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JULY 2024
by Prof Assi J.C. Kimou
Abstract
The Sino-African relationship is driven by China's political will to meet its economic growth needs through access to raw materials and expanding markets. This cooperation is mutually beneficial, offering African countries, including Côte d'Ivoire, opportunities to address infrastructure deficits and boost economic exchanges. Since 1983, Côte d'Ivoire has strengthened ties with China, focusing on development through South-South cooperation. Various agreements have been signed since 1984, and Côte d'Ivoire actively participates in the Forum on China-Africa Cooperation (FOCAC). China supports Côte d'Ivoire’s economic growth through grants, interest-free loans, and preferential loans via institutions like the China Eximbank. This support has financed significant projects, including infrastructure developments and the expansion of the Abidjan Seaport. China's foreign direct investments (FDIs) in Côte d'Ivoire have grown, with a focus on sectors like construction, mining, and manufacturing. Despite this growth, Chinese FDI remains lower compared to other foreign investors, such as France. Trade between China and Côte d'Ivoire has increased significantly since 2000, although Côte d'Ivoire maintains a trade deficit. Cultural and educational cooperation is also significant, with initiatives such as the Confucius Institute promoting Chinese language and culture in Côte d'Ivoire. Challenges in the Sino-Ivorian relationship include China's economic slowdown, potential debt risks from Chinese loans, and limited job creation due to imported skilled labour. To maximise benefits and mitigate risks, Côte d'Ivoire must diversify its economy, deepen regional exchanges, and stimulate domestic activity. This paper explores these dynamics, providing a comprehensive analysis of the opportunities and challenges in Sino-Ivorian relations.
Keywords: China-Africa Cooperation; Côte d'Ivoire Development; Foreign Direct Investment (FDI); Infrastructure Projects; Trade Balance
Introduction
The Sino-African relationship is primarily driven by a political will of the Chinese government to serve its own economic growth needs, promote restructuring, and improve its economy. In other words, China's interest lies in ensuring access to raw materials at competitive prices, given the abundance of these resources in Africa, as well as expanding markets for its exports and realising profitable investments. In return, China commits to meeting the financing needs of countries in difficulty and addressing their urgent infrastructure needs such as highways, buildings, airports, and others.
This cooperation thus becomes an opportunity for African countries to address their infrastructure deficit and boost their exchanges. In this regard, Côte d'Ivoire has directed its development efforts and strengthened its relations with China since 1983, after several years of privileged relations with the West, particularly with France. Indeed, Côte d'Ivoire aims to establish the foundations of its development through
South-South cooperation focused on sharing experiences and knowledge, technology transfer, and market opening.
To concretise this cooperation, various agreements and conventions have been signed between the two states since December 1984. At the multilateral level, Côte d'Ivoire has participated in all meetings organised within the framework of the Forum on China-Africa Cooperation. The Forum on China-Africa Cooperation (FOCAC), since its establishment in October 2000 in Beijing, serves as a dialogue platform allowing China and Africa to diversify exchange frameworks and enrich bilateral and multilateral cooperation, with the aim of institutionalising and strengthening the Sino-African partnership.
Despite the advantages of this cooperation for both Côte d'Ivoire and China, the Chinese presence seems to raise concerns for the Ivorian economy, as it does in other African countries. The recommendations of the African Union (AU) summit in Banjul in 2006 on the need for research institutions to conduct studies on the challenges and opportunities represented by China for Africa are a perfect illustration of this.
This paper will explore several crucial aspects of the relationship between China and Côte d'Ivoire. First, it will examine the development support that China provides to Côte d'Ivoire, highlighting assistance projects and economic cooperation between the two countries. Next, the paper will analyse China's foreign direct investments (FDIs) in Côte d'Ivoire, studying the key sectors affected by these investments. It will also look at the trade exchanges between China and Côte d'Ivoire, examining trade flows, exchanged products, and trade trends between the two nations. Additionally, the paper will address Sino-Ivorian cultural and educational cooperation, highlighting initiatives aimed at promoting cultural and educational exchanges between the two countries. Finally, it will discuss the current challenges and future prospects of the Sino-Ivorian relationship, examining potential obstacles as well as opportunities for growth and development ahead.
Support for China's development of Côte d'Ivoire
The economic relations between China and Africa are often approached through two main channels: aid and investment, in addition to trade exchanges. Chinese foreign aid, as described in the 2011 White Paper, currently consists of two components: altruistic actions such as grants, and interest-bearing loans. These Chinese loans are granted within the framework of bilateral economic cooperation agreements, often through the China Export-Import Bank (Exim Bank), established in 1994 to modernise China's foreign aid modalities. It plays a crucial role in financing companies operating abroad, facilitating imports and exports, and promoting international economic relations.
