China’s Belt and Road Initiative and African Industrialisation

 

The art blurb would now read as follows: "The artworks in this issue depict aspects of the China-Africa relationship over the last half century. Three images that appear in the publication are paintings from the 2017 exhibition, ‘From “Tazara Railway” to the “Addis Ababa-Djibouti Railway”’, organised by the China National Arts Fund. Meanwhile, Guo Hongwu's (郭宏武) poster reminds us of the long history of solidarity between Chinese and African peoples, in which national development has been central to national sovereignty.

Tang Xiaoyang

Tang Xiaoyang (唐晓阳) is the chair and a professor in the Department of International Relations at Tsinghua University. His research interests include political philosophy, the global modernisation process, and China’s engagement with developing countries. He is the author of Coevolutionary Pragmatism: Approaches and Impacts of China-Africa Economic Cooperation (Cambridge University Press, 2020) and has published extensively on the Belt and Road Initiative. He has previously worked as a consultant for the World Bank, the United Nations Development Programme, and the United States Agency for International Development.

‘China’s Belt and Road Initiative and African Industrialisation’ (激活非洲工业化：“一带一路”能带来什么) was originally published in Wenhua Zongheng (文化纵横), issue no. 4 (August 2022).

Governments across Africa have long reached a consensus: ‘industrialisation is the essence of development’.¹ Over the past half-century, African nations continuously pursued industrialisation, embarking on various paths to develop their own industrial sectors. However, neither the industrial policies of the 1960s and 1970s that emphasised self-reliance and import substitution, nor the structural adjustment programmes adopted in subsequent decades, characterised by market liberalisation and pushed by Western countries, have been able to help Africa achieve sustainable industrial growth and transformation. In the twenty-first century, African countries have redesigned their paths to industrialisation and development. Across the continent, governments have become more unified in their thinking, formulating the ambitious New Partnership for Africa’s Development (2001) and the Action Plan for the Accelerated Industrial Development of Africa (2007). However, the aims of these initiatives have yet to be realised. Although the absolute output value of manufacturing across sub-Saharan Africa has generally grown each year for the past two decades, the rate of growth has been slow, and consequently, the share of manufacturing in gross domestic product (GDP) has decreased (Figure 1).

Figure 1: The share of manufacturing value added as a percentage of sub-Saharan Africa’s GDP from 1971 to 2018. Source: World Bank.

The biggest challenge to industrialisation in Africa lies in the difficulty of integrating various elements into a system. Early on in the industrial revolution of the eighteenth century, the economist Adam Smith observed that the high productivity of industrialisation was mainly derived from the division of labour and collaboration, and the use of machinery in multi-step production processes to perform extremely simple actions in a highly efficient manner.² This basic pattern is still applicable to manufacturing today, except that the depth and breadth of the division of labour and collaboration far exceeds that of the past. Today, the manufacture of any product – whether it is pins, shoes, hats, computers, or cars – requires a range of businesses and factories to cooperate with each other. The industrial chain contains many links related to the raw materials, tools and machinery, design, parts and accessories, approval of finished products, packaging, and sales; an individual enterprise may only be responsible for one or a few of these links, specialising to win market competition in a narrow area. Within each enterprise, the production process is also highly segmented: a production line often has hundreds of component processes, in which hundreds or thousands of workers operate simultaneously and a large number of machines and equipment are used. The closely interconnected system of modern industry requires every related party to complete their respective tasks in a precise and timely manner. Any absence or delay caused by any entity, individual, or even machine part in the production chain may disrupt the smooth operation of the entire manufacturing system. On top of this, the massive exchange and flow of materials requires large amounts of infrastructure and integrated management capabilities. Therefore, the development of modern industry cannot rely solely on individual enterprises or sectors, but depends on a country’s comprehensive production and circulation capabilities.

