Contemporary Chinese Economic Relations. A Catalyst in the Africa-Latin America Trade Relations


Master's Thesis, 2021

93 Pages, Grade: Merit


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Table of Contents

Abstract

Acknowledgements

Chapter I: Introduction

Overview of the Study

Research Problem

Research Objective

Justification of the Study

Focus of the Study

Methodology of the Study

Organization of the Study

Chapter II: Literature Review

Approach to the Study

Authors’ Arguments and Limits

General Observation of the Literature

Chapter III: Analysis
I- Early Africa-Latin America Relations: From Independent Nations to Trading Partners
a) Colonialism and the Rise of Socio-Political Brotherhood
b) Economic Strategies of Latin America and Africa: An Opportunity for China’s Regional Ambitions
i- Figure 1: Histogram of Latin America GDP growth rates, 1960-
II- The Flight of the Dragon: Booming Chinese Engagement in the Regions (late 1990s-early 2000s)
a) China’s Motives and Presence in Latin America
i- Table 1: Latin America’s export to China in
ii- Table 2: China’s Foreign Direct Investments in Latin America (2009)
b) China’s Motives and Presence in Africa
i- Map 1: Overview of Major Africa’s Natural Resources
ii- Figure 2: China’s FDI flows to Africa and the rest of the world 2004-
III- Today’s Africa-Latin America Trade Relations: Assessment of China’s role in Interregional Trade Development
a) Contemporary Debates around Technological Assets
b) Africa-Latin America Trade Relations: A Chinese Interregional Network?
i- Table 3: Summary of negative socio-economic impacts of Chinese investments in Cameroon
IV- African Development, China’s Investments, Africa-Latin America’s Trade Potential
a) Interview with Dr. Pippa Morgan: Contemporary Tendencies of Sino-African Relations and Opportunities for Africa-Latin America Trade Relations
b) Interview with Candace Nkoth Bisseck: The Booming E-Commerce in Africa and Evolving African Trade Mechanism
c) Summary
V- Impacts of the Covid-19 Pandemic on the China-Africa-Latin America Economic Ties
i- Figure 3: Global GDP Growth in a Historical Perspective
ii- Figure 4: Quarterly World GDP (GDP forecast in January 2020 versus January 2021, 2019 Q1=100)
a) The Covid-19 Pandemic, African and Latin American Economies, Shifting Chinese Economic Approach
b) Chinese Interests in the Development of the Africa-Latin America Trade
VI- Key Findings of the Analysis
a) China is an Indirect, yet crucial Player in the Africa-Latin America Trade and Beyond
b) The Covid-19 Pandemic has shaped China’s Economic Strategy in the Global South
c) There are long-term Socio-Economic and Political Challenges to China’s engagements in Africa and Latin America

Chapter IV: Recommendations and Conclusion

Recommendations of the Study

Conclusion

Bibliography

Abstract

In recent years, China’s economic development has provoked diverse reactions both from the developed world and the developing world (Farny, 2016, pp. 1-4). In Africa and Latin America, most nations share the belief that growing economic ties with China is the cure to their economic challenges and will propel their intraregional trade capacity and development agendas; whereas others fear that China’s expansion in the regions is increasingly disrupting their social, economic, and political structures (Sun, 2014, p. 1). Nevertheless, there is no denying that there is barely an alternative to China’s economic cooperation that can satisfy the development needs of these regions. As such, Chinese economic engagements stand as a key to maximize and develop the trade potential of Africa between Latin America.

Since the early 2000s however, many scholars and experts appeared to put a strong emphasis on what China can offer to Africa and Latin America, but paid limited attention to the benefits of Chinese economic expansion in improving conditions for interregional trade relations. Using a combination of quantitative and qualitative research methods, the present study introduces the perspective that China’s economic cooperation has a crucial importance in boosting trade relations between Africa and Latin America. Furthermore, the study identifies that both regions share similar purposes – to some extent –, but not strong interests in each other – which has equally affected the tendencies of their trade relations. While orienting a keen attention toward opportunities and challenges that the Covid-19 pandemic stimulates, the study reveals why it is essential that Africa and Latin America reassess their economic priorities, although China’s economic engagements remain indispensable as to develop their trade relations.

Acknowledgements

Above all, I would like to express my eternal gratitude to the Almighty God for all events that have become a line of opportunities to undertake my studies, and particularly this exciting and instructive study.

I am grateful to my supervisor Dr. Amalendu Misra, and to my lecturers Prof. Astrid Nordin, Dr. Anna-Sophie Maass and Dr. Germond Basil for their unconditional support and outstanding teachings.

My endless thanks to my family and friends for their relentless encouragements and unique contribution to complete my postgraduate studies.

Many thanks to Candace Nkoth Bisseck and Dr. Pippa Morgan for their active participation in my research and for their priceless insights that have nurtured my study and my personal knowledge.

I am grateful to the UK Government for its laudable efforts to tackle the Covid-19 pandemic, while delivering the best alternatives that allowed students and researchers to progress under the safest conditions.

Finally, I would like to thank Lancaster University for giving me the opportunity to develop my network, knowledge, and personality in a highly intellectual and welcoming environment.

Chapter I Introduction

Overview of the Study

The financial and infrastructural needs of African and Latin American nations, added to decades of debts and political instability have plunged the regions into a state of economic despair and development starvation (Ajakaiye & Page, 2012, pp. ii3-ii4). In this regard, the rise of China in the mid-20th century did not only change the image of these regions of the Global South – which were considered third-world or underdeveloped regions (Farny, 2016, pp. 1-3) –, but it also came as a gateway for their export and import needs. China’s economic opening could be described as a benevolent policy – with cheap investments, low-interest loans and abundance of aid – that became an alternative to Western supports (Solimano & Soto, 2005, p. 7). However, the overreliance of African and Latin American states on Chinese economic supports appears to turn as an economic priority, and gives the illusion that foreign engagements will be the core of a long-term economic development plan in the regions. Furthermore, they miss to explore how orienting Chinese supports toward maximizing local industry growth and developing their interregional trade conditions could present sustainable advantages. Thus, the study seeks to examine how Chinese economic cooperation with the regions can turn into a long-term asset that benefits their interregional trade relations. Additionally, the study will attempt to uncover multilevel socio-economic and political hindrances related to contemporary Chinese economic cooperation and impacts in the Africa-Latin America trade relations.

Research Problem

The Study notes that many academic scholars, experts and policymakers put a considerable emphasis on China’s relations with each region on the one hand, and Africa-Latin America relations on the other hand. However, there are limited arguments that shade the light on the benefits and risks of Chinese economic cooperation when it comes to boosting the Africa-Latin America trade relations, especially today. Furthermore, the research has not identified any published analysis of the implications of China’s economic policy – during the Covid-19 pandemic – for the Africa-Latin America trade relations. Therefore, missing to address the above concerns leaves a gap in the study and understanding of the contemporary China-Africa-Latin America ties in general, as well as new dynamics influencing them.

Research Objective

The Study will consider the following interrogations with keen interest:

- What are the key events that have favored China’s economic expansion in Africa and Latin America?
- What are the similarities and differences in China’s economic relations in Africa and in Latin America, and how do they affect their interregional trade relations?
- What particular assets are generated through contemporary Chinese investments and what are their implications for Africa’s and Latin America’s trade capacity?
- How did the Covid-19 pandemic affect China’s economic approach in both regions, and what is its importance in their interregional trade relations?

As such, the aim of the study is:

i. To explore the evolution and the extent of contemporary China’s influence in the Africa-Latin America trade relations;
ii. To identify comparative advantages that are available to Africa and Latin America today, through their economic cooperation with China;
iii. To develop an approach that promotes better understanding of and cooperation between China, Africa and Latin America.

Justification of the Study

The importance of the study lies on:

- Demonstrating limits in the contemporary knowledge of the China-Africa-Latin America relations, as to close theoretical and empirical gaps on the subject.
- Introducing an original approach to understand contemporary Chinese economic ambitions and influence beyond intraregional perspectives, and considering current dynamics such as the Covid-19 pandemic.
- Urging African and Latin American states to rethink their international positions and interregional interests, in order to develop sustainable conditions for their socio-economic and political stability.

Focus of the Study

The structure of the study mainly comprises four chapters.

The first chapter is the introduction of the study. It presents the overall scope and organization of the study. Equally, it highlights key concentrations that are relevant to the development of an original approach to understand major implications of China’s economic cooperation on the Africa-Latin America trade relations.

The second chapter will be the literature review. This part is fundamental in the development of a critical analysis of the subject, and to examine theoretical and empirical arguments of scholars and experts about China’s relations with Africa and Latin America. This chapter will also present limits attributed to the authors’ arguments, in order to depict the gaps in the study of China’s role in the interregional trade relations.

The third chapter will be dedicated to the analysis of the main topic. This section will give an overview of historical contexts – the birth and evolution of the relations between Africa and Latin America, their early interests and regional economic strategies, and China’s expansion in both regions. Additionally, the analysis will explore dynamics determining the extent of contemporary China’s economic engagement with the regions, and the scope of the latter’s interests and challenges in their interregional trade relations. Contemporary dynamics include, but are not limited to, the social and economic devastations of the Covid-19 pandemic, China’s economic competition with the United States in Latin America, and the trade potential and unaddressed needs of African and Latin American states.

Lastly, the fourth chapter will make recommendations and will conclude the study. Eventually, this part will use a deductive approach to the analysis in order to make crucial suggestions and highlighting key aspects of the study.

Methodology of the Study

The study will adopt an interdisciplinary approach, involving areas such as international political economy, foreign policy, diplomacy, and international development. Furthermore, this approach will put a particular emphasis on empirical analysis, although theoretical understandings – such as dependency theory, neoliberalism and colonialism – will be considered. The goal is to provide an academic contribution to deliver a consistent answer to why contemporary Chinese economic relations is important for trade relations between Africa and Latin America.

Although the Covid-19 pandemic poses a considerable hindrance to access primary sources of information, the study will mostly engage with secondary sources that are available remotely, yet it will privilege a combination of quantitative and qualitative research methods as follows.

Quantitatively, the study will utilize various relevant sources mostly collected from the internet. These include journal articles, reports, academic literature, news articles, charts, figures and tables. In this regard, the research will consider organizations such as the World Bank, the United Nations, the United Nations Conference for Trade and Development (UNCTAD), CEPAL, the Economist, and various African and Latin American academic, and trade and governmental institutions for proper referencing.

Qualitatively, the research will include two interviews, one with Candace Nkoth Bisseck – an expert in African e-commerce and former UNCTAD officer – and another with Dr. Pippa Morgan – an expert in China’s foreign direct investment in the Global South and a lecturer of political science at Duke Kunshan University, China. In respect of ethical conducts, both interviewees consented to participate in this academic study, and share their professional experience and opinions on the role of China in the development of the Africa-Latin America trade relations. Both interviews were conducted and transcribed entirely in English language. As this will constitute a section in the analysis chapter, each interview transcript will be preceded by an overview of the discussions – which will highlight main arguments of the interview participants. While the study expected to engage with more interview participants, it strongly considers information from the abovementioned interviewees as valuable and contributing to the contemporary knowledge of China’s relations with Africa and Latin America.

Organization of the Study

As detailed earlier, the study comprises four chapters in total.

The first chapter is introductive, and presents an overview of the research, its problem, key interrogations and structure of the analysis.

