Issue: 65
Sent: 05-12-2006 10:02:06
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China Looks to Its Interests in Africa - John A Robertson
There is little doubt, according to information compiled by the International Monetary Fund, that Africa is receiving more attention from private investors in the rest of the world.
The accompanying chart at http://www.thebigpicture.com.au/atc/africa.htm shows how net private capital flows to Africa have risen from a 20 year average of US$4.5 billion a year to an expected US$25 billion in 2006.
The level of capital flows may still be inadequate to meet fully the development needs of the continent but the recent Chinese initiative to court African leaders is another manifestation of the broadening commercial appeal of the continent.
The Chinese government hosted the largest ever gathering of African leaders - 48 out of the 53 possible - in Beijing in early November. No other nation has embraced the continent so tightly before.
China has at least three tactical aims in cultivating the African leaders.
- It wants to ensure African natural resource development is accelerated to meet its rapidly growing needs.
- It also wants to limit control of the industry by non Chinese companies. The Chinese are still smarting from the likes of BHP Billiton and Rio Tinto taking advantage of shortages to squeeze them commercially in negotiations in the past year.
- China also sees Africa as a market for its low value manufactured goods.
China will feel there are deals to be done. With ample foreign reserves, it is able to commit large quantities of capital to African development when others are less enthusiastic. The Chinese also seem ready to support education and training programmes.
All of this will be highly attractive to cash strapped African governments. With Europe and the USA being less inclined to help develop the continent, in part because of distractions in the middle east, Africa will be better off for the attention.
There will be at least one happy by-product of this for China and the rest of the world. It will help ease some of the pressures on China to recycle the burgeoning trade surpluses which continue to antagonise US politicians and which are a longer term economic imbalance requiring resolution.
In courting the African leaders, the Chinese are being criticised for turning a blind eye to human rights abuses, financial waste and maladministration. This will give it entry where some of the more censorious westerners cannot gain access. On this, if nothing else, we can take the word of Robert Mugabe.
Even so, there might be a limit to how much malfeasance even the Chinese will tolerate when their money is being wasted and their reputation is being sullied by association with some of the more despicable individuals running governments. The Chinese might find, in due course, that they can be just as judgemental as the next global power.
The Chinese are likely to gain access to the raw materials they so ardently covet. However, swapping low value manufactured goods for those African raw materials is probably not a sustainable economic proposition.
Some of the more enlightened African leaders such as former World Bank economist and current Sierra Leone Prime Minister Ellen Johnson-Sirleaf have already started to address the dangers in this thinking. They want African access to international markets for non resource products including agricultural raw materials which many developed countries continue to block in response to demands from their own primary producers. They also want access for their own low value manufactured goods and see China as a logical trading partner.
This will eventually put China in the same bind all other industrializing countries have encountered. An industrial revolution based on cheap labour takes you only so far. There is always someone more competitive around the corner, a challenge China has yet to face since the 1990s when its economy took off in an apparently sustainable fashion.
Until now, Africa's educational and physical infrastructure has constrained its industrial development. Africa might represent the challenge to China that Japan and then China, itself, posed for manufacturers in Europe and the USA. With a little good fortune, this might be the genie which China's African initiative, supported by growing amounts of private capital, allows to escape.
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