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China Adjusts for Africa's New Era of Development

09-25 14:31 Caijing
China needs to adapt to the transformation of traditional Sino-African trade patterns, and at the same time move quickly to occupy a favorable position in the new round of global investment in the continent.

By staff reporter Hu Weijia

While countries around the world are suffering from the global economic downturn, Africa, once described as the "Hopeless Continent," is now home to some of the world's fastest-growing economies.

Some African countries are casting off their role as resources and energy exporters and seeking to diversify their economies, while at the same time striving to carry out important transitions and structural adjustments in the fields of trade and investment.

The International Monetary Fund (IMF) forecasts that from 2011 to 2015, seven of the world's 10 fastest growing economies will be in Africa, including countries such as Ethiopia.

African countries relied heavily on oil, mineral and agricultural exports to earn their "first pot of gold." Now, in order to get rid of the curse of the single product economy, countries in Africa need to carry out economic and industrial restructuring, including the introduction of foreign capital.

African countries are increasingly looking to foreign companies to increase technology transfer and promote local employment, in order to spur endogenous economic development. But for Africa, stimulating industrial development through foreign capital is not easy. In addition to addressing the uncertainties in the political environment and social order, African countries should first deal with the problem of poor infrastructure, which is a major barrier to industrial investment.

As Africa's largest trading partner, China will be first to feel the impact of these changes and challenges.

Frederic Baranger, a researcher at the Amadeus Institute, a think tank and policy organization based in Morocco, said that while there are no fundamental conflicts in China-Africa trade patterns, the problem lies in how to go about "upgrading." The resource-rich African continent exporting its natural resources and gaining access to tangible manufactured products is determined by the laws of economics. It is understandable that Africa wants to gain more added value. The solution lies in the upgrading of the manufacturing value chain. Emerging Asian economies can provide support for this transformation by increasing investment in infrastructure while selectively carrying out local processing and manufacturing investment.

Rwandan President Paul Kagame, who attended the Summer Davos Forum held in Tianjin in September, told Caijing that in the process of economic transformation in Africa, greater attention and support will be given to direct investment compared to the previous mode of bilateral trade. He added that in this process of "upgrading," the key is to find a new mode that is beneficial to all parties.

Decision makers in China have reached a consensus about the transformation of economic and trade relations between China and African countries, especially with regard to moderately increasing industrial investment in Africa.

On the one hand, China needs to adapt to the transformation of traditional Sino-African trade patterns, and at the same time move quickly to occupy a favorable position in the new round of global investment in the continent. In addition to telecommunications infrastructure and other construction projects, traditional agriculture has also begun to attract the interest of Chinese investors.

Full article in Chinese: http://magazine.caijing.com.cn/2012-09-23/112146111.html

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