Chapter two will review the main arguments of scholars and experts, relevant to the topic discussion. In fact, the aim is to identify gaps in the knowledge of the effects of China’s economic cooperation in the Africa-Latin America trade relations, and to develop foundational arguments for the analysis.

The third chapter will analyze the topic, utilizing both theoretical and empirical approaches to examine historical and contemporary contexts. In addition, findings will derive form observation of quantitative and qualitative data used in the analysis.

The fourth chapter will develop suggestions considering the findings of the analysis, and will conclude the study.

Chapter II Literature Review

Approach to the Study

At the international level, it is observed that Chinese economic influence grows prominently around topics of trade, foreign direct investment (FDI), aid and loan. One could argue that China’s growing relations with the Global South has become a symbol of genuine independence and economic development agendas, beyond the control of major Western partners and former colonial states. China is regarded as the largest trading partner in Africa and Latin America respectively since 2009 (Albert, 2017) and 2018 (Garrison, 2020). As China’s presence evolves in both regions, it equally brings opportunities for Africa and Latin America to transform their economy and to develop their trade relations. However, the evolution of Chinese economic relations with Africa and Latin America also presents challenges in the development the Africa-Latin America trade relations. To lay foundational elements of this discussion, the present chapter will critically assess the views of contemporary scholars and experts on Chinese economic cooperation with both regions, as well as opportunities and challenges that emerge from it. Furthermore, the study will consider examining historical records on the Africa-Latin America trade relations, in order to understand and assess specific events and characteristics in their early relations.

Thus, the literature review will depict theoretical and empirical arguments and limits that will constitute the foundation of the empirical analysis of China’s economic role in the development of Africa-Latin America trade relations in the next chapter.

Authors’ Arguments and Limits

In “Dependency Theory: A useful Tool for Analyzing Global Inequalities Today?”, Farny (2016) makes a critical analysis of the relevance of the dependency theory to assess contemporary gaps between the Global North and the Global South. While she agrees on the relevance of “traditional dependency theory” in analyzing today’s structural divide – “core”, “semi-periphery”, and “periphery” –, she also perceives that dependency may remain a concern for Global South nations – even for those that have appeared to “break free” (Farny, 2016, pp. 1-3).

However, Farny seems to ignore that China, usually regarded as a semi-periphery nation, has proven that it can grow economically without the patronage from major Western players and appears to take over the position of core state among nations of the Global South – more acting as a core state itself. While it is clear that China is managing its relations with the Global South – particularly with Africa and Latin America – different than Western states do, it allows a new form of dependency (Shullman, 2019). In fact, Chinese flexible financial loan and cheap market, infrastructural and technological expansion in Africa and Latin America lure the latter regions in the arms of China, as they are still looking for alternatives to the West in order to break free (Shullman, 2019). Thus, it is important to understand that the dependency theory plays a significant role in examining contemporary gaps among nations of the Global South, particularly, it helps comprehending the nature and influence of contemporary Chinese economic in bilateral relations between Africa and Latin America.

The book chapter “Neoliberalism, Authoritarian Politics, and Social Policy in China” (Duckett, 2020) examines how China’s adoption of neoliberal doctrine serves its political objectives, as well as its social policy expansion. Duckett (2020, p. 524) argues that the global opening of Chinese markets and related economic reforms boosted China’s economic growth by 8.5 per cent from 1980 to 2018, transformation that eventually encouraged other developing countries to seek economic independence through deeper relations with China.

However, Duckett missed to observe that Chinese neoliberal approach – liberalization of markets, promoting preferential trade and elimination of tariff barriers, and promotion of equality and friendship – present neocolonial features, particularly in its relations with developing nations. For instance, a 2017 study of the impacts of Chinese investments in Cameroon (Benis, 2017, pp. 106-107) reveals that while the Cameroonian population and economy has benefitted from the growth of Chinese market in the country – easier access to cheap goods and employments –, the foreign market increasingly gets privilege over local goods and services, contributing to the deficit of local market and an increase in demand for financial loans to support the Cameroonian economy. As a result, China lent approximately $5.7 billion, some of which Cameroon was unable to pay back to China – leading to a debt cancellation of $78 million that Cameroon has accumulated over time (Alfa Shaban, 2019). Clearly, China is gaining almost as much as Cameroon is losing profits. This approach occasioned long-term debts and is not only a particular case to Cameroon, but also to many other developing countries in Africa and beyond (Horn et al., 2020). Eventually, this situation could potentially affect – if not already – the Africa-Latin America trade relations, which in turn could serve mostly to promote more of a Chinese brand than African and Latin American ones. Although evidences of this hypothesis are limited, this urges to elucidate whether Chinese neoliberal approach to both regions has been the root cause of their internal economic disparities, or Africa and Latin America have simply failed to manage their relations with China and maximize available benefits.

The article entitled “The Foreign Policy Consequences of Trade: China’s Commercial Relations with Africa and Latin America, 1992-2006” (Flores-Macias & Kreps, 2013) is relevant to this study, as it explores foreign policy implications of China’s growing bilateral trade with developing countries of Latin America and Africa between 1992 and 2006.

As China and the United States (US) have diverging foreign policies, the former’s engagement with developing African and Latin American nations was an increasing obstacle to the American policies of global alliance during the above-mentioned period (Flores-Macias & Kreps, 2013, pp. 357-358).

It is necessary to assess the extent to which developing countries – from Africa and Latin America – align their foreign policy concerns with that of China, as their trade relations grow beyond (Flores-Macias & Kreps, 2013, p. 357).

In recent years however, China has hosted diverse initiatives and conferences to boost its cooperation with African and Latin American nations. Among these are the Belt and Road Initiative (BRI) and the Forum on China-Africa Cooperation (FOCAC), which were motivated by the desire of China, and African and Latin American nations – among other world-nations – to further their economic relations (Gao, 2018). Additionally, the decrease of US economic involvements in Africa and the abuse of language by the former US President Donald Trump – treating African countries of “shithole countries” (Gao, 2018) – are notable features that contributed to the shift in policy behaviors in the developing world. In fact, US attitudes pushed African nations even further into the arms of China. From another angle, it is worth noting that the US – still under the Trump administration – developed draconian policies towards Latin American nations. Precisely, the US support to the Venezuelan opposition leader, Juan Guaido – leading to further divisions in the country – (Kaplan & Penfold, 2019, p. 1), the construction of a border wall at the US-Mexico frontier and large immigration restrictions have contributed indirectly to surging human rights, unemployment, and poverty crises in Latin America – favoring opportunities for Chinese diplomatic and economic ascension in the continent (Foer, 2017). Although the US has a new leadership – the Biden administration –, Holpuch (2021) posits that the US-Mexico border is still closed to asylum seekers to date. Therefore, there is no significant change in US immigration policy.

Clearly, one could observe that US attitudes toward African and Latin American nations facilitated their political and economic foreign policy alliances with China in recent years. As such, this seems to confirm that Latin American and African foreign policies are increasingly inclusive to China’s approach, as never before. However, there are limited knowledge on what to expect of this South-South alliance in the coming years.

While the authors understand China’s growing economic relations with Africa and Latin America as an alternative to Western relations, they missed to address Chinese relations as an incentive, in order to empower the current Africa-Latin America trade relations and the extent to which this occurred between 1992 and 2006. In this sense, the study perceives China as a game changer not only in its bilateral relations with Africa and Latin America, but also on the psychology of relations between these regions of the Global South. Thus, it is important to demonstrate China’s ability to boost opportunities and economic capacities between African and Latin American countries. By enabling rapid infrastructural and industrial developments of its latter partners, China’s engagement promotes their economic competitiveness and widens avenues of comparative advantage – of goods and services – in today’s trade between Africa and Latin America.

The following literature is a report by The Economist Intelligence Unit (2016) entitled “The evolving role of China in Africa and Latin America”. The 2016 report is useful to the study as it presents a more recent analysis of China’s role in both Africa’s and Latin America’s trade relations and economic growth.

While China continues to influence status of economic relations with its above-mentioned partners significantly, China’s strategic engagements remain the subject of many uncertainties and potential financial instability in Africa and in Latin America for subsequent years (The Economist Intelligence Unit, 2016, p. 2). On the one hand, Chinese investments in Africa and Latin America are large-scaled and at low costs, which in turn attract more local costumers, stimulate a shift of market demand and focus, and secure long-term effects on local markets (The Economist Intelligence Unit, 2016, pp. 2-8). On the other hand, Chinese financial loans at low interest rates –often free of charge – prompt a shift in many local public and private economic sectors away from Western lenders (The Economist Intelligence Unit, 2016, p. 5).

As the report acknowledges China’s role in raising competitiveness of African and Latin American countries, it also suggests that the latter must exploit intra-regional trades in order to enroot sustainable economic recovery from deficits in their relations with China and to improve their economic growth (The Economist Intelligence Unit, 2016, p. 2). While examining the report however, it is observed that Chinese investments seem to be the major incentives for the industrialization of Africa and Latin America – which in turn is indispensable to boost their regional and global competitiveness. In this sense, the report fails to clearly identify China as the central force to assure the success of developmental ambitions of both regions. Although the document posits that there are existing doubts about Chinese interests in Africa and Latin America (The Economist Intelligence Unit, 2016, p. 2), China’s current involvement in both regions still appears as a more realistic alternative compared to Western partners at the moment. Considering this, it is crucial to develop a comparative analysis of Chinese and Western impacts on economic and competition growth in Africa and Latin America.

The next literature is a recent report by the International Monetary Fund (IMF) entitled “Navigating a Long Pandemic” (2021). The report supports that African economy – and poverty rate – could worsen at least until the end of 2021, mainly due to the persistent effects of Covid-19 pandemic and limited access to vaccines (International Monetary Fund, p. V, 2021). Regarding Sub-Saharan Africa, the report indicates an economic contraction of -1.9 percent since the pandemic has started (International Monetary Fund, p. V, 2021). This economic downfall eventually affects African market and trade capacity, to the extent that goods and services became more expensive, local industries have produced at a deficit, and unemployment rate has increased (International Monetary Fund, p. V, 2021). However, an economic growth of 6% is expected to emerge and propel the regional economy towards recovery level, yet at a slow pace and not until 2022 (International Monetary Fund, pp. 4-5, 2021).

As the report suggests interventions of international communities – through medical supports and funding – as a solution to boost Africa’s economic recovery (International Monetary Fund, p. 18, 2021), it misses to recognize that the quick recovery of Chinese economy from the effects of the Covid-19 pandemic is an added value to China’s influence in the region. Precisely, one could observe that China’s production capacity, international market expansion, as well as the growing global demands for its products were key elements to its economic recovery and continuous growth (Hale, 2021). Equally, the report does not specifically mention that the pandemic represents a unique opportunity for China to further its relations in Africa, who suffers from various forms of economic instability – job losses, unemployment, food insecurity among others. It is clear that the pandemic did not only affect economic progressions of African nations, but also consumers’ behaviors. With a stronger demand for Chinese financial loans – with low-interest rates and flexible payoff periods (Chen, 2020) –, cheap goods and services, and jobs, the Sino-African relations are likely to grow at a faster pace during the pandemic. Thus, it becomes necessary to examine how such opportunity could revive and develop African industrial capacity and global market competitiveness.

