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Study of Chinese Investments and Influence in Africa

Chinese financial injections have been supporting economies of many African countries in recent years. Chinese business enterprises created new working positions, helped to improve infrastructure, brought new technologies and also cheap products which could African people afford more then the ones exported from Europe or USA. However, later it appeared that China’s increasing influence doesn’t lead African countries only to prosperity and better life but started to cause problems.

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Nowadays, there are many questions whether Chinese expansion to Africa has positive or negative impact, especially in terms of respecting human and worker’s rights, environmental issues, protection of local labor markets and constantly blooming corruption and non transparency of political systems in most of the African countries. Hypothesis: Chinese investments and business practices in Africa have surely brought certain cure and help to this continent, however, due to obviously increasing Chinese power and interest in gaining as much benefits as possible in Africa started to show its negative impacts. Paradigm:

Africa has a long history of unhappy experiences with outside powers coming to exploit the continent. After decolonization most of newly created states were not prepared enough to independent state existence. The whole continent has been facing to adverse conditions for decades. Nowadays there more that 40 countries in Africa which are classified as the least developed countries – the countries with low standard of living and underdeveloped industry whose main problems are: a high population growth, poverty and low education and health system, pollution, non-functional government and bad infrastructure.

These countries could hardly exist without a support of other countries and international organizations that provide them a financial aid. Chinese investments have been bringing a significant financial help so many African countries in recent years. Though China is providing a needful help to African economies, nowadays its presence starts to be seen also as a threat. Chinese influence is constantly increasing and China pushes away even European and American investors. Analysis:

Apart from European Union and USA, China is the biggest donor of financial injections in Africa and it’s become a business partner number one in many parts of the continent. In every part of Africa there is something what interests China. The whole continent is quite rich in natural resources; there are copper mines in Zambia, iron ore in Gabon, chrome and gold mines Zimbabwe and huge oil reserves in many places. Moreover, other countries which posses less natural resources created a perfect opportunity for China to build companies and trade, and to take advantage of many investment opportunities.

China has large interest in Africa’s natural resources and it requires enormous investments in infrastructure, mines, power plants, oil exploration activities, pipelines, roads, bridges, railways, transmission lines and many others. Thus there are tons of raw materials and fuel going to China and Chinese billions going to Africa, for example to countless new Overview of Africa’s natural resources reserves Data of Chinese outward investments and trade with Africa Construction projects and agriculture.

From 2005 till 2010 China’s investments to Africa increased dramatically, Sub-Saharan Africa accounted for almost 14% and the whole region for 30,3% of China’s total outward investments. In 2010 trade between China and Africa exceeded $120 billion. 1 As we can see in the previous chart, the increase in investments between 2005 and 2010 is really significant. Nowadays, China has become Africa’s biggest trading partner and buys more then 1/3 of its oil. Even though China kept up a list of aid projects in more than forty-five African countries, they claim their help is not a charity but it’s based on utual benefits. Many African countries welcome Chinese investors because they help to develop their markets and infrastructure and they bring money to the African countries. China has given more loans to poor African countries than the World Bank in recent years. 2 Africa needs new and better roads, school and hospital buildings, computer networks, telecommunication systems and power generation which creates a lucrative opportunities for Chinese companies.

The increasing importance of Africa is obviously intensified, Chinese president Hu Jintao and premier Wen Jiabao have strengthen diplomatic activity in Africa and there was China-Africa Business Council (CABC) established in 2005 for the purpose of strengthening business activity between China and Africa. 3 China really did more to end poverty in Africa then any other country. Apart from new construction projects another benefit were new working places for Africans and also cheaper and more affordable Chinese good which started to be imported.

However, later Chinese appeared to be viewed with mixed feelings, mainly in smaller countries, because of their poor business practices. Chinese construction work appeared to be often careless and some of the buildings fell apart after a while. There was a new hospital built in Luanda (Angola) by Chinese Construction Company but few months later it had to be closed because of cracks in walls. Another case is from Zambia, where 130km long road Chinese built was quickly swept away by rains. Moreover, China also doesn’t impose conditions about abiding by human and worker‘s rights, lacks interest in environmental issues, doesn’t care about protection of local labor markets and obey Chinese policy of non interference in domestic affairs which includes corruption and illegal business practices. Unfortunately, China’s neutral status towards dreadful dictators in places like Zimbabwe or Sudan makes no contributions to regime changes in these countries. That’s the main difference between China’s and other countries development aid.