In Africa, China cooperates through various development projects, particularly in the fields of infrastructure, agriculture, and culture. According to several studies, China has significantly increased its assistance to African countries since the 2000s, benefiting from vast currency reserves that enable it to offer loans on favourable terms. Unlike international donors, China can quickly implement projects, signing agreements in as little as one year. By primarily using national institutions such as the China Eximbank and the China Development Bank, it has become Africa's main creditor.
Regarding Côte d'Ivoire, China has supported its path to economic growth since 1985 through loans and grants for various development projects. Three types of aid can be distinguished: long-term interest-free Chinese government loans, preferential loans at low-interest rates granted by the China Eximbank, and grants from the Chinese government, which do not require repayment (Ma & Zhou, 2021). Graphic 1 illustrates the dynamics of gross loans granted at concessional rates by the People's Republic of China, the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD), and France as a historical partner of Côte d'Ivoire. Our analysis of the dynamics is thus based on Official Development Assistance (ODA) in the form of loans.
Graphic 1: Concessional gross loans from the People’s Republic of China, the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD), and France (US Dollar)
Source: Author’s From OCDE and China Africa Research Initiatives Database
The total gross loans granted at concessional rates by the OECD's Development Assistance Committee, including France, amounted to US$1,775 million between 2010 and 2021. During the same period, China provided Official Development Assistance (ODA) in the form of loans totalling US$4,227.84 million, representing 70% of the total ODA mobilised by Côte d'Ivoire over the period. This amount is four times the value of ODA provided by France as a historical partner (excluding 2012, 2013, 2014). In terms of dynamics, China represents on average 61% of the concessional loans Côte d'Ivoire receives annually between 2010 and 2022.
The sectors benefitting from China's financing are a mix of traditional and non-traditional sectors according to estimates from the Global Development Policy Center at Boston University. These sectors include, in order of importance: transportation, environment, information and communication technologies (ICT), education, defense and military, water/sanitation/waste, trade, and services.
In Côte d'Ivoire, China has supported the realisation of several projects, including the construction of the Soubré hydroelectric dam, the construction of the Abidjan-Grand Bassam highway, the provision of drinking water to the city of Abidjan, the expansion of the Abidjan Seaport, and the rehabilitation of the national electricity network, with financing ranging from US$100 million to US$1 billion.
Figure 1: The Architecture of Chinese Aid
Source: Aurégan (2014)
Foreign Direct Investment from China to Côte d'Ivoire
Chinese foreign direct investments in West Africa have significantly increased in recent years, reflecting China's growing interest in this resource-rich region offering economic growth opportunities (see graphic 2). China has become one of the leading investors in many West African countries.
Graphic 2: Evolution of FDI from China to West Africa
Source: China Africa Research Initiatives Database
In Côte d'Ivoire, although state-owned enterprises with official representation are few, Chinese investments have a particular pattern. According to studies, these investments are a combination of public investments led by state-owned enterprises and private investments originating from Ivorian legal entities with Chinese capital.
Foreign direct investment inflows into Côte d'Ivoire have increased on average by 15.57% per year between 2012 and 2021. Compared to 2012, these FDI flows have quadrupled to reach US$1,392.44 million in 2021. FDI from China has experienced significant growth of 33.33%, rising from US$3.61 million in 2012 to US$64.17 million in 2021. However, compared to FDI from France, Chinese FDI is significantly lower in terms of level. These FDIs represent only 9% of the cumulative annual foreign direct investments over the period, compared to 24% for France.
Graphic 3: Evolution of FDI from China to Côte d'Ivoire (US Dollar)
Source: Author’s From OCDE and China Africa Research Initiatives Database
Chinese foreign direct investments primarily focus on five priority sectors. In order of importance, these sectors are construction, mining, manufacturing industry, scientific research, and technological services. It is interesting to note that the share of FDI allocated to the latter three sectors has remained relatively stable over time. With a diaspora estimated at over 2 500 individuals, Chinese investments in Côte d'Ivoire cover various economic sectors. Specifically, they are present in healthcare, construction, telecommunications, finance, advertising, tourism, import-export, trade, agriculture (including agricultural equipment and rubber), the fishing industry, the garment industry (especially shoes and textiles), as well as in dietary supplements.