Historically, African countries have long been marginalised in the global economy, serving as a source of raw materials for Europe and North America. Most countries on the continent do not have a complete industrial sector and existing factories often have to import a large amount of machinery and parts from abroad. Local power and water supplies and infrastructure are often limited and unable to meet the needs of large-scale production. Meanwhile, poor and dilapidated transportation facilities, administrative inefficiencies, and political and geographical complexities often result in poor material exchange and circulation both within Africa and between the continent and other regions. Finally, due to a lack of practical experience and systematic training, there are deficiencies in the professional and technical skills of workers as well as the coordination and organisational capabilities of managers. These factors have constrained the deepening of the interconnected division of labour on the continent at multiple levels, and over time, the gap between African industrial development and that of other regions of the world has grown increasingly large.

How Has the Belt and Road Initiative Promoted Industrialisation in Africa

Most African economies still primarily depend upon traditional small-scale agriculture, relying on subsistence production. Only by advancing highly specialised and professionalised industrial production, coupled with appropriate market reforms, can productivity be significantly and sustainably improved. For a long time, China’s economy was also largely agricultural and experienced many hardships on the path to national industrial development. Since the launch of reform and opening up in the late 1970s, China has achieved explosive industrial growth, becoming the ‘world’s factory’. China’s successful experience in industrialisation has aroused great interest around the world, including among African countries. For China, this continuous industrial growth has further boosted the country’s demand for resources, labour, and markets. In the context of saturated European and North American markets as well as intense domestic competition, it is urgent for China to find new partners for cooperation and new opportunities for growth. Given the common interests and aspirations of China and other developing countries in pursuing industrial development, the Belt and Road Initiative (BRI) identifies industrial capacity as an important area for mutually beneficial cooperation. In this vein, the Forum on China-Africa Cooperation (FOCAC) has always emphasised industrialisation and industrial cooperation in its action plans. China’s industrial capacity cooperation with African countries has focused on three main aspects.

1. The construction of industrial parks. Given the generally low industrial level of African countries, there is an overall shortage of factors of production. To ensure that large-scale industrial production operates in a rapid and smooth manner, in some countries Chinese companies have invested in the construction of local industrial parks, introducing firms both upstream and downstream in the industrial chain for vertical collaboration, constructing basic infrastructure, and providing basic services to promote the formation of regional industrial clusters of interconnected firms, suppliers, and institutions. For example, in 2007, China Nonferrous Metal Mining Group (CNMC), a state-owned enterprise (SOE), established the Zambia-China Economic and Trade Cooperation Zone (ZCCZ) in Chambishi, Zambia, for deep processing of natural resources mined locally. The companies operating in the economic zone are mostly CNMC subsidiaries, covering various steps along the industrial chain of copper and cobalt resources, including mining, smelting, and processing. There are also several Chinese private enterprises and local Zambian private enterprises that have provided supporting services such as machine repair and logistics.³ This industrial park project has contributed to Zambia’s efforts to progress from simple resource mining and gradually ascend to higher value-added processing activities. In 2009, the ZCCZ launched a sub-zone on the outskirts of Zambia’s capital, Lusaka, clustering light industrial enterprises in food processing, brewing, and plastic products, among other sectors, based on the character of the urban economy. While there is no direct commercial connection between the companies in the sub-zone, the services provided by the zone (such as water, electricity, transport, and security) have decreased the cost of building a factory and greatly shortened the investment cycle (for example, without the services provided by the sub-zone, the application process for the industrial use of electricity alone could take several years). Small and medium-sized enterprises lacking international experience and large amounts of capital can also exchange information, saving a great deal in costs they would have incurred due to their inexperience and benefiting from strength in numbers.

