Introduction - China and the Global Economy

According to some observers, the evidence of China’s growing African involvement suggests a strategy devised to secure access to the continent’s abundant resources through a combination of soft power, tactical incentives, strategic investment and political collaboration. Self-serving diplomatic interventions underpin China’s advance across the continent, as Beijing seeks access to sources of raw materials.

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 3rd, 2012

According to some observers, the evidence of China’s growing African involvement suggests a strategy devised to secure access to the continent’s abundant resources through a combination of soft power, tactical incentives, strategic investment and political collaboration. Self-serving diplomatic interventions underpin China’s advance across the continent, as Beijing seeks access to sources of raw materials. Observers declare Chinese interventions particularly troubling where they appear to (inadvertently or by design) support authoritarian regimes, hinder economic development, promote conflict and allow human rights abuses. Western critics contend that China’s African agenda is driven by China’s narrow self-interests, and that it thus often undermines efforts to promote regional peace, economic growth and democratisation. China’s urgent drive to access the continent’s scarce resources may not favour local development, while the EU-USA vision of an Africa governed by western-style democracies, the rule of law and free markets is being challenged by Beijing’s African engagement.          

The driver of China’s African engagement is a growing necessity to access the ingredients for China’s long-term economic growth and prosperity. Many of those ingredients, in the form of hydrocarbons and raw materials, are to be found on the African continent. Over the last twenty years, China has transformed its economy and moved from an inefficient socialist mode of production to a robust free market system. China’s successful economic transformation (although still work in progress), along with the country’s growing market potential, has acted as a magnet for international investors. Soon after coming to power in 1978, Deng Xiaoping unleashed China’s entrepreneurial potential by instituting free market reforms and opening the country to international investment and trade. The result has been an average annual growth rate of close to 10 percent for more than 30 years, and a dramatic improvement in the living standards of ordinary citizens.

China’s impressive economic growth has had a dramatic impact on both exports and imports, making the PRC a key element in the global production chain for many labour-intensive products. Capital-intensive components are sent to China from Japan, South Korea and elsewhere for assembly, before being re-exported to global markets, confirming the PRC as a key manufacturing hub for the world. China’s exports are matched by significant increases in imports and foreign investments, making the PRC an engine for global economic growth. China’s new role as a major trading nation is dramatically changing the world’s commodity markets, accounting for 30 percent of iron ore consumption, 20 percent of platinum consumption and 15 percent of aluminium consumption.

China’s continued economic development and growing power will be the defining feature of international affairs in the 21st Century. Africa’s effective interaction with a rising China offers both challenges and opportunities. Africa’s leadership needs to devise appropriate commercial strategies to engage China and benefit from the opportunities offered by China’s phenomenal growth. China is well positioned for an extended period of economic growth, based on the enormous economic potential of post-1980 economic reforms and restructuring. High savings rates and good returns on investment will underpin impressive economic performance in China for the foreseeable future. Impressive economic growth over the long-term will be based on an abundant supply of labour, China’s continued attraction of foreign direct investment (FDI), along with a very significant expansion of the country’s service sector. In international terms, wages are expected to stay relatively low, making China the chosen destination for labour-intensive manufacturing and assembly. More and more, developing countries will be forced to advance market-friendly reforms in order to compete effectively with China. Based on expected continued spectacular growth, forecasts suggest that China will before long overtake the US as the largest economy in the world.

Identifying the 21st Century as “the Chinese Century,” Oded Shenkar points out that:

“China will soon become the dominant manufacturer and exporter in industries  ranging from the labour intensive to the technologically driven. It will also be a strong contender, though not yet a leader, in product lines associated with advanced technology and will start to play an important role in the higher end of the market. Chinese made cars will become a common sight on American and European roads, sporting not only the familiar name brands of Ford and VW, but also the marks of SAIC and Dongfeng Motors. Made-in-China aircraft will enter commercial aviation and Chinese missions to space will cease to be a news item.”

China’s labour-intensive advantage will facilitate leverage into high-tech production and knowledge-intensive areas. This process will transform China into the leading economy in the world, posing both challenges and opportunities to other states. The impact of China’s economic transformation will have a enormous impact on the economies of both developed and developing nations. China’s economic development model needs to be urgently investigated by developing countries. Given that Africa and China share a similar battle against poverty, China’s experience is of direct relevance to the African agenda. As Ted Fishman points out, “China is providing more upward mobility than the rest of the developing world put together.”

Africa needs to urgently identify both the challenges and opportunities arising from China’s economic success, and to develop an appropriate commercial engagement strategy.Given China’s willingness to work with Africa both at the bi-lateral and multilateral level, African states have a unique opportunity to build commercial interaction with China which can take advantage of new opportunities. China’s willingness to extend a hand of friendship to Africa as a fellow developing region holds promise for all African states and a chance to participate more directly in China’s economic rise with a mutually beneficial outcome.   

Economically, China’s rise provides major threats and opportunities. China’s manufacturing capacity threatens the survival of higher-cost production facilities throughout the globe, while increasingly wealthy Chinese consumers provide almost unlimited opportunities for new commercial engagement. Given the need for China to grow its economy and expand its political prestige, China’s global agenda is driven by three key objectives:

·                     Accessing key raw materials – accelerated economic growth is driving the demand for critical raw materials, many of which will be sourced in Africa.Longer-term trends suggest that China will become the world’s largest consumer of a number of key commodities.

·                     Market access – China’s burgeoning manufacturing industries demand access to the markets of the world. China’s membership of the World Trade Organisation (WTO) was motivated by a need to expand access to the European Union (EU), North American and Japanese markets. At the same time, detailed analysis conducted by China’s economic affairs ministry has confirmed the potential of African markets for a range of low-cost manufactured products. Market access is vital to maintain high levels of employment in China and continued economic prosperity.

Greater role in international politics – China’s desire to become a key global player is driving Beijing’s efforts to mobilise support from African countries in the major multilateral forums. In the WTO, China seeks support from other developing countries to advance a new agenda intended to allow greater access to consumers in developed countries.

About the author(s)

Claude Kabemba is the Director of the Southern Africa Resource Watch (SARW). In 2006, the Open Society Initiative for Southern Africa (OSISA) asked him to spearhead the formation of SARW. He holds a PhD in International Relations (Political economy) at the University of the Witwatersrand (Thesis: Democratisation and the Political Economy of a Dysfunctional State: The Case of the Democratic Republic of Congo). Before joining SARW, he worked at the Human Sciences Research Council and the Electoral institute of Southern Africa as a Chief Research Manager and Research Manager respectively. He has also worked at the Development Bank of Southern Africa and the Centre for Policy Studies as Policy Analyst. Dr. Kabemba’s main areas of research interest include: Political economy of Sub Saharan Africa with focus on Southern and Central Africa looking specifically on issues of democratization and governance, natural resources governance, election politics, citizen participation, conflicts, media, political parties, civil society and social policies. He has consulted for international organizations such Oxfam, UNHCR, The Norwegian People’s Aid, Electoral Commissions and the African Union. He has undertaken various evaluations related to the work of Electoral Commissions and civil society groups interventions in the electoral process in many African countries. He is regularly approached by both local and international media for comments on political and social issues on the continent. His publication record spans from books (as editor), book chapters, journal articles, monographs, research reports, and newspaper articles.


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