China's Investment in Africa

Written by Zunaira Malik 11:55 am Articles, Current Affairs, International Relations, Published Content

China’s Investment in Africa: A Tale of Economic Diplomacy?

China’s use of soft power in its relations with the international community has given it an edge over the US. In Africa, China has used different forms of economic diplomacy to strengthen its ties with the regional states. Zunaira Malik notes that while China’s investment in Africa has been widely criticized by the West and even labeled as a manifestation of Chinese colonialism, the China-Africa relations are mutually beneficial for the parties involved.
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Ms Zunaira Malik is studying international relations at Kinnaird College for Women University Lahore.

Introduction

The philosophy of economic diplomacy is encompassed in Ricardo’s book Principles of Political Economy and Taxation which states, “no matter who reigns, the merchant reins.” Similarly, Judy Biggert while talking about the significance of economic diplomacy rightfully remarked that “economics, politics, and diplomacy are like three souls in one person where politics without economy is unworkable and politics without diplomacy is unthinkable.

Economic diplomacy, in the words of Baine and Woolcock, is the cross-border set of activities regarding the processes of decision-making in the field of investment, and imports and exports. There is a considerable shift witnessed in the diplomatic arena where economic, business and financial issues are now the central concerns of diplomats. In the book Economic Diplomacy: Japan and Balance of National Interests, it was quoted that “economic diplomacy has been revived since the Cold War with steady growth in the increase in the economic discourse of diplomacy.”

Considering economic diplomacy in a general sense reveals that in order to achieve particular economic foreign policy objectives, states make use of economic rewards and punishments as tools of diplomacy to pursue their interests. In the pursuit of a “global strategy,” China is making use of economic diplomacy to accomplish the soft power posture of its peaceful rise. The economic policy also served to counter the threat theory of China.

While explaining the diplomatic dichotomy of China in his book “On China,” Henry Kissinger remarked that when Chinese envoys are sent aboard, they were not considered diplomats but heavenly envoys from celestial courts. China is countering the trans-Atlantic world order by calling on its trade partners and allies to reorient their policies along political-economic lines.

Some critics consider China’s investment in Africa as part of its strategic or economic opening up to the world. Chinese Academy of Social Sciences quoted that both China and Africa share common diplomatic values of non-interference in human rights.

Contextualizing Economic Diplomacy

Thucydides’ work “The History of Peloponnesian War” pioneered the approach to indoctrinating the concept of economic diplomacy. The theories like two-level game diplomacy by Robert Putnam conceptualize that economic diplomacy is used as a tool to suffice politico-economic consideration at the domestic/international level. Whereas, the model of triangular diplomacy asks states to frame relations with non-state actors and actively engage with transnational economic players.

Similarly, emphasizing the significance of economic diplomacy, Solomon Polachek stated that economic diplomacy could be utilized as a tool to mitigate conflicts. In the gravity model, it is explained that states are inclined toward economic diplomacy due to political-economic tensions, interjection between domestic and international factions, enhanced interaction between state and economic non-state actors, and the strategic environment of the international system which is more inclined towards economic affairs.

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James Alan defines economic diplomacy as “the use of economics as a tool in foreign policy strategy to achieve political ends and vice versa.” In the book Negotiating the World Economy, Odell emphasizes that states while framing their foreign policy in the international arena should consider their placement in the international markets. On the other hand, Dell’s theory of conflict prevention, propounded by Thomas Freidman, states that if two states are unstripped in a similar supply chain then those states could be prevented from waging full-scale conflict

Africa in China’s Grand Strategy

The three-prong goal of China’s grand strategy of becoming a great or “world-class” power by 2049 lays the foundation of China’s engagement in the African continent. Being part of the multibillion-dollar Belt and Road Initiative (BRI), the African region plays a vital role in the realization of the Chinese grand strategic goals. Based on the idea of guanxi (loosely translated to “personal connections, relationships or social networks), Chinese diplomats, besides maintaining ties with formal institutes, are also busy with social networking.

The sacrosanct principle of China’s investment and foreign policy in Africa is non-interference. The establishment of the China-AU Strategic Dialogue in 2008 and that of FOCAC (Forum on China-Africa Cooperation) in 2000 is a reflection of this principle. China also considers it essential to forge ties in the research areas, for which, it is funding a lot of African think tanks and has even established the China-Africa Think Tank Forum.

China is promoting its national values in Africa through investment and the establishment of Confucius institutes. In 2018, a Joint Conference of Confucius Institutes in Africa was held; 40 African countries took part in the conference. There exists a widespread opinion that the threat perception of China’s economic diplomacy in Africa is nothing but “hypocritical sour grapes of Western suspicion” as the African countries benefit in terms of infrastructure while China is getting a due share in natural resources. An example of this is the south of Bagamoyo which was once the hub of the slave trade and is now converted into a tech hub that is likely to make it Africa’s biggest port.

Typology of China’s Economic Diplomacy in Africa

Debt Trap Diplomacy

Debt trap diplomacy is the strategy where a creditor nation traps a borrowing one in debt by giving it infrastructure or development incentives through trade investment. For example, the Chinese firms took charge of Hambantota Port when the Sri Lankan government was unable to pay loans for investment in the port. Being the second-largest lender in Kenya after the World Bank, China is bestowing Nairobi with more loans than it could afford.

