CHINA’S ECONOMIC ACTIVITIES IN AFRICA: TRADE, FOREIGN DIRECT INVESTMENT AND AID

Year 2012, Volume: 5 Issue: 1-2, 59 - 78, 26.05.2014

Tomasz Michałowski

Abstract

The paper examines the nature of China’s economic activities in Africa in three dimensions: merchandise trade, foreign direct investment, and aid. These are three main channels through which China’s presence on the continent affects Africa’s economic growth and development. China’s economic relations with Africa are, to a large extent, driven by Chinese demand for natural resources, especially oil and minerals. It is the most visible in Sino-African trade, where fuels alone account for about two thirds of China’s imports from Africa. Natural resource extraction has also significant impact on Chinese decisions regarding foreign direct investment (FDI) and aid. Mutual cooperation between China and Africa has brought obvious advantages for both sides. For African countries, closer trade relations with China have been associated with gains in the form of lower import prices and improving terms of trade. Chinese FDI in non-extractive sectors has become a chance for economic diversification on the African continent. China’s aid and FDI can significantly contribute to the development of local infrastructure and technology upgrading. However, China’s economic presence on the continent has also its negative side. African countries may suffer, for example, from trade related losses, unfair competition or further debt accumulation.

Keywords

China, Africa, trade, foreign direct investment, aid

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