Unlike China, the World Bank, EU or most of other countries see the main source in heading for better improvements in political, legal and educational system in African countries and these are the areas where their financial funds are flowing. The help to Africa should be based on effort which would change the system in most of the countries and in this case money is just small instrument, there needs to be somebody who would really care and observe the situation. However, in case of China, apparently the most important drive force is a possible benefit.

Another problem connected with Chinese presence in Africa is the environmental protection. Comparison of Investors in Africa Chinese investments in Africa are usually concentrated in industry areas which are environmentally very sensitive; such as mining, oil exploration, infrastructure projects etc. China wants to make previously inaccessible resources accessible but this strategy has serious environmental risks because of developing projects in ecologically fragile regions and in protected territories and in countries with weak governance structures. The Chinese government set certain laws and regulations for environmental protection but they have been followed with limited success. All European and American oil corporations that operate in Africa have to follow a strict guidelines and international standards according to which the possible negative impact on environment should be reduced as much as possible. However, Chinese companies do not want to hear about these standards but follow their own. Chinese oil companies had been sharply criticized for oil exploration in Loango National Park in 2006 till park authorities were forced to ban the access to the protected areas.

According to them Chinese company SINOPEC caused damages of many rare species of animals and plants. 6 In Nigeria the Chinese company Western Metal products Company Limited was accused of releasing sewage to the river which caused polluting of water resources which had been used by local people for many years. Another case is from Lagos, where another Chinese company WAHUM was criticized for the amount of pollution which is pumping to the atmosphere. Another problem concerning environment is extracting timber in Africa. Nowadays China is the biggest exporter of wood in the world.

However, nearly 90% of the wood imported from Cameroon, Gabon, Congo and Equatorial Guinea is a result of illegal deforestation. 7 By cutting trees in places where shouldn’t be done so, the natural living environment for many species and plants which are gradually being destroyed. Besides of causing environmental issues this also leads to billions of dollars loses for countries where this wood is originally coming from. Africa was also over flooded with cheap goods from China which is much cheaper then products that African companies can produce or Western products.

Thus many local producers were not able to keep up with competition and went bankrupt or had to reduce employees or cut wages. This means that most of people are forced to work in Chinese companies for less money and often in unsafe conditions and with presence of violating worker’s and human rights. There are many issues in Zambia, concerning frequent accidents in mines because of week safety standards. 8 The employees in mines owned by Chinese companies often have to work twelve hour shifts without any break.

In some countries Chinese construction companies pay employees less than local companies and sometimes even less then the minimum legal wage is. However, many African’s are happy to have at least some job to feed their families and governments are not doing anything about this fact. Moreover, most of Chinese products are very low quality, and they are sent to Africa by private companies thus the government has only a little control. Chinese influence in the country doesn’t even help to political background of the country. Most of the governments are easily bribed and thus many state contracts go straight to Chinese construction companies.

The main countries which have gained a Chinese attention are Sudan, South African republic, Algeria, Zambia and also Nigeria. Chinese Investments in Nigeria Nigeria is the second biggest consumer of Chinese goods and services and also the third most important business partner in Africa. Chinese building companies have become cheap and attractive for Nigerian and other countries governments. And in the other hand Nigeria represents a tempting source of raw materials, especially oil, for China. This partnership between China and Nigeria is based on mutual advantages and its fundamental parts are common investments.

Since 2008 Chinese market has been partly opened for Nigerian goods. The value of recent Chinese investments in Nigeria is approximately 6 billions USD and 75% is represented by investments to sectors of mining and petrol industry. One of the considerable activities is for example a cooperation between “China National Oil“ and “Nigerian National Petroleum Corporation“ as a purpose to research possible petroleum deposits in the area of Chad pool. Another company “China National Offshore Oil Company“ has express its interest in 23 oil blocks which are owned by Shell, Chevron, Exxon Mobil, Snepco and Total.

Nigeria’s Oil Production and Consumption The second part of Chinese investments in Nigeria belongs to the infrastructure. There is Chinese state company CGC in Nigerian market that is very successful in gaining a lucrative government contracts for reconstructions of road system in the country. This company and many others are already deep-rooted and have started a diversification of its own production programs (for example a founding of agriculture farms). Nigeria and China also cooperate together in program of Nigerian railway system and telecommunication satellites.