Among the most significant investors is Huawei, a privately held company that has established its sub-regional headquarters in Abidjan, the Ivorian economic and financial centre. According to Aurégan (2014), Côte d'Ivoire hosts 92 Chinese-capital companies, with an estimated amount of €25 million over the period 2005-2011, as reported by the Center for the Promotion of Investment in Côte d'Ivoire (CEPICI). Abidjan, the economic capital of Côte d'Ivoire, hosts 95% of companies with Chinese capital, thus contributing to the economic polarisation of the southern region of the country and the geographical concentration of aid and public investment. These private enterprises are generally registered as limited liability companies (LLC or SARLU), although a few are joint-stock companies (SA). Approximately 69 companies have the status of LLC or SARLU, while 10 are SAs. The average share capital of these companies is around €34 000, although half of them have invested only the minimum required amount, which is €1524 (Aurégan, 2014).
Graphic 4: Chinese end of the year FDI Stock to Africa, top 5 sectors (US Dollar)
Source: China Africa Research Initiatives Database
The weight of China in foreign direct investments remained marginal compared to other foreign investors in 2022 [estimates from the Center for the Promotion of Investment in Côte d'Ivoire (CEPICI)]. Among the main partners of Côte d'Ivoire in terms of incoming FDI, Mauritius occupies the first place with an investment of XAF67 billion, followed by Singapore in second position with XAF63 billion. Lebanon, with an investment of XAF46 billion, ranks third, while France occupies the fourth place with an investment of XAF43 billion. China ranks only 13th with an investment of XAF14 billion.
China-Côte d'Ivoire trade
China has emerged as one of Africa's major trading partners, solidifying its position as an importer and exporter of African products (Nguena & Tsafack Nanfosso, 2014). It provides African countries with cheap manufactured goods, thereby reducing their reliance on traditional trading partners. By becoming a major importer of primary products, China has contributed to improving the terms of trade, which has been beneficial for sub-Saharan African countries that export raw materials. The strong demand for energy and minerals from China has boosted international commodity prices, thereby increasing the volume and value of African exports (Goldstein et al, 2006).
The observation is similar in West Africa. Indeed, graphic 5 highlights an increase in trade between China and West African countries. Consequently, these trade exchanges have strengthened economic ties between China and West African countries, offering an opportunity for countries to diversify their trading partners and develop their local production capacity. This is essential for promoting sustainable economic development.
Graphic 5: Evolution of trade patterns between Côte d'Ivoire and West Africa
Source: China Africa Research Initiatives
Trade between Côte d'Ivoire and the People's Republic of China was modest between 1992 and 1999. However, starting in the 2000s, these exchanges gained momentum. Ivorian exports to China increased from US$7.25 million in 2000 to US$970.22 million in 2022, representing an average annual growth of 25% over the period 2000-2022. At the same time, imports also recorded an average growth of 13.32% over the same period, rising from US$222.76 million in 2000 to US$3,490.90 million. This significant growth in imports and exports is indicative of a robust trade relationship between the two countries.
Graphic 6: Evolution of the structure of trade between Côte d'Ivoire and China (US Dollar)
Source: China Africa Research Initiatives
From 2000 to 2022, Côte d'Ivoire maintained a trade deficit. Although the coverage rate increased from 3.25% in 2000 to 28% in 2022, it remained well below 100%, indicating that the deficit remained significant throughout this period. This imbalance in the trade balance suggests that China enjoys greater competitive advantages than Côte d'Ivoire in their exchanges.
It should be noted that starting in 2016, China became Côte d'Ivoire's main supplier, with offers amounting to XAF1695.20 billion in 2023, compared to XAF1055.84 billion in 2019. Nigeria and France respectively occupy the second and third positions in 2023, with XAF1602.2 billion and XAF638.1 billion. However, China is not among Côte d'Ivoire's main customers during this period. Considering these observations, it is evident that China benefits from its exchanges with Côte d'Ivoire.
Graphic 7: Côte d'Ivoire’s Main Suppliers (in Billions of CFA francs)
Source: DGD/DSEE (General Directorate of Customs of Côte d'Ivoire)
Sino-Ivorian Cultural and Educational Cooperation
China deploys the concept of cooperation to promote its worldview in Africa, notably by establishing Confucius Institutes tasked with disseminating the language, culture, and political vision of the country worldwide. In this context, the Confucius Institute within Félix Houphouët-Boigny University in Abidjan plays a pivotal role by conducting various activities aimed at promoting the Chinese language, Chinese culture, and cultural exchanges between China and Côte d'Ivoire. These activities include Chinese language instruction, the promotion of Chinese culture through courses, workshops, lectures, artistic performances, cultural exchanges, and community events. These initiatives aim to strengthen cultural and educational ties between China and Côte d'Ivoire, thereby fostering better understanding and increased international cooperation.
