit will result in some significant new agreements, the meeting’s importance is often exaggerated in the media.

Firstly, “financing” is not aid, but rather loans that will have to be repaid. Of the US$60bn announced at the recent Focac Summit only US$5bn is in the form of aid or interest free loans. It is worth noting, however, that such financing guarantees adds to capital inflows without increasing Africa’s debt burden.

Secondly, China’s economic influence on Africa is frequently overstated. Sub-Saharan Africa’s exports to Europe exceed US$90bn while exports to China are less than US$60bn per annum.

Thirdly, economic ties between China and Africa are not, as is often assumed, tightly controlled by Beijing. While some economic links between China and Africa are planned strategically by large, state-owned enterprises, the majority of FDI projects are now run by small, private firms.

In 2002, around 90% of Chinese FDI projects in Africa were driven by the state. By 2013 more than 50% of Chinese FDI to Africa was driven by the private sector.

The recent Focac summit provides a clear sign that China-Africa economic links remain strong, even in the face of fears of a Chinese slowdown. Xi’s announcement of US$60bn in financing for the continent is no doubt significant. However, the meeting does not play the determinative role in China-Africa links that is often assumed. Ties between the two economies are increasingly complex and unlikely to be micro-managed by a two-day summit.

There is no doubt that China is a close friend and ally of Zimbabwe, but the Asian giant is certainly not a charitable organisation. China will continue to support Zimbabwe as long as we remain an important source of natural resources.

In the never-ending battle between the “East” and the “West” in creating symbiotic, economically and politically beneficial friendships with African countries, it is Africa itself that must, by addressing its political, economic and humanitarian challenges, chart its own future.

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