Deeper in the Sino-African context, the article entitled “ICT Aid Flows From China to African Countries: A Communication Network Perspective” (Wang et al., 2020) discusses how growing investments of Chinese telecommunication companies in Africa are molding a future for technological advancement on the continent. Although Chinese information and telecommunication technology (ICT) investment in Africa has perceived a slow growth rate since 2000 – less than 20% compared to industrial, mining, and construction investments –, major Chinese companies such as Huawei and ZTE were able to expand their influence in and upgrade the telecommunication systems of dozens of African countries (Wang et al., 2020, pp. 1505-1514).

While the authors agree on the growing influence of Chinese ICT aid in Africa’s digital future, they missed to address it as an asset to diversify Africa’s comparative advantage. Today, it is observed that ICT investments in Africa contributes to the development of e-commerce for goods and services on the continent. According to Gill (2020), entrepreneurship in e-commerce is prone to reach an annual growth of 17% by 2024, as internet users could reach a number of 500 million by 2025. Not only the current pandemic was a favorable condition for a booming e-commerce, but China’s success in ICT and e-commerce – through Alibaba company – has inspired and propelled the continent (Opali, 2020). As Africa moves toward Chinese 5G technology (Bloomberg Businessweek, 2020), the continent seems to have a greater access to China’s ICT aid than Latin America does. In fact, Latin American governments remain victims of the technological competition between the US and China (Stuenkel, 2021). Many of them still rely heavily on US technology almost as they do with China; however, some hesitate to approve the construction of their 5G cellular networks by Huawei due to pressure from the US – urging regional nations to stop deals with China (Stuenkel, 2021). This clearly cripples the Latin American continent from realizing its development goals. Thus, it is necessary to assess the extent to which the status quo of Chinese ICT aid in Africa and Latin America helps creating favorable conditions to develop partnerships between both regions – especially in the e-commerce sector.

The book chapter “The dynamics of South-South co-operation in the context of Africa and Latin America relations” (Barros de Carvalho, 2013) makes a critical analysis of the contemporary status of the relations between Africa and Latin America. In this piece, Barros de Carvalho argues that Africa and Latin America played a historic role in the development of international relations mechanism in the Global South, displaying “intermittent and diffuse inter-regional relations” (Barros de Carvalho, 2013, p. 377). While it is clear to him that both regions share economic, political and cultural similarities and differences, he also believes that they did not build significant connections post-independence (Barros de Carvalho, 2013, p. 377). Mainly, this is due to limited interests in each other as both continents sought fast-growing avenues – such as Europe and Asia – to achieve their development agenda (Barros de Carvalho, 2013, p. 378). Although relations between Africa and Latin America focused on bringing down international disparities and maintaining development alliances, strategic co-operations involving the BRICS nations - Brazil, Russia, India, China, South Africa – have resulted in deeper inter-regional relations, development and influence (Barros de Carvalho, 2013, pp. 379-380). Clearly, the author sees that, arguments supporting the development of the Africa-Latin America relations are not consistent, and present little effectiveness and interactions between countries of both regions – stained by “weak institutionalized inter-regional framework” (Barros de Carvalho, 2013, p. 380).

However, Barros de Carvalho’s analysis is challenged by two aspects. Firstly, the relations between Africa and Latin America saw more inter-regional interests and engagements post-2013, with more state participants, better economic growth, and series of economic agreements signed (Orozco, 2014). Secondly, one could observe that China plays a significant and increasing role in both Africa’s and Latin America’s economy as compared to its position in early 2000s – as mentioned earlier, China is the largest trading partner of both regions. Implicitly, China’s economic relations boost the industrial and infrastructural capacities of African and Latin American countries, enabling the growth of competitiveness and opportunity to further their inter-regional relations. Thus, it is crucial to evaluate the evolution of the Africa-Latin America relations since the year 2000 and how the economic implications of China in both regions make the difference today.

In the article “Implications of the COVID-19 Pandemic on China’s Belt and Road Initiative”, Mouritz (2020) assesses impacts of the COVID-19 pandemic on the Belt and Road Initiative (BRI). In his analysis, he argues that there are short-term and long-term impacts (Mouritz, 2020, p. 115). Among the short-term effects of the pandemic on the BRI, Mouritz states that global economic disruption and the COVID-19 policy prioritization are setbacks to the ambitious development initiative (2020, p. 115). In fact, as China is at the center of the BRI and at the same time of investigations on the origin and spread of the SARS-COV2 virus, the pandemic did not affect significantly China’s credibility among BRI members (YingHui, 2020). Rather, it interrupted supply chains routes mainly through international travel restrictions – slowing down BRI projects and their impacts (Mouritz, 2020, p. 116). As a result, in 2020, “30 to 40 %” of investment projects under the BRI were affected, despite China’s remaining commitments to achieve its infrastructural initiatives (YingHui, 2020). Furthermore, Mouritz believes that, while long-term effects of the pandemic on the BRI are hard to predict, “many BRI countries will not be able to reopen their economies fully for a long time”, unlike China (2020, p. 120). As stated earlier, the prioritization of COVID responses requires more financial resources, and is likely to continue for as long as the pandemic remains.

As the pandemic continues and economic strategies under the BRI seem to face complications over time, Mouritz sees China growing as a sole and capable investor and aid donor for emerging and developing member countries (2020, p. 122). Clearly, the latter may see “no other alternative at the moment” outside of the BRI (Mouritz, 2020, p. 122).

While Mouritz believes that the future of BRI countries is uncertain, he fails to clearly identify the BRI as a third-party facilitator for growing cooperation among developing countries. Although he states that “the BRI has become both too important in foreign policy terms and too big in economic terms for it to fail” (Mouritz, 2020, p. 124), he emphasizes on China as a central actor among BRI members, yet misses to assess its influence outside of the BRI context. As China is a major player in its bilateral development projects with Global South nations, it also seems to create avenues for low economies to grow faster, mainly through the achievement of infrastructural and technological initiatives. Despite potential long-term debts accumulations and economic hindrances of the pandemic, it is clear that Chinese investments and aids under the BRI become only second China’s bilateral relations as fuel to re-launch weaker economies from Africa and Latin America – giving them the chance to explore deeper relations with each other. Thus, it becomes important to examine the degree to which China’s bilateral cooperation promote faster development and potential in economic relations between Africa and Latin America today. Furthermore, it is relevant to question whether China’s contribution in the Africa-Latin America economic relations is likely to develop into a sustainable patronage in a long-term. This is a crucial question considering the growing economic dependency of both Africa and Latin America to China.

General Observation of the Literature

From the above examination, it is noted that the authors perceive the relations between China, Africa and Latin America with theoretical and empirical lenses. While many depict that China’s historical economic growth and investment shift in both regions are promoting their development agendas, others remain skeptical and believe that China is furthering Africa’s and Latin America’s economic dependency. As neither of these perspectives can be ignored, they focus on regional relations with China and clearly miss to see China’s growing economic influence as an asset to improve the Africa-Latin America trade relations. Nevertheless, it would be unfair to deny the relevance of their arguments, as they lay a foundation for a deeper analysis of China’s economic involvement in interregional trade relations. These are particularly relevant today as China continues to expand its investments – especially in infrastructure and ICT –, loans and aid in the Global South.

Thus, assessing how and to what extent Chinese economic relations contribute to the development of the interregional trade relations will be the major concentration of the study, specifically in the next chapter. As stated in the introductive chapter however, these interrogations are important in order to comprehend the position of China in Africa and Latin America, and whether both regions’ trade relations are progressing or regressing with Chinese supports.

Chapter III Analysis

In order to determine the contemporary importance and degree of influence of China’s economic cooperation in the Africa-Latin America trade relations, it is necessary to move beyond theoretical observations and arguments of scholars and experts mentioned in the previous chapter. That is to say, understanding the depth of Chinese economic cooperation and approaches to empower the trade potential of Africa and Latin America cannot ignore key historical and contemporary events that have favored the economic growth of China and its growing influence in both regions. Since its initiative of an open-economy policy in the early 20th century, China has played a significant role in defining the development model in developing countries of Africa and Latin America, while increasingly standing as an alternative to Western donors (Chhadra et al., 2020). However, while some believe that “China perpetuates a neo-colonial relationship in which Africa exports raw materials to China in exchange for manufactured goods” (Hanauer & Morris, 2014), others see that China’s growing influence in Latin America could possibly cause a “new cold war” of economies – with the United States (US) as major contender – in the region (Nugent & Campell, 2021). In this sense, China’s contribution in the development of the Africa-Latin America trade relations raises many questions over potential benefits and challenges.

Thus, the analysis will consist of six sections.

The first section will be a critical examination of early relations between Africa and Latin America, as well as the political, social and economic dynamics. In order to further this analysis, it will be necessary to consider influences of colonialism and particularly the transatlantic slave trade between the 16th and 19th century.

While the first section will explore the origins of the Africa-Latin America trade relations, the second section will emphasize on China’s bilateral engagements in both continents, with a particular emphasis on its motives and key opportunities between 1990 and the 2000s.

The third section will discuss the contemporary Africa-Latin America trade relations and China’s economic involvement. This section will particularly focus on 21st century Chinese investment progressions, loans and aid, and how these contribute to the creation of better avenues for African and Latin American trade – and long-term economic challenges.

The fourth section will present two interviews involving Candace Nkoth Bisseck and Dr. Pippa Morgan. In this section, they will critically discuss how ongoing African development and China’s engagements could boost Africa-Latin America trade relations, providing new avenues and comparative advantage.

The fifth section will assess how the Covid-19 pandemic has occasioned new challenges and opportunities for China’s involvement in the Africa-Latin America trade relations. Here, the analysis will discuss how the need to respond to the devastations of the Pandemic has forced China to reassess its historical relations with both regions, and its potential effects on the Africa-Latin America trade perspectives.

Finally, the sixth section will emphasize on key arguments of the analysis. This section will be a synthesis of major findings on China’s economic influence vis-à-vis Africa and Latin America, the significance of Covid-19 for the China-Africa-Latin America ties, and speculations on future outcomes of China’s involvement in the regions and the interregional trade relations.

I- Early Africa-Latin America Relations: From Independent Nations to Trading Partners

a) Colonialism and The Rise of Socio-Political Brotherhood

It is undeniable that colonialism played a fundamental role not only in the making of modern states in Africa and Latin America, but also in building earlier relationship and trading history. On the latter point, the transatlantic slave trade – from the 16th to 19th century – became the first system of trade relations between Africa and Latin America, although they were merely proxy regions that enabled natural resources and human capital to benefits European colonial powers in their overseas expansion (Murray, 1986, p. 203). While approximately 12 million slaves were exported from Africa to the Americas – with Brazil as main point of contact in Latin America – to work mainly on sugar and coffee plantations, the commodities produced were channeled to Europe (Pruitt, 2016).

Clearly, the transatlantic slave trade shows that the Africa-Latin America relations were only built to fuel and sustain Europe’s economy during that era. Thus, injustices of the slave trade and colonialism at large – precisely the export of African socio-cultural heritage and human commodities to the Americas – prompted the need to reconnect with their continent of origin, and seeking social, political and economic revolutions between the 18th and 19th century (Eltis & Walvin, 1981, pp. 311-312). Precisely, African slaves waged series of resistance in the Americas, in order to take political and economic control of the lands they were forcibly brought into – and unfairly treated –, and to break free from colonial servitude. In the early 19th century, the revolt of slaves in the Americas had a significant effect on the African continent and inspired internal anti-colonial revolution (Murray, 1986, p. 204).

