Chinese Foreign Direct Investment (FDI) has increased substantially in the last few years. According to The Economist, trade between China and Africa surpassed $120 billion in 2010. Also, according to The New York Times, in 2009, China became Africa’s single largest trading partner, surpassing the United States.
China’s foreign direct investment in Africa has exploded from under $100 million in 2003 to more than $12 billion in 2011. It is to be expected that an enormous economy in growth, such that the Chinese would look to assert its influence on trade. Vast amounts of resources are needed to fuel Chinese economic growth.
Nonetheless, some would argue that China is not only after economic influence but also in search of strategic geopolitical advantage. According to The New York Times, in June 2011, Secretary of State Hillary Clinton gave a speech in Zambia warning of a “new colonialism” threatening Africa. She expressed that “we saw that during colonial times, it is easy to come in, take out natural resources, pay off leaders and leave.”
However, American skepticism has one of its roots in the fact that Chinese companies are driving American enterprises out of business.
One can easily make conjectures about a generalized phenomenon. Even though Chinese investment has taken place in much of Africa, it is not appropriate to single out Africa as a single and homogenous entity. Therefore, a closer look in some cases is highly recommended.
For example, Uganda has seen a gigantic increase in Chinese investment. The Global Times has reported that “the construction of a 350-million-US-dollar Chinese-funded Kampala-Entebbe Expressway is expected to start soon as the government, the contractor China Communications Construction Company. Ltd (CCCC) and other stakeholders are going through the final procedural stages.”
Many Ugandans see Chinese investment as a form of much needed help. Faith Mwesigye, a second year Environmental Science major and Politics minor from Uganda, sees Chinese investment through positive eyes. When asked about the impact of such investments in her country, she expressed, “I definitely strongly support Chinese investments in Uganda. Our infrastructure is improving greatly thanks to those investments. We would still be very far behind in agricultural technology and infrastructure, like the new and improved roads being constructed, and the office buildings, etc. if it was not for those Chinese companies the government is contracting.”
Mwesigye went on to say that Chinese investments are very important to Uganda since they create jobs and therefore incentives such as reduced tax on machinery imports. Many other Africans would agree with her, however some are bit more skeptical.
Bheki Khumalo, a second year International Development Studies and Environmental Science major from Zimbabwe, agrees that Chinese investment is playing an important part in the construction of his country’s infrastructure. He pointed out that they are building a road connecting two main cities of Harare and Bulawayo. He also notes that Chinese companies are building a nationwide underground internet cable.
However, Khumalo is concerned about the reasons why the Chinese are investing in his country. He explains that many benefits associated with Chinese investment are short-term. Roads and communications system require a great deal of maintenance and even though they create jobs for locals in the short-term, they would not necessarily do it in the long run. Furthermore, he is concerned with local agricultural producers, as Chinese investment in that sector has provided cheaper products with which some local farmers cannot compete.
Surely, there are associated costs and benefits with any foreign direct investment. The issue then becomes which one prevails. It is in the best Chinese interest to increase and diversify their investment abroad not only to supply their domestic economy with raw materials, but also to diversify their trade portfolio and keep economic growth at a stable level.
On the other hand, Ugandans and Zimbabweans are moving forward in the difficult task of building their country’s infrastructure. But again, at what cost?