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Kaleidoscope of successful options

Updated: 2013-09-06 11:51
By Zhang Yongpeng ( China Daily)

Joint ventures have fostered a new era of understanding, cooperation between companies

Chinese investment in Africa has grown rapidly in recent years, and its scope has gradually widened. Infrastructure construction contracts that predominated until 2006 are now just part of the mix, alongside agriculture, catering, clothing and textiles, energy, financial services, heavy industry, high-tech, manufacturing, processing, telecommunications and transport. The form of investment has also evolved, from initial early-stage investment to setting up factories and building oil refineries.

All of that has happened against the backdrop of China's labor-intensive industries and low value-added industries being replaced by technology-intensive and high value-added industries on a large scale. Rises in the cost of labor and the impact of that on sales has resulted in many industries facing pressure to find a way out.

China's industrialization is now moving to a higher level. It is in this context that African countries still in the early stages of industrialization have become an important destination for investment and development for Chinese enterprises. This shift follows a pattern industrialized countries traced 20 years ago. This has been not only to the immense economic benefit of Chinese businesses and their country but to Africa, too, whose industrialization has received a strong fillip.

The investment of Chinese companies in Africa is more comprehensive than that of Western countries, as are the activities they are engaged in. They not only involve projects critical to Africa, but take in sectors that are a key to industrialization and economic development. By doing so, Africa can have its own solid industrial base, which is critical for its self-dependent capacity.

China's investment in Africa has been all the more critical given the financial crisis that has continued to dog much of the world. Africa's annual GDP in recent years has been about 5 percent, which has a lot to do with China's investment. As an emerging capital exporting country, China has recognized that transforming Africa from a single-pattern economy to a diversified economic power is beneficial to China's own development.

The structure of Chinese investment in Africa has gradually become more logical, moving from a traditional emphasis on primary products to manufacturing and services.

China is a big consumer of energy and minerals, and Africa provides an important export market for such products. So helping Africa can build up the necessary funds for development. For example, African oil production is increasing, and in addition to the traditional oil producing areas in West Africa, East Africa is being developed.

On the other hand, Western countries have reduced their demand for oil from Africa. The United States used to be the main buyer of crude oil in the continent, but because of shale oil and gas and other new energy development it has substantially reduced its offtake from Africa. Last year it was no longer the largest oil buyer in Angola, and accounted for only 11 percent of Angola's total exports, ranking behind China and India.

Chinese products also play an important role in meeting the needs of Africans. Low levels of consumption and backwardness in industry development in Africa have resulted in a shortage of household goods. Chinese goods are relatively cheap and have improved in quality over the years.

Chinese business people are also trying to develop products that can be adapted to the local market, such as electricity generators and refrigerators that save energy. Most Chinese companies meet the energy emissions and environmental standards that comply with relevant laws and regulations in Africa.

Chinese companies also create jobs in Africa, helping the continent to build up its stock of talent, technology and management experience. Western countries often accuse China of excessive use of Chinese labor in Africa, but in fact in recent years they have used a high proportion of local staff, including at management level.

This has helped reduce misunderstandings on both sides. Some joint ventures have even signed deals allowing for the eventual transfer into local hands of all operations, including land, technology and personnel. That means Africa not only acquires plant, machinery and know-how, but also continuous improvement in its production capacity.

Chinese companies, in their constant efforts to remain up to date, are paying ever more attention to standardizing their operations in Africa, paying their fair share of taxes and bearing the appropriate social responsibility, thus encouraging local development.

China's most important role is to promote the development of industrialization in Africa. China's industrial transfer to the continent is mostly in line with international or local environmental standards. Such transfers of industry meet the needs of Africa's current stage of development.

The author is a researcher at the Institute of West Asian and African Studies under the Chinese Academy of Social Sciences.

(China Daily Africa Weekly 09/06/2013 page9)

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