In the context of the 40th anniversary of diplomatic relations between Côte d'Ivoire and China, the Confucius Institute, in collaboration with Félix Houphouët-Boigny University, is redefining its educational mission. This reform aims to enhance the quality of education and transform the Confucius Institute into a major platform for dynamic cultural exchanges between China and Côte d'Ivoire. Objectives include improving the HSK programme, providing a solid foundation for students to study and work in China, as well as supporting a greater number of students from Félix Houphouët-Boigny University in obtaining scholarships from the Chinese government to pursue their studies in China. It is worth noting that China awards about ten scholarships annually to Ivorian students wishing to pursue higher education in China. More than 600 Ivorian students have thus been able to benefit from quality training in various academic fields, such as international finance, science and technology, commerce, accounting expertise, geoscience, journalism, business, and management, among others. These scholarships cover tuition fees, accommodation, necessary books and supplies, as well as a monthly allowance to meet their daily needs.
Challenges and opportunities
Since the early 2010s, China's economic growth has slowed, affected by several factors: a slowdown in the real estate sector, demographic changes related to its aging population, as well as trade tensions, geo-economic fragmentation, and the Covid-19 pandemic on the international stage. While it had an average annual growth rate of about 10% in the 2000s, China saw this rate drop to less than 8% in the 2010s. This trend has been exacerbated since the pandemic, with International Monetary Fund (IMF) projections announcing an average annual growth rate of about 4% over the next five years, marked by reduced investments and a transition to more environmentally friendly technologies (IMF, 2023). These developments could have negative repercussions, particularly on trade links, leading to both a decrease in export volumes and a decline in commodity prices. Consequently, Côte d'Ivoire, which exports relatively more to China, risks being more severely affected by this economic slowdown in the country.
The loans granted by China to sub-Saharan Africa have received considerable attention and criticism due to the relatively strict terms imposed on beneficiary countries, as well as the use of natural resources as collateral (Acker, Brautigam & Huang, 2020). These loans have also raised concerns about the normalisation and transparency of public debt, as Chinese lenders do not systematically document loans to each borrowing country, resulting in significant data gaps. Moreover, according to Pinaud and Reisen (2006), China's financial practices promote corruption, undermine democracy, and increase debt tolerance. China's growing presence in many African countries, as highlighted by Chaponnière (2006), leads to fierce competition that can lead to the disappearance of local businesses. Additionally, the quality of products imported from China is not always trustworthy, as traceability standards are not always adhered to during export to developing countries, often resulting in the importation of inferior quality products. This leads to considerable harm for consumers, who may not fully benefit from the purchased products in the long term despite their competitiveness.
Regarding Chinese investment in Côte d'Ivoire, it is important to note that it is not necessarily associated with significant job creation, as skilled labour is often directly imported from China (Seka & Kouakou, 2012). Consequently, the long-awaited technology transfer by African countries remains a challenge, as Chinese investments are often made with Chinese skilled labour, thereby limiting opportunities for local learning and development. The only jobs created are often unskilled jobs.
Conclusion
The relations between China and Côte d'Ivoire, which began in 1983, have significantly progressed in recent years through the signing of several partnership agreements in economic, cultural, and scientific fields. China has provided significant support to the development of Côte d'Ivoire, manifested through grants and interest-free loans. During the period 2010-2021, China granted official development assistance (ODA) in the form of loans totalling US$4,227.84 million.
Foreign direct investment in Côte d'Ivoire has seen an average annual increase of 15.57% between 2012 and 2021. Although trade exports and imports have significantly increased, the trade balance remains negative for Côte d'Ivoire. This situation could potentially lead to increased dependence on China, raising concerns about possible dominance resulting from this cooperation.
The economic relations between Côte d'Ivoire and China present considerable opportunities, particularly in terms of financing for the country's development. However, they also entail risks, such as increased dependence on raw material exports and heightened debt risks, as well as potential consequences for small and medium-sized enterprises and the informal sector.
To maximise the benefits of this cooperation while mitigating its negative effects, Côte d'Ivoire will need to strengthen its economic resilience and implement structural reforms aimed at diversifying its economy, deepening regional exchanges, improving competitiveness, and stimulating domestic activity.
References
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Chaponnière, J-R. 2006. Les échanges entre la Chine et l’Afrique Situation actuelle, perspectives et sources pour l’analyse. Agence Française de Développement (AFD)
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Nguena, C.L. & Tsafack Nanfosso, R. 2014. Banking Activity Sensitivity to Macroeconomic Shocks and Financial Policies Implications: The Case of CEMAC Sub-region, African Development Review, African Development Bank, 26(1): 102-117
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