The Changing Dynamics of Chinese Oil and Gas Engagements in Africa

This chapter examines the changing patterns of Chinese state oil corporations’ engagements with African petro-states through investments in the upstream and downstream oil and gas sectors, and their potential for Africa’s development within the context of evolving China–Africa relations. It conceptually frames such relations, analyzes the contextual shifts and interests involved, and cautions against rather alarmist or biased readings of China–Africa relations that neglect or gloss over the ‘facts on the ground’ and specificities. It also unpacks the notion of African agency in the context of Africa–China economic relations, particularly in the ways Chinese state oil corporations operating in Africa’s oilfields—traditionally dominated by Western oil multinationals—have been exposed to opportunities, risks, structural challenges, and regulation by African petro-states. This provides a sound basis for understanding how lessons learnt and experiences on both sides define the place of China–Africa oil engagements as a key element for potential economic transformation.

Introduction to China–Africa and an Economic Transformation

This introductory chapter outlines the aims, analytical perspectives, and the organization of the volume. It sets the scene by describing China’s place in the changing dynamics of global economic order, the increasing role of China in Africa’s economic transformation, and the unevenness of the China’s economic footprint in Africa. It introduces the four thematic sections that primarily focus on the progress, foundations, challenges, and future trajectory of China–Africa cooperation. Part I: ‘China’s Rise and the Changing Global Development Discourse’ examines the meanings and global externalities of China’s economic emergence in an era of globalization. Part II: ‘Evolving China–Africa Relations: Context, Perspectives, and Framework’ examines China–Africa ties in their historical context, the institutional and policy frameworks for promoting cooperation. Part III: ‘The Dynamics of China–Africa Economic Ties’ describes the Chinese approach to doing business in Africa, while the last section Part IV: ‘China and Africa’s Economic Transformation’ discusses the conditions under which Chinese engagement in Africa can play a catalytic role in Africa’s industrialization and structural transformation.

The Institutional Framework of Sino-African Relations

Chinese policy towards Africa is mediated through an array of different actors and institutions, which complicates the ability of Beijing to see through specific policy pronouncements. Liberalization has seen a plethora of agencies and companies engaging with the continent, and while China has official policies, different interests and dynamics within the official structures may frustrate the smooth delivery of such goals. A study of the institutional framework demonstrates that China is by no means a unitary actor, and contrary to popular belief, what happens on the ground in Africa may not necessarily reflect the official Chinese position. Despite this, China is routinely blamed if something negative occurs. This problem is compounded by an asymmetry in the Sino-African relationship and the fact that Chinese officials will not admit that they are not fully in control of matters.

Agreements and Dispute Settlement in China–Africa Economic Ties

Unencumbered by a history of an intrinsically hierarchical relationship, contemporary China–Africa economic ties appear to have the benefit of being on balance politically horizontal, economically reciprocal, and systemically transactional. A corpus of credible evidence now demonstrates that overall the economic ties of the last couple of decades in the areas of trade, investment, and other types of commercial relations have been remarkably successful. The trajectories also appear optimistic. Beginning from ancient times, political boundaries notwithstanding, commercial relations have always been ordered by law. The existing post-colonial modern world order is, however, largely formalistic and moderately harmonized. It expects formal rules and institutions for the ordering of economic affairs of the scale and complexity represented by China’s contemporary relations with Africa. This chapter identifies and critically appraises China–Africa’s use of agreements to order their economic relations, and the mechanisms of dispute settlement that these agreements envision.

China’s Light Manufacturing and Africa’s Industrialization

This chapter aims to explore whether and how China’s light manufacturing transfer can help to drive Africa’s industrialization. First, it examines the opportunities and challenges presented by the transfer of light manufacturing from contemporary China to low-wage developing countries from the historical perspective of the ‘flying geese’ pattern. Second, it uses first-hand survey data to explore how Chinese light manufacturing firms have coped with rising labour costs, what types of firms are more likely to relocate their manufacturing capacity to low-wage destinations, and where firms tend to relocate their production line. Third, it examines how ‘pilot’ Chinese light manufacturing firms have overcome first-mover challenges. Finally, it employs the analytical framework of New Structural Economics to make policy recommendations on how to mitigate binding constraints to help African countries seize the window of opportunity of industrial transfer from China to achieve economic structural transformation.

