The impact of China’s trade and investment on the economic development in resources-rich developing countries (RRDCs) and non-resources-rich developing countries (Non-RRDCs) in Africa: a comparative study of Angola and Rwanda

Abstract

Abstract The emergence of the People’s Republic of China (hereafter, China) as a significant economic powerhouse in the last decade has restarted intense and ongoing discussions about China’s foreign policy objectives. Sino-African relations, especially, have gained considerable prominence in the last two decades, as it has been a broadly discussed subject globally. Despite the significance of this intriguing subject, empirical research that examines the impact and effect of China’s rapidly growing trade and investment on economic development outcomes on its trading partner countries in Africa is limited. This thesis examines China’s trade and investment presence in resources-rich developing countries (RRDCs) and non-resources-rich developing countries (non RRDCs) with a particular focus on two African countries, resources-rich Angola and non-resources-rich Rwanda. The central purpose of the thesis is to study how far, and in what ways, China’s foreign direct investment (FDI) affects economic and human development in terms of the creation of employment and the transfer of skills and technology. These elements are important for local capacity building, increase in productivity and the overall economic development of these countries. The study, thus, attempts to make a contribution to the ongoing academic debate on the rise of China and its developmental impact on Africa. In doing so, the context and background of the study has been established by reviewing the existing literature. Three relevant theories of international political economy (IEP), economic nationalism and dependency theory have been identified as the theoretical basis for analysing the complex relationship between China and Africa. A comparative case-study and mixed method approaches have been used in this study, accompanied by both qualitative and quantitative methods of data gathering, with most data collected from independent and credible sources including the World Bank, United Nations Conference on Trade and Development (UNCTAD), Ministry of Commerce of the People’s Republic of China (MOFOCM), government reports and official documents, published books and academic journals. I argue that China’s increasing trade, FDI inflow and influence on the economic growth and development of Angola and Rwanda have resulted in a long-term negative impact in their development outcomes and capacity building for future self-reliance. Angola and Rwanda have been selected for this cross-national comparison due to the recent increase in their economic collaboration with China. These countries were selected based on their different levels of economic development and resources, institutions, size of their economies, trade and FDI volume with China and the GDP growth rate. These factors made significantly interesting variables for the comparative examination. Although Africa, and the two case-countries in particular, have received a large volume of trade and FDI from China in the period following the launch of the Forum on China-Africa Cooperation, (FOCAC), the results suggest that China’s trade and investment has resulted in negative outcomes in Angola and Rwanda. The findings not only fill a significant gap in the literature but also challenge the claims that Chinese investment is a win-win for Africa and that all African states benefit from their engagement with China. One of the major findings of this study is that China has replaced the Western form of dependency with a new dependency of similar structure. It is argued that China’s FDI contribution to the stable creation of employment and the transfer of skills and technology is limited. The flood of cheap Chinese products has been instrumental in increasing unemployment, particularly in Angola. Local manufacturers and retailers have been displaced and consequently their very survival is in jeopardy. China has established economic relationships with the two countries because it is in China’s best interests. Unless a relationship to maximize their benefits is forged from the Rwandan and Angolan side, the economic dependence of these two countries on China will continue to increase. The thesis, therefore, concludes that the understanding of the rising role of China in Africa is a critical part of the current international political economy. The size of China’s economic activities indicates that it is likely to have a significant role to play in shaping Africa’s economic and political situation in the years to come.