The worldwide recession has struck the world’s supposedly strongest economies. While it cannot be said that China remains unaffected by the recession, it is still much better off than most countries. Out of the developing world Africa has also been hit but it has benefited immensely from the protectionism extended to the continent by China. The growth levels being witnessed by Africa are distinctly underpinned by Chinese demand, and China’s levels of growth will depend even more on African resources. The recession is seeing increased Chinese investment in African nations, as it is using its foreign exchange surplus to scout around for cheap investments. Chinese financial institutions are financing business ventures initiated by companies that are investing abroad for the first time.
The long association between China and Africa has not been a bed of roses for investors. Many Chinese investments have ended in big losses and many ventures have failed, and it is evident that many more will follow suit. But China has been quick to learn and has dramatically changed its investment strategies, according to the changing political and economic environment in African countries. Its ‘new’ Africa policy and the Forum of China-Africa Cooperation (FOCAC) are all efforts to establish mutually beneficial relations. China has now turned to bilateral trade as the route to development for African industry rather than aid-funded development. This will help the local African nations put in more serious efforts to develop local talent that will benefit the African community in more ways than one.
China has become a major player in developing infrastructure facilities in many African countries with work being contracted to Chinese companies.
It is interesting to observe that while Western banks and financial institutions are withdrawing credit to Africa, China is increasing its loan exposure through its banks. Chinese banks are providing credit on terms that are conducive to development in growing economies. A case in point is the establishment of the China-Africa Development Fund. Mauritius, Zambia, Nigeria and Egypt are now four ‘official’ zones for China, which are hubs of manufacturing by Chinese companies. Another eight African countries are in the same league from the Chinese point of view.
Chinese can be the perfect role model for Africa as the Asian nation has weathered many storms and passed difficult periods to achieve its present level of success. It has developed business models that Africa would do well to adopt.
Source : China Africa
