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29 Oct 2019 
Viktoria 
PRC in Africa: A win-win under pressure
The People’s Republic of China represents the largest trading partner of the African continent and its largest donor. Despite the innumerable rumors about the methods and intentions, the reality is more contrasted than we would like to see.China’s presence in Africa was first and foremost political. It is rooted since the 1960s with the support of Mao African independence. It is only by embracing the liberalization of the Chinese economy, initiated by Deng Xiaoping in the 1990s, that it takes a more economic face.
Twenty years later, the rise of Beijing in the African economy has upset the balance, for the better and for the worse. Because, as an adviser to Benin’s Minister of Industry confided, “no one in Africa will refuse China’s outstretched hand, no matter what interests and conditions it imposes … There is far too much money at stake and investors are still rare.
A finding all the more relevant as Europeans and Americans, affected by the crisis, fall back.In some parts of the economy, China has become unavoidable, winning a large part of construction contracts (roads, bridges, airports, housing estates …). In this area, it works in time and at unbeatable costs. In exchange for concessional loans that it grants to its partners to finance projects, the Middle Kingdom signs lucrative contracts for the supply of raw materials. This is what he calls a “win-win” strategy. In fact, the map of Chinese investments in Africa follows, to a large extent, that of the most precious natural resources. Sudan, Angola and Nigeria (oil), South Africa (coal, platinum), DR Congo and Zambia (copper and cobalt) have become the preferred partners of the Asian giant.China does not hesitate to put the means of its ambitions on the table, in defiance of the risk of indebtedness of the countries concerned.
The $ 6 billion loan granted by Beijing to Kinshasa in 2007 has caused the International Monetary Fund (IMF) and the World Bank to grind their teeth, while reducing the country’s external debt by 80% – $ 12 billion – was in preparation. On the African side, China is often acclaimed because its offensive breaks the monopoly of European firms, creating profitable competition.However, Beijing’s influence largely exceeds infrastructure and natural resources. It concerns the entire economic fabric.
It is enough to go up the alleys of the Centennial, to Dakar, to be convinced that the presence of the
Nothing, indeed, except the desire to be able to consume, which gains the African popular strata. Many small consumers are delighted to have access to affordable products once reserved for an elite.In some sectors, such as textiles, the arrival of the Chinese, however, has almost negated the effort of industrialization. For example, in South Africa, Lesotho or Nigeria, garment shops are now facing the frontline competition of the Shanghai looms. In just one decade, Africa’s trade deficit with China in textiles has increased from 200 million to 1.35 billion dollars. Despite transportation costs, Chinese products remain more competitive. Impossible or almost, today, to find non-Chinese wax on a small market of Cotonou!The commercial success of Beijing has made much ink on the “Chinese strategy in Africa.”
But there are as many strategies on the continent as there are Chinese actors. Many local decision makers have no idea of the nature of their Chinese interlocutors, like this cadre of the Senegalese Ministry of Agriculture, unable to indicate with whom – private contractor, Chinese state firm, department of the cooperation of the embassy? – negotiating an agreement covering 50,000 ha of arable land.In fact, behind the mask of the “Chinese of Africa” are revealed contrasting faces. Small farmers leaving dislocated regions, skilled workers recruited by specialized firms, intrepid businessmen in search of fortune, officials of large state-owned companies …
Many escape the censuses, which estimate their number at 1 million on the continent. Some will stay in Africa for many years, sailing from country to country, like the engineer he met in Ghana who claims to have “lived in seven African countries in ten years”. Others will only make a passing light. On the other hand, fewer are those who decide to settle there permanently.China’s time in Africa has come, opening up ambiguous prospects. The Chinese business has obvious advantages for its African partners: increased financing opportunities, diversification of markets for producing countries and a major contribution to basic infrastructure, which are so lacking.
On the contrary, it generates an increase in the prices of raw materials. The sale of cheap manufactured goods offers opportunities for consumers, but at the cost of the destruction of some local industrial fabrics. Hubert Dibgolongo, CEO of Burkina Moto, in Bobo-Dioulasso, is sad and the trade of mopeds imported from China, often in breach of customs standards, gradually causes the collapse of local assembly lines.
