The economics of China's engagement with Africa: What is the empirical evidence?

Abstract

Motivation In the last decade, economic and political ties between China and African countries grew fast, fuelling a heated debate about the implications for the latter and for the global system of China's engagement in Africa. Purpose The article reviews the existing evidence on the nature, causes and impact of China's economic engagement in Africa. Approach and methods The review focuses mainly on the economic literature with a quantitative focus. Findings China's reasons to engage with Africa are not so different from those of western countries: securing natural resources and seeking new export markets. However, there is evidence that China is less interested in the quality of governance and institutions of its African partners. The literature tends to agree on the positive growth effects for African countries of Chinese interest, but also suggests that their already thin manufacturing sector could be adversely affected by Chinese competition and that the increasing natural resource specialization of African countries might hamper diversification, structural transformation and future growth prospects. At the same time Chinese investments are building valuable infrastructure and linkages with local firms, which are growing although still very limited. The emergent trend of increasing presence of small and medium Chinese firms in Africa is promising in this respect. Policy implications Increased Chinese interactions with African countries present opportunities as well as threats for African countries. A key aspect will be the capacity of Chinese presence in Africa to spread to the local economy through spillover effects and linkages to the domestic economy. Both sides should introduce policies aimed at strengthening these linkages and spillovers.

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