China | 'Chinese FDI helps to stabilize Africa': Brookings fellow

‘Chinese FDI helps to stabilize Africa’: Brookings fellow

David Dollar, a senior fellow at the Washington DC-based Brookings Institution, tells Doug Tsuruoka that China is a positive force in the continent.

January 5, 2017 10:35 AM (UTC+8)
African artists perform at the Nan Hau Temple in Bronkhorstspruit, South Africa, during Chinese New Year celebrations in 2015. Photo: AFP
African artists perform at the Nan Hau Temple in Bronkhorstspruit, South Africa, during Chinese New Year celebrations in 2015. Photo: AFP

Gauging the true extent of China’s involvement in Africa is like strolling through a hall of mirrors — it’s hard to sort through the distortions. Some reports characterize Beijing’s investment in African nations and its hunt for bases in the Horn of Africa as posing a challenge to the United States. Others play down China’s influence.

David Dollar, a senior fellow at the Washington, D.C.-based Brookings Institution, has published a study that offers an upbeat yet sober assessment of Beijing’s involvement in a continent which by some estimates is now home to over one million Chinese workers and entrepreneurs.

While China clearly has geopolitical aims, Dollar argues that its presence is primarily economic in motivation. In addition to direct investment, the former US Treasury emissary to China says Africa is now dotted with tiny Chinatowns that are firing local economies.

Dollar spoke with Asia Times recently about China’s engagement with Africa.

Asia Times: What role does Chinese investment play in Africa’s economy?

David Dollar: China is basically a stabilizing and positive force in Africa. There are a lot of different aspects to Chinese investment there. One important part is Chinese loans for infrastructure. Quite a few African countries are making good use of these. China has been providing an average of a little more than US$5 billion in loans over the last few years. That’s very supportive.

AT: Has the scale of China’s investment in Africa been exaggerated by the western press? Is it less than overwhelming?

DD: There’s a fair amount of Chinese foreign direct investment (FDI) coming into Africa. But it’s one of the things that tends to get exaggerated in some stories. It’s a useful support, but it’s still a pretty small percentage of total investment.

AT: How much of China’s FDI goes to Africa?

DD: There are some problems with the data. But when you look at different sources, it seems to add up to about 5% of China’s total global FDI. That’s a useful, but not an overwhelming number. (China’s worldwide non-financial FDI hit US$118.02 billion in 2015)

AT: What are China’s economic/political aims in carrying out such investment in Africa?

DD: The aims are mostly economic based on the fact that China has had diplomatic relations with African countries for a long time. Beijing also has political objectives. But this big surge in investment is fairly recent, so something has changed.

A Chinese construction engineer works at a section of the Mombasa-Nairobi standard gauge railway (SGR) at Emali in Kenya October 10, 2015. Picture taken October 10, 2015. REUTERS/Noor Khamis - RTX1X4VS
A Chinese construction engineer works at a section of the Mombasa-Nairobi standard gauge railway (SGR) at Emali in Kenya. Photo: Reuters

AT: What was the trigger?

DD: I think it’s because the Chinese economy is slowing down. It has excess capacity. You read about this excess capacity in heavy industry all the time. So it’s natural at this stage for some of their capital to be looking around the world for new opportunities.

AT: The US press has focused on China’s growing military presence in the Horn of Africa and other moves as a geopolitical challenge. Do you think this is overblown as well?

DD: China has been giving assistance to Africa for a long time. It likes to have friends in the United Nations, and you’ve got China developing a blue water navy. They are going to need more military bases around the world. So Chinese involvement in Africa also has political and strategic ramifications.

AT: There are reports of Chinese immigrants seeding small “Chinatown” communities across Africa. Are they contributing to economic growth?

DD: One of the things I cover in my study is that there are an estimated one million Chinese who have moved to Africa in the last 15 to 20 years. There are a lot of problems with the data for this one million number. But I think this is a reasonable estimate.

Howard French [a journalist] has a book that mentions Chinese creating Chinatowns in Africa. He’s got interesting stories about how Chinese will come to Africa on a construction project. When they do, you often have these little communities develop.

They bring a lot of different types of workers. They bring chefs to cook Chinese food, teachers for their children, and medical personnel so people can speak in Chinese if they go see a doctor. So their model inherently is creating little Chinese communities that are also contributing to local economic growth in terms of spending and jobs.

AT: Are China’s government or Chinese companies behind the creation of such Chinatowns or are these Chinese immigrants doing it of their own accord?

DD: I don’t think it’s a deliberate thing pushed by the Chinese state. It’s a natural way for Chinese workers to conduct business in an African environment.

AT: Similar to how Chinatowns started in US cities like San Francisco and New York?

DD: Yes. But what French picks up on is how after a couple of years on a contract, quite a few Chinese seem to be deciding that there are a lot of opportunities in Africa. So much so that they want to stay and become part of self-perpetuating communities.

AT: Has Africa reached a catalytic point as a regional economy and is it preparing to lift off in similar fashion to what happened with Asian nations after World War II?

DD: Africa’s demographics are similar to Asia’s and China’s 35 years ago. About half the population of Africa is below age 20 — so there’s going to be a big surge in the labor force. That doesn’t guarantee that you’re going to create jobs for people to work. But there’s a lot of potential and a lot of pressure on local governments to deliver on this promise.

AT: What are Africa’s positives and negatives going forward?

DD: Various indicators show that macroeconomic management/policy has improved in Africa. You have quite a few well-performing states. You don’t have problems with high inflation. So you’ve got some good foundations.

Asia had special factors. It was a moment in history where developing countries there could take off very quickly. The world market and demand in the US was growing. But I’m not sure the world will provide such a favorable environment for Africa going forward. Africa is also divided into a large number of small economies and I think that’s a disadvantage.

So a balanced assessment is there are some similarities with Asia, and Africa is one of the world’s bright growth spots. But I’m always hesitant when somebody proclaims the “next economic miracle.”

Doug Tsuruoka is Asia Times’ Editor-at-Large

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