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Assignment 02  –
Seminar Group No 06

Name – Dushyanthi Joachim

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China has become a major economic partner of Africa.  Total merchandise trade between China and
Africa surpassed to more than US$ 200 billion in year 2014, making China
Africa’s largest trade partner. In terms of foreign direct investment (FDI), to
Africa has extended up to US$ 2.52 billion in 2012 which has shown an annual
growth of more than 20 percent from year 2009 turning China into the largest
developing country investor in Africa. Additionally, Chinese aid initiatives in
Africa in the form of economic or technical cooperation have also increased
remarkably in the last decade. According to the “The Huffington Post” it is
understood that the China’s venture restored on powerful three-pronged approach
of trade, foreign direct investment, and aid largesse. Africa’s growth
performance has improved significantly. Various factors have contributed to
Africa’s better growth performance, including a marked improvement in
institutions and infrastructure. It is understood that the China’s major economic
actions have made a significant economic growth in Africa’s overall trade, foreign
direct investments and aid.

In contrast to these positive effects, Chinese involvement
in Africa is driven mainly by the quest for material inputs (oil, steel/iron and
other primary commodities) required for its infrastructural investments and
booming manufacturing sector. China has an enormous demand for raw
material. The expansion in the trade has created a demand for Africa’s raw
materials. Chinese foreign direct investments mainly flows to African countries
with large natural resources endowments. China’s engagement in Africa could
have negative consequences for economic growth as well. Partly due to China’s
strong demand for raw materials, African exports are more and more concentrated
in the primary sector. This enhances the risk of encountering the resource
curse in African countries. Extracting and exporting natural resources could
lead to rent-seeking and corruption.

Even though the consumers in Africa are benefited from imports
of low cost manufactured products from China and African producers are also
taking advantage of low-cost Chinese inputs in their production process. Chinese
manufactured firms could displace their African competitors in case they
produce similar goods. China threatens African suppliers in manufacturing in
particular to textiles, furniture, footwear, or ceramic products. China has
changed its investment patterns and started to invest heavily in African countries
with weak institutions. It is understood without doubt that China’s interventions
in Africa have opportunities like growth in economy, increase in GDP and improvement
infrastructure. And also negative impacts like encountering in natural resource
curse and adverse effects in manufacturing trade within the country. So Summing
up, there are opportunities and risks that arise from China’s various
activities in Africa.

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