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Résumé : This paper goes beyond the standard approach of only focusing on Chinese infrastructure investment and its impact on African integration. It discusses how African countries could work together adopt common policy issues towards that country.
For African countries to reap benefits from economies of scale and to strengthen their position in international negotiations, regional integration in Africa is important in a globalized world, Yet, this process has been hampered by overlapping mandates and memberships of various regional organizations. At the same time, the rise of China as a global economic power has created additional opportunities and challenges for African integration. On the one hand, Chinese investment in infrastructure is alleviating major supply side bottlenecks for further integration. On the other hand, the bilateral approach of China to individual African countries, limits the possibility of addressing regional issues. This paper argues for the establishment of a core group of African countries within the China-Africa Cooperation Forum (FOCAC) to promote regional integration. In the short term, this core group of African countries would pursue initiatives which are relatively easy to achieve, i.e “low hanging fruits” such as improving access to the Chinese market and advancing regional infrastructure projects. In the long term, this group could focus on more challenging tasks such as establishing a coordinated approach to debt relief and untying of development assistance. The core group of Africa countries would thus strengthen FOCAC implementation, thereby deepening China-Africa relationships and creating win-win situations for all stakeholders.
Résumé : China’s phenomenal growth offers an opportunity to boost Africa’s development. China’s loans and concessional assistance have financed a wide range of development projects on the continent. China also is reaping significant benefits from this relationship, through access to raw materials, expanded markets for exports of manufactures, and the establishment of investment relationships. But leadership from African governments, particularly to strengthen domestic policies and governance and to harmonize regional policies so as to improve the continent’s bargaining position with China, is required to ensure that the China-Africa relationship contributes to sustainable growth and poverty reduction. The twin goals of this paper are to summarize the analysis on the economic exchange between China and Africa, and to outline policy recommendations to improve the benefits to both parties.
China is a valuable trading partner, a source of investment financing, and an important complement to traditional development partners. China is investing massively in infrastructure, which helps alleviate supply bottlenecks and improves competitiveness. For China, Africa is not only a source of critical capital inputs necessary to expand its domestic economy, but also a future investment destination for labor intensive manufacturing, especially given that wages are rising much faster in China than in African. The following recommendations for African countries, China and the African Development Bank Group are intended to improve the mutual gains from African-Chinese cooperation.
African Countries should:
Résumé : This paper discusses how China’s relationship with Africa is contributing to its overall development and emphasizes the central role of the Forum on China-Africa Cooperation (FOCAC). The principal conclusion is that while China is likely to remain engaged with Africa in the medium term, to reap the full benefits, African countries need to transform this engagement into additional development opportunities. China’s rapid growth has transformed its relationship with Africa. Industrialization has boosted China’s demand for oil and minerals (e.g. iron ore, bauxite, nickel, copper), which Africa can satisfy. China is now Africa’s third largest trading partner and the Chinese government’s going global strategy has encouraged Chinese companies to become multinationals. The China-Africa relationship could be described as “commodities-for-infrastructure”, although a shift to broader cooperation on development is now evident. As a Chinese scholar puts it, “Relations with Africa are still the most important and reliable part of China’s foreign relations with developing countries” (Zhang, 2007). If there was anxiety in Africa that the global financial crisis might reduce China’s interest in the continent, Chinese President Hu Jintao provided some political reassurance during his visit in February 2009, as he committed to ‘fully and punctually implement measures agreed at the Beijing Summit of the Forum on China-Africa Cooperation, seek China-Africa pragmatic relations and promote the further development of our new strategic partnership’ (Ministry of Foreign Affairs, 2009). At the FOCAC meeting in November 2009, China reaffirmed its commitment to maintain the level of ODA and investment flows to Africa in the wake of the financial crisis, and pledged $10 billion in concessional loans to Africa, as well as a loan of $1 billion for small-and medium-sized African businesses. As noted above, China is also providing substantial debt relief to 33 African countries. China’s commitment to maintaining development assistance is particularly welcome, as there is a risk that ODA flows might be reduced by traditional development partners due to the deterioration of their national budgets.
