Chinese capital and economic transformation in Africa: what has changed after Covid-19?

Abstract

Chinese capital plays a role in supporting economic transformation in Africa. This briefing analyses how various forms of Chinese capital (trade, investment, infrastructure lending and construction) foster positive transitions or reinforce existing patterns. Trade, in particular exports of Chinese equipment and machinery, has enabled African manufacturing development; but in some cases, imports from China have contributed to deindustrialisation. Chinese foreign direct investment has contributed to the development of modern sectors like manufacturing and information communication technology, although flows have declined since the Covid-19 pandemic. Chinese-financed infrastructure has alleviated bottlenecks and contributed to boosting the construction and manufacturing sectors. However, not all Chinese-financed infrastructure has been transformative, and the landscape of Chinese lending has shifted towards emergency and commercially oriented loans with potentially less transformative impact. Following the pandemic, Chinese capital can still be leveraged for transformative development, but the overall prospects for significant economic transformation driven by this engagement appear limited, underscoring the critical importance of strategic vision from African governments.