Thursday, August 26, 2010

Sriparna Pathak, a Research Scholar at the Centre, on Sino- African Trade: Facts and Opinions

At the beginning of the new millennium, in the year 2000, China’s overall trade with Africa stood at US $ 10.6 billion. By 2005, within merely five years, the statistics for the same were US $ 40 billion, and have been on an increasing curve eve since. In 2009, trade between the African continent on the one hand and China on the other, was estimated at US $ 91 billion, despite the negative effects of the global recession. While the figure is slightly lower than the US $ 106 billion registered in 2008, there is optimism, particularly from the Chinese side that trade will continue to grow with increasing cooperation between the two. Toys, electrical goods, clothing and shoes are among the wide range of Chinese goods that can be found in the various African states.

The economic relations between Africa and China are also focused on promoting investment trade and labour contract between the two sides. By the end of 2008, labour contracted projects accounted for US $ 39.44 billion, which is ten times that of what it was in 2000. According to Zhang Yongpen, a research fellow at the Chinese Academy of Social Sciences, the contribution rate of Sino- African trade to Africa’s trade development is by 20 per cent.

Besides this the Africa- China development fund brings about US $ 2 billion from Chinese enterprises, and in 2008 itself, 20 projects worth US $ 400 million had already been invested. Chinese direct investment has also been flourishing over the years. From being merely US $ 50 million in 2001, an increase of 50 per cent was witnessed, and the investment was about US $ 1 billion by the end of 2008.

A report on the growth of foreign direct investment (FDI) in Africa, by non African developing countries, was unveiled by the UNCTAD Secretary General, Supachai Panitchpakdi at the ongoing Shanghai Expo in China. The report, clearly showed that the strongest contributor to the increase was China. The Economic Development in Africa Report 2010, which focuses specifically on the theme of South- South Cooperation: Africa and the New Forms of Development Partnership found that the trade between China and Africa had risen nearly ten fold between 2000 and 2008.

From ideologically driven considerations during the Cold War, the relations between China and Africa today, seem to combine pragmatism, economic and political means to bolster mutual benefit for both the sides. Trade and diplomacy between the two sides are definitely driven by China’s economic capabilities that have rapidly grown since the undertaking of reforms and opening up to the outside world in 1978. Nevertheless, China’s subsequent demand for new raw materials and the need to identify new markets for its cheap consumer products cannot be completely ignored.

For many African countries, the Beijing Consensus is an attractive alternative to development, along with being an alternative to the political and economic reforms espoused by the Washington Consensus of the World Bank, the International Monetary Fund (IMF) and particularly the developed countries of the West.

Beijing’s financial and technical aid with no strings attached, to several African countries have been beneficial in formulating more friendly ties between the states of Africa on the one hand and China on the other.

Besides, trade and investment, China has also committed itself to the development of human resources in Africa, under the auspices of China- Africa Cooperation Forum by establishing a fund that is jointly administered and used by various Chinese ministries, in order to train African personnel.

However, China has been often addressed as the resource hungry super power. Its growing trade and investments in Africa has led to an increase in the suspicion of its intentions. With China’s presence rising on the African continent, concerns are being voiced that Beijing is preying on the resources of Africa, to feed the Chinese economy, contributing little significant improvement to African livelihoods. China’s oil and fuel imports from Africa have thus come under a scanner, particularly from the Western states.

In 2007, Africa supplied 24.8 per cent of China’s imported mineral fuels, compared to 9.1 per cent in 1997. Angola was China’s largest overall mineral fuel supplier and its largest African supplier. The other major African suppliers of mineral fuel to China were Sudan, the Congo, Equatorial Guinea and Libya.

What needs to b highlighted here is that even though oil is a major source of Chinese interest in Africa, it is not the only one. China actively seeks resources of every kind. Copper, Bauxite, Uranium, Aluminium, Manganese and Iron Ore are a few to name. Oil exploration or minerals exploration or the exploration of mineral fuels is not China’s only interests in trading with African states. Chinese textiles and clothing companies have been investing heavily in the African continent over the years. Nevertheless, only issues highlighting China’s oil quest in Africa seem to concern capitals in the West.

As facts read, China’s oil explorations in African countries have been beneficial to some African states, as it has allowed them to exploit untapped resources or to gain leverage to negotiate better deals with existing customers. China’s new energy demands need not be necessarily seen from the challenging the American hegemony or conflicting with interests of stats in the West in the long term.

The concern that Chinese interest in African states is exploitative and takes cognizance of only Chinese interests is largely untrue. Ethiopia for example, has reaped the benefits of a preferential trade policy with the Chinese government. Its trade volume was merely US $ 150 million in 2003, which grew to US $ 250 million in two years in 2005.

Similarly, the ongoing visit of South African President Jacob Zuma to China, aims at strengthening trade agreements with South Africa’s largest trading partner- i.e. China. According to Martyn Davies, the chief executive of business consultants Frontier Advisory, South Africa is trying to strengthen ties with other emerging economies, and there is a need to collaborate with other emerging economies and not collide with them.
The wisdom in the above statement made by Mr. Davies should be applied to the rising concerns over Chinese neo colonialism of Africa. Trade and investment between the African continent and China need to be seen through the prism of cooperation and mutual benefit and not through that of conflict, as it can end opportunities of integration of developmental needs of the two at the very outset.

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