Also, in what it called "a major step for Sino-African co-operation", the China-Africa Development Fund (CADFund) opened its first representative office in Africa on 16th March 2010. According to the CEO of the fund, "The fund will boost economic development in Africa by encouraging investment by Chinese enterprises." Finally, the growing importance of China should not mask the continuing importance of Africa’s traditional development partners among the industrial countries, who still provide the lion’s share of ODA and investment. Moreover, traditional development partners provide some forms of aid, such as general budget support, which are highly effective and efficient and are not provided by China or other emerging developing country donors, underlining the complementarily of traditional development partners with emerging development partners, such as China.
Résumé : This paper has considers the impact of China’s engagement in Africa for African economic development. Due to a lack of good information, we have attempted to analyze this engagement using indirect methods.
Chinese aid, finance, trade and investment flows to Africa are growing fast. We consider the consequences of these trends using a quantified framework. Very often, adequate data are simply non-available, but we find that existing data provide useful insights on what is going on.
Our findings suggest that the core of the Chinese financial engagement in Africa is either in countries with which it has good political relations, notably its “all weather friends” such as Egypt, Ethiopia, Mali and Tanzania, or in countries that represent strategic interests for the Chinese economy due to their oil and mineral resources, such as Algeria, Angola, Congo, the Democratic Republic of Congo, Nigeria, Sudan and Zambia. Thus China, like other bilateral donors, does pursue its own economic interests in its engagement with Africa. However, in recent years China’s engagement with Africa has expanded to cover most countries on the continent and beyond natural resources to light manufacturing and services. Clear examples are China’s projects in Mauritius and Botswana. China is also significantly involved in some countries that are “aid darlings” of the international donor community, such as Ghana. Moreover, China’s development assistance policy has had, from its very beginning, an orientation towards poverty reduction, with significant cooperation and technical assistance in the health sector and agriculture. In recent years, we observe also, insofar as data permit, some influence of poverty on Chinese geographical aid allocation. Recently, China’s financial engagement in Africa has supported sectors that are under-financed by the international donor community, notably infrastructure. This is an area in which there is room for cooperation between China and multilateral financial institutions such as the World Bank and the African Development Bank, although so far such cooperation has been limited.
This engagement can be helpful in assisting African economies through the current global financial crisis. Since the end of 2008, Chinese leaders have repeated that the crisis will not affect their assistance to Africa. Keeping this commitment would help Africa mitigate the adverse consequences of the global financial crisis, and will be a good test of China’s desire to maintain its support for African development. Engagement with Africa can also help support China’s growth through the current economic environment. As China’s financial sector is insulated from international financial markets, the main impact of the financial crisis on China has come through reduced demand for its exports (for example, China’s exports fell by 25.7% in February 2009 below the February 2008 level). While Africa receives only a small share of China’s exports, nevertheless continued growth in Africa will contribute to the recovery of China’s exports. And lending to resource-rich African countries in RMB may not turn out to be a poor investment, particularly if the RMB continues its appreciation against the dollar.
Résumé : The objective of this paper is to examine the state of industrialization in Africa and to discuss the interactions between China’s growth and African development. African nations are linked to China through that country’s importance in determining the prices of raw materials, China’s demand for Africa’s raw materials exports, substantial investments in Africa, and exports of low-cost investment and consumer goods.
China and other Asian economies have achieved spectacular growth rates through opening up markets to facilitate sensible price signals, and operating trade and exchange rate policies that favour exports over imports in at least the initial stages. They have sought sound incentives framework for investment, and developing large-scale physical infrastructure. These policies have fostered dynamic gains from increased production and export of manufactures. In Africa, by contrast, the acceleration of growth from 2001 until the global recession was based on higher primary commodity prices, while diversification into manufactures production has been limited.