These events not only link Africa and Latin America through colonial experiences, but also mark the beginning of a new relationship between rising nations of both regions. As Henry Gemery and Jan Hogendorn posit, ending the transatlantic slave trade generated numerous benefits for African economy, which include “the elimination of the social costs resulting from the disruptive activities of enslavers and the ending of the export of humans in return for cowrie shells and other commodity currencies” (Eltis & Walvin, 1981, p. 312). In this regard, one could argue that abolishing slave trade allowed Africa – and to a larger extent Latin America – to see the potentials to build newly independent states and considering their colonial experience as a landmark to expand sovereign social, economic and political ties in the Global South.

b) Economic Strategies of Latin America and Africa: An Opportunity for China’s Regional Ambitions

The 20th century is known as the century of independence of former colonies in Africa, in contrast with most Latin American nations that gained independence in the 19th century (Bates et al, 2007, p. 917). As a liberal economic order has emerged following World War Two, the objective of the liberalized global economy was to limit damages caused by protectionist policies and unregulated financial flows, while allowing mutual benefits for all states adhering to the new international economic environment (O’Brien & Williams, 2016, pp. 31-78). Eventually, one could argue that this played a determinant role in the formation of newly-independent and liberal nations.

However, global liberal policies were subjected to criticisms, as they failed to advance inclusive cooperation globally (Dickins, 2006, pp. 479-492). In fact, for O’Brien and Williams (2016, p. 10), the global economic order was used by stronger states as an instrument to strengthen their economy at the expense of the weaker states – developing countries in this context. As the latter states perceived concepts of global economic order and interdependence as a zero-sum game – where they were the sole losers and exploited –, they seized the opportunity of the economic divisions of Cold War to promote nationalist development agendas and forming regional economic alliances (Sethi, 1978, pp. 228-230).

Consequently, it is clear that these events only brought African and Latin American states closer as they both sought to promote genuine economic freedom and development internally. In this sense, both regions seem to understand that regional trade blocs were essential strategies for their economic ambitions.

On the one hand, Frankema and Van Waijenburg (2018, p. 546) explain that members of the Organization of African Unity (OAU) – mainly those from sub-Saharan African region – have adopted “The ‘followers’ move along similar paths of industrialization as the ‘leaders’, by first substituting domestic production of manufactures for imports, and then by continuing to build up an export position”. However, this strategy failed to achieve sufficient industrialization needs – due to existing political and economic instabilities – and led to its termination in the early 1980s (Ajakaiye & Page, 2012, pp. ii3-ii4). Furthermore, many countries had no alternative option than relying on the Western-led IMF and World Bank via the structural adjustment programs (SAPs) to support their falling economy (Ajakaiye & Page, 2012, pp. ii5-ii6).

On the other hand, regional bloc such as the Mercosur – comprising Venezuela, Brazil, Paraguay, Uruguay and Argentina among others – was an early strategic coalition to promote inclusive development in Latin America at the end of the Cold war in 1991 (Felter et al, 2019). Its strategy was rooted in the Treaty of Asuncion, which promoted “free movements of goods, services, and factors of production between countries” of the region (Felter et al, 2019). However, the regional alliance has failed due to a variety of issues – mainly economic and diplomatic tensions between Argentina and Brazil, who were both dominant forces within the region (Felter et al, 2019). From another angle, Solimano and Soto (2005, p. 7) argue that Latin America “has witnessed cycles of prosperity, stagnation, and negative growth” in the late 20th century. Here, they seem to understand that the economic disruption was occasioned by internal competition, unsustainable financial resources and regional norms to promote effective long-term development, and growing indebtedness. For this reason, they believe that while the region overcame the fall of Bretton Woods’ exchange rate parities and the two failures of the oil price – via large and cheap external funding –, it was a short-term success that eventually led the region into the 1980s debt crisis (Solimano & Soto, 2005, p. 7). Solimano and Soto (2005, p. 7) add that the latter period was stained with “slow and unstable growth and macroeconomic instability”, as represented on the figure below.

Figure 1: Histogram of Latin America GDP growth rates, 1960-2002; Source: Solimano & Soto (2005, p. 11)

As development and economic freedom and growth were similar ambitions for both Africa and Latin American states in the 20th century, they equally faced similar challenges to some extent such as insufficiency of national economic assets and series of political tensions, which in the end appear as major impediments to the success of their agendas.

However, it is noted that centuries of colonial experience and the struggle for economic independence and development of both regions brought them closer to fast-growing economies such as China, who rapidly became a strong ally and an alternative to Western powers.

II- The Flight of the Dragon: Booming Chinese Engagement in the Regions (late 1990s-early 2000s)

The rapid economic expansion of China in the Global South between the late 1990s and early 2000s is in part justified by the persistence of Western neocolonial tendencies and economic policies originating from the Washington Consensus, which in turn inspired the development of the Beijing Consensus – the Chinese development model (Galchu, 2016, pp. 1-5). As a result, China became the factory of the world, where most of global goods were manufactured (Galchu, 2016, pp. 1-5). Not only that, China quickly developed into a hub for exports of raw material and for cheap products for global consumers, and eventually drew the attention of developing countries from the Global South, particularly Latin America and Africa (Galchu, 2016, p. 1). In turn, the growing economy of China was increasingly pictured as its key asset to realize its global ambitions of economic hegemony.

Nevertheless, it is important to assess the motives for the early economic engagement of China with Latin American and African countries in particular, during the abovementioned period.

a) China’s Motives and Presence in Latin America

The China-Latin America economic relations, in the first decade of 2000s, was mainly motivated by China’s ambition to expand its market in the latter region, and large Chinese demands for raw materials, particularly from Mexico, Chile, Argentina, Brazil and Venezuela, and becoming Latin America’s third largest trading partner (Koleski, 2011, p. 4). Between 2000 and 2009, China-Latin America annual trade saw a dramatic increase of 1,200%, from $10 billion to $130 billion (Koleski, 2011, p. 4). In fact, main exports to China included crude petroleum, soybeans, base metals, iron and copper among others (Koleski, 2011, p. 5).

Table 1: Latin America’s export to China in 2009; Source: Gallagher (2010, p. 2)

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Conversely, China’s exports to Latin America – mainly manufactured and industrial goods – constituted only 5% of its global exports (Koleski, 2011, p. 4). While agriculture and mining produced 83% of Latin America’s exports to China, they contrasted with a 33% in exports to the rest of the world between 2008 and 2009 (Koleski, 2011, p. 4). Here, one could observe that most of Latin America’s exports were oriented increasingly towards China, whereas the latter did not appear to prioritize Latin America in its global exports. As a result, China’s regional influence continued to grow while its exports to Latin American countries remained low. Furthermore, Gallagher (2010, p. 1) argues that “China has leapt over Latin America to become the most competitive exporter of manufactured goods in the world — leaving 92 percent of Latin America’s manufacturing exports under threat from China in 2009”. For him, it is clear that one of China’s priorities in Latin America was to maximize the supply of raw material to the few countries mentioned above, leading to uncertainties for future regional gains. However, he sees that China’s economic relations with Latin America was able to develop regional productivity, which makes its approach “far more effective than the Washington Consensus” (Gallagher, 2010, p. 1). As a result, China gross domestic product (GDP) rose to $2.7 trillion, whereas Latin American countries had a combined GDP of $2.6 trillion (Gallagher, 2010, p. 2).

As part of China’s economic engagement, Koleski (2011, p. 3) stresses that Chinese investments in – and generous funding to – Latin American states are based on the condition to “officially recognize China instead of Taiwan, thereby weakening Taiwan’s global support for a role in the international arena”. In this sense, it is clear that Chinese investments not only aimed at promoting better economic cooperation between China and Latin America, but, more importantly, was an incentive to encourage regional diplomatic supports for China’s political ambitions in Taiwan. As Table 2 below shows, Chinese FDIs in Latin America were increasingly present between 2005 and 2010, and diversified over this period.

Table 2: China’s Foreign Direct Investments in Latin America (2009); Source: Gallagher (2010, p. 3)

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b) China’s Motives and Presence in Africa

Similar to the Latin American context, China’s political intention appears as the main driver for the establishment of its economic relations with Africa in the late 1990s. Precisely, China sought to gain political support from African states, in order to assert its authority over Tibet and Taiwan, and to ensure the success of its agenda at the UN level (Sun, 2014, pp. 3-5). Among its African allies, China’s major supporters included – but were not limited to – Egypt, Ghana, Sudan, Libya, Ethiopia, and Liberia (Sun, 2014, pp. 3-4). To develop and strengthen its ties in Africa, China committed to initiate several diplomatic relations with African states, and providing generous foreign aid and “zero-interest” loans to support their development agenda and fighting overwhelming debts (Sun, 2014, p. 4).

From another angle, it cannot be dismissed that China’s economic intention in Africa in the first decade of 2000 shifted as to satisfy the rising demand for supply of raw materials in the country, finding more avenues that will benefit Chinese companies’ investments (Sun, 2014, pp. 5-6). In fact, Africa is known to be the richest continent in the world, in terms of natural resources – with enormous reserves of oil and gas, copper, coltan, gold, uranium among others – and one of the largest landmasses (Aljazeera, 2018). As such, it is obvious, for Sun, that China’s objective oriented toward boosting its industrial and infrastructural investments in the largely-unexploited territories of Africa (2014, p. 6).

Map 1: Overview of Major Africa’s Natural Resources; Source: Aljazeera (2018)

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However, Sun (2014, p. 19) believes that the continent was “a low-priority issue for China’s foreign policy in general”. Clearly, between the late 1990s to the early 2000s, China’s investments in Africa accounted only for 3% of its global investments, and 5% of its global trade (Sun, 2014, p. 2). Figure 2 below shows that although Chinese investments rose in the early 2000s, its investment flow to Africa – particularly in Sub-Saharan Africa (SSA) – has in fact remained a tiny percentage of its global output.

Figure 2: China’s FDI flows to Africa and the rest of the world 2004-2015; Source: Bräutigam et al. (2017, p. 31)

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While China’s economic relations with Africa and Latin America have promoted their development to some extent and increasingly positioned Chinese model as an alternative to Western model, it is noted that the influence of China in both regions differ at some point. As discussed in the previous chapter, China’s competitor – the United States – had disruptive economic and geopolitical effects in the Latin American continent, in contrast with Africa. Despite growing Chinese investments and intentions in both regions, China’s ambitions in Latin America and Africa remained a low priority as the latter were still at a developing stage. Thus, one could perceive Latin America and Africa merely as strategic platforms for Chinese global ambitions, and therefore, questioning the long-run benefits in their future relations with China.

III- Today’s Africa-Latin America Trade Relations: Assessment of China in Interregional Trade Development

There is no denying that China’s economic cooperation in the regions generated tremendous possibilities, which could bring Africa and Latin America to develop their trade relations at a faster pace, and enabling to move beyond diplomatic yet traditional discussions – exchange of raw materials, diplomatic visits, sociocultural exchange among others. In fact, it is clear that technological and industrial innovations appear as potential sources of comparative advantage for both regions. However, it is still clear today that China stands as a fundamental financial, technical and infrastructural mentor for both Africa and Latin America. Thus, China’s relations with many of African and Latin American states today take the form of bilateral and multilateral platforms, and engage in preferential schemes.

a) Contemporary Debates around Technological Assets

Prior to discussing categories of Chinese asset that can boost the Latin-American trade relations, it is important to keep in mind the following questions. To what degree China influences Latin American and African economic fluctuation nowadays? Which of the stakeholders will benefit most from the development of the interregional trade relations? To what extent and for how long?