The Meanings and Global Externalities of China’s Economic Emergence

The Chinese economy has become a multifaceted global public good. Even as China carefully and gradually rebalances its growth model from export-led to domestic consumption, it will also help address issues of global imbalances. Still, during that internal adjustment process, China will absorb increasingly large quantities of exports from around the world—including from developing countries that can strategically position themselves to competitively supply goods and services in light manufacturing and low-skilled industries which China dominated at earlier stages of its economic take-off. China’s industrial upgrading strategies, which reflect changes in its endowment structure, have defied mainstream economic prescriptions. The country’s stubbornness in designing and implementing steadfastly policy frameworks that identify potentially competitive industries and facilitate their emergence (while accounting for social and political constraints and realities) could provide useful blueprints for other developing countries. This chapter highlights several global externalities of China’s economy, and examines the opportunities and challenges they present. It also discusses some of China’s major macroeconomic risks and possible negative externalities to the world economy.

Evolving Debates and Outlooks on China–Africa Economic Ties

China and Africa’s economic relations have evolved over time, from the tentative commercial engagements characteristic of the early 1980s to the comprehensive infrastructure loans and increased foreign direct investment being pursued across all sectors today. Expanding economic ties have been accompanied by changing debates as to the nature of China–Africa engagement and its significance for their respective development aspirations. South–South cooperation, for instance, framed the approach in this first phase of intensifying economic relations and reflected the combination of technical assistance, grant aid, and concessional loans negotiated by Chinese and Africans in exchange for access to the continent’s abundant resources. As African economies came to demonstrate sustained patterns of higher rates of growth and two-way trade with China grew proportionally, the debates shifted decidedly towards one that focused on economic complementarities between them and Africa’s integration into global value chains. Furthermore, as the African industrialization process intensifies in economies like Ethiopia, China’s key role in development finance and its sectoral experience put it in a crucial position to promote this new phase of development on the continent.

Labour Regimes and Workplace Encounters between China and Africa

This chapter explores labour outcomes and dynamics for Chinese FDI and infrastructure contractors through their encounters with workers, states, and labour institutions in Africa. The chapter critically assesses the most popular claims about job creation and working conditions in Chinese firms in Africa and offers an alternative and more empirically nuanced view of the employment realities and dynamics in construction and industrial Chinese firms across Africa. The chapter questions claims of ‘Chinese exceptionalism’ in labour relations, and proposes a labour regime analysis to grasp the power of global capitalist forces, national political economy, and micro-level workplace processes to better understand labour relations in China as well as in Africa, in the sectors where Chinese firms are particularly present. This framework is deployed to illustrate the variation, diversity, and changes in labour regimes in China and among Chinese firms in Africa, and the key factors that drive such variations.

Catalysing China–Africa Ties for Africa’s Structural Transformation

Economic cooperation between China and Africa has deepened in scope and scale in recent times, and FOCAC has emerged as the largest South–South economic partnership platform. However, evidence suggests that the catalytic effect of China–Africa engagement on the economic transformation of African countries has been uneven, primarily shaped by the strategic response of the respective African countries. This chapter proposes that China–Africa economic ties should be examined from a structural transformation perspective to adequately evaluate the catalytic effect of Chinese engagement on the economic growth and diversification of African economies, the development of domestic capabilities, and lastly on Africa’s successful insertion into the globalized economy of the twenty-first century. Based on the experience of Ethiopia, the chapter unpacks the pathways to structural transformation in the African context, and the role of the state in guiding the economy through a proactive and strategic approach to economic transformation. The chapter concludes with pathways to the future.

China–Africa Ties in Historical Context

From Mao Zedong’s seizure of power in 1949 until the early 1990s, China focused more intensely on its political relationship with Africa than its economic ties. During this period China was more concerned about support for African liberation movements, competition with Taiwan, the ‘One China’ principle, and dealing with internal challenges such as the Great Leap Forward and the Cultural Revolution. The Deng Xiaoping era witnessed a reduction of China’s engagement in Africa while the Jiang Zemin period set the stage for significant advancement. By Hu Jintao’s arrival early in the twenty-first century, the China–Africa relationship had become based predominantly on economic interests, especially China’s desire to access African raw materials. It began with trade and expanded into Chinese outward investment in Africa. By 2009, China had overtaken the United States as Africa’s largest trading partner. So far, the Xi Jinping era has resulted in a greater focus on protection of Chinese interests in Africa, security cooperation, and a levelling off and even decline in China’s economic engagement.