Africa will provide China with cheap economic resources. It will create profit opportunities for Chinese construction companies. It will provide markets for China’s cheap products.
And it will serve as a bridge to Latin America.
Africa will help China become a global empire. But it won’t help China become a prosperous society.
Nonetheless, China is all over Africa these days.
“I travel 4 to 5 times per year to Africa, mostly in Northern and Western Africa,” says Jean-Francois Fiorina, Vice Dean, Grenoble Ecole de Management. “Ten years ago, I didn’t see any Chinese there, but now, it’s quite common to see them. I remember my most recent visit to Madagascar last year. There were more Chinese than non-Chinese boarding the planes in the airport. Everyone was traveling back to China.”
Apparently, the Chinese are not visiting Africa for tourist reasons. They are rather “soldiers of economic war,” according to Fiorina.
“The Chinese don’t visit Africa for tourism, but rather, for economic reasons,’ he said. “The Chinese have a global vision of the world. They think globally and act locally. This is why there are more than 3,000 Chinese companies in Africa.“
That’s a very conservative estimate. In June 2017 a McKinsey & Company estimated that there are more than 10,000 Chinese-owned firms operating in Africa.
What are they doing? They’re capitalizing on Africa’s four main business advantages, according to Fiorina.
1. It’s a location to secure raw material suppliers. This could explain the investments in Angola or in the Democratic Republic of Congo.
2. It’s a location to secure maritime roads (and the OBOR projects) to facilitate Chinese exports. This why the Chinese are present in Djibouti with a huge military base.
3. It’s a place for de-localizations of de-localizations. The cost of production is going to rise in China so the Chinese must look for new areas that they can take over and have full military control. This a part of the economic miracle happening in Ethiopia.
4. It’s a base for re-exportation to Latin America or the USA; this is why the Chinese invested in Morocco.
“China has a global vision of the world, and for them, Africa is a key factor in their global approach of the world,” adds Fiorina.
While Africa is helping China’s ambitions to become a global empire, it won’t help China’s march towards “technological maturity,” and “high mass consumption.” For that to happen, China needs to re-allocate official credit from the state sectors to consumer sectors, as has been the case in America and other developed countries.
But that’s easier said than done. For an obvious reason. Credit in China is controlled by state owned banks. And it is directed to the state-owned enterprises (SOEs) and Town Village Enterprises (TVEs)—the bastions of the central and local leadership of the country.
While it’s unclear whether Beijing is prepared to make such a radical decision as relocating official credit, one thing is clear: Africa won’t help China’s consumers catch up with American consumers anytime soon.
By Panos Mourdoukoutas