China deepening aid and trade ties with Africa

by Frank Ching

Having overtaken the United States as Africa’s biggest trading partner two years ago, China is continuing to cement its relationship with the continent, with President Hu Jintao pledging $20 billion in loans over the next three years at a meeting in Beijing attended by leaders from 50 African countries.

A statement issued at the end of a two-day meeting of the Forum on China-Africa Cooperation (FOCAC), first formed in 2000, said: “We believe that the development of the new type of strategic partnership between China, the largest developing country, and Africa, the largest group of developing countries, is of great significance for the peace, stability and development of the world and serves the fundamental and strategic interests of both sides.”

Both China and Africa, the statement said, “are ready to strengthen the building of FOCAC so that it will continue to steer China-Africa relations toward greater development.”

The $20 billion figure is double what China had pledged at the last FOCAC meeting three years ago in Egypt. While FOCAC focuses primarily on economic cooperation, its political ramifications are clear.

As Liu Hongwu, director of the Institute of African Studies at Zhejiang Normal University told the Global Times newspaper: “Sino-African cooperation will promote South-South cooperation. Also, it accelerates the shifting of power from the West to the East.”

Chinese Foreign Minister Yang Jiechi said the two sides have “carried out closer cooperation in international affairs.”

He also outlined plans for more exchanges, including of media organizations, so as to nurture “a favorable public opinion environment for sound and stable China-Africa relations.”

In fact, China is making major efforts to enhance its soft power in Africa. Beijing has promised to send 1,500 medical personnel to Africa in the next three years.

China is also increasing its media outreach in Africa. One recent example was an agreement signed this month for the Zimbabwe Broadcasting Corporation to air CCTV news programs.

The speed with which China has engaged with the continent is breathtaking, with two-way trade rising about 30 percent each year so far in the 21st century, reaching a record $166 billion in 2011.

While China imports natural resources, it exports mostly finished products, manufactured goods and textiles, with Africa enjoying a trade surplus. By contrast, European countries — Africa’s traditional trading partners and its former colonizers — are experiencing major financial difficulties and their trade remains bogged down at 2008 levels.

Moreover, as Jacob Zuma, the South African president, made clear, China is perceived as being quite different from the countries of the West.

“We are particularly pleased that in our relationship with China we are equals and that agreements entered into are for mutual gain,” said President Zuma. “We certainly are convinced that China’s intention is different from Europe’s, which to date continues to intend to influence African countries for their sole benefit.”

While the West had a big head start over China on dealings with Africa, and continues to import significantly more oil each year than China, the Chinese are clearly in the resource-rich continent for the long haul.

After all, seven of the world’s 10 fastest-growing economies are African and, as the Atlantic magazine said recently in a headline, “The Next Asia Is Africa.”

In fact, China is already thinking of ways in which Africa can help make the Chinese currency more international, such as by encouraging the use of the yuan in settling trade and investment with Africa and by the development of Chinese financial institutions across the continent.

Li Dongrong, assistant governor of the People’s Bank of China, said at the FOCAC meeting that Africa is capable of becoming a new international capital hub and the use of the yuan there should improve with increasing demand for the currency there.

“We will continue to encourage domestic financial institutions to increase their presence and business across the continent,” he said.

African countries, for their part, have shown interest in the yuan, with an official of the Bank of Ghana saying that its board of directors had decided to use the yuan as part of its settlement and reserve currencies, though details need to be worked out with the People’s Bank of China.

Of course, nothing can be taken for granted. An economic recovery in the United States and Europe — along with a strengthening of the dollar and the euro — would lessen the attractiveness of the yuan as a reserve currency for African central bankers.

As Karl Marx noted in the 19th century, economics determines politics.

Email: Frank.ching@gmail.com Twitter: @FrankChing1