Africa Brings New Trade and Challenges to World Economies.
China and India’s new-found interest in trade and investment with Africa—home to 300 million of the globe’s poorest people and the world’s most formidable development challenge—presents a significant opportunity for growth and integration of the Sub-Saharan continent into the global economy.
These two emerging economic “giants” of Asia are at the centre of the explosion of African-Asian trade and investment, a striking hallmark of the new trend in South-South commercial relations. Both nations have centuries-long histories of international commerce, dating back to at least the days of the Silk Road, where merchants plied goods traversing continents, reaching the most challenging and relatively untouched markets of the day.
In contemporary times, Chinese trade and investment with Africa actually dates back several decades, with most of the early investments made in infrastructure sectors, such as railways, at the start of Africa’s post-colonial era. India, too, has a long history of trade and investment with modern-day Africa, particularly in East Africa, where there are significant expatriate Indian communities. Today’s scale and pace of China and India’s trade and investment flows with Africa, however, are wholly unprecedented.
The acceleration of South-South trade and investment is one of the most significant features of recent developments in the global economy.
AFRICA’S SILK ROAD: CHINA AND INDIA’S NEW ECONOMIC FRONTIER
“World trade has traditionally been dominated by commerce both among developed countries—the North—and between the North and the developing countries of the South. Since 2000 there has been a massive increase in trade and investment flows between Africa and Asia, as the western influences on these areas have lessened.
Today, Asia receives about 27 percent of Africa’s exports, in contrast to only about 14 percent in 2000. This volume of trade is now almost on par with Africa’s exports to the United States and the European Union (EU)—Africa’s traditional trading partners; in fact, the EU’s share of African exports has halved over the period 2000–05. This is due to a great extent of the enormous changes in the complex political dynamics–none of which need to be addressed in this article, but most of which have been decidedly beneficial to Africa and her people.
Asia’s exports to Africa also are growing very rapidly—about 18 percent per year—which is higher than to any other region. At the same time, although the volume of foreign direct investment (FDI) between Africa and Asia is more modest than that of trade—and Sub-Saharan Africa accounts for only 1.8 percent of global FDI inflows—African-Asian FDI is growing at a tremendous rate. This is especially true of Asian FDI in Africa.
China and India each have rapidly modernising industries and burgeoning middle classes with rising incomes and purchasing power. The result is growing demand not only for natural resource–extractive commodities, agricultural goods such as cotton, and other traditional African exports, but also more diversified, non-traditional exports such as processed commodities, light manufactured products, household consumer goods, food, and tourism. By virtue of its labor-intensive capacity, Africa has the potential to export these non-traditional goods and services competitively to the average Chinese and Indian consumer and firm.
With regard to investment, much of the accumulated stock of Chinese and Indian FDI (Foreign Direct Investment) in Africa is concentrated in extractive sectors, such as oil and mining. While this has been grabbing most of the media headlines, greater diversification of these countries’ FDI flows to Africa has in fact been occurring more recently.
Significant Chinese and Indian investments on the African continent have been made in apparel, food processing, retail ventures, fisheries and seafood farming, commercial real estate and transport construction, tourism, power plants, and telecommunications, among other sectors. Moreover, some of these investments are propelling African trade into cutting-edge multinational corporate networks, which are increasingly altering the “international division of labour.” China and India are pursuing commercial strategies with Africa that are about far more than resources.
Despite the immense growth in trade and investment between the two regions, there are significant asymmetries. While Asia accounts for one-quarter of Africa’s global exports, this trade represents only about 1.6 percent of the exports shipped to Asia from all sources worldwide. By the same token, FDI in Asia by African firms is extremely small, both in absolute and relative terms. At the same time, the rise of internationally competitive Chinese and Indian businesses has displaced domestic sales as well as exports by African producers, such as textile and apparel firms, whether through investments by Chinese and Indian entrepreneurs on the Sub-Saharan continent or through exports from their home markets.
This competition spurs African firms to become more efficient, but it also creates unemployment and other social costs during the transition. Not surprisingly, some African governments are responding with policies that protect domestic businesses. As the global marketplace continues to be increasingly integrated, with rapidly changing notions of comparative advantage, much is at stake for the economic welfare of hundreds of millions of people in Sub-Saharan Africa.
With this newest phase in the evolution of world trade and investment flows taking root—the increasing emergence of South-South international commerce, with China and India poised to take the lead—Africans cannot afford to be left behind, especially if growing opportunities for trade and investment with the North continue to be as limited as they have been. Nor can the rest of the world, including Africa’s international development partners, afford to allow Africans to be unable to genuinely participate in—and most important, benefit from—the new patterns of international commerce.”
The United States Entrepreneur Will Benefit Also From New Alliances
I would hope that the western world never makes the mistake of under-estimating China. I would also hope that China would not ever under-estimate their own traditional culture, built over thousands of years of recorded–and unrecorded–history and cultivation. Communism, Socialism, Fascism are all despotic branches of the same rotten tree that is destroying the corrupt economic and corporate madmen who have been the source of the plagues of wars, destruction and economic catastrophes in the world since long before the French Revolution.
Communism came to China not as a result of a great people’s revolution, but through deceit, betrayal and treason. Traitors in the United States State Department sabotaged the Nationalist Army and slandered it terribly in the media the corporate interests bribed even in those days, so it had no support, and no weapons. Mao was a terrible leader and a worse soldier. He did not have the support of the people in the least. This has been the real truth behind ALL the so-called “People’s Revolutions” in the world. They were all staged and contrived, many violent CIA-staged coups. It’s very possible many Chinese and Russians already know this.
More important than financial and economic gains is realising the limitless potential of the human spirit. It can accomplish great things, more than any machine or computer ever could. The ancient Chinese people, as well as old and forgotten cultures realised this. Mao’s “Cultural Revolution” was China’s greatest tragedy, and it is followed by the persecution of the Falun Dafa and others for their spiritual and cultural beliefs.
As a Art History major in my college days, I studied Chinese Art, and was awed by China’s incredible history and the great moral and cultural development of its civilisation. Just one example was the development of the art of Jade sculpture. This is one of the hardest minerals in existence, yet in ancient times, Chinese artists (who regarded Jade in spiritual terms also), carved it with nothing more than bamboo and sand mixed with fat–they called it “toad grease”.
This method took such a long time and required such patience, that some sculptures were handed down 8-9 generations at times. Yet the original intention and design of the first ancestor was never altered. How could any nation spurn such a great de for the brute hate and empty slogans of the CPC, I wonder?
The wise Asians think in eons, and its the Western error to think in dollars. But this is changing. My son went over to China to meet with his friend who is from Uganda. He spoke enthusiastically and hope of the spirit and life that he found in China, and with great length about investment possibilities with his Ugandan friend who was eager to bring industry and development to a nation starved for progress and the opportunities denied them so long and so unfairly. I hope that none of the new nations stepping so boldly into the future make the fatal mistake of falling back into the same errors that has destroyed the old corrupt one.
Parts excerpted from: Africa’s Silk Road – China and India’s New Economic Frontier, Harry G. Broadman
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Categories: Trade & Investment