Boosting infrastructure: Justin Yifu Lin, Director, Institute of New Structural Economics, Peking University, on Chinese investment in Africa

How successful have China’s efforts to move beyond aid in Africa proved thus far?

LIN: China has been investing in African countries mostly in infrastructure, and such investment certainly helps the continent pave the foundation for future growth. Infrastructure is a long-term investment, but even with the limited time spent we are already witnessing some major changes, especially in some of the larger sub-Saharan African cities such as Addis Ababa and Kigali. One flagship project is that of the Addis Ababa-Djibouti railway, which was inaugurated in October 2016 and has reduced cargo transportation time between the cities from three to four days down to 10 hours.

While the intention was certainly good, returns from traditional development support in the past have been slightly disappointing. To that end, the focus should be on helping African countries create jobs and diversify the economy away from natural resources while boosting global competitiveness. Projects moving forward should help support the development of a country. Obviously, traditional development support will be welcome, but other kinds of resources need to be mobilised in order to maximise the socio-economic impact of funding and foreign direct investment.

To what extent do you think the African Continental Free Trade Area (AfCFTA) can help drive industrialisation on the continent?

LIN: The AfCFTA, which aims to integrate the African continent into one market, is a desirable goal, but in order to promote industrialisation and generate jobs, global markets are essential. If we take the example of China, after several decades of development, the country’s total highway length stood at 4800 km in the late 1990s as opposed to 86,000 km in the US, which roughly occupies the same surface area as China. Yet that did not stop China from having an export-oriented growth, subsequently contributing to the country’s industrialisation, boosting economic growth, and increasing government revenues and the ability to improve domestic infrastructure. Infrastructure linkages to date across Africa, however, remain poor and the market is fragmented as a result. Therefore, it would be easier for Africa to penetrate the global market than it would be within the continent. Although it has a large population of around 1.4bn, purchasing power remains low, with the region’s economy accounting for around 3% of global GDP. By contrast, the economies of the EU, the US, China and Japan combined account for two-thirds of global markets. Certainly, we need to have a goal to integrate African markets, but at the same time Africa should not neglect the importance of global markets.

How significant is Djibouti to Chinese interests throughout the continent?

LIN: Djibouti is an attractive destination for Chinese involvement in Africa given its political and social stability, growing economy and strategic location. Djibouti remains a key destination and linkage to Ethiopia and East Africa, but also the Red Sea and the vast Mediterranean region. Recent projects such as the Addis Ababa-Djibouti railway and the new Djibouti International Free Trade Zone testify to the friendly partnership that has established itself between both countries. Such projects represent a new era of dynamic growth for Djibouti, and it is expected that they will provide the experiences and demonstrative effects for developments elsewhere in Africa. Undeniably, one of the bottlenecks for Africa’s development is infrastructure, but in the short to medium term Africa is set to benefit from infrastructure investment carried out by China, most notably the transport and energy projects associated with the country’s Belt and Road Initiative.