The so, they are playing an important factor

The reasons why China invests in AfricaThere are 3 main reasons why China is increasingly investing in Africa. • Chinese leaders have recognized the increasing need and demand for natural resources, energy, food and product markets necessary for rapid economic growth. Africa is rich in natural resources and has enough people of working-age to drive the economy. As can be seen, Africa could bring a lot of benefits to China to strengthen its economy.• Africa is a logical place for China to achieve greater political influence, notably within the United Nations (28% of United Nations members are African countries). • China has already significantly invested in other Asian markets, Latin markets and South America. The demand for Chinese goods might be saturated in these markets so Africa can be a new market for growth. As a matter of fact, African economies are growing rapidly, especially in nations like Kenya, Ghana, or Ethiopia.Chinese firms in AfricaChinese companies of all sizes and sectors are bringing capital investment, management know-how, and resources to Africa across diversified operations such as infrastructure, manufacturing, telecommunications and agriculture. By doing so, they are playing an important factor in the improvement of Africa’s economies.It is estimated that currently, there are more than 10,000 Chinese firms operating in Africa:• According to statistics, nearly a third are involved in manufacturing, a quarter in services, and around a fifth each in trade and in construction and real estate. • In manufacturing, it is estimated that 12 percent of Africa’s industrial production that are valued at $500 billion a year in total is handled by Chinese firms. • In infrastructure, Chinese firms’ dominance is even clearer, and they claim nearly 50 percent of Africa’s internationally contracted construction market. • Around 90 percent of these firms are privately owned.Economic strategyChina has participated in energy, mining, and telecommunications industries and financed the construction of roads, railways, ports, airports, hospitals, schools, and stadiums. As part of China’s “going out” or “going global” strategy, Chinese companies are encouraged by the government to expand out of their domestic market. Chinese investment in Africa also fits into Chinese President Xi Jinping’s development framework, “One Belt, One Road’, which joins a continental economic belt and a maritime road to promote cooperation and interconnectivity from Eurasia to Africa.According to Deborah Brautigam of the China-Africa Initiative for Research (SAIS-CARI), China has adopted a multidimensional approach in economic relations with Africa. China is a major foreign direct investment (FDI) company in Africa: providing development loans to resource-rich countries, investing in agriculture, developing trade and business cooperation, especially in some countries like Ethiopia, Nigeria and Zambia. China’s financial channels for loans and credits are provided by the People’s Bank of China, the China Development Bank, the Export-Import Bank of China and the China-Africa Development Fund. According to SAIS-CARI, between 2000 and 2014, China lent Africa more than $ 86 billion; Angola, Congo, Ethiopia, Kenya and Sudan are the countries receiving the most support.Poor infrastructure is really a considerable disadvantage that holds back Africa’s economy development. Thus, Africa needs funding from outside to deal with higher demand for better infrastructure. China’s investment in infrastructural development in Africa comes with no political strings attached, as Chinese Premier Li Keqiang stated: “China will not follow the beaten track of colonialism of other countries or allow the re-emergence of colonialism in Africa. To Africa and China, collaboration means opportunities and mutual gain.”Nevertheless, in a paper dated July 2016, David Dollar, a senior research at Brookings, concluded that China’s involvement in Africa has been gradually shifting from natural resources to human resources. Chinese businesses are placing a greater emphasis on the multiple social effects of investment, including in terms of technology transfer, capacity building, and living standards. In a study published in 2015, it has been indicated that China’s overseas investment is primarily profit driven. Since Africa holds significant market potential for China, it is a rational business option in globalization context. Furthermore, the investment of Chinese businesses in the field of natural resources in Africa is small compared to that in the services industry, which occupies a leading position, while investment in manufacturing is also significant.Country engagementChina focuses on eight large African economies:• Robust partners. Ethiopia and South Africa have a clear strategic posture toward China, along with a high degree of economic engagement in the form of investment, trade, loans, and aid. For example, both countries have translated their national economic-development strategies into specific initiatives related to China, and they have also developed important relationships with Chinese provinces and with Beijing. As a result, China sees these African countries as true partners: reliably engaged and strategic for China’s economic and political interests. These countries have also created a strong platform for continued Chinese engagement through prominent participation in such forums as the Belt and Road initiative (previously known as One Belt, One Road), and they can therefore expect to see ongoing rapid growth in Chinese investment.• Solid partners. Kenya, Nigeria, and Tanzania do not yet have the same level of engagement with China as Ethiopia and South Africa, but government relations and Chinese business and investment activity are meaningful and growing. These three governments recognize China’s importance, but they have yet to translate this recognition into an explicit China strategy. Each has several hundred Chinese firms across a diverse set of sectors, but this presence has largely been the result of a passive posture relying on large markets or historical ties; much more is possible with true strategic engagement.Monetary strategy:Chinese currency renminbi (otherwise known as yuan) is becoming increasingly popular in South Africa. SWIFT (provider of secure messaging services) found that renminbi usage in South African payments has increased by 65 percent over the last 12 months, and 112 percent in the last two years.”The surge of Chinese investment abroad – especially in Africa – is a major factor in this internationalization of the yuan,” says Chinese economist Qu Hongbin. Currently, the yuan only occupies the 5th place of the most used currencies in international trade, far behind the dollar. Indeed, in the shadow of the rising red ticket, there is the China-US standoff.By directly financing investments, China is strengthening its monetary capacity, which requires the yuan as a standard currency and the weakening of the dollar. Since 2009, Africa is at the heart of this new monetary strategy conducted by Beijing. Zimbabwe had even considered for a moment abandoning its currency to the yuan. A decision that proved essentially to be political.China is one of Zimbabwe’s largest trading partner after South Africa and the European Union, and until recently was the biggest buyer of its tobacco. In 2013, trade between China and Zimbabwe amounted to $1.1 billion. Today the Bank Reserve of Zimbabwe added the yuan to the list of currencies of its currency basket, with the Japanese yen, the Australian dollar and the Indian rupee; which ultimately strengthens the growing list of African countries using the yuan as its currency.Many African central banks, such as Nigeria, today have the equivalent of 10% of their foreign exchange reserves denominated in yuan. “It is very clear that a growing number of countries should choose the RMB (Chinese currency) to avoid losses in their trade with China, said a Chinese diplomat. This is a strong currency, already used daily in many Asian countries for their transactions. In Africa, the more trade increase, the more currency will be requested.


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