2. The synergy of infrastructure construction and industrial investment. China is a global leader in both manufacturing and construction industries, and Chinese enterprises accounted for 61.9 percent of the entire African construction market in 2019.⁴ Chinese infrastructure construction provides necessary facilities in various sectors in Africa, such as energy and transportation, aiding industrial development. To play a sustainable role on the continent, these infrastructure projects must be combined with industrialisation. The main challenges for infrastructure construction in Africa are the large-scale investments required and the long-term horizons for repayment. In developing countries, sometimes the revenues generated by infrastructure projects are insufficient to maintain the operation of the facilities. In view of this, China and African countries have jointly planned industrial projects interconnected with infrastructure projects to improve the utility and return on these endeavours. Taking the Addis Ababa-Djibouti Railway as an example, in 2016, the Chinese government guided its enterprises to ‘combine large-scale infrastructure construction with industrial park and special economic zone development, striving to build an industrial belt along the railway for a harmonious interaction between large-scale infrastructure and industrial development’.⁵ Chinese private enterprises had already built two industrial parks near the Ethiopian capital of Addis Ababa but in recent years SOEs have played an important role. China Civil Engineering Construction Corporation has signed agreements with Ethiopia to build a series of industrial parks along the Addis Ababa-Djibouti Railway in Hawassa, Dire Dawa, Kombolcha, and Adama to make full use of the railway’s capacity. In addition, the state-owned China Merchants Group has participated in the construction of the Port of Doraleh, aiming to significantly enhance the port’s throughput capacity to cope with the increased cargo volume of the new railway. Similarly, to support the long-term development along the Mombasa-Nairobi Railway, China and Kenya have signed an agreement to upgrade the Mombasa port and establish a special economic zone near the port.

3. China’s industrial investment in Africa focuses on production that is suitable for local markets, and thus better synergised with local development and generating sustained momentum for industrialisation. Some economists have predicted that Africa will follow Asian countries in attracting global labour-intensive manufacturing, due to its lower labour costs, and embark on an export-led path to industrial development.⁶ However, in practice, African industries rely on imports for many inputs, such as raw materials, components, and spare parts. Without a developed ecosystem of suppliers and service providers, African factories face chronic issues, including administrative delays, traffic congestion, poor logistics, and unstable currency exchange rates, making the quality and timeliness of orders difficult to guarantee.⁷ In contrast, in Asia, there is a comprehensive and mature industrial network centred on Japan and China. Other countries in the region can find their own comparative advantages in this system and leverage their low labour costs to undertake industrial transfers. Due to the geographical distance, it is difficult for African countries to become integrated into Asia’s industrial network. Merely reducing production costs cannot compensate for the lack of support in other aspects, and foreign firms aiming to transfer production to the continent have only been able to maintain smaller scale operations in Eastern and Southern Africa that are difficult to expand.⁸

Rather than pursuing export-led models, the industrial enterprises that have established a foothold for long-term operations in Africa and that are driving local enterprises to grow together, are mainly focusing on the domestic markets of African countries. Their production, supply, marketing, and sales are all rooted in the African continent. For example, Sun Jian (孙坚), a businessman from Wenzhou, China, toured Nigeria in 2010 and found that a large number of ceramic products in the country were imported from abroad. Sun saw a commercial opportunity. Because ceramics are heavy and fragile, they are not conducive to transportation; if they could be produced locally, the manufacturer would have a great advantage in the market. Sun quickly set up the Wangkang Ceramic Factory in Nigeria with $40 million, and the tiles produced were immediately popular among local consumers and quickly became short in supply.⁹ Over the past decade, the company has set up five large tile factories in Nigeria, Ghana, Tanzania, and Uganda, accounting for 25 percent of Africa’s ceramic tile production capacity. This example shows how industrial development can take place by closely examining the African market and identifying niche areas. Multinational companies often overlook the African market and rarely pay attention to the specific needs and interests of local consumers, with products exported to Africa often overpriced and outdated. Through closer economic and trade relations with African countries, Chinese companies have developed a keener awareness of the African market and spotted new trends. Chinese firms have set up factories locally to manufacture everyday products such as building materials, furniture, plastics, food, medicine, clothing, and footwear. Local production not only significantly reduces transport costs but also ensures that products are targeted and responsive to changing consumer preferences and market trends. These locally manufactured products have not replaced existing imports but filled gaps in the market.

