China is moving away from its help-for-infrastructure relationship with Africa to focus on cooperation that will lever substantial investments
By Zhou Jinyan
With China-Africa relations on the fast track of development, investment-driven cooperation will be the new norm. Chinese Foreign Minister Wang Yi has pledged that China will expand SinoAfrican trade relations to industrial cooperation and technology transfer. Traditional cooperation focusing on engineering contracts will be broadened to include investment management and financial services. Cooperation in the form of assistance, mainly by government agencies, will take a win-win approach spearheaded by businesses.
China has pledged to continue emergency and necessary assistance to African countries, gradually expanding the scale, innovating the mode and optimizing the conditions. In my opinion, boosting investment by assistance is the most appropriate approach to innovate the mode of cooperation.
This can be read between the lines of China’s latest African policy documents and the Johannesburg Action Plan (2016-18) agreed on at the Johannesburg Summit of the Forum on China-Africa Cooperation in December. The implementation of 10 major plans to boost cooperation with Africa in the next three years, as announced by Chinese President Xi Jinping, will require joint efforts and investment.
In agricultural cooperation, China will continue its earlier assistance such as building agricultural technology demonstration centers, sending agriculture experts and providing vocational training as well as food assistance. In a new move, Beijing has said it will support Chinese businesses to invest in the extended agriculture chain in Africa and develop it.
In infrastructure cooperation, the new policy proposes public-private partnerships.
Although social development cooperation, such as in public health, was generally discussed under the comprehensive agenda of development cooperation, China has pledged, for the first time, to encourage Chinese pharmaceutical companies to invest in Africa. It has called for joint operation of hospitals and cooperation in medicine production and health information management to help Africa improve the availability of health and diagnostic services and commodities.
China’s intention to boost investment by assistance is evident from all this.
Why?
The reason for innovating on the mode of aid is to optimize the outcome of assistance and investment.
First, from the assistance perspective, there is a consensus on reforming the current mode of assistance. Providing assistance in mere infrastructure construction is unsustainable. Recipient countries are prone to become dependent on foreign aid and lose impetus to build their own development capacity. Besides, stadium construction projects on the request of African countries will become fewer and fewer in the future.
Second, China’s investment in Africa is still at a low level. In the first half of 2015, China’s invest-ment in Africa decreased by 40 percent. A lot of challenges must be tackled before reaching the goal of investing $100 billion by the end of 2020. With the price of international commodities slumping, African economies have been severely affected. Last October, the International Monetary Fund (IMF) assessed that growth in Sub-Saharan Africa was set to slow down to 3.8 percent in 2015, the lowest in 15 years. Therefore, transforming to partnership stimulated by investment will be the key to upgrade China-Africa relations.
Third, from the perspective of world opinion, if China offers too many loans to Africa, Western countries may worry and criticize it, saying African nations’ external debts would be too heavy. Such reactions may jeopardize Sino-African cooperation. Instead, gradually expanding the assistance scale, innovating on the mode, optimizing the conditions of assistance and boosting investment by assistance would help African countries’ poverty alleviation efforts. It would also improve people’s livelihoods, accelerate their capacity-building efforts and promote industrialization.
Boosting investment by assistance is essentially different from conditional assistance. Western donor nations have reached a consensus that they should minimize and gradually remove conditions when providing aid. China’s approach of boosting investment by assistance doesn’t mean it supports the notorious “conditional aids.” It is an innovation on the model of offering assistance. Such assistance would boost investment by improving local infrastructure and the investment environment.
How?
The investment environment is the key issue for Chinese businesses to make investment decisions. Boosting investment by assistance doesn’t mean the assistance will directly increase profits. With the assistance, African governments and decisionmaking agencies would be able to enhance their governance capability, thus creating a better macroeconomic environment and attracting more foreign investment. Assistance in this regard includes training and sending policy advisors.
To boost industrialization and investment in Africa, there must be good governance and a stable investment environment. It has been a stereotype that China-Africa intergovernmental relations are strong while people-to-people exchanges are relatively weak. Compared with Japan, the United States and European countries, Sino-African intergovernmental relations are restricted to high-level visits, thus having limited deep influence.
Take Angola as an example. Bilateral cooperation over the past 10 years made significant contribution to Angola’s reconstruction. However, as the investments focused on engineering contracts, China didn’t exert corresponding influence on Luanda’s policy-making process. Angola accepted policy advice from Western nations and agencies. The nation’s top officials once told the IMF, “We don’t need your money, but your brain.”
China is competent to help African governments improve their abilities to make better decisions and create a more favorable investment environment. As its assistance in human resources projects, it could provide diploma education, short- and mid-term training, and personnel exchanges for officials and technicians in recipient nations. Innovation on the mode of assistance regarding the selection of personnel will be reflected in selecting trainees who are fundamentally useful to local development. Currently, the trainee lists are provided by local African governments. But it often turns out that these personnel are not the most suitable. In the future, Chinese businesses can play a bigger role in selecting trainees.
Boosting investment by assistance is the main approach to innovate on the mode of assistance and the key to upgrade bilateral relations to a comprehensive strategic partnership. To this end, there must be effective communication between governments and businesses so that assistance can effectively lever substantial investments, injecting sustainable momentum into African economies and China-Africa cooperation. CA
(The author is an assistant research fellow at the Institute of West Asian and African Studies, Chinese Academy of Social Sciences)