China’s ascension into the global economy via world trade and investment occurred almost simultaneously with the renaissance in growth in a great number of African economies. Thus, it would not be surprising to find that African economies rely heavily on China for investment and trade. As we will show below, the numbers don’t always bear this out.
Trade
Africa’s growth renaissance was accompanied by rapid growth in Africa’s total value of imports and exports (Figures 12a and 12b). The blue line in Figure 12a shows that the share of Africa’s exports going to China increased dramatically over this period going from around 2 percent of total exports in 1998 to a little over 25 percent of total exports in 2015. The share of Africa’s imports coming from China also increased rapidly over this same period going from around 4 percent in 1998 to around 26 percent in 2015. The drops in African exports and imports in 2015 are partially explained by the drops in world commodity prices and partially explained by the slowdown in the world economy; we saw a similar pattern in Figure 3 for Chinese exports and imports.
Foreign Direct Investment
Figures 13a and 13b show that like trade, there was a rapid increase in FDI to Africa between 2004 and 2015 both from the world and from China. The bars in figure 13a show that total FDI flows to Africa nearly quadrupled in a 10-year period rising from $13 billion in 2004 to $48 billion in 2015. In this period, excluding 2008 due to the one-off transaction with Standard Bank in South Africa, we see that the share of Chinese FDI in Africa’s total inward FDI flows rises from around 2 percent in 2004 and 2005 to 6-7 percent in recent years. In terms of FDI stocks, the bars in Figure 13b show that over this same period, FDI stocks in Africa went from around $200 billion to almost $530 billion; and China’s share in Africa’s FDI stocks increases from less than 1 percent in 2004 and 2005 to 6 percent in 2015. In both Figures 13a and 13b, the part of the bars that is shaded in red show the value of FDI from China to Africa. Unlike China’s important role in Africa’s total exports and imports, it is evident from both Figures 13a and 13b that China still accounts for a tiny share of total FDI in Africa, although it has been steadily increasing since 2004. These numbers are consistent with our discussion in the data section indicating that the actual as opposed to planned projects in Africa are still very few.
When we break down the FDI data by the amount received by five largest recipients– DRC, Nigeria, South Africa, Sudan and Zambia - versus the rest of Africa, a more interesting pattern emerges. We established using Figures 6a and 6b that Africa’s top five recipients of global FDI also attract a significant share of Chinese FDI. Figures 14a and 14b actually show that as shares of these five top countries’ total FDI, China is not that different from its shares in the rest of Africa in the early years of this 12-year period. This seems to tell us that the large African countries that received more of China’s FDI inflows in these early years are also the countries that receive more FDI from the rest of the world. Thus, the argument that China’s patterns of investment in Africa differ significantly from the rest of world’s investments in Africa does not appear to be supported by the data in the early years.
However, we can also see that although China’s share in FDI to all of Africa has been relatively modest, the share of Chinese FDI going to countries outside the top five recipients has become more important in recent years. This can be most easily seen by staring at the red bars that represent the Chinese share of FDI stock in the rest of Africa in Figure 14b. In 2004, China’s share of FDI stocks in countries outside the top five amounted to only 1 percent. By 2014 and 2015, China’s share of FDI stocks in countries outside the top five was 8-9 percent. The implication is that China is diversifying its pattern of FDI away from the top five and into other African countries. It also indicates that Chinese FDI is diversifying more rapidly, at least in terms of destination, than FDI from other countries.
Loans and Construction
When we examined Africa’s share in total Chinese lending and construction, we were able to use official statistics compiled by the Chinese government. It is close to impossible to do the reverse since there is no comprehensive database of construction projects in Africa. Getting a handle on this would almost certainly require fieldwork. Similarly, there is no comprehensive public database which shows borrowing by African countries by origin of lender. To the extent possible, we discuss this issue on a country by country basis in the next section of this paper where we consider the relative importance of Chinese investment in African countries’ total gross fixed capital formation.
Summarizing, Africa appears to be much more dependent on China for trade than for foreign direct investment. By 2015, roughly 25 percent of Africa’s global trade was with China. By contrast, China only accounted for around 5 percent of global FDI into Africa in 2015. The investment figures are consistent with the work showing that planned investments by China in Africa far outstrip actual investments. Finally, the aggregate statistics on Chinese FDI into Africa reveal some interesting heterogeneity. In particular, once one excludes the top five recipients of FDI - DRC, DRC, Nigeria, South Africa, Sudan and Zambia – a pattern of the increasing importance of Chinese FDI emerges.