Table 2 above demonstrates that Chinese investments started to shift from raw material extraction to local manufacturing in Latin America since 2009. However, some experts share the view that contemporary Chinese trade and investments are not directly intended to develop the continent, but rather to amplify and praise China’s image “among Latin American political, academic, media, and business elites” (Trevisan, 2020, p. 29). To achieve this, China utilizes various infrastructural means such as boosting 5G technology’s infrastructure and training in Mexico, Ecuador, and Argentina – to combat crime and promote surveillance systems –; improving telecommunication systems via investments of Huawei, ZTE, and Tencent – which in total, worth more than $250 million between 2018 and 2019 (Trevisan, 2020, pp. 28-29).

Clearly, investing in technology not only boost China’s branding, but it equally propels the industrial potential of Latin American countries. This in turn, could encourage the latter to diversify their global trade relations, and to extend its retail market to large consumers of Africa in particular.

Like Latin America, Africa shares similar experiences when it comes to China’s technological investments, but with few different outcomes. Among many foreign technology investors in Africa, China appears as one of the most prominent in e-commerce and digital payment technology (People’s Daily Online, 2020). While internet users in Africa reached an estimated number of 465 million in 2020 with a potential growth of 495 million by 2025, it is noted that China’s sponsorship for e-commerce is an increasing demand in the continent (People’s Daily Online, 2020). In this effect, Jeremy Hodara – founder and CEO of Jumia – believes that “Africa’s e-commerce platforms are hoping to deepen cooperation with China and ensure growth by using China’s experience in the sector” (People’s Daily Online, 2020). For him, it seems obvious that China is becoming a dominant contributor in e-commerce training and technological supply, as well as creating a proxy channel to sell its cheap retail goods. Eventually, China has already laid foundations by furthering its technological ties with Rwanda and South Africa, while supporting major online market companies such as Jumia and Kilimall (Xinhua, 2019). Furthermore, it is worth noting that the World Economic Forum (2015) predicted that the booming e-commerce market in Africa was likely to reach a potential of $75 billion on retail sales with only 50% of African consumers by 2025. Implicitly, e-commerce in Africa appears to provide a larger consumer outreach and capacity for entrepreneurial growth, compared to many other economic sectors.

From the above, it is noted that China’s investments in technology give Africa and Latin America the potential to develop smarter and faster channels for bilateral trade in services and goods. In this sense, increasing future debates around Africa-Latin America technological partnerships would be inevitable. Nonetheless, the size of local markets and the competition with Chinese market growth in both regions could remain a major concern, as they are likely to determine the sustainability and monopoly of gains in the interregional trade relations.

b) Africa-Latin America Trade Relations: A Chinese Interregional Network?

While relations between Africa and Latin America are historical, the present study notes that their trade relations emerged in the post-independence era, since 1960 (International Trade Forum, 2010). In fact, trade agreements were focused on cooperation to find better conditions for natural resources markets such as cacao and coffee, forming international coalitions in multilateral platforms, and developing direct trade relations – with Brazil and South Africa as major interregional trading partners (International Trade Forum, 2010). From this perspective, Brazil and South Africa have become channels and pillars of investments and trade for both regions, bringing them closer to their mutual goals. With the support of foreign investors, African and Latin America were able to overcome the financial crisis of 2008 and transform their industries and tradable goods and services – machinery, chemical and mineral products, electrical power, telecommunication, and financial services from South Africa; tobacco, food and animal products from Brazil (International Trade Forum, 2010).

In the contemporary context of the South-South cooperation, it is clear that economic interests of Africa, Latin America and China intersect and are manifested in multiple forms. For instance, the BRICS nations – Russia, India, China, Brazil and South Africa – stand as the most economically influential and leading international coalition for development in the Global South since 2009 (Wolhuter, 2020, p. 52). Furthermore, it is reported that BRICS exports value has grown from $494 billion to $2,902 billion between 2001 and 2016, while its imports has developed from $417 billion to $2,339 billion during the same period (Al-Mohamad et al, 2020, p. 2). Additionally, the report states that the success of the BRICS is mainly because its member states are identified as “attractive destinations for foreign investors” and there are “high returns on investments” (Al-Mohamad et al, 2020, p. 2). Clearly, the BRICS could be seen as the driving force that has deepened South-South relations today and became a mentor organization to the China-Africa-Latin America economic relations.

In a similar way, China’s engagement in both regions is part of its contemporary objectives to harmonize and facilitate aid and trade, as well as expand its economic influence in the Global South (OECD, 2012, p. 16). As such, it inspired the creation of several regions and interregional economic forums and alliances – although some extended prior to the BRICS – such as the Belt and Road Initiative (BRI), Asian Infrastructural Investment Bank (AIIB), China-Africa Cooperation (FOCAC) among others (Ndegwa, 2020).

However, it would be careless to deny that contemporary Chinese economic presence in Africa and Latin America is equally a concern for the evolution of local markets. In fact, due to a rapid increase of private Chinese investments particularly in Africa, the region sees a rapid increase in informal economic sectors and a slow growth of formal sectors (Nyiawung, 2021, pp. 7-11). In the case of Cameroon, the surge in import of cheap Chinese goods and services have invaded local markets and became prominent in infrastructural projects at the expense of local contractors (Nyiawung, 2021, p. 1). Eventually, one could observe that this impacts negatively local production rates, gains, and financial capacities. As investments from China could serve as incentives to promote its economic influence – and political favoritism to some extent – in the country, social issues seem to irrupt, as shown in Table 3 below. However, such situation proves that there are flaws in the management of economic activities in Cameroon, and limits in the capacity of local authorities to ensure a healthy business environment.

Table 3: Summary of negative socio-economic impacts of Chinese investments in Cameroon 2019; Source: Mvondo (2019, pp. 15-16)

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From the above, China’s economic expansion in Africa and Latin America has proven to be beneficial for some stakeholders, while being increasingly problematic for local markets development. Nevertheless, it is difficult to dissociate China’s economic ambitions for development with African and Latin American development agendas today. They are clearly interdependent and see mutual benefits, albeit not having the same economic progression.

IV- African Development, China’s Investments, Africa-Latin America’s Trade Potential

In order to further the assessment of the importance and influence of Chinese economic cooperation in the contemporary Africa-Latin America trade, Dr. Pippa Morgan and Candace Nkoth Bisseck share their expert opinions and insights through an interview.

a) Interview with Dr. Pippa Morgan: Contemporary Tendencies of Sino-African Relations and Opportunities for Africa-Latin America Trade Relations

Overview of the Interview

In this interview, Dr. Morgan highlights that understanding the contemporary relations between China and Africa requires an examination of its history, particularly the motives and evolution of the relations in the late 20th century. With that in mind, she mentions that a decrease of business activities in China during that period was a major motive behind China’s economic opening and foreign direct investment, particularly in the Global South. Equally she claims that China’s foreign cooperation privilege bilateral interactions over multilateral ones – such as the Belt and Road Initiative –, as to deepen its relations with the continent.

Dr. Morgan argues that the benefits of China’s investments for Africa and Latin America lie mostly on regional development strategies. That is to say, if states from both region direct Chinese investments toward projects that genuinely contribute to economic development – precisely those in industrial sector –, then they are likely to perceive their benefits in a long-run. As such, this could provide an opportunity to develop regional industries faster as well as the Africa-Latin America trade, but could cause a shortage in demand of Chinese investors in the future. However, she warns that the economic devastations caused by the Covid-19 pandemic are limiting Chinese investments and flexible funding in the developing world, while it is difficult to predict any significant change in their future relations.

Interview Transcript

Interviewer:

In this context, many economy experts claim that the Sino-African relations have largely developed in the year 2000. From your experience, how do you perceive the evolution of their relations in the last decade?

Dr. Pippa Morgan:

That is a very good question!

I actually think that it is important to go back a little bit further than either 2000 or the last decade. So, I think it is very much true that in terms of the economic relationship, it did expand a lot after 2000 And part of that is basically due to a policy that the Chinese government introduced called the Going Global Policy, which was basically an instruction to Chinese companies to go and make money abroad. And part of the reason behind that was because big Chinese construction companies - many of them being state owned - were kind of running out of business in China and there was a very big overcapacity in China. So, the Government encouraged them to go abroad to find investment opportunities and contracting opportunities after the year,2000 or 1999 to be a little more precise. So, you do see the kind of very significant growth of the relationship after that.

Then, another turning point in the past decade or so is eventually the Belt and Road Initiative, which was started in 2013; although I would caution against putting too much emphasis on the Belt and Road Initiative. So, I see the Belt and Road as a repackaging of stuff that was already happening. If you would look at the actual data in terms of Chinese investment, Chinese contracting and Chinese aid, it does not really go up significantly, the trend does not really change that much after the Belt and Road. So, it is more a kind of branding of stuff that was already happening from my perspective. But that still is somehow the most significant development over the past decade or so.

I mentioned at the beginning of his answer that I think it is important to go back further than the year 2000. The reason for that is because, certainly if we are thinking about Chinese aid in Africa, it goes all the way back to the 1950s. And while the amounts that were given were relatively small compared to Chinese economic interaction with Africa now, it was a very important aspect of China's foreign economic engagement from a Chinese perspective. So, remember, China was very poor back then. And as a proportion of the Chinese economy, it was actually quite significant and was very important aspect of Chinese foreign policy. From my perspective, key theme in my research is assessing the way that historical relationship actually influences the contemporary relationship.

Interviewer:

What are some of the benefits of Chinese investments, loans and aid that you perceive on African societies, but also on your economies today? When it comes to infrastructure, industry and telecommunication we see that these aspects are some of China's major focus now, if we consider the shift from agriculture to emphasize on these three aspects in the recent decade. So, what is your take on the benefits?

Dr. Pippa Morgan:

I think that this focus on constructing infrastructure - in particular hard infrastructure like transport roads and railways, power stations, the internet, all those kind of things - is in large part derived from China's on development model, and in particular the way that China actually used in the past. When China was still very poor but growing very fast in the 80s and 90s, it actually used funding from Japan in large part to construct infrastructure within China, and it was quite a valuable and successful model. Now, China is taking basically this model and applying it not only in Africa, but around the developing world.

If we are thinking about the benefits, economic growth and economic development are by far the largest benefits here, especially when this funding is used well; and I can go on to say that when this funding is used well, it can be a catalyst for industrial development. And if you practically look at success stories of economic development and also economic development theory, and old basic theories of how economies develop, a key is to move activity or labor from agriculture - which is low value added - to industry - which is higher value added. So, basically you need to make factories, right? And you need to send the population to work in the factories. That is what China, Korea, Japan and Hong Kong did before, all these kind of success stories of economic development. The UK (United Kingdom) - for example - did it very long time ago during the industrial revolution.

And you cannot do that without infrastructure, right? So, you cannot persuade someone to make a factory, with no road to go to and from that factory, or no water to run for electricity, or the internet nowadays - which is also very important nowadays. So, without these hard infrastructures, you can't have this process of moving people from agriculture or moving economic activity into the industrial sector - which history, kind of tells us, is really the key to economic development. So, I think that is really the key benefit.

