China and India, the ‘Emerging Giants,’ and African economic prospects

By Sumit Roy - 06 July 2012

China and India, coined as the ‘Emerging Giants’, are major Asian players in a globalising world. Both powers are forging relationships with diverse regions to pursue their strategic interests. In this context, this essay unfolds key facets of the growing, but controversial ties, between the two nations and Africa; ties which are underpinned by flows of trade and investment. It argues that despite the persistence of historical (colonial) biases in exchange tilted against Africa, there remains the potential to induce structural economic changes that could address current imbalances. This requires African states to bolster their bargaining prowess to tackle challenges stemming from the relationship.

Policy Implications

  • African states should ensure that they use their ties with China and India to break away from historical (colonial) biases in trade and investment, and shift towards sectors, industries, and services which can stimulate domestic and external diversification and structural transformation.
  • Africa’s trade and investment ties with China and India reveal:
  1. in the short term, Africa should use its increased income from ‘booms’ in ‘traditional’ exports (eg, commodities and minerals) to invest in basic needs and   infrastructure, and enhance its industrial and technological capacity. This can safeguard Africa from fluctuations in prices and demand in the world market for ‘traditional’ exports, while helping to build its economic capacity and take advantage of shifts in future world demand towards manufactured goods and new services.
  2. the urgency of removing trade barriers in Asia to boost exports of African processed goods and infant industries. This could stimulate the growth of such sectors and those which supply inputs to them, thereby enhancing the prospects of structural change
  3. the scope in the medium and long term of shifts in the nature of Asian investment in Africa towards new industries and sectors (e.g. agro-industries, SME’s, pharmaceuticals, textiles, IT, banking and retail) offers the chance of accelerating diversification and moving from an agricultural to a more industrial and technology-based economy
  • African states have to bolster their bargaining strategies vis-a-vis China and India to minimise the risks and harness unique medium and long term opportunities through using national, regional, and international institutions, and ushering in economic development.