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MGMT-1120 Introduction to Business

China in Africa: A Big Step Forward, or a Bigger Step Backward?

Entering an untapped international market can strengthen a business tremendously—but what

if the costs outweigh the benefits for the market itself? China has long been an important player on the

global stage, but recent advances in manufacturing, natural resources, and energy production have

catapulted the expansive country to the forefront of international trade. Currently the world’s fastest

growing major economy, China is set to eclipse the United States as the world’s largest economy by

2016. Among various domestic and international plays, one of China’s most fascinating uses of its

newfound economic might is a considerable interest—and investment—in the continent of Africa.

As its economy grew throughout the 2000s, China began establishing oil and mining firms across

Africa. In return for the cooperation of African governments, China built new roads, bridges, and other

varieties of desperately needed infrastructure. The economic powerhouse’s inroads into the African

market quickly widened, and so did the scope of its investments. For every new mining and drilling

operation, China built new governmental buildings, sports stadiums and housing complexes. China’s

most prominent declaration of its intent to strengthen ties with Africa, however, was the construction of

the $200 million African Union building in Addis Ababa, Ethiopia. Today, China’s trade with Africa

exceeds $190 billion—up from just $10 billion in 2000.

Many African leaders see China’s willingness to invest in Africa as an endorsement of the

continent’s economic potential, or as African Union chairperson and President of Equatorial Guinea

Teodoro Obiang Nguema puts it, “a reflection of the new Africa.” Others, however, see China’s actions

as a step down an unfortunate path that Africa has walked before. As Nigerian Central Bank Governor

Sanusi Lamido Sanusi suggests, “China takes our primary goods and sells us manufactured ones. This

was also the essence of colonialism. Africa is now willingly opening itself up to a new form of

imperialism.”

There are a number of reasons why China’s investment is a boon to Africa:

• Africa is the one of the fastest growing market and has the world’s richest mineral reserves—an

emerging nation with a tremendous economy would be foolish not to invest in the continent. By

planting roots in Africa early on, China is positioning itself for long-term growth. Its relationships

in Africa will flower over time, presenting even more business opportunities.

• China’s investment in Africa is good for Africa itself. According to President of the Eurasia Group

Ian Bremmer, “Fifty percent of Africa's 1.1 billion people now live in cities. Their women are

getting educated. As that happens, you start to see better demographics. They're more

sustainable. There's less poverty, of course, and the government improves. And when the

government improves, the investment starts looking less colonial.”

• China is a reliable partner with a real stake in Africa’s future. Two weeks after being selected as

China’s head of state, President Xi Jinping selected Africa as his first official trip abroad. China

has demonstrated a commitment to improve Africa’s political and economic climates as its own

economy grows—which is more than can be said for many western nations. However, there are

several reasons why Africa should limit China’s role in its economy:

• China’s continuous investment perpetuates the belief that Africa is helpless to improve itself

and must forever depend on foreign aid. According to Chérif Moumina Sy, chairman of the

African Editor’s Forum, “China is an imperialist power . . . Africa must start thinking deeply of

building the continent. We must think by ourselves or invent by ourselves other democratic

forms and elections which fit the reality of our societies.”

• Western governments often necessitate that trade partners avoid unfair labor practices or at

least support basic human rights, but China requires much less of its African partners. China

does not hesitate to work with corrupt or authoritarian governments if it’s in the country’s

economic interest. Thus, China’s investment is bad for the world’s long-term political climate.

• China’s inroads into Africa come at the expense of Africa’s citizens. Says Bremmer, “The Chinese

quid pro quo typically involves lots of Chinese content, lots of Chinese labor that they’re sending

over to these countries to work, which hurts local unemployment issues. And of course, the

availability of commodities, including food, to be exported to China.

You Decide

1. Should Africa be wary of China’s continued investment across the continent? Who stands to benefit

from this arrangement, and who stands to suffer? Explain

2. When engaging in international trade, China focuses on the business arrangement, not its political

implications. Do you think the United States should act more like China, strengthening its economy by

fostering mutually beneficial partnerships with foreign countries that do not promote democracy or

fair labor practices? Justify your response.

3. China is set to overtake the United States as the world’s largest economy before the end of this

decade. How do you think this monumental economic shift will affect your life in the short term? How

will it affect your life in the long term? Should the United States try to maintain its role as the largest

economy in the world? Why or why not? If so, how?

Sources: “China ‘to Overtake America by 2016,’” by Rachel Cooper, Telegraph website, http://www.telegraph.co.uk/finance/china-business/9947825/China-to-overtake-America-by-2016.html; “The World Factbook,” CIA website, https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2003rank.html; “Is China Buying Up Africa?” by Samuel Burke, CNN website, http://amanpour.blogs.cnn.com/2013/03/29/is-china-buying-up-africa; “Mozambique-China Trade Continues to Grow,” All Africa website, http://allafrica.com/stories/201212090143.html; “African Union Opens Chinese-funded HQ in Ethiopia,” BBC website, http://www.bbc.co.uk/news/world-africa16770932; “In Africa, U.S. Watches China’s Rise,” by Peter Wonacott, Wall Street Journal website, http://online.wsj.com/article/SB10001424053111903392904576510271838147248.html; “Africa Needs to Think by Itself, Says Cherif Moumina Sy,” All Africa