If we are thinking about China specifically, this is somehow an advantage for its approach to economic cooperation with other countries, compared to the UK or the United States for example, which tend to focus more on social sectors like women's education or anti malaria et cetera. The Western donors tend to be more focused on these kind of softer social aspects - which are also incredibly valuable, right? - but they do not really want to build infrastructure. So, China is a kind of complement, if we think about substitutes and complements as concepts in economics. I think China's building of hard infrastructure is kind of complimentary. Those are the key benefits from my perspective.

Interviewer:

Do you believe that these benefits also provide a comparative advantage - in terms of interregional trade - to African states over its other partners of the global South, like Latin American states? It is known that Africa and Latin America are still looking for developmental routes, so the relations between the two continents do not appear to have grown significantly for years now. So, I am curious if Africa is going to draw - from China - comparative advantages that could boost its potential and encourage fast-growing and immensely beneficial trade relations between Africa and Latin America.

Dr. Pippa Morgan:

It very much depends on the country. Africa is, as you know, a very large and diverse place; but if we are thinking about countries with relatively large and young populations - which is a characteristic of many African countries with comparatively cheap labor -, that comparative advantage is in kind of low-cost manufacturing, which is what China's comparative advantage was in the 1980s, for example.

I think what this presents is a kind of opportunity. If you look at Ethiopia, for example, which wants to turn itself into this kind of hub for low-cost manufacturing. What China can kind of bring to that – if we are thinking about, economic connections between Latin America and Africa – is support and investment. If African states can succeed in using Chinese support and investment – utilizing that comparative advantage and low-cost manufacturing –, then you can think of a situation where Latin American states could buy light manufactured products from Africa, instead of buying them from China – which the latter has been doing for a long time. But China is losing its own domestic comparative advantage and light manufacturing, because Chinese wages are becoming too high – which is a kind of normal aspect of the process of economic development. In the 80s, for example, factories were moving from Korea to China. And then, China utilized that. So, if states like Ethiopia can then follow the same approach, and selling products to Latin American states, that can be that can be very beneficial.

Interviewer:

Do you think that there are some aspects of the Sino-African economic relations that are still challenging to African trading potential in general?

Dr. Pippa Morgan:

Yes, absolutely! And I think that not enough attention is paid to the agency of African governments in kind of managing their relationship with China, and taking advantage of or doing good things with the money or the investments that they can get from China. For example, I have conducted my own research in two countries, Ethiopia and Malawi. As I mentioned earlier, Ethiopia - which I know, has many political problems going on at the moment - has successfully channeled Chinese investments into industrial parks and into attracting international firms to construct factories, making great strides in the food sector, et cetera. And I am not saying that is perfect, but it is building jobs that boosted Ethiopia's productivity which grew at 10% per year pre-COVID, which is very fast.

So, the Ethiopian government was really quite strategic in the way that it was using the relationship with China, whereas another country like Malawi – which basically established diplomatic relations with China quite late in 2007 – received a bunch of money from China and utilize it to construct a parliament building, which is very beautiful, but it is not particularly conducive to economic develop. So, Malawi had a shiny new building, a football stadium. Again, it is nice looking, but that is not going to fuel your industrial growth. Some presidential villas, all these kinds of things look nice, but are not very helpful for economic development.

This is both a strength and a disadvantage of China's approach. Because China does not like to put its hands on other countries' domestic politics, it tends to be quite open to build whatever you know if there is demand for. And what that means is if African partner states can ask for useful things like power or roads, then that can be very beneficial; but if they do not ask for some things that are not very productive, that is not a good thing for economic development especially if this is being funded by a grant - free money. It is not the best use of a grant. If it is being funded by a loan, then that is really a bad thing because it is taking on debt for something that is not conducive to economic development. For me, taking on debt for things that are not conducive to economic development is really a key issue not in every country, but in some countries.

I do think when we are talking about debts, though it is important to remember that for most states in Africa, China has a relatively small proportion of their overall external debts; but for some states that is a very big proportion. So, we need to keep that perspective in mind, but I do think it is something for certain countries to worry about.

Interviewer:

Among powerful nations, China was one of the fastest to recover from the economy downturn of the COVID-19 pandemic. Considering this, do you see an opportunity for Chinese investments, aid, and financial loans to continue to outmatch those of Western nations in Africa in the long run?

Dr. Pippa Morgan:

That is a good question!

So, I think you have to consider this in relative terms rather than absolute terms. What I mean is, while China recovered very well from COVID and is, one of the only places in the world that is still growing economically, the Chinese economy is still growing slower than what was expected previously. And I don't think that China's successful COVID recovery is going to result in this kind of huge increase in either Chinese aid or investments. The reason is, where China expected to be is still lower. However, Western countries are obviously suffering a lot economically, health wise and in all the aspects of COVID. So, you can expect that while China may stay here somehow or just go up a little bit, Western countries may go down, right? We saw, for example, the UK cutting its aid budget very significantly, recently. While the G7 nations are discussing whether they can be rivals to the Belt and Road Initiative, they never really put any money behind or any serious money, compared to what China is doing. Relatively speaking, I think probably will expect to see China increasing in importance post-COVID or over the long term.

Interviewer:

How do you see the future of the Sino-African relations in terms of manifests and in terms of challenges?

Dr. Pippa Morgan:

That is a very big question!

Honestly, I do not see any big changes coming up in the future. So, I think that COVID does not really seem to have changed the broad trends, and if that did not, then one is going to. We can expect the relations to continue to grow, but to be relatively similar to how it is now. I do not think that it is going to radically change. I mean, a lot of people get into thinking about automation, and artificial intelligence and all that, how that is going to change this kind of low-cost labor and intensive manufacturing model, but people have been worrying about how machines are going to shape working practices and models of economic growth for decades and for centuries.

And still, this basic growth model of moving out of agriculture into industry and developing through industrial growth has not really changed the model, although the specifics have changed. At the same time, I do not see any kind of incentive, but I think you may see China start to get a little bit more strategic in terms of not spending money for things that are not going to generate actual return or kind of projects that do not make any sense – which did not do in the past. You start to see more professionalization among the Chinese officials and the policy backs, more project management skills, and more due diligence skills, et cetera. So, you may see China saying No a little bit more to projects that do not make sense. But broadly speaking, I think in 10 years from now, it is probably going to look fairly similar to how it looks today. That would be my cautious prediction.

Interviewer:

Dr. Morgan, we have arrived at the end of this interview, and it has been a very enriching experience for me. I will continue to follow your work online. Thank you very much for your time!

b) Interview with Candace Nkoth Bisseck: The Booming E-Commerce in Africa and Evolving African Trade Mechanism

Overview if the Interview

Nkoth Bisseck’s words emphasize on the vitality of information and telecommunication technologies in African trade today, precisely in the e-commerce sector. She believes that it is a fast-growing economic sector that facilitates diversity of products that enter the African markets and widens the outreach of customers and sellers. While she perceives this as a lucrative area, she believes that e-commerce is changing the lives of people in African countries and supporting national and continental development agendas.

From her experience with Jumia Cameroon, Nkoth Bisseck identifies key facilitations – digital banking, online delivery, and digital literacy – as fundamental features for trade expansion, speed, and outreach to small-scaled and remote businesses. However, she claims that e-commerce tools are still underused in Africa’s international trade due to policy barriers and financial regulations. As such, she believes that reforming these barriers to facilitate e-commerce operations could become a catalyst to improve Africa’s trade relations internally and with Latin America, especially now that the Covid-19 pandemic creates more windows of opportunity for digital economic expansion.

Interview Transcript

Interviewer:

There are many economy experts who claim that in the recent years, Africa has seen a boom in e-commerce. which has contributed a lot in its economy. From your experience, how do you perceive the evolution of e-commerce in Africa in the last decade?

Candace Nkoth Bisseck:

I tend to agree with those experts because there has been an increase in internet connectivity. And slowly, and surely, we have seen African usage evolve with that, like Internet once was a way to connect with people send emails and spend time on social media interacting. And little by little, we have seen people using internet and the digital economy in general as a way to make business. And when transformative actors such as Jumia arrived with the cash and investment, and the ability to scale up aggressively. It took it a bit further in the sense that, so right now, they have narrowed down the number of country where they are present. But for several years, Jumia had a very aggressive development across Africa, being present in many countries. So just because of that day, it was originally a tangible proof of the growth of e-commerce.

So, we are seeing growth because of Jumia's expansion across all these markets. But there is also another interesting part of e-commerce, which is all those people who have started using and leveraging the internet to do business like Facebook, Instagram sellers, et cetera, which may not be like full-fledged e-commerce company with integrated logistics and payment systems. But still, it shows you the appeal for people and users for those distant transaction because they want to go to because they do not want to spend time going to the market, et cetera. So yes. And social media is a huge vehicle for a form of consumerism, which makes you buy more and yes, most definitely, e-commerce has been, and I believe, is still on the rise.

I believe e-commerce is a huge lever for growth and development, and I can take few examples from the time we were running Jumia online marketplace. We had merchants who had to be in the selling product in their respective local market, from 9am to 5pm for example. Thanks to Jumia, whether it is raining or shining, whether they want to go to work or not, they were able to sell 24/7 across the entire country. They did not necessarily have to go to the market to make an income. And we have seen tremendous success story of people becoming digitally literate, people who never had an email before, but now who are interested in partaking in this digital transformation as getting educated on this new tool allow them to scale up their business and send their children to school et cetera. We have had the story of a young student who used to receive a few phones from his brother in Germany and selling at the University at a small scale. And he saw an advertising from Jumia marketplace. He realized that and claimed, "oh, maybe I should try that". Then we contacted him and he came to our offices. Fast forward, that was between 2014 and 2017. He was like a multimillion entrepreneur who had to travel abroad every month to get new stocks of products.

Also, we have success stories of women who are not digitally literate, who become more empowered to read more, when you were able to hire staff. We have success stories of young professionals who arrived in companies at lower-level position, who never knew anything about internet besides social media who became not only Cameroonian, but African experts in the field of e-commerce. And this is not just a story about Cameroon, this story is replicable, to at least 20 African countries. So, we created a new expertise on the continent, some of them are now interesting talent for global companies operating in the digital economy. In terms of improving the workforce, it has been transformative as well. And beyond that, it has also challenged – even if it has not transformed in a very spectacular way – the logistics and infrastructures of countries in in Sub-Saharan Africa and Africa in general, in the sense that maybe we could do better with our postal services, maybe we could do better with our logistics in general. So, I think that every time we embrace innovation, in the way we are operating, especially in commerce and trade, we give an opportunity to everybody to upgrade their skills and their level of opportunities.

Interviewer:

Do you perceive any challenge to the effectiveness of the African e-commerce?

Candace Nkoth Bisseck:

Yes, there are a few of them. So initially, between 7 and 8 years ago, the talent gap – on a scale of 1 to 10 – was one, because nobody had proper experience of e-commerce. So, you had to have the capital to start from scratch and training people. But now it is less and less the case to be honest. Cost of bandwidth of internet and access to internet as well, because it is amazing to be able to ship a product from Douala to Yaoundé, from Accra to Takoradi or something like that. But you have secondary cities, villages where you have people from the village to be able to sell such platform. But because there is still a huge digital gap when it comes to when you compare the rural part to the urban part of cities in Africa. That makes it a little bit limited. The development of the off ecommerce is limited when it comes to like the geographical spread. Financially, people are in many countries – maybe with the exception of countries like Kenya or maybe other countries mostly in the Anglophone part of Africa – are still very much cash driven. In this sense that for many years – especially in the case of Jumia Cameroon –, people will still prefer to pay cash at delivery than paying via mobile money transfer; not even mentioning the use of credit card. That is unfortunate for anybody who operates in that space, because it puts a lot of risk on your transaction and there is a huge loss of money behind it. It is equally a loss of time as well, because that is not utterly efficient.

