Sino-Africa Link Goes Beyond Trade

According to statistics compiled by the US Heritage Foundation, foreign direct investment by Chinese companies in Africa between 2005 and 2010 totaled more than $44 billion. This includes products and services, as well as Chinese-funded projects on the African continent. The rate of Sino-African growth in trade experienced a ten-fold increase in the decade ending 2010, in comparison with an eight-fold increase between China and the rest of the world.

South Africa accounted for up to 25 percent of China’s foreign direct investment (FDI) in Africa, spurred on by the establishment of China’s major banks in the country. With a 20 percent share ownership, the single biggest shareholder in Standard Bank of South Africa is the Industrial and Commercial Bank of China. The China Construction Bank and Eximbank both have representative offices in Johannesburg, and highlighting the fact that China’s influence in South Africa is not limited to commodities, Chinese state-owned Eximbank’s investment through loans reached $7 billion by the year 2009. Loans issued by Eximbank have a number of conditions attached to them which, among other factors, guarantee contractor rights and supply of goods by Chinese companies.

In a recent report by RenCap it was noted that Eximbank and China Development Bank had a similar lending capacity to that of the African Development Bank and the World Bank, with the difference being that the Chinese banks are more flexible on repayment terms and interest rates, making them a more attractive option to African countries. It was also noted that Africa has a huge market for low-cost Chinese exports across a wide range of products. Using Uganda as an example, advisory analyst Hannah Edinger pointed out that previously it was common for citizens in this African country to buy second-hand clothes. With China flooding the market with low-cost items, new clothes are now within the financial means of many Ugandans.

It is not only Chinese products that are flowing into Africa. China’s Xinhua news agency has noted that, as of August 2007, there were upward of 750,000 Chinese citizens living in Africa – a number which surely has increased since then. The statistics compiled by Xinhua also revealed that of this number, some 8,540 Chinese were employed by state-owned companies in Zimbabwe, Ghana, Nigeria and Kenya.