BEIJING, China — Within the last decade, China has surpassed the United States and EU Countries as the number-one trading partner, and biggest investor, in many African countries.
Following a “One China Policy”–which requires non-recognition of Taiwan’s sovereignty as a pre-condition for investment–many African countries have since entered into bilateral agreements with China.
Many African countries have also found that direct links with China enable them to overcome conditions imposed by Western-oriented monetary schemes, such as the IMF and World Bank, by allowing non-Western and developing countries to invest directly with each other.
Angola, for instance, receives huge Chinese loans which help finance its national oil company, in exchange for allowing Beijing to buy Angola oil at a cheap price.
In addition to an increase in trade and investment, China has also massively increased its physical presence within Africa and African cities; serving to transform the physical geography of African rural and urban space.
Land-grabbing, for instance–the practice of lending large amounts of land for a period of up to 99 years in exchange for money or access to resources–has become an increasingly common practice for large Chinese and other multinational firms within Africa.
Many African cities today, as a result, have experienced a boom in growing ‘China Towns,’ such as in Johannesburg, and the emergence of various ‘ghost towns’ built by Chinese firms, such as Kilamba–a 5,000 hectares development built in Angola, where the state-owned China International Trust and Investment Corporation (CITIC) started construction in 2012.
Africa’s growing dependence on China and Chinese investment, however, now places African countries in a perilous condition; thanks to China’s economic slowdown, which has occured at a much faster pace than economists expected.
Last week, the Shanghai Composite Index fell by 16.61 percent, causing investors all over the world to panic and sell stocks.
According to economists, the recent devaluation of the Chinese yuan could result in less demand for African goods–since African goods are priced in American dollars that would make them less profitable for the Chinese.
If Chinese demand for African products, and Chinese investment within the region shrinks, African countries could see their countries take on more debt as a way to compensate for China’s diminished presence. Countries such as Angola might also see their economies and oil money dramatically reduced if Chinese investment withers.
African countries could also see major infrastructure works come to a halt if Chinese funding becomes depleted. Chinese state companies, for instance, have been concentrating their efforts recently on building roads, railways, power stations, and airports between Nairobi and Lagos.
If China backs out, these infrastructure projects will likely take much longer to be completed–hurting industry and job creation in Africa in the process.
While the Chinese slowdown has greatly affected many international markets (such as the American market, which saw a 588 point drop in the Dow Jones at closing on August 24), and greatly concerned many African nations who have become increasingly intertwined with China in recent years, economists have argued that African countries may still find a way to stay afloat.
Certain Chinese commitments, such as the assembling of the first African-made smartphone in Ethiopia, should still happen–due to the fact that many Chinese private companies have enough cash reserves to invest in Africa independently of state support.
Trade between African countries, and increased South-South trade between African countries and other BRICs nations (which include Brazil, Russia, India, China, and South Africa) could also serve to offset the potential damage that China’s situation could wreck on China-Africa relations, African infrastructure, and African economies.