China in Africa

From oil to textiles to raw materials to humanitarian aid to military cooperation, and so on, China's presence in Africa is growing by leaps and bounds. I keep focusing on energy matters here because energy resources are absolutely vital to any great nation's ambitions. Whether we realize it or not in our daily lives, we are in competition with China for energy supplies worldwide, and China is building up its presence in Africa because of Africa's greath wealth in natural resources.

This account illustrates the growth in China's presence there.

Five years ago, Martyn Davies used to give talks on China a couple of times a year, if he was lucky. "Now I get invited twice a week," he says, highlighting how interest in China’s booming economy has grown.
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China’s growth is a reality. It’s here to stay," Naomi Ngwira, a board member of the Southern African Regional Poverty Network (SARPN), told IPS. The non-profit grouping, based in Pretoria, organised Wednesday’s meeting — and has been monitoring trade between China and Southern Africa.

However, she rejected the notion of an open-door policy which would give Chinese firms a free hand in Africa.

"China is interested in Africa. There are resources in Africa that it wants. And, there are markets in Africa it can supply and benefit from," Ngwira said. "We should invite China (into Africa), but make sure that we work in partnership."

In the first ten months of 2005, trade between China and Africa rose by 39 percent to over 32 billion dollars, according to Chinese official figures. This was largely as a result of imports of African oil, mainly from Sudan.

The China Law Blog illstruates how China's foreign investment is growing. A significant amount of this investment will end up in Africa.

China's Ministry of Commerce states Chinese outbound Foreign Direct Investment (FDI) totaled $8.84 billion in 2005, more than double the $3.78 billion in 2004, which itself was more than double the $1.5 billion in 2003. The most prominent Chinese deals were Lenovo's $1.25 billion acquisition in 2004 of IBM's PC division and TCL International's majority-owned joint venture with French company Thomson, which got it the RCA brand and made TCL the world's largest TV manufacturer. "Yet the biggest deals have been in resources, with Chinese companies buying interests from Africa to Latin America."

The article predicts "several forces will drive a quantum leap in the quantity and prominence of such deals in the next couple of years."First, China just this year terminated limits on foreign currency Chinese companies can buy for overseas investment. Second, the State Assets Supervision Commission encouraged 169 state-owned enterprises to list on international stock markets before listing on domestic markets. Then last month, China's Ministry of Finance said China would soon be using International Financial Reporting Standards, which will help its companies meet the disclosure requirements in tenders for the shares of public companies. On top of all this, if (or should we say when?) the yuan increases in value, Chinese companies will have even more dollars to spend on overseas expansion.

Last Tuesday the Guardian had an informative article on the remarkable growth of China's involvement in Africa.

The resurrection of Chambishi is just one small example of China's explosion into Africa. From the barest foothold a decade ago an army of diplomats, technicians and entrepreneurs has kicked the continent's door wide open, making Beijing a heavyweight investor and political player.

The phenomenon has barely registered in the west, but in Africa the evidence is everywhere: Chinese lumberjacks in the Central African Republic, Chinese textile merchants in Lesotho, Chinese tourists in Zimbabwe, Chinese road builders in Ethiopia, Chinese newspapers in South Africa, Chinese geologists in Sudan, Chinese channels on African satellite television.

In the past six years, trade between China and Africa has almost quadrupled, reaching £22.8bn last year, according to Beijing's official figures. The same period has seen the birth of more than 500 Chinese-funded companies and an influx of tens of thousands of mostly young Chinese newcomers. The country may have already overtaken Britain and is chasing France and the US in the race to become the continent's biggest commercial partner.
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The single greatest Chinese interest in Africa is oil. China 's economy is thirsty; by 2030 it will need to import 60% of its oil. China already swallows most of Sudan's production, is on its way to becoming Angola's biggest client and is playing catch-up in Nigeria, paying $2.3bn for a 45% share of an offshore block. Next month, Beijing will host an African petroleum and energy forum.

Does this add up to a threat to western interests? "I think that China has just as great a right to engage in Africa as any other country," the US assistant secretary of state for African affairs, Jendayi Frazer, said last year. "Why should we see ourselves in competition with any country in Africa? There is enough good to be done." But a report sponsored by America's Council on Foreign Relations was less sanguine, accusing China of shielding rogue states and turning a blind eye to misrule. "The Chinese government's practices in Africa can be expected to undermine US goals," it concluded.

In some areas Chinese imports are driving out African industries. But in other areas, Chinese investments mean jobs for Africans. The mixed bag for Africans is also a concern for us. The competition going on in Africa will affect our future, and it is something we and our leaders and policy makers will have to pay close attention to.