The high-interest repayments which put east African nations at a disadvantageous negotiating position have alarmed a lot of economic analysts like Aly-Khan Stachus. Critics articulate that the Chinese debt trap strategy in Africa is similar to that of Taft’s dollar diplomacy in Latin America. China conceives this narrative as a conspiracy staged against the mutually beneficial projects of China in Africa.

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But the economic leniency China showed while renegotiating the Chinese-financed railway in Ethiopia reflected that the Chinese loans for infrastructure development are a boon for the borrower nations. Bloomberg declared the debt trap diplomacy of China’s investment in Africa a myth with no well-founded evidence.  

 Resource or Oil Diplomacy

This strand of diplomacy is adopted by states to securitize or keep the supplies of energy resources crucial for their economic development in the chain. Being a region rich in crude oil, non-ferrous metals, and fisheries, Africa is a resource safari for China. China has repetitively adopted this rhetoric of commonalities and similar experiences of historical oppression by colonial powers to reflect strategic or diplomatic solidarity with African nations.

China’s economic diplomacy and investment in Africa have recently picked up its pace in the agreement between Total Gabon and Sinopec, the 2006 agreement of Zhengyuan Petroleum Company, the CNOOC (China National Offshore Oil Corp) agreement worth $350 million with Algerian refineries in 2003, and the 2004 agreement with stakeholders in western Ethiopia.

China’s oil diplomacy is suffering from the aversion of rogue states like Angola and Sudan and both of these states are the ones who have shifted from being sufferers of Afro-Stalinism to petro-diamond capitalism.  China’s oil diplomacy is making the African economies prone to price shocks.

Africa's Biggest Economies
“Africa’s Biggest Economies” by Statista is licensed under CC BY-ND 4.0.

The competitive edge that these African countries previously featured – due to the export-oriented manufacturing sectors – is now being undermined because of fuel currency overvaluation. But Chinese engagement, specifically in the oil sector, is apparently different from the one of western exploiters. An illustration of this could be found in the Dutch government’s suspension of $140 million in aid to Kenya when China was busy securing an oil exploration agreement.

 Corporate or Business Diplomacy

Corporate and business diplomats influence the foreign policy strategies of their countries through the use of their country’s bargaining powers, by using business diplomacy by giving investment and aid incentives to try to win lucrative contracts or make a conducive environment for their bossiness. It was the evacuation of US citizens after the Ethiopian war in 1990 that provided China with the opportunity to strengthen its roots in the Horn of Africa.

Chinese businesses have successfully replaced French, British, and US enterprises. The Chinese exports to Africa have reached $26.7 billion while imports have surged to $28.8 billion. It was reported by The Economist that owing to the support from Chinese diplomats, Chinese firms are successful enough to leave a mark on the African continent. Chinese firms, which dominated the cobalt refining in 2020, yearned for stakes in about 15 of Congo’s 19 cobalt-producing mines.  

Trade Diplomacy

Defined by Cruzan as an inter-governmental bargaining zero-sum game pursued by states where sometimes trade is used as a diplomatic tool. For example, Nigeria extended its diplomatic support to China over the Taiwan conflict after receiving $40 billion in investment. Trade diplomacy is the earliest form of China’s engagement and investment in Africa.

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China's African Trade Takeover
“China’s African Trade Takeover” by Statista is licensed under CC BY-ND 4.0.

The China-Africa trade volume which was initially standing at $12.4 million peaked at $114 billion as per 2011 statistics. In the fields of customs, inspections, and taxation, China has signed multiple bilateral trade agreements based on the principles of reciprocity where it also welcomes African enterprises with a zero-tariff policy. The Chinese trade is also sufficing the developmental needs of 45 African countries.

Criticism

China’s Resource Engagement with Africa

The energy engagement of  China and Africa reflects bullionist attitudes where a country sees its national pride in the accumulation of energy resources. China, with an aim to de-dollarize the international financial system, is busy stockpiling its reserves of gold which primarily compel China to ensure the security of its energy supplies coming from Africa.   

China’s Diplomacy in Africa

According to Jean-Marc, China’s investment in Africa is another manifestation of colonial policies with China extending its monopolistic attitudes in the local economies and trading resources with manufactured goods. Critics argue that Chinese-led resource extraction projects are causing depletion of resources and Chinese authorities are involved in inflicting harm to the social and political attitudes of the African countries.

However, being the major trading partner of the African countries, China proved to be a blessing for them by assisting them in infrastructure development. Moreover, the Silk Road is playing its part in fixing African trade problems and integrating these states into global trade networks. Some critics remarked that China’s diplomacy is pushing the African countries to a “resource curse” by inculcating in them a sense of complacency thus making them over-dependent on Chinese investment and trade.

China: A Soft Power or New Mercantilist Player in Africa?

Chinese officials utilized plausible diplomatic attitudes to encapsulate the economic potential of the African continent in their hands. China’s extreme economic nationalism is now facing mounting objections in Africa. The asymmetrical power relation that exists between China and African nations reflects that China is pursuing economic diplomacy to subject the African states to its sovereignty.

China is paying little regard to the political, social or environmental concerns of the African countries to advance its mercantilist interest. To pursue their new mercantilist goals, Chinese firms are expanding business with African elites at the expense of locals. However, China’s investment, infrastructure improvement, and health diplomacy reflect its soft power posture. It was the state interest of China in the Sudanese oil industries that compelled it to disregard any UN resolution on the Darfur crisis in Sudan.


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