However, the proof that China’s enter to Nigerian trade market is not always successful is the fact that Nigerian government backed out of contract of reconstruction of productions factories. Again, the one of fundamental investments are building of cement factories by Sinoma Intl. Engineering. China is also playing an important role in supporting Nigerian agriculture. There have been created many working places in Nigeria since Chinese companies got to market but China imports its own cheap labor thus the chances for local people to get a job are very limited now.

There have been created “Chinatowns“where the workers live, they are poorly educated and ill-equipped to live in different cultures. Another fact that worries Nigerian society is that indifference of Chinese enterprises to environmental damage is out of concern. Mainly the mining industry has a destructive impact on nature. China is also accused of dumping inferior goods and medicines on the Nigerian markets and generally Africa’s fragile but important textile industries are being killed off by a cheap Chinese manufactures.

Furthermore, Chinese merchants are flooding in to the country and displace local traders. Nigerian traditional fabrics and textile production has slowly disappearing and is replaced by Chinese cheap and low quality products over flooding the market. Nigerian officials speak about controlling their country’s development, but they admit that most of contracts usually go to Chinese companies because of they keep costs low. Nigeria is just one example but similar situation is in many other African countries.

In one hand China is the reason of Nigerian economical growth but there are more serious issues the country needs help and has to deal with those are; huge debt, extreme poverty, military rule, volatile politics and conflict in the oil-producing Niger Delta. The complete information about Chinese investments is not accessible but it is obvious that Chinese companies are firmly established in Nigeria and the whole countries are appearing to be depended on China’s contracts. China‘s strongest interest is in petroleum sector in the country and China is striving to deepen a further cooperation.

The research shows that Nigerian public is aware of raising Chinese presence and also West world’s fears about complete Chinese accession to Africa but apparently they have no other choice. Real GDP growth rose from 7. 0% in 2009 to 8. 1% in 2010. Real GDP growth is projected to remain strong and stable at 6. 9% in 2011 and 6. 7% in 2012. 9 Even thought Chinese impact has brought a lot of money to Nigeria and other African countries and has been proving a needful help in economy. It should be seen also as a threat.

Thanks to unstable politic system in most of the countries the corruption increases and the situation is not getting better even thought all of the international help from EU and USA. Nowadays during the economic crisis Western investments are declining in Africa and it allows China to increase its influence. The countries that provide development aid at head with EU realized that if African countries keep dealing with China in the same way till now the real profit will be only on side of China that could dominate Africa. The European parliament has been dealing with the Chinese politics and its influence on Africa.

They emphasize that Chinese investments in countries with despotic regime supports breaking human rights and also give a notice on the role of China in the connection with arms trafficking and using natural resources. China was called to cut down export of guns to the countries that are in conflicts like Kenya, Zimbabwe, Sudan, Somalia, Ethiopia, and Chad and control the impact of African projects on environment. They also demand that all of the international contracts about mining or recourse researches will indicate the amount of profits coming to development of local societies.

EU also encouraged China to cooperate with OSN and AU missions in Africa and meet accountability especially as regards of civil people. China has accepted all of the conditions and proclaimed that they are seeking harmonious world, peaceful co-existence and they respects and supports African countries and their main interest is to show them a path towards to development. Problems: Unreliability of Chinese data, lack of transparency and possibility to judge the issue only from one point which usually speaks against China. Conclusion: For couple of past years Chinese influence in Africa has been a controversial question.

We can surely say that China has changed Africa with its huge infrastructure projects across the whole continent. However, this African-China relationship is unbalanced and works especially for China’s favour. Africa is vulnerable and needs help but not only financial, there has to be a different approach which would help to change the political systems in African countries. If China does business in Africa it supposed to be African counties who benefit from it not only China. Chinese power in Africa should be limited and there should be some borders which would make China to change its approach.

This relationship between Africa and China can be fruitful if they both respect and learn from each other. There should also be some third parties who would supervise and control the situation in African countries. Nowadays, China basically spread its business all around the world but in developed countries they usually cannot perform harmful practices like in case of Africa. Therefore the main help to Africa should focus mainly on restructuring the government, education and health systems. It is hard to say what would have to be done in order to improve and control the situation and as long as it hasn’t been done so far t is not going to be in near future. China is basically “over taking” the whole world and as long as other countries see profit in doing business with China the problem with Africa is still going to be here.

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