African governments seeking to interact with China must start by using Chinese investment strategically as a resources-to-infrastructure transformer, oriented to economic diversification, said Chunlin Zhang, a private sector development specialist at the World Bank.
“Use the Chinese government support to the increase of non-resources exports to China, by technology and skills transfer, through Chinese importers,” he added. Zhang also suggested that it would be a good idea to strategically target and stimulate Chinese tourism to the continent.
Speaking at the Harith Fund Managers dialogue on continental Africa infrastructure development recently, Zhang sees the China factor as an opportunity for Africa. He maintained that China’s presence in Sub-Saharan Africa (SSA) is a potential game-changer for the region’s development.
According to Zhang, China’s role could be multi-dimensional. “The country could be an additional financier and builder of infrastructure; it could also be a rapidly growing market for resources and increasingly non-resource exports; and the more obvious one: a new source of foreign direct investment and technology and skills transfer.”
“The opportunity to provide technology and skills transfer to build local capacity should not be missed, specifically when it comes to using the Chinese government subsidy aimed at developing industrial parks in Africa,” he noted.
African governments would do well to begin monitoring the movement of Chinese low-skill intensive industries to seek opportunities, and perhaps attract Chinese exporters to produce their wares in Africa. He also highlighted the importance of providing systematic support to African traders and entrepreneurs operating in China. At last estimate there could be as many as 500,000 Africans there.
Chinese infrastructure finance commitment in SSA rose from US$0.47 billion in 2001 to $7.05 billion in 2006, before falling back to $4.5 billion in 2007. The finance was concentrated in electricity and transport infrastructure.
It’s not all one-way traffic though. The growth of Africa-China trade has been explosive in the last decade. It grew from $5 billion to $56 billion between 2000 and 2008, before reaching $115 billion in 2010. African Development Bank research confirms that about 70% of registered African exports to China consist of crude oil and 15% of raw materials.
Turning to foreign direct investment (FDI), Zhang said that Chinese FDI accounted for 6% of total FDI inflow to SSA in 2008, but is growing rapidly. In fact, Chinese official data shows that it increased yearly by 46% over the last decade. “And despite the international financial crisis, Chinese FDI increased by 79% year on year, during the first three quarters of 2009.”