Trying to Turn Gold into Lead: Mislabeling Chinese-American FDI in Africa

The first US-Africa summit took place in August. It afforded the US an opportunity to show it was not completely distracted by events in Gaza and Ukraine. It also gave US businesses, encouraged by US President Barack Obama, a chance to strike deals with giants like Coca-Cola, General Electric, and IBM and investors like Blackstone pouring $14 billion into Africa. Not surprisingly, Western media seized upon the summit to raise the issue about the US-China competition in Africa (even Chinese media jumped on this bandwagon) and whether or not the summit showed the US was catching up.

While Chinese African investments substantially exceed American ones, it is open to debate how much the US really needs to “catch up” given the major presence of American investors in countries such as Angola, Kenya, and Nigeria. Moreover, China’s massive resource dealings with Africa are as much a sign of weakness as strength. While it would be wrong to deny China’s significant presence in Africa concerns the US, American businesses and the US government also are attracted by the potential for economic gain (as Obama’s recent Air Force One Economist interview makes clear). Another problem with using the “competition” label is that this is not a zero-sum game: Chinese resource development, infrastructure building, and aid giving/lending can create a better operating environment for American companies. The reverse also holds true. Finally, influential American and Chinese voices accept “others” are welcome. Stepping out of character, Beijing has taken the lead in proposing Chinese-US collaboration in Africa in areas like infrastructure. The good news is that Washington is seriously entertaining its proposal. This would be good for African countries, foreign firms (who need a more stable political environment and risk sharing opportunities), and various Chinese and American politico-economic interests. Foreign MNCs should support such collaboration.