One key challenge that connects everything together is also lack of trust in systems. This is because people have a culture of not trusting the water they are drinking out of their tap, not even trusting the constant supply of electricity, and not necessarily trusting people are supposed to make them feel safe in their own country sometimes. First thing in the company or in a business that you cannot see, that you cannot touch, and that is asking you out there for your information and possibly to pay something for product that you do not have in your hands is still a challenge to overcome. And, it is not just because people are skeptical because of internet. It is because there is a whole ecosystem, a whole context of lack of trust in the system that needs to be improved and that's why e-commerce cannot be fixed or improved in isolation. It needs healthier ecosystem, overall ecosystem for it to thrive properly.

Interviewer:

Considering the current pandemic and also social distancing restrictions and regulations, do you believe that e-commerce has a particular use when it comes to supporting business activities on the continent?

Candace Nkoth Bisseck:

Oh, most definitely! If you do further research, you will realize that there are several articles, press releases and reports from ITC and many other organizations that are connected to Trade and Development, and did some work on the impact of impact of the Covid-19 crisis on the digital transformation of some ecosystem and how the digital economy can help people to become more resilient. I have had the chance to either organize or being a speaker, during event aiming to demonstrate how internet in the digital economy can help people, citizens, and professional entrepreneurs to become more resilient amidst Covid-19 crisis. We have seen that – for example –, in Senegal, there is a company that focuses on digital payment system. And they were doing good before Covid. But after Covid, they were doing better, they were trying to reach out to organizations that they were after and schools, telling them, “Hey, you can use our payment system so that your parents do not have to come to school to pay the school fees”. And they were not necessarily interested because they felt like we do not really need that all of a sudden, because of Covid and nobody is coming to class. But they still needed the funds to maintain the school and they became users and more proactive reaching out to those digital players to help them do something.

In countries where the use of mobile payment is more common, people have been using even more mobile payment solution as a way to avoid unnecessary contact, et cetera. So, I have read somewhere – it is a sad reality which is kind of ironic as well – that Covid-19 has been the most powerful Chief Digital Officer of the story of internet, because the crisis has led organization and people that will slow or resistant to adopt e-commerce in the digital economy as a way to operate in whatever they were doing.

Interviewer:

Do you think that e-commerce is increasingly an essential tool for African trade, especially outside of the continent?

Candace Nkoth Bisseck:

I think that it is a vastly underused tool for many reasons, I do not know all of them. But as far as my experience is concerned, there was one key limitation which is regulation. For example – the following is still the case for postal services and their ability to transact from one country to another –, what we realized is that we had customers that were purchasing products from beyond the borders. So, we had people in Chad, who act as if they were living in the northern part of Cameroon and ordering from Jumia. We also had people in Gabon, ordering from Jumia and acting as if they were living in the south of Cameroon. And some expressed that, “if there is a market in this country, we need to be able to deliver there and we need to do something about it”.

Although we had amazing meetings and work sessions with people working at the postal services, we also learned that regulations were difficult. There is something in terms of regulation that cannot allow us to seamlessly order and have this kind of flowing transaction across our borders. And I found it so frustrating, and a little bit sad, but I do not know if that has changed today, but it is related to the international post offices, their regulation and the willingness of countries to make those breaches happen.

Also, in terms of payment, it is changing increasingly but there are still a lot of countries in Sub-Saharan African that cannot receive payment from abroad through platforms such as PayPal, Transfer Wise, all those kinds of digital channel that allow people to transact effortlessly from one country to another. So, it is still not facilitated in a way. Without those access to payments, there is not much trade that can happen.

One good new is that there are players that have tried to overcome the regulatory and logistical barrier to try to allow African entrepreneurs to do trade internationally such as Afrikrea – it is a company based in Cote d'Ivoire –, which allows people to sell African goods that are either made in Africa or inspired by African culture globally. So, you can be a merchant in Togo or in Cote d'Ivoire, et cetera, and benefit from their partnership with different carriers, international carriers, and their online platform and get your product shipped all around the world and make an income out of that. But still, a huge part of e-commerce in Africa is not necessarily include African brands, but most likely cheap goods that are imported from China and sold locally and internationally. That is still commerce and that make economies turn, but there is still room for more African products in the e-commerce space.

Interviewer:

Candace, we know that in the recent ten years, we have not seen much of offer African relations with Latin America – in terms of economy – and we did not see much of fast-growing revolution between them, as compared to African countries and Western countries or Africa and China, for instance. So, in the African context, do believe that e-commerce could be a facilitator for market access for Africa and Latin America?

Candace Nkoth Bisseck:

I think that, ultimately, there is always a question of offering and demand in a way; I believe that the attractiveness, what is happening with China also comes from the fact that both parties seem interested in trading with each other. I cannot speak from a Chinese standpoint, but I know for a fact that there are a lot of skills, resources, product and technology that are of interest for African market in China.

When it comes to other parts of the world, particularly Latin America, which in terms of natural resources especially foods or those kinds of products are not that vastly different from Africa. They have cocoa, they have coffee, all those sorts of goods. I think that in terms of trade, they just need to find mutual needs or mutual interests for the trade to happen. But I have the feeling that those exchange are probably more likely to happen on the intellectual and talent levels rather than, physical and traditional trade relations. That is just totally based on my empirical observation and intuition.

Interviewer:

Candace, thank you so much! We have arrived at the end of this interview and it has been an enriching experience. Thank you and I hope I will talk to you again soon.

c) Summary

Both participants agree that African and Latin American economic relations and capacity have improved in the last decades, thanks to financial and infrastructural supports from China in particular. However, they acknowledge that important issues such as political and economic managements of Chinese inputs in the regions, and failures to maximize the use of technological advancements need to be addressed in priority. Then, it is clear that more comparative advantages could be generated in order to facilitate the growth of the trade potential of African and Latin American countries.

V- Impacts of the Covid-19 Pandemic on the China-Africa-Latin America Economic Ties

The Covid-19 pandemic appears as one of the biggest global crises of the 21st century that has affected severely health conditions and socio-economic livelihood of many people – with 3.5% contraction of the global economy in 2020, mainly due to lockdowns –, and has equally shaped states aid and trade policies (Yeyati & Filippini, 2021, p. 1). Considering this, it is noted that the demand for aid – to respond to the effects of pandemic and support for economic recovery – has increased, particularly in developing countries (Yeyati & Filippini, 2021, p. 1). However, only a few numbers of wealthy countries and international financial institutions were able to grant financial and medical aid through unilateral and multilateral means (Yeyati & Filippini, 2021, p. 3).

Figure 3: Global GDP Growth in a Historical Perspective 1871-2021; Source: Yeyati & Filippini (2021, p. 1)

Abbildung in dieser Leseprobe nicht enthalten

Among prominent international actors, China is not only one of the fastest states to recover from the economic downturn caused by the pandemic, but also one of the largest donors in developing countries – including Africa and Latin America (Yeyati & Filippini, 2021, pp. 2-4).

Figure 4: Quarterly World GDP (GDP forecast in January 2020 versus January 2021, 2019 Q1 = 100); Source: Yeyati & Filippini (2021, p. 2)

Abbildung in dieser Leseprobe nicht enthalten

Although it is uncertain whether the Covid-19 pandemic will have long-lasting negative effects on infrastructural projects and market progressions in Africa and Latin America, it clearly opens a debate about potential opportunities and gains of China’s economic growth from the two regions.

a) The Covid-19 Pandemic, African and Latin American Economies, Shifting Chinese Economic Approach

Recent reports from the UNCTAD indicate a sharp decline in foreign direct investment of 16% in Africa (UNCTAD, 2021) and 45% in Latin America amid the Pandemic (UNCTAD, 2021). While African FDIs plunged from $47 billion to $40 billion between 2019 and 2020 (UNCTAD, 2021), Latin America experienced “the sharpest decline in foreign direct investment flows” in the Global South (UNCTAD, 2021). Following the early global impacts of covid-19 on economies and foreign direct investments, the World Bank predicts that global extreme poverty is likely to rise from 8.23% – recorded in 2019 – to at least 8.82% in subsequent years (The World Bank, 2020).

Implicitly, these data show that there is a correlation between the negative impacts of the Covid-19 pandemic on foreign direct investments, and the limits in resilience capacity of the two developing regions. Additionally, the World Bank (2021) posits that African economy has plunged to -3% in 2020, whereas the United Nations (2021, p. 115) records a decline of -8.9% in Latin America. However, these international institutions predict that both regions will recover slowly, as they would be able to develop “credible policies to stimulate private investment” (The World Bank, 2021) and would be favorable to “exports, commodities prices and remittances” (United Nations, 2021, p. 117).

Therefore, the rapid economic recovery of China places its businesses at a privileged position to respond to rising investment demands from Africa and Latin America, whose economic progressions and development goals seem to remain dependent on foreign direct investments. Clearly, China appears to have an upper hand when it comes to FDIs, loans and aid in both regions. However, Dr. Pippa Morgan warns – on the above interview – that China is likely to limit its investments, loans and aid essentially to projects that are conducive to economic development in both regions. In this sense, she understands that China’s foreign policy will probably shift more toward investing, lending and aiding pragmatic development projects, and less toward supporting gifts diplomacy with its Latin American and especially African partners. Similarly, Chimbelu (2020) agrees that the pandemic has pushed China to adopt a more cautious approach to China-Africa economic ties, in order to limit non-essential loans, investments and aid, and maximizing its assets for its anti-Covid 19 support across the developing world.

b) Chinese Interests in the Development of the Africa-Latin America Trade

China’s economic expansion in both regions of the Global South implicitly sends a strong message to its Western competitors, particularly to the US, as both sides endlessly struggle to assert their dominance in the developing world. However, China seems to be the most pragmatic supporter of the South-South cooperation since the years 2000s – at least at the multilateral level (OECD, 2012, p. 10). That being said, it raises interrogations around the benefits behind China’s supports for the South-South cooperation, precisely in the Africa-Latin America trade ties.

As argued earlier, China’s interests in both regions have shifted from a mere political to stronger economic standpoint. Thus, when it comes to supporting the Africa-Latin America bilateral trade, it could be assumed that China’s benefits lie on the facilitation of supply chain needs and mechanisms. Precisely, as many of Latin American and African countries’ economic development are increasingly dependent on China’s inputs, one could expect that Chinese financial supports and supply of goods and services determine considerably the progression of their trade relations – regionally and beyond. In support of this assumption, it was discussed earlier that the Covid-19 pandemic caused some damage to the economy of Africa and Latin America. This could mean that the production and financial capacities of both developing regions have diminished, favoring the expansion of Chinese markets within and across the continents. Thus, long-term effects of the pandemic might promote China’s economic gains and monopoly in the Africa-Latin America trade ties, as long as the latter’s economies have not fully recovered.

