Companies have “central role” in growth of China-Africa economic relations

3 September 2007

Washington, United States, 3 Sept – The growth of bilateral relations between China and Africa is becoming increasingle based on companies and trade, rather than by States and public aid, said a study published by the International Monetary Fund (IMF).

The study by economist Jian-Ye Wang was published last week and also revealed had risen by some 60 percent in the first half, to US$18.8 billion.

Figures obtained by Portuguese news agency Lusa showed that this level of trade is expected to “rapidly” reach the targets set last September in Macau of US$50 billion by 2009.

In the study entitled, “Drivers of China’s increasing intervention in Africa,” Wang projects that bilateral economic relations will continue to increase, due to the fact that these days “they are based on trade and investment, and trade covers more than raw materials,” and these will lead to growth of the economies involved.

“The growing role of China in Africa is not transitory. Bilateral economic relations are increasingly dominated by commercial ties, rather than by public aid considerations,” the economist said.

According to Wang, investment gives Africa the possibility of overcoming traditional obstacles to economic growth, namely lack of investment and infrastructure.

“The future of bilateral economic relations will be increasingly molded by oscillations in comparative advantages and changes in global supply chains. This sustains the importance of improving the investment climate and strengthening the regulatory framework, particularly in Africa, in order to achieve mutually beneficial results,” he said.

According to figures presented in the study, African exports to China have risen more than five-fold since 2000, having reached US$28.8 billion last year. China exported almost US$27 billion to the African continent, which was also a five-fold increase.

African imports from China are mainly made up of manufactured goods (45 percent) and transport machinery and equipment (31 percent), while Chinese imports were split amongst oil (62 percent) and its derivatives (13 percent) and others (17 percent), which include agricultural products.

According to Wang, development of ties has mainly benefited from support from Chinese state financial institutions, which create opportunities to solve blocks on economic growth.

Institutions such as the China Exim Bank, the Chinese Development Bank and Sinosure, “have been instrumental as the basis of new economic ties, based on trade,” and “are helping to correct the chronic under-valuation of Africa by investors, helping to finance new investments in the export and infrastructure sectors.”

“Africa will become an increasingly attractive market as income levels grow and with advances in regional integration. It will also become a key destination for international investment, as well as needing infrastructures. Togetehr these two powerful market forces could place economic relations firmly on a commercial footing,” Wang said.

However, he noted, it is the job of governments to ensure that best use is made of increased economic links, on an economic and social level, in each country.

“Both the public and private sectors have a role to play in ensuring that the ever increasing trade and investment ties are mutually beneficial and contribute to sustainable growth and development in Africa,” said the economist. (macauhub)