CHANGING CHINA, CHANGING AFRICA:

FUTURE CONTOURS OF AN EMERGING RELATIONSHIP

Peter Draper

South African Institute of International Affairs (presenter)

Martyn Davies and Hannah Edinger

Frontier Advisory

OVERVIEW• Background• China in Africa: Current Frame• China’s Economic Rebalancing – Implications for Africa• Broader Considerations

Background• Moving beyond the current frame• Key driver: Chinese economic rebalancing

China in Africa: Current Frame• Politics/security

• FOCAC• Conflict zones and human rights• Non-interference

• Economics• State capitalism (SOEs; policy banks; ODA)• Resources• Trade structure

NB: ‘Deindustrialization’ concerns

• SEZs and their development impacts

China in Africa: Current Frame• Social

• Corporate social responsibility• Labour practices• Environmental impacts

• Culture• Formal engagements (eg Confucius institutes)• Informal/community (eg Chinese traders)

China’s Economic Rebalancing – Implications for Africa

• Chinese drivers• Increased domestic cost structure• Concerns over resource-intensive manufacturing• Major problems in the financial sector• Emphasis on new sectors (services)• Domestic competition

China’s Economic Rebalancing – Implications for Africa

• Implications for Africa• Increased outward FDI from China• Changing composition of OFDI towards middle-sized private firms• Role of SOEs will probably decline, relatively• Therefore less emphasis on resource acquisition, relatively• And relatively declining emphasis on role of policy banks/finance

China’s Economic Rebalancing – Implications for Africa

• Is Africa the ‘final frontier’ for export-oriented manufacturing FDI?

• Will take time, perhaps a long time• Enduring Chinese advantages• Broader Asian advantages• African challenges

• But consider the ‘flying geese’ paradigm• In relation to some emerging African advantages,

particularly demographic

African Population growth dynamics

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Rapid growth and urbanization, mostly from low bases, holds out the ‘middle class’ proposition

Mostly a west and east African phenomenon

China’s Economic Rebalancing – Implications for Africa

• The most likely to benefit are those that:• Grasp the governance reform nettle• Are favoured by geography and resource endowments• Welcome FDI by MNCs

• Chinese SEZs could be a key policy tool to faciitate this process

Broader Considerations• Smarter Chinese diplomacy towards Africa will be

required to service diversified footprints• Commercial (project oriented):

• targeting new sectors• working more with the Chinese private sector

• Economic (rules of the game):• Greater emphasis on good governance in order to secure Chinese

commercial interests• Promoting trade liberalization• Securing investments through BITs

Broader Considerations• Politics, society and culture

• Policy of non-interference could become increasingly strained• Increasing contact with emerging African middle classes will

require greater attention to human rights agendas, corporate social responsibility, labour rights, and the environment