Chinese enterprises can better understand African markets and seize industrial opportunities for two reasons: first, the many years of economic cooperation between China and Africa and, second, China’s strong industrial system. The founder of Wangkang did not originally engage in the ceramics industry, but when he spotted the business opportunity he quickly contacted suppliers of ceramic production equipment in China and was able to assemble production lines in Africa within a few months. Wangkang was able to rely on Chinese firms for installation, debugging, training, and maintenance services. China is the only country in the world that is home to all of the categories listed in the United Nations’ International Standard Industrial Classification of All Economic Activities, covering both high-precision technologies and traditional low-end industries.¹⁰ Due to the unstable power supplies and maintenance difficulties on the African continent, many newer types of precision machinery from Europe and the United States are not the best suited for use in African manufacturing. In contrast, some basic equipment made in China functions well in this environment, as well as being economical and durable. Industrial investments in the African market can use China’s comprehensive industrial system to provide strong support services for production activities in Africa. These factories obtain the main raw materials locally and sell their products on the local market, gradually forming an initial system of industrial production and circulation. Although these industries start small, they can drive the comprehensive cyclical development and are a more sustainable pathway to industrialisation.

This is exemplified by the rise of the local plastic recycling industry in Ghana. Initially, a company from China’s Fujian province began collecting the packaging discarded by locals after drinking bagged water, which could be processed and sold as plastic shopping bags. Although the work was difficult and tiring, the company was quite profitable because there was almost no competition. This news soon attracted many followers. Initially, more than ten Chinese companies followed suit, followed by local companies. Through their Chinese partners, these firms found machine and equipment suppliers and also entered this field. In the first six or seven years, the new entrants did not engage in fierce competition, but instead, worked together to increase the size of the industry ‘cake’ (把行业蛋糕做大, bǎ hángyè dàngāo zuòdà). The geographic range for recycling gradually expanded from the capital of Accra to the whole country and divisions developed in the industrial chain. Local companies are more familiar with the social environment, can better locate the dumping sites of discarded packaging, and have focused more on upstream recycling and primary processing, employing hundreds of waste collectors. Chinese companies have a better understanding of the machinery and production, and have increasingly invested in high-tech, back-end processing. In addition, many Chinese and Ghanaian companies have set their sights on other types of plastic recycling and processing. By identifying market opportunities, Chinese and Ghanaian firms have driven the development of an entire plastic recycling and processing chain and industrial cluster in Ghana.¹¹

Challenges and Solutions in Sino-African Industrial Cooperation

Relying on a unique model of collaboration and complementary economic structures, Sino-African industrial cooperation has made important achievements in the first two decades of the twenty-first century. Across the African continent, thousands of Chinese enterprises have invested in or co-built dozens of industrial parks, employing large numbers of local workers and driving the growth of related suppliers, service providers, and downstream businesses.¹² China has established six national-level economic and trade cooperation zones in countries such as Egypt, Zambia, Nigeria, Mauritius, and Ethiopia, attracting over 300 enterprises and employing more than 30,000 local workers.¹³ However, long-term challenges remain in Africa’s pursuit of industrialisation, which pose a serious challenge to the sustainable growth of Sino-African industrial cooperation.

As discussed earlier, the key challenge in African industrialisation relates to the lack of systematic cooperation. Sino-African cooperation has made progress in resolving some coordination problems through the construction of infrastructure and industrial parks, the setting up of supply chains, and the connecting of markets. However, further industrial development will require far more than the supply of equipment or building of factories. To industrialise, developing countries must undergo a sea change in social structures and ideology. In each country or region, this process will be different, depending on local histories, cultures, and customs. For its part, when partnering with African countries, China must proceed with an understanding of local conditions and complexities. Chinese enterprises must appropriately navigate contradictions and conflicts that arise with local workers, indigenous communities, business partners, and governmental bodies. This will be particularly important as international tensions rise and foreign political forces attempt to inflame disputes and weaponise them for their own agendas.