From the previous sections, it is observed that China’s economic disruption during the Covid-19 pandemic did not forestall its rapid recovery and expansion, in contrast with many developed economies. Meanwhile, the developing world particularly African and Latin American countries, suffered severe economic deficits that plunged the regions into a new stage of dependency. As this situation also affects the Africa-Latin America trade relations, it appears as an economic opportunity for China.

VI- Key Findings of the Analysis

While this chapter reveals historical and contemporary dynamics of China’s economic involvement in the Africa-Latin America trade relations, results from qualitative and quantitative approaches to the analysis allow to elaborate on three aspects.

a) China is an Indirect, yet crucial Player in the Africa-Latin America Trade and Beyond

To develop their bilateral trade ties, the analysis identifies that Africa and Latin America need long-term financial and infrastructural supports from developed and fast-growing economies such as China. However, China’s economic relations with both regions are perceived as core-periphery relations. Precisely, it was discussed that China serves as donor and mentor to Africa and Latin America, whereas the dependency of both regions creates an opportunity to deepen China’s influence in their economic lives.

From another angle, it is undeniable that shortcomings of political positions and economic policies of Western nations and international financial institutions brought both regions closer to China, in quest for better economic and development opportunities. The case of Trump’s policy on border restrictions in Latin America and pejorative remarks on African nations are few instances that were discussed in the previous chapter. Additionally, it is important to remember that both regions have not yet maximized their intraregional trade potential in order to build a strong and self-sustaining economy. For example, Latin America-Caribbean’s intraregional trade accounted for 10.4% in 2017 (ECLAC, 2017), while Africa’s internal trade reached only 16.6% during the same year (UNCTAD, 2019). As Africa and Latin America clearly lack resources to catalyze their trade potentials, the analysis depicts China as growing and indispensable supporter for both economies.

As Chinese economic interests are increasing in the Global South, it is safe to assume that China and its counterparts from Africa and Latin America are interdependent, albeit not equal in terms of economic capacity. Despite intraregional efforts by African Union to promote trade liberalization and economic independence through the African Continental Free Trade Area (AfCFTA) agreements – as to empower the continent’s economic capacity – (Kuwonu, 2021), it may be premature to affirm these either as a successful initiative, or free from any form of external economic dependency.

b) The Covid-19 Pandemic has shaped China’s Economic Strategy in the Global South

It was evidenced in the analysis that the pandemic is affecting the way China understands and monitors its economic relations with its counterparts from the Global South, particularly with African countries. Needless to say, the Pandemic has forced China to be more aware of volatile financial donations and cautious about its future investments. While this topic requires further studies, this could mean that if China emphasizes reform on regulatory policies in its economic relations, it could genuinely boost the capital and create long-term benefits for both its markets and those of the region. Consequently, such approach would speed up African industrial and infrastructural development, as well as bolstering competitiveness in interregional markets.

However, it is difficult at this point to predict whether this new approach would promote a more friendly environment for China’s relationship with the developing world, as the former appears to shift gradually from policies of non-essential donations – free money – to productive economic contribution. As Chimbelu (2020) mentioned above, limiting non-essential economic outputs has allowed China to better support covid-19 responses in Africa. Also, he claims that “gone are the days of Chinese big loans and major borrowing” (Chimbelu, 2020). That is to say, China is increasingly moving away from counterproductive economic relations.

Additionally, the new economic approach of China does not necessarily imply that promoting pragmatic African and Latin American economic growth will result in less dependency on Chinese loans, aid and investments – although it may seem likely. It was observed that both regions are still facing long-term development challenges such as lack of industries and infrastructures, and the presence of financial debts. From another angle, China still needs to expand its consumers space, as its economy is constantly increasing – despite short-term economic hindrances of the Pandemic (Nicita & Razo, 2021). Thus, there are mutual benefits in strengthening ties between China, Africa and Latin America, albeit China is likely to have the monopoly of profits.

c) There are long-term Socio-Economic and Political Challenges to China’s engagements in Africa and Latin America

On the one hand, China’s economic relations with African nations has not only promoted avenues for both sides, but also a variety of inconvenience. For instance, Table 3 above presents a record of socio-economic grievances that follows Chinese investments in Cameroon in 2019. Additionally, a Chinese businessman has been assaulted by local war veterans amid possessions of land in Zimbabwe in 2019 (Taruvinga, 2021), whereas a recent video shows a Chinese construction manager – from China Railway Seventh Group (CRSG) – aggressing a local employee in Sierra Leone following a dispute (Narayanan, 2021). While these cases raise ethical concerns, such occurrences appear to be rampant and demonstrate a degree of failure – by both African governments and Chinese officials and businesses – to harmonize their development objectives with social and economic conditions in Africa. These issues are likely to become more frequent as long as socio-economic tensions related to Chinese investments are not sufficiently addressed at governments level. In this regard, if state responsibilities are ignored, these issues may develop into long-term and major hindrances to Sino-African economic relations. Similarly, Chinese investments in Latin America caused various socio-economic tensions. In 2018, Latin American civil society organizations and 21 local non-governmental organizations (NGOs) reported human rights abuses linked with infrastructural and mining projects by Chinese businesses (Koop & Soutar, 2018). In this sense, it is clear that Latin America and Africa face risks of deterioration of economic relations with China.

On the other hand, Latin American nations are increasingly torn apart by the US-China economic competition in the region (Stuenkel, 2021). Clearly, staying neutral seems to be a difficult choice for regional states, as they are in need of infrastructural development and seek to expand consumer outreach. As China appears to provide convenient opportunities in order to address both concerns, Paulo Estivallet (Nugent & Campell, 2021) – Ambassador of Brazil to China – believes that Latin America and particularly Brazil, would “rather not be so dependent to China, but what is the alternative?”. From another angle, Nugent and Campbell (2021) note that while US officials spread anti-China propaganda globally, they equally put relentless pressure on Latin American nations as to limit their interactions with China. However, the US does not appear to provide better economic alternatives to convince its regional partners. Although Latin America sees China as a better choice, the latter’s tensions with the US are still likely to create an unstable economic and political environment in the region, as well as uncertainties in the evolution of the China-Latin America ties.

Chapter IV Recommendations and Conclusion

Recommendations of the Study

Unequivocally, the present study discussed relevant elements that justify China’s importance in the economic development of Africa and Latin America, as well as their trade relations today. While contemporary Chinese economic cooperation is key to the fast-growing development of trade between both regions, it is noted that the latter do not appear to demonstrate significant interests on the matter even nowadays. Thus, it becomes clear that:

Both African and Latin American states must recognize that intraregional and interregional trade relations are essential for a sustainable development. That is to say, building economic capacity with the help of fast-growing and developed economies as a priority is likely to provide short-term benefits – mainly in terms of infrastructure and finances –, but also long-term inconvenient – growing debts, economic disparity, and political clientelism. As these do not dismiss the importance of external support, it is crucial that regional states do not limit their intraregional and interregional trade relations to mere rhetoric, but rather consider these as genuine priorities followed by pragmatic results;

It is the responsibility of regional states to promote inclusiveness in public-private partnerships, in order to involve local trade unions, prominent businesses and economic experts in defining their interregional trade – Africa-Latin America trade – and approaches to Chinese economic cooperation. It would be clumsy to limit participations to states bureaucrats and external partners, as this would misrepresent the real conditions and needs of local consumers to some extent. As the previous chapter shows, inconsistent representation will undoubtedly result in an increase of social uprisings and market disparity internally, and a limited vision of potential comparative advantages. Thus, addressing these issues would promote a healthier trade environment between China, Africa and Latin America;

Like China, both Latin American and African states must be economically cautious. In this context, this means that they should be held accountable with regard to the financial aid and loans they receive, as to ensure that these funds serve their destined projects. Furthermore, it is crucial that funded projects are conducive to economic development, as to avoid accumulation of foreign debt and to promote genuine economic and trade developments;

From a historical perspective, it is obvious that the intention of China has never been to develop neither Africa, Latin America nor their trade relations. Rather, Chinese economic cooperation brings greater opportunities for both regions to develop interregional interests and to reinvent their approaches to trade.

Nonetheless, further studies of future implications of China’s involvement and competitions in Africa and Latin America are needed in order to understand the larger extent of challenges in the Africa-Latin America trade relations. In the meantime, the present study stands as an introduction to the analysis of the subject, considering contemporary dynamics such as the Covid-19 pandemic.

Conclusion

In an attempt to justify the claim that China’s economic cooperation is a catalyst in the Africa-Latin America trade relations, the study proposed an original approach to its understanding.

Prior to the analysis, assessing key arguments and limits of relevant literatures was foundational to the development and contribution of the study’s perspectives. While some scholars and experts emphasized that the economic expansion of China in the regions has promoted a rapid development – and a constant sponsorship for further agendas –, others believed that this economic expansion is a means to influence and control African and Latin American resources. However, the study identified that both sides appeared to ignore Latin American and African states are mainly responsible for successes and shortcomings of their economies, and missed to see China’s economic involvement as a contribution to catalyze their interregional trade relations.

Following the literature review, the analysis focused on historical and contemporary dynamics in the evolution of the Africa-Latin America trade relations, and particularly on the engagement and motives of China in economic relations. As a result, three arguments were developed. Firstly, the study found that China plays an indirect but crucial role in boosting the Africa-Latin America trade relations, as it is the main provider of flexible financial supports and infrastructural investments lacking in the regions. Secondly, the study identified a change of Chinese economic policy in the Global South amid the Covid-19 pandemic. Here, it was discussed that China is increasingly careful to limit its investments and particularly its funding towards lucrative projects in the regions. Lastly, the study pointed out long-term socio-economic and political hindrances regarding China’s economic cooperation with both regions, and their impacts in their interregional trade relations. It was clear that human rights violations, negligence of regional governments and pressures from China’s rivalry with the US – mostly in Latin America – are staining the Africa’s and Latin America’s relations with China, which in turn prevent them to maximize their economic potentials.

Finally, the study suggested a genuine accountability of regional governments with regard to socio-economic impacts of their cooperation with China. Additionally, it was recommended that both regions give priority to exploring interests and assets in their intraregional and interregional trade relations, while considering China essentially as a contributor, rather than a patron. Also, further and in-depth analyses of the implications of China’s economic cooperation for the Africa-Latin America trade relations were suggested, as the present research provides an introduction to the subject.

To conclude, this study has shown that China has grown relentlessly in influence in the Global South, precisely in Africa and Latin America. However, both regions remain delusional that more advanced economies such as China are saviors, inexhaustible donors with regard to their economic needs and sustainable development goals. Nonetheless, recent events demonstrate that the situation can change rapidly, and nations of these developing regions need to take productive initiatives to promote their economic development and better conditions for trade.

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93 of 93 pages

Details

Title
Contemporary Chinese Economic Relations. A Catalyst in the Africa-Latin America Trade Relations
College
Lancaster University
Grade
Merit
Author
Year
2021
Pages
93
Catalog Number
V1149830
ISBN (eBook)
9783346536020
ISBN (Book)
9783346536037
Language
English
Keywords
China, Africa, Latin America, Trade, Economy, International Development, digital economy
Quote paper
Lionel Issombo (Author), 2021, Contemporary Chinese Economic Relations. A Catalyst in the Africa-Latin America Trade Relations, Munich, GRIN Verlag, https://www.grin.com/document/1149830

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Title: Contemporary Chinese Economic Relations. A Catalyst in the Africa-Latin America Trade Relations



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