In addition, spillovers in terms of employment and technology transfer are still insufficient for the Chinese presence to have a significant impact on development.It would be reductive, however, to believe that African countries blindly play the game of Beijing, following its guidelines like students too docile. The colossal natural resources of Africa, which China needs more than ever to maintain its momentum, constitute a real bargaining weapon. It is up to the African leaders, to whom Beijing rolled out the red carpet at the July summit, that today it is incumbent to consider a better allocation of the exceptional means provided by Chinese investments.
A lesser presence in the MaghrebMore discreet than in Algeria, where the attraction of raw materials played a big role, the Chinese presence in Morocco and Tunisia could gradually develop. In April, a new strategic partnership was signed between Beijing and Rabat to “deepen bilateral cooperation in all areas, with a particular focus on innovative niches,” said a Chinese statement. Moroccan entrepreneurs also campaign for the fairness of import taxes between Asian and European products.
The latter benefit from a tax up to 10% lower, Morocco having the status of associate member of the European Union. In Tunisia, if the new government does not hide its desire to see the Middle Kingdom invest, it will also make efforts, such as reviewing its import quotas on vehicles, including Asian.The weight of Sino-Maghreb economic relationsThere are three biases to address Sino-Maghreb economic relations: direct investment, trade in goods (the trade balance excluding services) and services. We could add public development aid to the extent that these would be deducted from the cost of certain benefits. These aids may take the form of stadiums or operas most often erected to influence the commercial decisions of the recipient states.
They can also take the form of interest rate subsidies when granting a buyer credit to a government using Chinese companies for an infrastructure project. In both cases, these are good business practices that directly or indirectly reduce the costs of the balance of goods and services. It is therefore of little importance for our purpose to be able to explicitly distinguish these rebates since they are already counted although invisible.
Regarding foreign direct investment (FDI), there is no information on possible Maghreb investments in China. In contrast, MOFCOM publishes annually on its website a Statistical Communiqué on Chinese Direct Investment Abroad (Zhongguo duiwai zhijie touzi tongji gongbao) which, since 2003, has identified Chinese FDI flows and stocks. For the Maghreb, this is very small flows. Thus, in 2015, it benefited from 0.14% of Chinese FDI that year, or 0.012% of the world total outward FDI.
This capital represents 0.22% of the gross fixed capital formation (GFCF) of the Maghreb countries. Moreover, from 2003 to 2015, 92.7% of Chinese FDI flows to the five Maghreb countries benefited Algeria alone; in 2014, this exclusivity resulted in a 0.85% share of Chinese FDI in GFCF, in a country where the average was raised, from 2003 to 2014, to 38% of GDP17. In 2015, Chinese FDI in the Maghreb was $ 203 million, eight times less than Ford\’s planned investment to build a plant in Mexico before Donald Trump opposed it (Woodall and Shepardson, 2017). . In other words, whatever the point of view adopted, Chinese investment in Algeria, as in the Maghreb and more generally in Africa, was only of very marginal importance (Pairault, 2017).
On the other hand, the same is not true for goods and services.I will begin by providing services to denounce a confusion in the understanding of FDI statistics. It is not because Chinese companies are involved in infrastructure works in Africa, the Maghreb or elsewhere, that they “invest in infrastructure”, since they do not become owners or even holders of rights in this infrastructure. Both approaches generate financial flows in the opposite direction: when a Chinese company invests, it transfers funds to the recipient country; when a Chinese company provides services, it receives a payment from the recipient country.
The definition of foreign direct investment retained by international organizations such as the OECD, the IMF … (OECD, 2003, p.193), in order to be considered as an investor, implies “ownership of ten percent or more shares or voting rights of a company “and to want to be involved in the long-term management of this company. In the case of Chinese construction companies, their participation is simply the provision of services, as in the case of the “Angolan” package deals under which Chinese companies are paid for services (construction of a road). , a dam …) through privileged access to natural resources (infrastructures for resources).
The Chinese statistics on turnkey contracts completed each year show that the amount of these services has been continuously higher than the amount of FDI (Figure 3) 18. In 2015 alone, Chinese service providers completed benefits in the Maghreb amounting to $ 9.94 billion19, an amount fifty times higher ($ 230 million) than Chinese investment the same year in the Maghreb .
