China trade a boost to Africa's economy

By Wang Zhenghua (China Daily)
Updated: 2007-05-15 07:02

SHANGHAI: Increased collaboration between Africa and China continues to play a role in Africa's growth, economists said yesterday.

Trade between Africa and China and investments in the continent have helped to build up the region's infrastructure, Razia Khan, the Standard Chartered Bank's regional head of research for Africa, said yesterday.

"It would be wrong to think of China's role in Africa as being about commodity trade alone," she added.

Africa's economic growth has outperformed global growth since 2001 and in most of Africa, fundamentals have been strong, she said.

Khan attributed much of the growth to domestic reforms initiated by African governments. Meanwhile, "the favorable external environment, with increased engagement between Africa and China, has also played a key role."

Currently, Africa's trade with Asia - and with China in particular - is growing rapidly and Africa has benefited from growing trade flows with Asia though Europe remains Africa's dominant trading partner.

Standard Chartered Bank's statistics show that in the late 1990s China-Africa trade accounted for a little more than $5 billion annually, but since then it has grown ten-fold.

China has announced it will cancel debts to 33 African countries by the end of 2005. The country also said it will grant zero-tariff to many African exports, a move likely to benefit 30 less-developed African countries.

These measures are significant as an indicator of China's intentions towards Africa, Khan added.

Africa's services sector is also expected to receive a boost as the number of Chinese tourists visiting Africa increases, according to a Standard Chartered research note.

The Chinese government has promised to step up China-Africa cooperation in transportation, communication, water conservancy, electricity and other infrastructures.

Chinese companies are active in various infrastructure projects, including roads, bridges, schools, shopping centers, office buildings and low-cost housing.

China's role in improving Africa's infrastructure holds much promise for further diversification of African countries' exports. China can also help them to move up the value chain, Khan said.

"One of the greatest constraints faced by commercial agriculture in Africa is the poor state of the continent's current infrastructure. Any intervention in this regard could therefore be transformative," she said.

Given China's assistance to correct the chronic investor undervaluation of Africa, and contribution to new investment from both China and elsewhere, it would be wrong to characterize Sino-African engagement as being about commodities alone, she said.

"China's industrialization has changed the profile of global trade and created a vibrant trade corridor with Africa. The burgeoning trade relationship is based on more than just commodities," said Abah Ofon, global research economist in Africa at the Standard Chartered Bank.

In addition to the infrastructure construction and aid provision, the development of the African capital market is another area in which Asian influences have been significant.

The recent record of macroeconomic progress in Africa, combined with commodity price strength, has been an important driver of new foreign investor interest in African debt market, Khan said.

(China Daily 05/15/2007 page25)