Swedish economist and Nobel laureate Gunnar Myrdal pointed out, as early as the 1970s, that socio-economic systems have self-reinforcing characteristics. Due to social inertia, non-industrialised countries face a much greater difficulty in transitioning to industrial societies than developed countries face in continuing industrial development. A number of political, economic, social, and cultural factors work to keep these countries in a low-level equilibrium state.¹⁴ Singaporean-American economist Yuen Yuen Ang has argued that there is a ‘fundamental problem’ in development, in that a country’s economic prosperity often requires strong institutional support, ‘yet attaining these preconditions also appears to depend on the level of economic wealth’.¹⁵ This creates a ‘chicken-or-egg’ dilemma: many developing countries lack the resources to improve their institutional environment and, consequently, are unable to realise long-term, sustainable industrial development; in turn, the economy further declines and the institutional environment further deteriorates.

Overcoming this cyclical dilemma is essential to African industrialisation as well as the long-term success of Sino-African cooperation. To reverse this vicious cycle, it is necessary to simultaneously improve both the ‘chicken’ and ‘egg’ – that is, economic growth and institutional development – and promote a mutually reinforcing cycle. Only when all parties in the process of industrialisation are striving towards the same goal of promoting the sustainable growth of productivity can synergies form. However, this type of cooperation is difficult to achieve in practice. In the pursuit of industrialisation, most members of society are not oriented towards the long-term growth in productivity, but can only see local activities and pursue short-term benefits, and thus deviate from the overall goal. Determining how to promote widespread recognition of and commitment to industrialisation by all parties in society is an important issue for African countries to resolve to break past limitations and achieve continuous progress.

One of the major challenges in Sino-African economic and trade cooperation concerns the differences in perspectives and goals of various parties.¹⁶ The Tanzania-China Friendship Textile Company jointly operated by China and Tanzania is an illustrative example. The primary goals of the Chinese managers, on the one hand, are to improve enterprise productivity and profits; the Tanzanian managers appointed by the local government, on the other hand, are not only concerned with operational efficiency, but also with generating employment and tax revenue, as well as increasing purchases of locally-produced cotton.¹⁷ Similarly, in the construction of infrastructure and industrial parks, there are often differences in the goals of all the parties involved: for instance, Chinese companies aim to increase their profits, Chinese government officials seek to improve bilateral political relations, African government officials are concerned with fiscal revenues and employment opportunities, while local populations hope that projects are beneficial to their livelihoods and communities. Although these various goals are interrelated and compatible in many ways, differing priorities can lead to disagreements and conflicts. To reach consensus and synergise efforts, all parties must make appropriate adjustments to prioritise the larger goal of industrialisation over their respective individual goals, to find common ground while respecting differences, and to achieve mutually beneficial, ‘win-win’ results for all.

A similar process of adaptation to and integration of different perspectives has also occurred during the course of China’s reforms. At various times over the past four decades, the state has had to manage different tendencies in society, including conservatism, protectionism, and liberalism, through theoretical guidance and administrative management, and ultimately unify various sectors to strive for industrial development. The challenge in Sino-African international cooperation is that it includes multiple states, each with their own system of governance, and matters cannot be resolved through centralised leadership. The only path for cooperation is through equal-footed exchanges. In this regard, Sino-African partners should adhere to the progressive spirit of ‘crossing the river by feeling the stones’ (摸着石头过河, mōzhe shítou guòhé), in which they emphasise robust communication, a willingness to adjust and compromise, mutual understanding, and consensus. In the aforementioned example of the Tanzania-China Friendship Textile Company, the Chinese side respects Tanzanian interests and traditions, retains a large number of long-tenured employees, and actively dialogues with union organisations, while highlighting the market nature of the enterprise, introducing the piece-rate bonus system, and identifying areas to improve productivity.¹⁸ Similarly, in industrial park and infrastructure projects, Sino-African cooperation learns from China’s own rapid economic development in the past forty years but is not confined to a fixed mold, and is guided by a ‘win-win’ principle in the pursuit of long-term, sustainable economic growth, considering the needs of broader numbers of parties and willing to sacrifice some short-term commercial profits for broader political and social interests.¹⁹

