AFRICA, a continent of rich natural resources and immense growth potential, has for the past two decades held a magnetic attraction for Chinese companies, especially in view of the multilateral cooperative mechanism between African countries and China.
China-Africa trade reached US $198.5 billion last year. Chinese investment in the continent exceeded US $40 billion, and direct investment from China stood at US $14.7 billion, according to Chinese customs statistics. China has been the continent’s largest trade partner for almost a decade.
|A Bank of China representative offers consulation at the annual meeting of the African Development Bank held in Shanghai.
Huge Demand for Financial Services
Exchanges between China and Africa accelerated after the founding of the PRC, and more so following the independence of African countries. Ties have now expanded from the political to the economic realm. The commencement in the year 2000 of the Forum on China-Africa Cooperation heralded a new era of economic cooperation between the two sides in trade, investment, project contracting, and aid programs. As a result, bilateral trade has reached a new peak. Since 2003, trade volumes between the two sides have grown at a brisk 40 percent annually.
The China-Africa economic relationship takes on new features as it expands. According to Zhang Wei, vice chairman of China Council for the Promotion of International Trade and China Chamber of International Commerce, Chinese investment in Africa is escalating. Although largely related to natural resources projects, China-backed investment projects are now widely dispersed accross the continent. Medium-sized and small enterprises are a surging force in Chinese operations on the ground.
“In the early years, trade between China and Africa was predominantly in primary products, such as iron ore and farm produce. Now it is more diversified. These days, African countries see China both as a resource importer and an exporter of capital goods needed for domestic development. This opens doors for Chinese companies that are striving to move up the value chain,” Zhang Wei said. Over the past two years, machinery and transport equipment have taken the lion’s share – about 41 percent – of Chinese exports to Africa. Zhang predicts that China-Africa trade will tick up 50 percent by 2015, and will head up to US $1.7 trillion in 2030.
Wei Jianguo, secretary general of the China Center for International Economic Exchanges, is also optimistic about prospects for China-Africa economic cooperation. He believes that regional unrest in parts of the continent will not derail the overall trend of strong growth. International Monetary Fund figures show that Africa registered a six percent GDP growth last year, well above the global average. Today China-Africa trade has moved beyond conventional sectors such as infrastructure, textiles and machinery, into other industries, like retailing and tourism. African countries moreover share a strong desire to work with China.
“Complete, wide-ranging financial services are needed to expand bilateral cooperation and facilitate Chinese businesses’ going to Africa. These include project finance, trade finance, bridge loans, foreign exchange, hedging of bulk commodities, cash management and e-banking,” said Lin Qingde, CEO of Standard Chartered Bank (China) Ltd.
US $5.7 billion worth of cross-border transactions between China and Africa was settled in RMB last year, according to a Standard Chartered Bank report. It states that a projected 20 percent of Chinese imports and exports will be settled in RMB by 2015, of which the African share will hit US $15 billion.