China and Africa

by RO on Thursday, 28 December 2006 Comments
In November 2006, leaders of China and 48 African nations pledged to form a new strategic partnership and adopted an action plan to deepen political and economic links over the next three years. The pledges came as trade deals worth US$1.9 billion were signed during the Forum on China-Africa Co-operation summit.

The year 2006 saw the number of Chinese tourists to Africa double to over 200,000. Most of them went to Africa to search for business opportunities and Kenya was often the gateway. Official statistics showed that between 2000 and 2005, trade between China and Africa increased from just under 10 billion U.S. dollars to nearly 40 billion U.S. dollars, and is likely to surpass 50 billion dollars in 2006 and hit 80 billion dollars in 2010. China is rapidly becoming one of Africa’s main sources of investment. By the end of September 2006, China had established more than 800 enterprises in the continent, involving a total investment of 11 billion U.S. dollars. During the November 2006 Summit, Premier Wen Jiabao pledged that China would launch a 5-billion-U.S.-dollar China-Africa Development Fund.

At the same time, China’s action as a lender is creating a new wave of hidden debt in Africa as it backs its companies’ expansion overseas with increasingly aggressive lending. A report prepared by the IMF and World Bank shows China is the largest of six new creditor nations. The others are Kuwait, Brazil, India, South Korea and Saudi Arabia. It said lending by China had risen to US$ 5 billion in 2004. In exchange China gets access to energy supplies and raw materials. China has committed $8.1 billion this year to Nigeria, Angola and Mozambique, according to World Bank figures. Nigeria this year agreed to provide a drilling license to Chinese companies in exchange for a US$ 4 billion commitment to improve infrastructure, including a 1,800 kilometer railway. China gets 25 per cent of its oil from Angola and Sudan, which is boycotted by other states for the genocide in Darfur. Chinese loans raise the prospect of a renewed debt crisis in Africa, just a year after the world’s rich nations agreed to forgive as much as US$57 billion of debt.

In some African countries some voices are already criticizing Chinese practices. “There is a risk that some governments in Africa may use Chinese money in the wrong way to avoid pressure from the West for good government,” said recently the minister of Public Sector Reform in Ghana, which is seeking a $1.2 billion loan from China for a hydro-electric dam and rural electrification. Meanwhile in South Africa merchants are complaining that the invasion of Chinese products is killing the local economy.

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