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Africa-China Exports Descend by 40% amid Investment Uncertainty

African exports to China declined by 38% in 2015, according to China’s customs office, a shift similar to the 40% year-on-year decrease of FDI to Africa in the first half of 2015. The trade figure for African exports to China in 2015 was US$67 billion (C$92 billion), while African imports from China increased by 3.6% to US$102 billion.

Chinese investments in Africa have fallen; mainly due to declining investment by SOEs. On the other hand, private investment is increasing, as many Chinese private companies and entrepreneurs seek opportunities in African countries due to increased competition at home and limited access to loans and credit from state financial agencies in China. Further inducements for Chinese firms are the size of African markets, the increase in purchasing power in countries like Nigeria and South Africa, cheap production and labour cost in markets such as Ethiopia, and well established infrastructure and regulated business environments in markets such as South Africa, Botswana, and Mauritius.

Recent figures show that China’s firms are the 7th largest among foreign investors in Africa in terms of project numbers. South Africa invests more into the rest of Africa than China into Africa, and Malaysia invests more than China, too.

China’s aid has increased, as was demonstrated during the Forum on China-Africa Cooperation held in Johannesburg, South Africa on Dec. 4th, 2015. Chinese President Xi Jinping announced a three-year plan, the “10 Major China-Africa Cooperation Plans” at the opening ceremony of the Johannesburg Summit of the Forum on China-Africa Cooperation. The plans cover cooperation in areas including industry, agriculture, infrastructure, finance, environment, trade and investment, education, and security.

President Xi also announced that China would provide aid totaling US$60 billion as financial support for the plans to be implemented. From US$20 billion (C$20 billion in 2012) during the last FOCAC meeting in 2012 in Beijing, the Chinese government pledged US$60 billion during FOCAC VI in South Africa. But we have to bear in mind that, under China’s aid structure, all this money is used as concessional and preferential loans to African countries which engage with China for state-to-state projects; as such, the money does not leave China. In many instances, this plays out by way of loans and credit being granted to different African countries via the companies which build infrastructure in African countries through state financial institutions like China Eximbank, policy banks like China Development Bank, or development funds like the China Africa Development Fund (CADFund).

Although the Plans and their supporting US$60 billion signal a strong cooperative prospect between China and Africa, the use and distribution of the fund is still unclear, which has raised concerns in some commentators. Furthermore, the scale of investment must be put into perspective: Africa is home to 54 countries and 1.2 billion people, and as such US$60 billion, if divided equally, would only lead to US$1 billion per country, or US$50 per person.

Further reading:

Chen, W., David Dollar, and Heiwei Tang. (2015) ‘China’s direct investment in Africa: Reality versus myth’, The Brookings Institution, September 2015. 

Cissé, D. (2015) ‘Debunking myths about China in Africa: Africa is now one of China top trading partners’, Reporting FOCAC, October 2015. 

Dollar, D. (2015) ‘Debunking myths about China in Africa: China is Africa’s # 1 investor’, Reporting FOCAC, October 2015. 

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