Copyright Page
© 2024 International Monetary Fund
WP/24/37
IMF Working Paper
African Department
Navigating the Evolving Landscape between China and Africa’s Economic Engagements
Prepared by Wenjie Chen, Michele Fornino, Henry Rawlings.1
Authorized for distribution by Luc Eyraud
February 2024
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: China and Africa have forged a strong economic relationship since China’s accession to the WTO in 2001. This paper examines the evolution of these economic ties starting in the early 2000s, and the subsequent shift in the relationship triggered by the commodity price collapse in 2015 and by the COVID-19 pandemic. The potential effects on the African continent of a further slowdown in Chinese growth are analyzed, highlighting the varying effects on different countries in Africa, especially those heavily dependent on their economic relationship with China. The conclusion offers a discussion of ways how African countries and China could adapt to the changing relationship.
RECOMMENDED CITATION: Chen, Wenjie, Michele Fornino and Henry Rawlings. 2024. “Navigating the Evolving Landscape between China and Africa’s Economic Engagements.” IMF Working Paper, 24/37.
| JEL Classification Numbers: | F10, F21, F34, F42 |
| Keywords: | Africa; sub-Saharan Africa; China; Trade; Debt; Lending; Investment; Belt and Road Initiative. |
| Author’s E-Mail Address: | wchen@imf.org, mfornino@imf.org, hrawlings@imf.org. |
| JEL Classification Numbers: | F10, F21, F34, F42 |
| Keywords: | Africa; sub-Saharan Africa; China; Trade; Debt; Lending; Investment; Belt and Road Initiative. |
| Author’s E-Mail Address: | wchen@imf.org, mfornino@imf.org, hrawlings@imf.org. |
Title Page
WORKING PAPERS
Navigating the Evolving Landscape between China and Africa’s Economic Engagements
Prepared by Wenjie Chen, Michele Fornino, and Henry Rawlings2
Contents
I. Introduction
II. The Makings of a Strong Economic Partnership
A. Trade: Where it All Began
B. Loans and Debt: It’s Complicated
Methodological considerations
External lending trends
A Closer Look at China’s Lending Agencies
The Currency Composition of Chinese Lending to Africa and Currency Swap Agreements
C. Investment Linkages
Foreign Direct Investment: It’s Small, but Also Big
The Belt and Road Initiative
Labor Flows Associated with Chinese FDI in Africa
D. Foreign Aid
III. Recent Developments and China’s Growth Slowdown
A. Lending: Evolving Priorities and Risk Appetite
B. Investment: Shrinking Financing Envelope and Evolving Framework
C. China’s Conjunctural and Structural Growth Slowdown
IV. Conclusion
Annex I. Details of GVAR and AFRMOD Models
A. AFRMOD
B. GVAR Model (Abdel-Latif and El-Gamal 2023)
References
Figures
Figure 1. Africa: International Trade Partners, 2000–22
Figure 3. African Trade Concentration with China, 2018–22
Figure 4. Africa: Inward Chinese Lending, 2000–21
Figure 5. Africa: Loan Commitments from China 2000–20
Figure 6. Africa: External Debt, end of 2021
Figure 7. Africa: Share of General Government External Debt Owed to China, Extended on Concessional Terms, 2005–21
Figure 8. Africa: Share of Interest Payments on General Government External Debt, by Creditor Type, 2019
Figure 9. Africa: Implicit Interest Rate on General Government External Debt, by Creditor Type, 2006–22
Figure 10. Africa: Loan Commitments from China 2000–20
Figure 11. Africa: Outstanding Debt Owed to Chinese Entities by Creditor Type, 2005–21
Figure 12. Currency Decomposition of Public and Publicly Guaranteed Debt in Africa
Figure 13. China: Outward Direct Investment, 2000–20
Figure 14. Africa: Inward Direct Investment, 2003–21
Figure 15. Africa: Chinese Inward Direct Investment by Sector, Country Export Type, and Concentration
Figure 16. BRI Engagement by Region, 2013–23
Figure 17. Africa: Total BRI Engagement in Africa, by Sector
Figure 18. Africa: Chinese Share of Announced Greenfield FDI Projects, 2009–21
Figure 19. Gross Annual Revenues of Chinese Companies’ Construction Projects by Region, 1998–2021
Figure 20. Africa: Number of Chinese Workers, 2009-21
Figure 21. China: Foreign Aid Expenditure, 2000-22
Figure 22. China: Average Annual Growth Rates, 2000–28
Figure 23. China: Working Age Population, 2000–50
Figure 24. Sub-Saharan Africa: GDP Response to China’s Growth Slowdown
Figure 25. Sub-Saharan Africa: GDP Response to China’s Growth Slowdown in AFRMOD, 2003–28
Tables
Annex Table 1. Country Groupings in the AFRMOD Model
Annex Table 2. Country Groupings in the GVAR Model
The authors would like to thank participants of the seminar hosted by Tsinghua University’s Department of International Relations in December 2023. Special acknowledgement is due to Deborah Bräutigam, Luc Eyraud, Andrea Richter Hume, Catherine Pattillo, Alfred Schipke, and Xiaoyang Tang whose thoughtful comments and suggestions significantly enhanced the quality of this work. We are especially thankful to Hany Abdel-Latif and IMF colleagues in the Research Departments for their invaluable insights on the spillover analysis. This paper is a culmination of our research into China’s economic ties with sub-Saharan Africa, a topic previously explored in the October 2023 Regional Economic Outlook on Sub-Saharan Africa. Lastly, the authors are profoundly appreciative of David Dollar’s esteemed scholarship in this field. His recent passing is a great loss, and his contributions to our work are deeply honored.
The authors would like to thank participants of the seminar hosted by Tsinghua University’s Department of International Relations in December 2023. Special acknowledgement is due to Deborah Bräutigam, Luc Eyraud, Andrea Richter Hume, Catherine Pattillo, Alfred Schipke, and Xiaoyang Tang whose thoughtful comments and suggestions significantly enhanced the quality of this work. We are especially thankful to Hany Abdel-Latif and IMF colleagues in the Research Departments for their invaluable insights on the spillover analysis. This paper is a culmination of our research into China’s economic ties with sub-Saharan Africa, a topic previously explored in the October 2023 Regional Economic Outlook on Sub-Saharan Africa. Lastly, the authors are profoundly appreciative of David Dollar’s esteemed scholarship in this field. His recent passing is a great loss, and his contributions to our work are deeply honored.