Chinese Developmental Engagement in Africa and the Understudy of Chinese Contractors

By Adam Ševčík

Introduction 

China’s growing economic and political influence across the globe demands attention of the West and other global powers. This has been driven mainly by its economic power based on trade, China’s own initiatives such as are the Belt and Road Initiative (BRI), or its increasingly ambitious foreign policy. This holds true even for the African continent where China’s developmental engagement has important implications for the global political and economic order, Africa's own development, environment, and regional security. 

All of these issues require a thorough analysis of Chinese engagement in the region as the economic and political landscape in Africa continues to rapidly change. Perhaps the most visible are the changes caused by the convergence of the long-term trends in Chinese overseas lending and the impact of covid-19 pandemic on the solvency of African countries when servicing their sovereign debts. However, this literature review will suggest that, while these developments in Chinese overseas finance are important and accordingly thoroughly studied, in turn a lack of attention is given to a crucial component of Chinese developmental engagement in Africa, the Chinese infrastructure contracting industry. 

Main Body 

Over the last two decades, China has increased its engagement in Africa to become its largest trading partner country between 2010-2020, and it continues to hold that position (Armstrong, 2023). This engagement goes beyond trade, as China also plays a significant role in Africa's development by providing financial aid, credit, and investment. The impact of China's involvement in Africa has sparked an interest in the academic community, leading to various studies exploring the subject matter from different angles.

One of the primary areas of focus in the academic literature on Chinese developmental engagement in Africa are Chinese lending practices (Gelpern et al. 2022). This research aims to understand the implications of Chinese lending practices and their impact on African countries' economies and their main stakeholder such as are the governments and citizens. In this regard, research has also oftentimes focused on analysing the commonly cited “debt trap diplomacy”, a lending practice of Chinese institutions which lend “large sums to poorer countries, mostly in Africa, to build infrastructure, with the intention of seizing the infrastructure as collateral when the country inevitably defaults on the interest repayment” so China could increase its political power in the region (Fabricius, 2020). Other studies focus on the Belt and Road initiative, which is a massive infrastructure project connecting Asia, Europe, and Africa. This academic literature examines the impact of this initiative on the African continent and how it shapes the global political economy's stability (Lai, Lin & Sidaway, 2020; Russel & Berger, 2020).

Furthermore, the literature explores the impact of Chinese engagement in the context of different stakeholders. For example, some studies focus on the agency of African governments in their interaction with foreign lenders, including China (Malm, 2020). Others delve into Chinese labor-related issues in Africa, such as worker exploitation and mistreatment (Cooke et al. 2018). Additionally, researchers investigate the influence of sociohistorical factors on Chinese companies' foreign direct investment (FDI) into Africa (Morgan & Zheng, 2019). Finally, there is research on China's changing role in Multilateral Developmental Banks and how it shapes the global landscape of developmental finance (Humphrey & Chen, 2021).

Despite the extensive literature on China's engagement in Africa, one stakeholder has been systematically overlooked in academia. These are the Chinese infrastructure contractors who have been assumed to be mere extensions of Chinese policy banks (Zhang, 2021a & 2021b). This continues to be the case despite the recent research suggests that these contractors play an integral role in driving China's pattern of engagement in Africa as they are not entirely dependent on financing from Chinese banks but also on non-Chinese financial institutions such as the multilateral development banks (World Bank, African Developmental Bank, etc.). As the graph below shows the share of major projects awarded to Chinese infrastructure contractors in Africa is around 30%-40% for these international institutions:

Nevertheless, even globally Chinese infrastructure contractors dominate the construction and engineering industry, with nine of the thirteen companies on the Global Fortune 500 list in 2020 being from China (Caifuzhongwen, 2021). China also became “the largest origin country for international contractors operating in the African market in 2006 and by 2019, Chinese companies had taken up over 60 percent of the total revenue of all major international contractors in Africa” (Zhang, 2021b).

What furthermore highlights the growing importance of the Chinese infrastructure contracting industry in Africa the is impact of covid-19 pandemic and the long-term trends in Chinese overseas lending. Firstly, regarding covid, the impact of the global pandemic on the developing economies of African nations was largely negative as local economies not only slowed down due to domestic restrictions but also as international trade, financing, and investments in the region sharply declined (Gallagher & Wang, 2020). Furthermore, as economic conditions worsened so did the ability of African countries to service their sovereign debts leaving many of them asking their creditors for debt relief. And with China being one of the leading creditors to African governments, it has been at the forefront of the sovereign debt issues in Africa ever since (Bavier, Leng & Shalal, 2020).

Secondly, covid pandemic has amplified the long-term trends in Chinese developmental lending to Africa that peaked in 2016 and sharply declined ever since.

This decline in Chinese lending has been said to be driven mainly by two factors. Firstly, in the period between 2009 and 2018, China’s overseas development loan commitments were strongly correlated with China’s current account surplus which started to decline in 2015. However, after 2018, the current account surplus rebounded while Chinese lending continues to decline:

This is where the second factor came in as there has been a shift in the Chinese approach to lending. This new approach has been called the “small is beautiful” approach characterized by the prioritization of smaller and more targeted projects which accounted for the fall in the total value of Chinese developmental finance overseas (Ray, 2023)

Lastly, recent research suggests that these infrastructure companies have been driving China's pattern of engagement in Africa as the Chinese government has a limited capacity in regulating its contractors in Africa (Xu, 2014; Gu et al., 2016; Zhang, 2020) while the Chinese banks, mainly focus on supporting Chinese companies abroad (Chen, 2020).

Conclusion 

This proposed literature review has thus outlined the gap in the current literature on Chinese developmental engagement in Africa and why it is so important to fill it. It is suggested that further research ought to be done to study the way Chinese infrastructure contractors conduct their business in Africa. This is because this research will have far-reaching implications for all parties involved in Africa’s development as well as other regions in which Chinese infrastructure contractors engage (for example South East Asia). Further research will help Multilateral development banks and Western institutions make better decisions to help Africa develop more efficiently. Additionally, African stakeholders, particularly leaders and governments, can better attract contractors and funding by understanding why infrastructure companies engage in some African countries and not in others, despite the universal need for infrastructure across most African countries (Lufumpa, Letsara & Saidi, 2017). While further research might also benefit stakeholders in the private sector, be it the infrastructure and engineering contractors helping build infrastructure in Africa or financial organizations lending money to these contractors.