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African Countries Benefit From Chinese Investment
2012/12/28

Analysis by He Wenping

Based on similar history of suffering from colonial invasion and the mutual desire for development, the cooperation between China and Africa has changed from combating imperialism and colonialism to carrying out all-round cooperation.

When African people see a face of yellow race, the question they often ask has changed from " Are you Japanese?" to "Are you Chinese?". From this, we can obviously feel China's fast-growing influence in Africa.

In recent over ten years, the number of Chinese people in Africa has reached nearly 1 million and the number of Chinese companies doing business in Africa has increased to over 2,000. Meanwhile, the number of African people coming to China increases with a rate of 30-40% annually and there are 200,000 Africans in Guangzhou alone

In modern times, based on similar history of suffering from colonial invasion and the mutual desire for development, the relationship between China and Africa has experienced three phases in such a short period of 60 years, from establishment, development to all-round fast development.

In the past decade, the trade volume between China and Africa has increased with an average annual rate of 35%, from 10 billion US dollars in 2000 to over 160 billion US dollars in 2011. China has replaced the United States to become the largest trading partner to Africa in 2009. In addition, Africa has grown rapidly to become China's second largest project contracting market and fourth largest overseas investment destination.

While the United States is ina weak economic recovery and the Europe is in serious debt crisis, African economy performed well in recent over ten yearswith an average annual growth rate of nearly 6%, good control of inflation and improved financial condition year by year. The main impetus for African economic growth is the large amount of investment from emerging economies like China and sharply increased trade volume with these countries in the past more than ten years (China-Africa trade volume alone has accounted for 20% of the total economic growth in Africa in the past few years).

In 2006, one of the articles in Economic Weekly of Germany stated "China has contributed to over 5% of African economy growth in 2005, and reduction of its inflation to the lowest level during the past 25 years. In African history, it was the first time that the capital flowing into Africa as economic investment had outweighed that as development aid(many people think this was a turning point in African history)". "For the first time, Africawas able to determine its own destiny. It was Chinathat created this amazing opportunity for Africa."

Being a continent possessing 54 countries with nearly 1 billion people, Africa has abundant natural resources and rich labor force, a vast market with a great potential for development. Suffering from a long period of colonization and exploitation by other countries as well as regional conflict and turmoil, Africa remains backward in economy and lacks capital, technology and experience for economic development. After 30 years of reform and opening-up to the world, China has witnessed remarkable growth in its economic scale and strength. But China also faces new problems like a lack of resources and fierce competition in domestic market. Therefore it will be a win-win solution if Africa and China can learn from each other, draw on each other's merit and establish cooperation in fields like resources, market and capital, and technology and experience.

When continuing to provide and gradually increasing economic aid without attached political conditions to Africa within its capability, Chinese government encourages and supports Chinese enterprises to invest and do business in Africa.

As for trade between Africa and China, in order to redress the problem of trade imbalance, China has increased import from African countries in recent years, resulting in the trade deficit on the part of China.Since 2005, in order to further facilitate the process of African commodities entering Chinese market, China has granted zero-tarrif treatment to some of the commodities imported from the least developed countries that maintained diplomatic relations with China. From 2000 to 2009, China remitted 312 deals of debts to 35 African countries, totaling RMB 18.96 billion yuan (around 3 billion US dollars).

In the field of investment, by April, 2012, according to statistics, Chinese direct investment in Africa has reached 15.3 billion US dollars --- the amount was less than 0.5 billion US dollars ten years ago. Over 2000 different types of Chinese enterprises were established in over 50 African countries, covering trade, production and processing, resource development, transportation, agriculture and comprehensive development of agricultural products etc.

Mr. Gobind Nankani, former Vice President for Africa at the World Bank, once said "Trade and investment from China to Africa are becoming the main impetus for economic growth in African countries." Among all foreign investment in Africa, one tenth of it is from China. Mr. Nankani said that African countries were benefiting from the growing investment from China, especially advanced technologies brought into Africa by more and more Chinese enterprises. "In the past two or three decades, China's rapid economic growth has benefited from increasing overseas investment, especially its trade exchange with the large US market.

(The author of this article is the director and researcher of African Studies Office of the Institute of Western Asian and African Studies of Chinese Academy of Social Sciences)

 

 

 

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