Chinese Colonialism

“Is China becoming the new colonial power in Africa?”

To the colonies and back again

The African continent went through a period of rapid colonisation between 1880 and 1900 as European nations sought to gain control over raw materials, land and labour; this time period is commonly referred to as “The Scramble for Africa”. This colonisation was as a result of several factors. The advent of iron hulled boats with steam engines allowed for the navigation and transportation of people and materials up Africa’s rivers. Medical advances, specifically the extraction of quinine to combat malaria allowed Europeans a better survival rate on the continent – during the 18th century, only 1 in 10 Europeans sent to Africa survived, with 6 of the 10 dying in the first year!

The European political backdrop and the creation of a unified Germany meant there was little room for European expansion and a rapid land-grab began. The colonisation process started to reverse after World War II with the signing of the Atlantic Charter in which US president Franklin D Roosevelt introduced a provision on the autonomy of imperial colonies. Italian East Africa (Ethiopia) initiated the independence process in 1944 with leader Haile Selassie coming to power. Some of the last countries to gain independence from their colonial rulers were Southern Rhodesia (Zimbabwe) in 1980 under Canaan Banana and the de facto independence of South West Africa (Namibia) in 1990 under Sam Nujoma.

African Colonial Powers – 1913

map-china-colonialism

Chinese shopping spree

The American Enterprise Institute and the Heritage Foundation keep a publically available dataset of large Chinese investments and contracts worldwide. What is clear is that the Peoples Bank of China (PBoC) has been on a shopping spree that shows little sign of abating irrespective of the global or domestic economic backdrop. Focussing just on Africa, we can see that just over $36bn was spent across the continent in 2013.

Chinese Investment & Contracts in Africa, 2005-2013

chinnese-investment

Source: The American Enterprise Institute & the Heritage Foundation

Over the 2005 to 2013 time period, Nigeria has been the largest recipient of Chinese cash flows followed by Algeria and Ethiopia.

Chinese Investments & Contracts by Country, (cumulative 2005-2013)

investments

Source: The American Enterprise Institute & the Heritage Foundation & RealCap

What’s in the bag?

The largest component of Chinese shopping has been within the energy sector, principally for gas and oil. China has been known as a “hoarder” of natural resources and ensuring a secure energy supply to meet growing domestic energy demand has been a key strategy to their investments. 2013 also saw a big increase in spending within the metals sector – there were two large investments in steel in Sierra Leone and a large aluminium investment in Guinea. Notably, the largest investment contract within the financial sector was in 2007 with the purchase of a 20% stake in South Africa’s Standard Bank.

Chinese Investments & Contracts by Sector, 2005-2013

investments-by-sector

Source: The American Enterprise Institute & the Heritage Foundation & RealCap

Is it colonialism?

There is much colloquial evidence that if you want a smooth path through Africa; a fistful of US Dollars or “Chinese money” is what is required. China however, is particularly sensitive to any accusation that it is becoming a colonial power and goes to great lengths to point out the relationship between itself and its African partners is a mutually beneficial one. Coupled with Chinese investment in natural resources comes hospitals, roads and schools and of course job creation. China also sees Africa as an ideal market for its goods and services and actively promotes Africa as a tourist destination for Chinese travellers.

In answer to our question, the sovereignty of African governments has not been threatened by Chinese investment; in fact, many governments have shown themselves to be quite astute dealmakers; so colonialism it is not. However, security of natural resources, particularly energy resources is a growing theme globally and African leaders need to take care their shiny new shopping mall has not come at too high a price.

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