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Background
Special> Joint Sino-African Progress> Background
UPDATED: May 16, 2012
Confronting Some of the Major Criticisms of Contemporary Sino-African Ties
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Africa is a zero-sum opportunity and China is squeezing others out

Challenge: China dominates the continent and is squeezing traditional partners out.

Chinese influence has grown swiftly across Africa. In conjunction with China's expanding commercial engagements, China has made major political advancements on the back of high-level visits. Trade between China and Africa has grown significantly faster than with any of Africa's other partners. Interestingly, the speed at which Chinese engagement has accelerated over the past few years has occurred at a time when interest from more traditional development partners has stagnated. Europe's share of Africa's trade has halved since 2000. Nevertheless, both the U.S. and European Union (EU) have strong positions in Africa. Furthermore, in Lusophone Africa, Brazil is offering stiff competition to Chinese expansion. In fact, President Lula was a guest of honor at the African Union summit in Sirte, Libya, in July 2009. In East Africa, a large diaspora network offers India an important foothold in Africa, presenting unique opportunities for corporate expansion.

Promisingly, as both a cause and consequence of Africa's internal reforms and more attractive economic growth trajectory, inward FDI into Africa increased five-fold from $14 billion in 2002 to $87.6 billion in 2008. (UNCTAD's Global Investment trends monitor expects FDI inflows to have fallen in 2009 to $56 billion.) And FDI has played a growing role in value of additions to fixed assets purchased by business, government and households. Consider that the share of FDI inflows in Gross Fixed Capital Formation (GFCF) in Africa has increased steadily from below 10 percent in 1995 to a peak of near 30 percent in 2008.

China's accumulative FDI stock has been critical for Africa's economic growth and development. China's FDI into Africa neatly aligns with the long-term strategic perspective China presents towards the continent. "The growth of Chinese FDI reflects a Chinese decision at a high level to contribute to South-South cooperation through mutually beneficial commercial relationships with the African continent" (Besada et al., 2008:7). Despite a great deal of media attention, China FDI inflows have grown, from $520 million in 2006 (Besada et al., 2008) to $1 billion in 2009. Therefore, quite astonishingly, China accounted for less than 2 percent of the total FDI inflows into Africa.

In terms of FDI stock, Europe and the U.S. account for 36.6 percent and 37 percent, respectively, of total FDI into Africa. Furthermore, in terms of FDI flows, flows from China are dwarfed by inflows from advanced economies. Moreover, China is facing increasingly stiff competition from other emerging markets, such as Brazil, India, the United Arab Emirates, Malaysia, Turkey and others.

Even in Africa's hotly debated energy sector, which has attracted the most Chinese interest, Sonatrach alone produces almost ten-times more crude oil per day than the combined output of China's National Petroleum Company, Sinopec and Sinochem. Evidently, the legacy of Africa's more mature bilateral arrangements remains an important advantage. Mainstream partners are currently dominant and advantaged owing to their historical hegemony in the continent. And, in Nigeria's energy market, China plays second fiddle not only to energy majors from the mature world, but also to Indian and Brazilian energy firms.

China is now a formidable player in the topography of influence on the continent. Moreover, the clear political will to magnify the relations implies China's engagement has just started. Consider the targets outlined at the FOCAC in 2009, which have captured the imagination: China has penned an investment targeted of $10 billion per annum and $10 billion in bilateral support by 2012. Therefore, China will be Africa's second-largest donor nation, largest trade partner and a dominant continent-wide investor.

(Xinhua News Agency May 16, 2012)

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