IntroductionAfrica a lot of benefits to China to strengthen

IntroductionAfrica is a huge emerging market with rapid growing population. Therefore, this continent is holding a lot of business opportunities for countries like China, the US, Germany. Over the past few decades, one of the most important economic partners of Africa is China. In fact, economic relationship between China and Africa have deepened as China’s economy has considerably grown. In 2009, China has surpassed the United States to become Africa’s largest trade partner.The reasons why China invests in AfricaThere are 3 possible reasons why China is increasingly investing in Africa:• First, there have been increasing need and demand for natural resources, energy, food and other products necessary for rapid economic growth. Regarding Africa, the country is rich in natural resources and has sufficient people of working-age to drive the economy. As can be seen, Africa could bring a lot of benefits to China to strengthen its economy.• Second, Africa is a logical place for China to achieve greater political influence, especially within the United Nations. The reason behind is the fact that about 28% of United Nations members are African countries. • Last but not least, China has already significantly invested in other Asian markets, Latin markets and South America. The demand for Chinese goods might be saturated in these markets; therefore, Africa can be a new market for growth. As a matter of fact, African economies are growing rapidly, especially in nations like Kenya, Ghana, or Ethiopia.Chinese firms in AfricaChinese companies of all sizes and sectors are bringing capital investment, management know-how, and resources to Africa across diversified operations such as infrastructure, manufacturing, telecommunications and agriculture. By doing so, they are playing an important factor in the improvement of Africa’s economies.It is estimated that there are already more than 10,000 Chinese firms operating in Africa with approximately 90 percent of those are private-owned.• According to statistics, a third of total Chinese firms are involved in manufacturing, a quarter in services, and around a fifth each in trade and in construction and real estate. • In manufacturing, large amount of Africa’s industrial production is handled by Chinese firms. • Notably, in infrastructure, the dominance of Chinese firms is much bigger as they are handling nearly 50 percent of Africa’s internationally contracted construction market. Economic strategyChina has participated in energy, mining, and telecommunications industries and financed the construction of roads, railways, ports, airports, hospitals, schools, and stadiums. As part of China’s “going out” or “going global” strategy, Chinese companies are encouraged by the government to do business out of their domestic market. According to China-Africa Initiative for Research (SAIS-CARI), China has adopted a multidimensional approach in economic relations with Africa. China is a major foreign direct investment (FDI) company in Africa. The table below will give clearer view on FDI projects in Africa (particularly Sub-Saharan Africa) in different sectors between January 2003 and June 2014.Table: FDI trends by sector (Chinese FDI to Sub-Saharan Africa) between 2003 and 2014Regarding FDI, China has provided development loans to resource-rich countries, investing in agriculture, developing trade and business cooperation, especially in some countries like Ethiopia, Nigeria and Zambia. Trade volume between China and African countries surged 16.8 percent year on year in the first quarter of 2017 to $38.8 billion as bilateral economic relations boomed, the commerce ministry said on May 11.China’s financial channels for loans and credits are provided by the People’s Bank of China, the China Development Bank, the Export-Import Bank of China and the China-Africa Development Fund. According to SAIS-CARI, between 2000 and 2014, China lent Africa more than $86 billion; countries receiving the most support included Angola, Congo, Ethiopia, Kenya and Sudan.Poor infrastructure is really a considerable disadvantage that holds back Africa’s economy development. Thus, Africa needs funding from outside to deal with higher demand for better infrastructure. China’s investment in infrastructural development is significant. Only taking into account year 2014, China has invested £56 billion to build stadiums, highways, trains, airports, schools, hospitals in Africa. The Chinese Premier Li Keqiang has stated: “China will not follow the beaten track of colonialism of other countries or allow the re-emergence of colonialism in Africa. To Africa and China, collaboration means opportunities and mutual gain.” China also invested in oil and gas fields and power plants. The table below represents number of power projects with the involvement of China in Sub-Saharan Africa between 2010 and 2020.Table 2: Number of power projects with China participation in Sub-Saharan Africa between 2010 and 2020Nevertheless, in a paper dated July 2016, David Dollar, a senior research at Brookings, concluded that China’s involvement in Africa has been gradually shifting from natural resources to human resources. Chinese businesses are placing a greater emphasis on the multiple social effects of investment, including in terms of technology transfer, capacity building, and living standards. Additionally, in a study published in 2015, it has been indicated that China’s overseas investment is primarily profit driven. Country engagementChina focuses on large African economies:• Robust partners. Ethiopia and South Africa have high degree of economic engagement with China in investment, trade, loans, and aid. They have their national economic strategies related to China and create a strong platform through prominent participation in such forums as the Belt and Road initiative in order to facilitate continued Chinese engagement. As a result, China sees these African countries as true partners: reliably engaged and strategic for China’s economic and political interests.• Solid partners. Kenya, Nigeria, and Tanzania currently do not have high degree of economic engagement with China as Ethiopia and South Africa; however, Chinese activities or relationship between China and the government are growing.Monetary strategyCurrently, the Chinese currency renminbi (also known as yuan) is one of the most used currencies in the world for international trade and transactions. Especially, Yuan is increasingly used in South Africa. According to statistics, renminbi usage in South African payments has increased by 65 percent in 2015, which is a significant figure. “The surge of Chinese investment abroad – especially in Africa – is a major factor in this internationalization of the yuan,” said the Chinese economist Qu Hongbin. China is one of Zimbabwe’s largest trading partner after South Africa and the European Union. In 2013, it is estimated that trade between China and Zimbabwe amounted to $1.1 billion. As a matter of fact, Zimbabwe had even considered for a moment to change its currency to renminbi. Today, the Bank Reserve of Zimbabwe has added the yuan to the list of currencies along with the Japanese yen, the Australian dollar and the Indian rupee. By keeping the yuan as reserve, this has pointed out the increasing significance of the yuan and consequently facilitate the usage of the yuan in Africa.Not only Zimbabwe but other African central banks namely Nigeria also have 10% of foreign exchange reserves in yuan. “It is very clear that a growing number of countries should choose yuan to avoid losses in their trade with China”, said a Chinese diplomat. As in current situation, China is still investing in Africa in different sectors which require a lot of transactions and trade. In a common sense, more currencies will be requested. ConclusionFrom my point of view, at the macroeconomic level, China’s investment has really helped Africa to boost every aspect of the economy with better infrastructure, technology readiness, and more jobs available for African citizens. By doing so, not only Africa but also China could gain benefits from obtaining natural resources, higher political influence, and potential markets for some Chinese products.However, at the mesoeconomic level, there will be high competition between African companies and Chinese firms. Particularly, in manufacturing, African firms are significantly behind global productivity levels so it is really hard for the companies to directly compete with Chinese firms. Therefore, African companies have to dramatically improve their productivity and efficiency to compete or do partnership effectively with Chinese companies.Regarding the Chinese currency renminbi, this is a strong currency, which has already used daily in many Asian countries for their transactions and now it is expanding to African countries.Regarding recommendations, because of beneficial China-Africa relationship, it will a good idea to identify all the gaps and weaknesses in the Africa–China partnership. there are three major main points that should be addressed by both China and Africa sides: corruption in some countries, concerns about personal safety, and language and cultural barriers