Engagement with China is an important phenomenon for the African continent. Beyond the quantitative impact of growing aid, finance, trade and investment flows, this engagement may have significant qualitative impacts on African development, positive and negative. It is often alleged that the heavy role played by extractive industries in Africa‘s engagement with China will impede diversification. More generally it is stated that China‘s engagement in Africa could undermine African development, implying an adverse impact on aid effectiveness. However, too often such discussions are based on informed opinion, rather than on hard data and research results. This paper approaches these debates using as much as possible a quantified framework, in an attempt to go beyond the common wisdom. The issues addressed include aid effectiveness, trade creation, and diversification.

Chinese assistance (defined by the turnover of economic cooperation) has traditionally focused on countries with which it has good political relations and countries with oil and mineral resources. However, recent trends have seen some broadening of Chinese assistance. Chinese assistance has traditionally provided support for poverty reduction, has focused on sectors that have been relatively untouched by Africa‘s traditional development partners, and does not appear to have impaired debt sustainability. Thus Chinese assistance has overall played a positive role in supporting African development.

UN Comtrade data reveal that China‘s involvement in Africa has contributed to a sharp increase in Africa‘s trade and welfare, in part related to China‘s financial assistance. And so far, China‘s engagement with Africa has not affected African economic diversification, although China‘s support for special economic zones and tariff preferences may help increase African diversification.

The rest of the paper is organized as follows. The next section provides a brief review of China‘s past engagement in Africa, based on the existing literature and on data describing stylised facts on China-Africa trade, FDI and aid flows. The third section considers the debate over the effectiveness of China‘s development assistance. The fourth section examines trade, FDI and diversification in detail. And the final section considers the way forward in the context of the global financial crisis.

*  The 36 page report, written by Jean Claude Berthelemy, can be accessed here.