For a given year, the inflow generated by Chinese FDI is therefore very far from equating to the outflows caused by the provision of services.Figure 3. – Trade flows between Maghreb and China (2003-2015) Sources: UNCTAD’s online database, MOFCOM annual news releases and China’s statistical yearbooksThis first subtraction is added to that generated by the deficit in the trade balance (excluding services) of the Maghreb countries (Figure 3). In 2015, this deficit amounted to $ 13.15 billion. In other words, the Maghreb countries that year owed more than $ 23 billion to Chinese companies for the deficit of the trade balance (excluding services) plus the provision of services.
Once deducted FDI, we get a net sum of $ 22.8 billion which the Maghreb countries remain accountable. This levy on wealth created (regardless of the effective date of the puncture) has increased steadily since 2003, from 1.0% to 6.1% in 2015 of the cumulative GDP of the five Maghreb countries; this pressure even amounted to 8.4% that year for Algeria. We do not conclude that China would perceive, through its trade relations, a toll on these countries, but note that this imbalance has meaning only in relation to the use of these imported goods and services: Wenke Krestin (2017) shows that the purchase of Chinese machinery has boosted the growth of the Algerian agri-food sector.
Hence the need to resume the analysis of trade.Structure of Sino-Maghreb tradeStatistics show that the Maghreb trade with China follows the general trend of China\’s trade with the world until the Libyan crisis and the setback, following the decline in Algerian crude oil and natural gas exports exacerbated by a sharp drop in oil prices (Figure 4). This observation immediately raises the question of the nature of the exchanges between China and the Maghreb countries.
Developments in Maghreb and World Trade with China (1995-2015) Source: UNCTAD online database at http://unctadstat.unctad.orgWith regard to exports, from 1995 to 2015, Maghreb countries export very little to China (3% of their total exports), while exports to China have, for Africa as a whole, a triple weight (10%) and, for the world, a weight more than double (7%).
On the other hand, during the same period, the share of exports of primary products (ores, metals and fuels20) in North African (89%) and African (86%) exports is almost identical, whereas it is only 25%. % on average worldwide. It is thus a characteristic specialization of the African continent, but which affects very differently the exchanges with China of each country taken individually. In the case of the Maghreb, three countries (Libya, Algeria and Mauritania) almost exclusively export ores, metals and fuels to China; they account for nearly 90% of Maghreb exports to China (hydrocarbons for Libya and Algeria, iron and copper for Mauritania). Morocco and Tunisia, for which exports of such commodities to China have only a small weight, exported only very poorly to China during this period. Except for Libya, these exports cover relatively poorly the imports of the Maghreb countries throughout these twenty years21.
As for imports, is it useful to specify that they are 94% manufactured articles? In this sense, the Maghreb is not distinguished from the world average (93%) or the African average (94%). On the other hand, their composition by degree of technicality of their manufacture varies considerably; let us say that the imports of Chinese manufactured products mark a tropism for products requiring only little or weakly technical manufacturing processes, and all the more so when it comes to consumer goods.
This trend is not significantly aggravated by the length of the selected period (1995-2015), since the older the imports, the lower their weight and the less they weigh in the calculation of the average. In any case, imports could tend to evolve towards more technical Chinese products (Zouikri, 2017), even if the technicality of the latter still lags behind that of the products of other developing countries (Pairault, 2017).If China is now present in all categories of products, the market shares that it conquers affect the traditional partners of the Maghreb countries differently.
Consider four emblematic categories in 2015 (Figure 5). China secures a virtual monopoly in the sale of motorcycles and cycles (75%) and clearly dominates the market in the sale of clothing (53%) although developed economies22 still occupy more than a quarter of the market ; on the other hand, in the other categories, China’s place is far from being dominant at the moment. In telecommunications equipment, developed economies retain more than a third of the market (38%), just ahead of China (35%) while other economies are satisfied with a quarter (28%). It should be noted, however, that Customs records the value of imported products made in China which does not ipso facto imply that the manufacturer is necessarily Chinese or, if so, that it is more than one or more subcontractors that same reasoning applies to the category of motor vehicles dominated by more than two-thirds (70%) by producers in developed economies, China being reduced to the minimum (5% ).
