The Hindu Business Line : China's African safari

In two landmark summits — one with Asean and the other including 48 African Heads of government or Ministers,held within a span of 10days — China has demonstrated its reach, offering billions of dollars for investments and agreeing to make larger imports from African and Asian countries.

China's gathering force as a global economic locomotive, second only to the US, has given it a growing stature in the comity of nations, though there is increasing concern in the West about its over-heating growth, massive surpluses, under-valued currency and rapid spread of its economic power, not only across Asia but also into Africa. No longer is the Dark Continent just the white man's burden.

China did not allow itself to be distracted by the IMF's recent call for a significant appreciation of its currency, which remained as under-valued as two years ago, despite its "managed float" from July 2005, nor by warnings from Brussels of "defensive measures" if it did not ensure "fair competition", and open its market wider for goods and services of the European Union, its largest trading partner. The EU Trade Commissioner, Mr Peter Mandelson, delivered a tough message to remind China that its privileges as a global economic power went with responsibilities, and that it should give up "China-first" approach in key sectors to the disadvantage of European companies.

Having failed to get China to revalue its currency and reduce dependence on external demand to bolster its high growth, the Bush Administration opted for an economic dialogue mechanism as punitive measures such as a 27 per cent across-the-board levy on Chinese imports promoted in US Congress earlier this year would have proved counter-productive if Washington was to be brought before the WTO Dispute Settlement Panel.

Co-ordinated policy action

With its reserves now almost $1 trillion and current account surpluses of over 7 per cent of GDP, China poses a conundrum in the IMF's search for co-ordinated policy actions by the major surplus and deficit countries to bring about an orderly reduction of global imbalances, the aim of its current multilateral consultations.

Chinese officials admit that things are getting so out of hand that in 2006, all the targets, investment, credit and money supply, pierced their ceilings and that, if the economy is to avoid overheating in 2007, it should now begin to apply the brakes to maintain macro-economic stability. They hope to use the interest rate mechanism and channel more investments into education, science and rural development.

Refurbishing strategy

China is making the most of its power status to spread its wings, refurbish its economic strategy and enhance its political influence in Africa, as a foreign policy priority, even as it has firmed up a Free Trade Area with the dynamic South-East Asian region to be ushered in by 2010. In recent years, China has been building a strong resource base in Africa for its growing needs of oil, minerals, metals and other raw materials for its fast-growing economy.

In two landmark summits — with 10 Asean leaders and 48 African Heads of Government or Ministers held within a span of 10days — China demonstrated its reach offering billions of dollars for investments and agreeing to make larger imports from African and Asian countries. Targets were set to expand two-way trade to levels of $200 billion with Asean by 2008 and $100 billion with Africa by 2010, from $130 billion and $40 billion respectively.

Tariff reduction

The Asean Summit, of October 29-30, marking the 15th anniversary of China becoming the first Asean dialogue partner, laid the foundation for "enhanced China-Asean partnership" and resolved to speed up processes to launch in 2010 the Free Trade Area, which will be one of the largest, with 1.8 billion people and combined GDP in the $2.5-3 trillion range. Asean is China's fifth largest trading partner and the Grouping has invested $40 billion in the mainland while Chinese companies are planning more investments in the bloc.

Tariff reductions toward the FTA have begun from July 2005 and will be zero between China and six Asean countries from 2010, while free trade would begin with the four new members (Vietnam, Cambodia, Laos and Myanmar) by 2015. Politically, China has reinforced its friendly relations with Asean, based on the five principles of co-existence, by endorsing the concept of a "nuclear weapon free zone" in South-East Asia and committed itself to signing the protocol for a Treaty in this regard.

New multi-lateralism

The more spectacular China-Africa Summit (November 4-5) came up with a declaration proclaiming the establishment of a "new type of strategic partnership" between China and Africa based on political equality, mutual trust, economic win-win cooperation and cultural exchanges. It reaffirmed support for and strengthening the role of United Nations and promoting multi-lateralism and democracy in international relations.

China has over the years been extending aid to Africa and building roads, railways, ports and other infrastructure there. The Chinese President, Mr Hu Jintao, announced doubling of Chinese aid and provision of $5 billion — $3 billion in preferential loans, and $2 billion in export credit — over the next three years.

A China-Africa Development Fund with a target of $5 billion would be set up to encourage Chinese companies to make more investments in Africa and to build a Conference Centre for the African Union. Some 15,000 African nationals would be given professional training in the next three years.

Trade target

The action plan also incorporated the trade expansion target and the Chinese Premier, Mr Wen Jiabao, assured African leaders that China would import more African goods, even if it increased its deficit in bilateral trade. In the run-up to the Beijing Summit, there was orchestrated concern from Washington and other capitals and also from the IMF/World Bank about the terms and conditions of China's lending in Africa, where many countries were receiving bilateral and multi-lateral debt relief.

The World Bank President, Mr Paul Wolfowitz, wondered whether the loans were on "responsible terms" and took account of social and environmental concerns. The Western criticism hinges on China's support to many countries with "corrupt regimes" and absence of human rights. But China has refuted these contentions, maintaining it had also given debt relief and its loans were not on hard terms, and that its role was one of expanding South-South cooperation.

Global resource hunt

For some years now, the US has been promoting Africa as a potential market with its Africa Growth and Opportunities Act and with an eye on its oil resources. But China has made serious inroads here, with oil exploration ventures in Angola, Sudan, Nigeria and other countries — in effect, telling the western powers that Africa is no longer their exclusive hunting ground.

India has also been on a global hunt for resources, especially oil and gas and other minerals, but is yet to make headway. Nor has it been able to make demonstrable progress on its Free Trade Area plans, especially the one with Asean. But it has become part of economic strategy with nations to negotiate for free trade agreements within the region or across regions and continents, as with the proposed IBSA (India, Brazil and South Africa). India, China and Brazil will, it seems, be increasingly competing with each other within the FTAs.

(The author is a former Chief News Editor of PTI.)