China and Africa, a shared future ahead

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by Matteo Guarnieri

China, the most populated country with 1.3 billion people and second-largest economy in the world with a GDP of $13.46 trillion in 2017. Africa, a continent of 54 countries with a population of 1.216 billion and a GDP equal to only $2.33 trillion. It seems that China and Africa do not have anything in common. The former has experienced a rapid growth since its reforms and “opening up”, the latter is still dependent on its agricultural sector (15% of Africa GDP) and is characterized by a lack of infrastructure that leaves millions of people languishing in poverty.

China and Africa seem to be complete opposites, but “the over 1.3 billion Chinese people have been with the over 1.2 billion African people in pursuing a shared future” as stated by Chinese President Xi Jinping during the summit of the Forum on China-Africa Cooperation that took place in Beijing in September 2018. Industrial promotion, infrastructure connectivity, trade facilitation, green development, capacity building, health care, people-to-people exchange, and peace & security are all the initiatives promoted by China to help the development of Africa through a further $60 billion financing for the next three years in the form of government assistance, financial institution and companies’ investment and financing.

President Xi Jinping also highlighted that resources will not be spent on vanity projects, but in places targeting the “major bottlenecks to development”.

The $60 billion financing to Africa has been highly criticised around the world as “a careful laid debt trap” or a way to boost the Chinese economy. Beijing denied all the accusations of investing in Africa with the aim of extracting mineral resources to feed the Chinese economy.

The Chinese government repeatedly underlined that it is offering loans to African governments to develop roads, ports, railways, pipelines and other trade links. However, the Chinese and the numerous African governments are not the only players in the continent. Today over 10,000 Chinese companies operate in Africa with 90% being privately owned. Chinese private firms seem to hold Africa and focus on boosting profits. According to McKinsey, in 2015 they handled 12% of African industrial production worth a total of $500 billion a year and claimed almost 50% of Africa’s internationally contracted construction market. In addition, millions of low-skilled African workers are employed by Chinese private firms operating in Africa corresponding to 89% of their entire workforce. The motives behind this can be possibly traced back to current situation in China. The Chinese economic growth of the past 30 years has pushed a large segment of the population into the middle-class. Education level in China has remarkably improved shifting the low-skilled workers into medium-skilled in just few decades and leaving China’s low-skilled labour not as competitive as before. Consequently, Chinese firms are investing abroad in less developed countries and appeared to have found Africa as the source of low-skilled workers to boost their profits. Currently only 6% of total African workforce is categorized as high-skilled, way below the global average of 24%. Poverty is also another issue, there are still 736 million African people earning less than $1.60 a day. Resource management, agricultural transformation and policy research are desperately needed.

Africa’s best “mentor” is China, that has reformed its education system with 8 million university graduates just in 2017 (ten times higher than 1997) and managed to lift out of poverty 800 million Chinese people since the start of its economic reforms. Furthermore, improvements in African infrastructure and industrialization have already been pursued by China, such as the Chinese-built International Free Trade Zone opened in Djibouti in July 2018 or the construction of Kenya’s $3.2 billion Nairobi-Mombasa railway. The possibility of a “shared future” lies ahead, close collaboration between China and Africa is the answer to realize it.