Turkey – ranked among the developing economies by UNCTAD – produces Renault Symbol that were massively imported into Algeria before they started to compete with their cousins made in bladi (or “locally” bled) or more exactly, assembled in the factory of Oued Tlelat near Oran, from kits imported from Romania, because this car is a demarcated version of the very Romanian Dacia Logan (Hallas, 2014).
Following the same logic, his cousin, the Dacia Sandero, will also, as of July 2016, be made in bladi (Beldjenna, 2016). On the other hand, the monopoly of Western countries remains intact for drugs and other pharmaceutical products.The uprising of Tunisia: China is back!In seeking to reposition itself geo-strategically, China is invited to deepen its economic relations with North Africa and, within this framework, to intensify its initiatives in favor of Tunisia.
The last Sino-African forum (held in Beijing in September 2018) probably marks the return of North Africa in general and Tunisia in particular in the Chinese radar: benefiting from the advantages offered by this region (ie geographical location, openness to the Mediterranean, skilled and abundant labor force, the existence of a large middle class with relatively high purchasing power, attractive policies for FDI), China wanted to send clear messages, materialized by the increase in the budget for the countries of the region, including investments and aid to Tunisia.Despite the fact that it does not have significant natural resources, Tunisia offers Chinese exports a new destination and opens new markets. In addition, its geographical position could be exploited by China which would make it a “hub” facilitating a political and economic expansion throughout North Africa, especially to Algeria and Libya.On the other hand, by consolidating its ties with China, Tunisia will not only benefit from Chinese FDI flows accompanied by technology transfer, but also from the economic aid and technical assistance that Beijing will provide, as it has always done for other African countries that have cooperated economically with China.
Perspectives of Tunisia-China relationsChina-Tunisia relations do not date from today. They began in the 1950s with the ratification of a first trade agreement that made Tunisia one of the first countries in the North Africa region to establish trade links with China.With a view to promoting these emerging economic links (and following the ratification of several successive trade agreements between the two countries), a Sino-Tunisian Joint Committee for Economic, Commercial and Technological Cooperation was created in 1983.
More recently, relations between the two countries led to the signing, on July 11, 2018, of a memorandum of understanding sealing the accession of Tunisia to the Chinese initiative of \”the new Silk Road\”, promoted by the Chinese President Xi Jinping since 2013, which will allow Tunisia to open up new opportunities for development in terms of trade, tourism, but also in terms of much needed investments in the country.
The two countries have thus undertaken to strengthen their partnership, in a win-win logic and as part of a South-South integration approach. But great progress remains to be made … Indeed, as bilateral cooperation between China and Tunisia should continue to flourish in the future, the two countries have begun to recognize the importance of air transport. A memorandum of understanding on air transport had already been signed in 2014 to allow the Tunisian national airline to fly 21 direct flights per week to China. However, to date, Tunisair does not serve any Chinese city!
The possibility of a growing partnership in the field of renewable energies is also mentioned. According to the Africa Economic Development Institute, although Europe and the United States continue to dominate the energy sector in Tunisia, Chinese companies have recently begun to break into this market.
As Tunisia seeks to develop its renewable energy sources, Beijing could take advantage of this opportunity to strengthen its roots in Tunisia.The fields of information and communication technologies, aeronautics and automotive are also an opportunity to be seized by Tunisia in order to promote its strategic partnership with China.
Recall in this context that Morocco, neighboring country and whose potential is similar to that of Tunisia, launched last year the project of the industrial and residential city “Mohamed VI Tangier Tech-city”, for an amount of $ 1 billion, which will serve as a basis for the establishment of Chinese enterprises specializing in the above-mentioned fields.Multiple domains can be a catalyst for a strategic partnership between China and Tunisia, namely tourism, information technologies, high value-added industries, defense, renewable energies, agro-business …
In this regard, a lot of efforts will have to be made by Tunisia, in order to attract the maximum FDI, to correct the imbalance existing in its commercial relations with China and to strengthen the monetary and financial relations with this country.The Chinese way could thus become the lifeline of the Tunisian economy.