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Asia-PacificJune 3 2007

China and Africa’s mutual back scratching

A 10-fold increase in bilateral trade means China is set to eclipse Europe and the US as the main foreign actor in Africa.
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China’s dynamic growth and thirst for commodities has transformed its relationship with Africa and has also helped revamp Africa’s economic direction too. The recent African Development Bank annual meeting in Shanghai highlighted the extraordinary changes in Africa-China relations in the last few years and the fundamental shifts in trade and growth patterns taking place.

While African exports still have a strong commodity concentration, raising concerns over the continent’s vulnerability in this area, it is wrong to think of China’s role in Africa as being just about commodity trade. The Shanghai meeting reflects an important turning point in global economic repositioning, a key point where new realities take hold.

Some core facts are extremely relevant. In the late 1990s Africa-China trade amounted to just $5bn a year, but this has grown 10-fold. In 2006, trade reached $55.5bn with exports from Africa up 37% to $28.8bn and exports from China up 43% to $26.7bn, making China Africa’s third largest trading partner after the US and France. Two-way trade is expected to reach $100bn by 2010.

In terms of investment, China has invested $11.7bn in Africa up to the end of 2006 and a further $2bn is expected in 2007 with 800 Chinese companies already operating there. As for assistance, China has cancelled debts of $1.4bn to 31 African countries and announced new aid of $1.3bn.

China has growing resource and import needs and Africa is a key supplier. For example, China needs to import almost half of its oil needs, and in the first nine months of 2006 China imported 34 million tonnes of oil from 13 of Africa’s 17 oil-producing countries, amounting to 31% of its total oil imports. Africa, led by Angola, is becoming a prime provider and this is also the case in metals and agriculture.

Africa has averaged a record 5.5% annual growth rate over the last six years and the development of the Africa-China trade corridor has helped spur further growth and reform. Africa is keen to learn from China’s experience and China’s demand is creating huge opportunities for Africa. There are challenges for sure and these include many human rights issues, such as the unaddressed tragedy in Sudan’s Darfur region. But the new corridor offers prizes too, and also the opportunity for Africa to bypass its traditional partners, the US and Europe, creating a new way forward.

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