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Sunday, June 03, 2007

Is China Good for Africa?: Chinese Investment and Trade in Africa

[See part 1, part 2, and part 3.]

While there is a diverse array of African industries that the Chinese have been investing in (such as tourism, power plants, and telecommunications), most of the capital that China is sending into Africa is confined to the building of natural resource extracting industries such as oil drilling and mining. The new Chinese desperation for resources is illustrated by the fact that China alone has accounted for 40% of the growth in global demand for oil since 2003. The importance of Africa in China's long-term energy security plan is underscored by the fact that in 2006 Angola became China’s largest source of foreign oil, surpassing Saudi Arabia.

Despite the economic benefit of China’s investment in Africa, the rise of Chinese companies that can out compete most of their international rivals (due mostly to their abundant, cheap labor) has also had a detrimental effect on African businesses, both in international markets as well as within Africa. Furthermore, China's tariff policies towards African imports seek to ensure that China will continue to out compete its African counterpart. Coffee, cocoa beans, cashews, and other agricultural products that African countries produce all have high tariffs. Crude oil and mineral ores, on the other hand, have no tariffs. Many of these tariffs discourage African exports of more highly processed products to China. South African President Thabo Mbeki warned his fellow African leaders about this in December of 2006, noting that Africa must be careful to avoid entering into a "colonial relationship" with the PRC where raw materials are shipped to China and then processed, manufactured goods are imported back to Africa at a net economic loss for the continent. China has stated that it plans to reduce its tariffs later this year; however, it remains to be seen if the changes will have any impact on restoring balanced competition.

One disconcerting segment of trade between China and Africa is arms sales. This is of great concern as the major recipients of these arms are oil-rich and human-rights lax countries like Angola, Sudan, Nigeria, and Zimbabwe. This is a mutually beneficial relationship for the countries involved because China recoups some of the oil money spent in these countries and African regimes that would otherwise need to turn to the international black market for weaponry have a willing, open supplier of arms. This gives these corrupt regimes the means to continue the brutal oppression and, in the case of Sudan, the overt murder of their citizens.

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