Earlier this month, Chinese leader Xi Jinping told 51 African leaders that relations between China and the continent were “the best in history.” Indeed, at the China-Africa summit, Beijing (even if the accounting was creative) raised $50.7 billion (in renminbi equivalent) in aid and investment, including new education, trade, and security assistance, as well as Established exchanges between countries. China also upgraded its relationship with Africa to “strategic” and “all-weather” status, claiming it would be a “common future in a new era.”
Behind China’s growth is a proposal for a new world order to replace the Western-led rules-based order, which seeks to redefine global governance on China-friendly terms.
Africa’s strategic interests, on the other hand, lie in competing in the geopolitical arena with all suitors. But the Chinese government most successfully charmed the mainland by touting its own miracle of economic development as a template. China offers itself as an alternative development partner that African countries need, pointing out its rapid rise and how it has achieved this without relying on Western development models or much Western aid. There is. This is a winning message as African governments prioritize the continent’s economic development above all else.
Elements of China’s economic approach are unfairly hurting African economies, even as Beijing touts its model and partnerships as a ticket to Africa’s development.
But despite Beijing touting its model and partnerships as a ticket to Africa’s development, elements of China’s economic approach are unfairly hurting African economies. The main reason is China’s excess production capacity. Simply put, China’s economy currently compensates for low domestic consumption by relying on the rest of the world as a market. This allows China to maintain a huge production system with excessive subsidies while maintaining a small amount of domestic consumption. This overcapacity has flooded the international market with Chinese-made products, creating various challenges for different economies. For Western economies, China’s overproduction of high-value-added goods is creating dependence and threatening some European industries. Consider how cheap solar power and bargain-priced electric cars are crowding out similar manufacturers in Europe. Meanwhile, developing countries in Africa are benefiting from these products. They haven’t made the product yet, so there’s no competition.
But overcapacity poses a problem for African economies, as Chinese economic planners want to play at both ends of the value-add spectrum. China’s 14th Five-Year Plan also explicitly calls for maintaining low-end manufacturing, rather than following the traditional “wild geese” economic trajectory of rising from low to high value-added production. Concerns about political dissatisfaction in rural areas where these industries are important for employment are likely influencing these decisions.
Therefore, as African economies seek to expand low-value-added production to step up the development ladder, they will have to contend with China as a competitor in Africa’s consumer market. Traditional economic development models usually favor Africa in this area because of cheap labor. However, China’s subsidized production makes its prices prohibitive, negating the advantage of Africa’s cheap labor. It floods African consumer markets with cheap textiles, clothing and other low-cost products, meeting demand at a price point lower than almost all local production. Chinese production therefore poses a major obstacle for Africa to follow in the former’s footsteps as the next “factory of the world.”
At the summit, the Chinese government acknowledged these concerns. China has made overtures to smooth trade imbalances with Africa and help the continent climb the value-added ladder. However, China withdrew its previous commitment to import $300 billion worth of African goods at the 2021 summit. Instead, China proposed eliminating tariffs on 33 of Africa’s least developed countries, a symbolic move with little prospect of these countries producing industrial goods. For export to China.
Entering the European economy
European economies are facing the flip side of the Chinese coin for African economies. China’s excess production capacity at the low-value production end risks hindering Africa’s economic development. At the same time, European economies are at risk of over-reliance on cheap critical goods and weakening domestic industry, and are suffering from China’s overcapacity.
Regarding the first issue, European policymakers can remind African policymakers of the macroeconomic mismatch between China and Africa. Europeans would then have a clear advantage. Unlike China, European economies have long abandoned their ambitions for low-value-added production. African countries will never be competitors in this area, but Europeans could be potential consumers.
But Europe, one rung up the value-added ladder, has another opportunity. European countries have already begun to reduce imports of Chinese industrial inputs through European environmental policies such as the Carbon Border Adjustment Mechanism, which imposes tariffs on products such as Chinese steel. Once again, China threatens the more developed African economies. Following India, South Africa recently imposed tariffs on Chinese steel to protect the local industry. The trajectory created by European and African measures to restrict imports from China could further create European market demand for African alternatives. The geoeconomic security argument for European nearshoring further strengthens this argument. This strong rationale could encourage European investment in African capabilities. This is a welcome move, as Africa faces serious structural obstacles in this area, including insufficient energy production.
At the high-value end, a third option for African-European cooperation emerges. In a break from Western strategy, South Africa recently imposed tariffs on solar panels and warned against high-value Chinese imports to give its own solar panel industry a fighting chance. The opportunity here lies in jointly tackling China’s overcapacity, rather than moving European production to Africa, as European countries aim to maintain and improve their own production capacity in this sector.
As European and African concerns about China’s overcapacity converge, European policymakers should work with their African counterparts to jointly address this challenge. This could pave the way for a common position, killing two birds with one stone by opening up new areas of economic cooperation between Africa and Europe, while creating a broader front to counter China’s overcapacity. . To take advantage of this opportunity, European policymakers simply need to connect the macroeconomic dots.
The European Council on Foreign Relations does not take collective positions. ECFR publications represent only the views of the individual authors.
