Econostrum | Economic News in the Mediterranean

Can Mediterranean countries profit from the Chinese presence ?

Article co-written by the Observatoire Europe-Afrique 2020 and the IPEMED

Written by By Christian Delavelle (Observatoire Europe-Afrique 2020) and Kelly Robin (Ipemed) on Tuesday, July 10th 2018 à 15:10 | Read 916 times

China has become a leading partner for Africa and its all-encompassing “One Belt, One Road” programme. The “Chinese breakthrough” has had the media buzzing, with a plethora of articles about projects of which some are mere promises. The latest study by the IPEMED in June, 2018, tries to put a few preconceived ideas into perspective and to offer points to ponder that counterbalance -and sometimes contradict- the media hype. Version française

Can Mediterranean countries profit from the Chinese presence ?

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In 2017, China accounted for 14.9% of trade on the African continent, 16.7% of imports and 12.1% of exports. But around half of the Chinese exports are absorbed by only four countries, South Africa (15%), Egypt (12%), Nigeria (11%) and Algeria (8.7%), which also have the largest trade deficit with China. Business exchanges remain lopsided volume-wise and are based on the principle of African raw materials in exchange for Chinese manufactured goods.
China’s economic strategy in Africa also includes the sale of services and turnkey projects, sometimes –erroneously- equated with foreign direct investment. In 2016, Chinese companies completed almost $50bn in infrastructure projects in Africa. Here again, 56% of the turnkey service contracts completed by China between 2003 and 2015 in Africa were in five countries: Algeria, Angola, Nigeria, Ethiopia and Sudan.
This figure needs to be compared to the –very low- amount of actual Chinese direct investment in the continent: $2.4bn, or a mere 1.2% of China’s worldwide FDI. Thus, China is pursuing a very prudent investment policy as far as Africa is concerned, with its priority remaining Europe and North America.

To put into perspective the impact of special economic zones

Les grandes entreprises chinoises de BTP ont exercé une pression à la baisse sur les coûts de construction (photo : F.Dubessy)
Les grandes entreprises chinoises de BTP ont exercé une pression à la baisse sur les coûts de construction (photo : F.Dubessy)
So what has been China’s contribution to industrial development in African countries? Chinese strategy seems to have concentrated on structuring the economic fabric of many African countries with improvements in transport and energy infrastructure. The leading Chinese construction companies have exerted a downward pressure on cost of construction. On the other hand, this financial bonanza has had a deleterious effect, in particular on African countries’ debt burden.
The impact of special economic zones also needs to be put into perspective, since Chinese interests remain confined to a dozen or so zones, mainly in Ethiopia.
So what should we make of the so-called “Chinese threat” in Africa? Is it not merely the result of our ethno-centric projection of China’s strategy on the continent? Shouldn’t the real issue be how Africa can benefit from what the Chinese have to offer? Implicitly, for Europeans, it all comes back down to the capacity of the political and economic powers that be to revamp the model of cooperation with their African counterparts.

Read the study "How does China contribute to the industrial development of african countries ?"

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