Of course, the exchange of ideas will not always lead cooperating parties to reach a mutual understanding. But in the long run, such exchanges are essential and are the most effective method to ensure the continuous and in-depth development of Sino-African cooperation. Ultimately, African industrialisation will only be realised by internal driving forces. This is a point emphasised by China in its partnership with African countries, based on its own development experience, and is an approach that differs greatly from Western countries.

The Character and Significance of the Sino-African Relationship

The West tends to take a condescending posture towards African development and industrialisation. Whether in its role as colonial ruler, suzerain, or donor, Western developed countries have often judged African countries according to their own political and economic systems, criticised Africa as ‘backwards’, and imposed their own models on the continent. For instance, in the era of the Washington Consensus, the United States and European countries often used coercive methods such as withholding aid and enacting sanctions to force African countries to implement Western free-market economic policies. Consequently, the Western approach not only has failed to integrate organically into African societies but has also promoted division and unrest, setting back African efforts to achieve comprehensive and sustainable industrial transformation.

In its own history and development, China has experienced similar external pressures and setbacks as African countries. Through its own exploration, China has found an effective path to industrialisation. Therefore, China has a different perspective and understanding than the West when it comes to the contradictions, challenges, and complexities faced by developing countries in the pursuit of industrialisation. In its relations with African countries, China emphasises the importance of economic development and the continuous growth of productivity. While constantly pursuing its own industrial upgrading and growth, China also hopes to promote common development with Africa, to escape poverty and underdevelopment, and no longer be controlled and oppressed by the West. To this end, China cooperates with African countries around the goal of improving productivity. It holds an open-minded and pragmatic attitude towards how African countries pursue economic transformation in their various, unique national conditions. Instead of imposing any policy on the African continent, China encourages each country to follow its own path of development and to not blindly follow any model. The BRI, which promotes infrastructure connectivity, trade, financial integration, complementary policies, and people-to-people exchanges, is guided by the principles of collaborative development and national sovereignty.

The unique approach of Sino-African industrial cooperation is not only necessary for economic growth, it is also guided by profound political thinking. In its cooperation with African countries, China, while emphasising economic development and market efficiency, does not ignore the political domain. China’s emphasis on productivity comes from its own practical experience in struggling against the domination of Western powers: only with a market economy and industrial development has the country been able to resist foreign influence and interference. This orientation is also consistent with China’s longstanding policy of supporting the independence and sovereignty of African countries and opposing Western hegemonism. In the contemporary period, international political support is more effective and sustainable through economic means. At the same time, the emphasis on equal exchange in Sino-African cooperation is not purely a political posture, but is guided by the fact that long-term cooperation and communication is necessary for the establishment of a new global market and industrial system that breaks free of the historic ‘chicken-or-egg’ vicious cycle.

As African countries advance on their paths to industrialisation, different social strata will be affected in drastically different ways and will have starkly different feelings and views about economic reforms. This is both a severe challenge and historic opportunity for Sino-African industrial cooperation. As Chinese infrastructure, industrial facilities, and other projects continue to develop in Africa, both sides will deepen their mutual understanding and integration through practice. From both an economic and political perspective, China and Africa share the same overall goal of promoting industrialisation and, therefore, can overcome temporary barriers and setbacks through communication and adjustment. In this gradual process, rich and extensive cooperation at multiple levels can help China and Africa build a closer and deeper connection and consensus.

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