Edited by B. Mak Arvin and Byron Lew
Chapter 8: China’s aid and FDI flows to Africa: strategic interest or economic motivation?
In the past decade there has been a marked increase in South–South cooperation, investment and trade. A remarkable example of this has been the case of China. Even while still a developing economy with per capita incomes well below those of the industrialized countries of the North, this Asian giant has become an international lender. Although Chinese flows of outward foreign direct investment (FDI) and aid are small on a global scale, they have increased rapidly in the recent past. The outward capital flows are the balance of payments flip-side generated by the large trade surpluses that China runs as the new ‘workshop of the world’. The workers of China are generating capital flows from their willingness to barter goods for promises of future payment. The Chinese government and businesses use these promises to invest and provide aid abroad. China, until recently a recipient of foreign aid and large inflows of FDI, has begun asserting its presence among developing countries through increased flows of FDI and aid. This emerging pattern is most apparent for resource-rich Africa. While the recent literature analyzes Chinese FDI in some depth, left unanswered is the question of importance of Chinese aid as distinct from FDI. However, the lack of data definitively distinguishing aid has made analysis of Chinese aid a challenging problem. Fortunately, new data on such aid has become available thus allowing a closer scrutiny of aid by the People’s Republic.
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