Tuesday, May 13, 2008

China's Emergence as a Dominant Economic Power in Africa

First we were afraid of the wolf, then we wanted to dance with the wolf now we want to be the wolf’ a Chinese Central bank official used this analogy to describe China’s world trade rivalry with the United States.
Ever since Chinese President Deng Xiaoping declared ‘to get rich is glorious’ and launched China into an era of industrialization and export-driven growth, China has never looked back. Chinese industrialization is unfolding at an unprecedented speed while driving an enormous demand for raw materials and new markets. China has been branded the ‘factory of the world’ for dominating global production of all goods imaginable from safety pins to domestic appliances. The most popular products on American and European supermarkets shelves now carry the ‘Made in China’ label, favored because of their cheaper prices owing, partly, to low labour costs in China.
Pick up a souvenir from any western capital and chances are that beneath it will be the label ‘Made in China’. According to Thomas Friedman author of ‘The world is Flat ’ Wal-Mart , the world’s largest supermarket chain, in one year imported $18 billion worth of goods from its 5,000 Chinese suppliers. (Friedman doesn't do the math, but this would mean that of Wal-Mart's 6,000 suppliers, 80 percent are in one country -- China.)
And it’s not only safety pins that should worry the west. China recently announced that it was going to begin production of commercial jets, long the domain of Boeing of the United States and Airbus of Europe. And it doesn’t stop there. Petro China is now the third largest company in the world having displaced General Motors of the United States. According to Newsweek, China now has three of the world’s biggest five companies by market capitalization. With US$ 1.2 trillion dollars market capitalization, Petro China is now the world’s most valuable company.
The United States has for long battled China because of an unfavorable balance of trade position. China exports much more to the United States that the latter imports from the United States. The Chinese avalanche has not spared Africa as well. Its scramble and partition of Africa all over again, only this time, its China’s turn. It has been widely reported that China now lends three times more money to Africa than the World Bank.
Take a moment and think about that. We are in the midst of a shift in balance of power in Africa with the Chinese coming in as the new kids on the block. Considering that the west has long dominated financial inflows into Africa as well the IMF/World Bank system and therefore called the shots in these parts, China’s new investments and lending to Africa give it unprecedented influence and clout on the continent. Indeed when the west wants a change in Sudan’s Darfur policy, it’s to Beijing they run. China is the leading export destination of Sudanese crude oil. Recently, a billion dollar infrastructure loan to Democratic Republic of Congo was announced by China which has a keen eye on Congo’s rich mineral wealth.
For a country that has known conflict for most of its post- independence history, the prospect of finally having financing to build basic roads and railways is an offer Congo can’t refuse. The African Development Bank says African trade with China rose from 10 billion dollars in 2000 to over 40 billion dollars last year. Reuters estimates this figure to have leapt to US$ 55 billion this year.Already the banking sector has been hit with the news that China’s ICBC bank has bought a 20% stake in South Africa’s Standard Bank, the parent company of Stanbic Bank Uganda, and this was done with a record cash purchase of US$ 5.6 billion dollars, the single biggest foreign investment anywhere in Africa.
There has been market speculation that China Mobile is set to make a bid for MTN, Africa’s largest phone operator with the share price increasing by 6% on the prospect. China Mobile recently bought an 89% stake in Pakistan operator, Pakistel.All this is going down well with African leaders. President Mogae of Botswana has already remarked publicly that the Chinese treat them as partners for a change compared to the Europeans who treat them as subjects.
Locally, the lure for Chinese products has proved too strong to resist for Spear motors, the local Mercedes Benz franchise. Spear Motors now deals in new Chinese vehicles made by the Great Wall Motors of China at some of the cheapest prices available for brand new vehicles in Uganda.
A Ugandan entrepreneur is doing brisk business exporting recycled mineral water bottle material to China at very lucrative rates. Consider that Uganda’s State House was built by a Chinese Contractor and that the biggest conference centre in Dar Es Salaam is to be built and funded by the Chinese.So, what does China’s new scramble for Africa portend for the continent?China doesn’t have the imperial ambitions that came with the earlier players in the scramble and partition of Africa.
However, the fact remains that African nations are largely raw material exporters and markets for Chinese Industry and until that changes, true partnership would be anything but achieved.

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