What’s China’s Investment in Africa?

From China’s rising political influence to its dramatic economic growth, many are closely watching the People’s Republic. Nov. 5, 2006, marked the end of the Beijing Summit of the Forum on China-Africa Cooperation (FOCAC), where political leaders from African nations and China met to discuss the challenges of globalization and development. The outcome: China plans to continue to increase its investments in Africa to the tune of billions.

China pledged to increase aid to $5 billion, in the form of export credits and preferential loans over the next three years. "With increased aid and trade, Africa will become the next flourishing market," says Dr. Ernest Wilson III of the University of Maryland’s Center for International Development and Conflict Management. Trade between Africa and China has already increased from $11 billion to nearly $40 billion in the past five years.

China’s demand for natural resources is increasing, while African nations have the potential to supply generous amounts of such resources. This past summer, oil demand in China hit 700 million barrels a day — a number it wasn’t projected to reach until between 2010 and 2015. To meet the need, China secured four oil drilling licenses from Nigeria in a deal involving $4 billion in investments and bought a controlling stake in Nigeria’s 110,000-barrel-a-day Kaduna oil refinery. In return, China will build a railway system and power stations in that country. "Africa has rich resources and market potentials, whereas China has available effective practices and practical know-how it has gained in the course of modernization," said Chinese President Hu Jintao during a speech to the Nigerian National Assembly last year.

The Chinese are providing not only new business ventures but also alternate methods of foreign aid such as improving infrastructure and healthcare. Dewardric McNeal, associate director of the recently established John L. Thornton China Center at the Brookings Institution, explains, "Unlike Belgium, which built roads solely for the extraction of resources in the Democratic Republic of Congo, China is constructing or improving roads that are suitable not only for the transport of resources but which citizens can also use to travel."

Wilson adds, "The improvements to infrastructures will create a better environment for foreign businesses, thus creating more opportunities for small and medium-sized businesses." Business owners looking to trade with African firms can get help from the Corporate Council on Africa.