Why has Africa failed to emulate the rapid growth of Asian economies, supported by spectacular increases in manufactured exports? One problem is that Africa’s economic policies, governance, and institutions have been far weaker than in many of the successful Asian economies. Moreover, Africa’s abundance of natural resources has starved manufacturing sectors of resources, while resource-rich economies (not only in Africa) have generally failed to achieve rapid growth, in part because of weak linkages between the natural resource sector and abundant unskilled labour, and in part because government control of natural resources has encouraged rent-seeking activities rather than productive investment. Africa’s limited diversification poses grave threats to development, owing to the volatility of primary commodity prices and the failure to reap the potential gains from economies of scale and productivity advances available in manufactures. Africa needs to strengthen ‘the policy umbrella’ through more stable macroeconomic policies, more dependable provision of government services, and expanded infrastructure investments, including support for regional trade (e.g. improved roads and border post management). Regional and multilateral negotiations should address ‘tariff escalation’, whereby imports of processed goods incur higher tariffs than imports of primary commodities, and should improve the value of tariff preferences by eliminating onerous and unworkable rules of origin. Dedicated geographic zones with less restrictive rules facing investment could support manufactured exports, although the extent to which such zones will further African development is uncertain. Finally, linkages need to be established between tariff and trade policies on the one side, and industrial policies on the other. In some cases (South Africa is the outstanding example), a combination of earlier unilateral liberalization and bilateral, regional and multilateral agreements have limited the policy space to nurture industrial development.
Résumé : This paper analyzes the different impacts of China on Africa, quantifies the advantages and disadvantages, and policy suggestions necessary to maximize the development impact of China. One overriding consideration is that reaping the full benefits from Chinese trade and investment will require substantial improvements in governance in African economies.
China’s growth and its capacity to transform in thirty years from under-development and extreme poverty to an emerging global power and one of the largest exporters of manufactured goods has attracted the attention of many developing countries. China has served as a development model for Africa and an alternative source of trade and finance from Africa’s traditional development partners. The impact of China on African economies has been diverse, depending on the sectoral composition of each country’s production. Overall, China’s increased engagement with Africa could generate important gains for African economies.
Despite various definitions, there is a consensus that governance encompasses institutions with the capacity to ensure the rule of law, respect for individual freedoms and a democratic political regime. In recent years, international organisations and bilateral aid agencies from traditional donors have made their assistance conditional on good governance. China, on the contrary, makes a clear distinction between economics and politics in its interventions in Africa. Trade and FDI in the natural resource sector tend to impair governance and efficiency, have harmed the environment, and often failed to lead to a reduction of poverty. Moreover, the oil sector’s demand for resources has often reduced manufacturing production (due to Dutch Disease effects) and has been associated with imprudent macroeconomic policies resulting in high levels of volatility.
Résumé : Chinese engagement in Africa, while not new, has changed significantly in recent years. The rising global prominence of Chinese aid, export credits, and bank finance has aroused both enthusiasm and concern among those concerned with development. China’s newly prominent role as a donor and financier is taking place within a set of rules, norms, and sometimes competing institutions that make up what is known as the global aid architecture. Some believe that Chinese practices in official aid, preferential export credits, and other forms of development finance pose a significant challenge to the norms governing the international aid architecture. Others welcome the rise of a new development partner, one with seemingly deep pockets, and suggest that the Chinese might provide new leverage to countries that were faced with conditionality-based aid advocated by traditional donors. Yet despite the intense interest, debates over the impact of China as a donor and financier have largely taken place with very little information.
This paper analyzes China’s growing foreign aid and export credit program as an element of the changing international aid architecture. The international aid architecture is defined as the institutions, norms, and practices that govern the transfer of concessional resources for development. It comprises four major areas: (1) Institutions and actors; (2) Volumes and composition; (4) Instruments and modalities; and (4) Rules and standards.
The evidence suggests that Chinese finance will be a significant, continuing source of capital for African countries and countries that propose bankable projects will likely be able to access some of this finance, whether or not they have natural resources, but for the most part, it is not being made available as ODA.
As for cooperation with other donors and financiers, so far, the Chinese have been reluctant to participate in established donor-led groups (such as the Paris Club, or the Consultative Groups) in part because they generally do not see aid from the West as having been very effective in reducing poverty in Africa. But there have been a number of cases of tripartite cooperation, including the South-South Cooperation Program run through the Food and Agriculture Organization’s Food Security Program.
Finally, building up local capacity to negotiate favorable natural resource deals with China Exim-bank and Chinese companies should also be a priority. In conclusion, we address three final issues. Can China compensate for what is likely to be a shrinking pool of finance from the OECD countries in the aftermath of the financial crisis? What efforts have been made to engage and work with China as a “rising donor” and how have they fared? Finally, how can African countries best position themselves to work with this significant partner country?
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