Financial Crisis Stalls China’s Engagement with Africa

The debate over whether China's push to invest in Africa is a bane or boon to the continent's people rages on, but the point may be moot for the time being due to China's own flagging economy.

Ever since China declared 2006 the "Year of Africa," its investment throughout some of the world's poorest countries has sparked controversy in the development community. Proponents of Chinese engagement in Africa point out that China builds desperately needed infrastructure while providing the demand for raw materials and technical expertise necessary to extract them.

"Sub-Saharan Africa cannot exist, much less prosper, without China," said World Peace Foundation President Robert Rotberg at a Feb. 5 seminar held at the Center for Global Development in Washington.

Critics argue that China ends up supporting some of the world's worst governments, including those of Robert Mugabe in Zimbabwe and of Omar Hassan al-Bashir in Sudan, while driving struggling African manufacturers out of business. They argue that since Chinese firms often import laborers from China, few new jobs are created for Africans.

Panelists noted that the pace of this engagement has slowed substantially as the financial crisis dampens Chinese demand for African raw materials.

"Before the meltdown, I would have bet China was capable of pulling large parts of the continent out of poverty," Rotberg said. Now, as China's growth rate is down to 6 percent (from 13 percent), he is less optimistic.

Wenran Jiang, professor at the University of Alberta's China Institute, noted that the effect of the slowdown is particularly acute in areas like Congo-Kinshasa, where China's investment of $9 billion has dwarfed contributions from international financial institutions and aid agency. Now, falling commodity prices have crippled the Congolese mining industry, dashing hopes that a boom in the extractive industries would lead to lasting development.

For Jiang, this slowdown demonstrates a valuable lesson: "The more a country is tied to China, the more danger you will have when there is a slowdown in the Chinese economy."

Yet the full impact of the financial crisis on Chinese involvement in Africa is hard to gauge, since it is difficult to assess just how much profit Chinese firms make in Africa. As adequate budgetary data is often unavailable and illicit expenditures (e.g. bribery) occur off the books, estimates of Chinese profits in Africa vary wildly, ranging from $12 billion to $80 billion.

About the author

  • News placeholder image

    Ryan Weddle

    Ryan Weddle served as Devex international development correspondent in Washington in 2008-2009 before joining the U.S. foreign service. He has worked in India for a business process outsourcing firm, and in Kazakhstan on U.S.-funded urban development initiatives. Ryan holds a bachelor's in Asian studies from the University of British Columbia and a master's in international studies from the National University of Singapore, where his research focused on aid effectiveness.