China - FDI in Africa

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  • Created by: FloraD
  • Created on: 02-06-16 19:40

China and the 'Scramble for Africa'

More than 2000 deals between China and African countries were under discussion at the first Sino-African summit in November 2006, held in Beijing.

China promised aid of $3billion in referential loans and $2billion in export credit. 

  • In 2006, China's African Policy was released - official government paper aimed at promoting economic and political cooperation...without interfering with each other's internal affairs.
  • During the 1950s-1960s, China supported African liberation movements and later helped a number of African countries in building railways and developing education and healthcare. 
  • GDP in Sub-Saharan Africa increased by av. of 4.4% during 2001 and 2004
  • The rate of growth was 5.5% in 2005
  • Trade btwn China and Africa has inc. from $3billion in 1995 to $32billion in 2005 = 10% of Africa's trade
  • 2004, China's FDI in Africa totalled $135million 
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Neo-colonialism

NEO-COLONIALISM

China's strongest critics have branded their involvement in Africa an example of neo-colonialism.

Chinese support for countries such as Zimbabwe and Sudan is seen in the West as legitimising brutal disctatorships - admire China's government model of a one-party totalitarian state.

China sees it as an example of 'South-South international trade' that may eventually be the engine that drives African development. 

 

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Focus on raw materials

RAW MATERIALS

China's most important raw imports from Africa include: Iron and Platinum, Timber, Oil and Cotton

  • China's oil consumption is estimated to increase by 10% per year
  • 30% of China's energy imports now come from Africa
  • 2004, China gave a $2billion loan to Angola in exchange fro a contract to supply 10,000 barrels of oil a day
  • China has invested $3billion in Sudan's oil and gas industry 
  • There is a claim that 4,000 chinese troops are guarding Sudanese pipelines
  • China's relationship with Sudan is very controversial as many MEDCs in the UN wished to impose sanctions on Sudan because of government 'support' for the genocide in Darfur
  • 80% of Sudan's $500 million annual oil revenue is used to purchase weapons to subdue the rebels in the South of the country
  • 70% of Sudan's exports are now destined for China
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China and Foreign TNCs

Major mining TNCs are becoming increasingly concerned that China is "freezing them out" of many African countries

The mining companies are finding it hard to compete with the massive incentives offered by China - roads and railways in return for mineral rights

China spent more than $10billion on infrastructure projects in Africa in 2006 - according to the World Bank

Some TNCs complain that Chinese projects do not meet the environmental standards expected of Western companies

China is helping Nigeria to launch a second space satelitte

With Chinese assistance, Sudan has been able to build three weapons factories near the capital city, Khartuom

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Chambishi Copper Mine: Case Study

Copper is a mineral China needs in abundance in its expanding manufacturing industries. The mine in Zambia is one of the largest Chinese-invested mining projects in Africa. 

CONCERNS

  • Poor safety record: 51 miners died in an explosion at a subsidiary plant in 2005
  • Reduction in workers' benefits: workers no longer eligible for the generous benefits - previous social programmes such as mine-sponsored football teams also lacking
  • Hostile attitude to trade unions: workers threatened with dismissal after pushing for better conditions
  • Low wages: workers paid as little as £53 a month, despite rising copper prices

A report descirbes how two miners were shot and injured (either by Chinese guards or Zambian police) when they were protesting about wages outside the Chinese managers compound. 

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Aid

The different types of Chinese aid have been: 

  • Financial help for key investments: 2006 China gave Kenya £20million to modernise its state-run utilities - mobile telephone network being built in Tunisia
  • A programme of limited debt relief: China has cancelled African debt amounting to several billions of dollars
  • A growing training programme: China's African Human Resources Development Fund had provided training in China for 9,400 Africans by 2004
  • Technical assistance: More than 15,000 Chinese doctors and over 600 teachers have worked in over 50 African countries
  • Providing peace-keeping forces: Over 1,500 troops are currently deployed in Sub-Saharan Africa.
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Assessing Costs and Benefits of Chinese Investment

COSTS

  • Life has become more difficult for countries which are raw material-poor as commodity prices rise
  • As Chinese traders move into the African market, they are frequently undercutting local producers because of huge economies of scale achieved by Chinese manufacturers - Textile factories in South Africa, Nigeria nad Lesotho have been badly affected by Chinese imports
  • President Levy Mwanawasa of Zambia called Chinese investors "profiteers, not investors"
  • China ha been increasing its tariffs on a number of African exports
  • An OECD report that China's demand for commodities may stifle producers efforts to diversify their economies
  • Trade unions have concerns about the working conditions in some Chinese owned mines and factories
  • Poor environmental standards of Chinese mining projects
  • Chinese firms often source a large amount of labour from China, not locally
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Assessing Costs and Benefits of Chinese Investment

BENEFITS

  • Chinese aid and assistance in the form of grants, preferential loans and cancellation of debs + since the 1960s, over 15,000 Chinese doctors have worked in 47 African countries treating 180 million patients. 
  • The increasing competition between the West and China provides Africa with a greater element of decision-making choice than before
  • Africa's risnig trade with China would provide an opportunity to diversify into the manufacture of raw materials
  • African consumers benefit directly from the relatively low price of Chinese goods. 
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