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03-11-09, 00:03
China's Africa goals more than just natural resources
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updated 5:26 p.m. PT, Sun., Nov . 1, 2009
By Ben Blanchard

BEIJING (Reuters) - Barely a month goes by without some new energy or mineral deal being struck between China and an African nation. These deals have transfixed the West, but China gets far more from the relationship than raw resources.

Africa offers China two important things -- a chance to earn the global respect it believes it deserves in recognition of its growing economic clout, and friends who do not judge it, or who at least have little reason to directly fear China's rise.

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Communist China's friendly relations with Africa go back decades, to when Beijing backed newly independent states as well as liberation movements. The continent's backing was vital in getting China into the United Nations in 1971.

"You could argue that the contemporary driver is economic, but they've always had a political interest in Africa, from the mid-1950s onward," said Chris Alden, an Africa expert at the London School of Economics.

"As China becomes a more active player in multilateral affairs, it recognizes it needs partners, and Africa in many ways is a very suitable partner."

In 2006, President Hu Jintao promised a leap in investment, trade and aid at Beijing's first summit with African leaders. At the G20 summit of big developed and developing economies last November, he raised Africa's needs during the global economic turmoil.

When Chinese Premier Wen Jiabao visits Egypt for the second Africa-China summit from November 8-9, analysts and diplomats expect him to match the $5 billion in loans and credit offered then by Hu, or even exceed it.

Africa's GDP is about $1.2 trillion, roughly one quarter the size of China's $4.4 trillion economy.

"While savoring the fruits of its own growth, China has never forgotten its obligations to the African brothers," the official Xinhua news agency said in a recent commentary.

Hu's commitment to Africa appears to reflect his belief that the continent offers a friendly stage to show the wider world that China's growth and international policies are a global good.

"They would like to demonstrate that their benign intentions are best represented in places like Africa," said Alden.

Africa also offers China important diplomatic support that it invariably does not get from the United States, Europe or even other countries in Asia, especially when it comes to contentious issues like United Nations' votes over human rights.

"We need the vote from African countries whenever we are facing voting events, like the Shanghai Expo, Olympic Games, Human Rights, et cetera," said He Wenping at China's Institute of West African and African Studies.

TEMPTING MARKETS

Of course, none of this is to say business deals and investments in mines and oil fields are not important.

Trade between China and African countries has surged by an average annual 30 percent for much of the past decade, driven by China's appetite for oil and minerals, and its sales of clothes, cars, telecommunications and other goods to African markets.

Yet the investments go beyond simply buying up natural resources. China's largest bank, ICBC <1398.HK>, owns 20 percent of South Africa's Standard Bank <SBKJ.J>.

Shenzhen-based Huawei Technologies <HWT.UL>, China's biggest telecoms equipment maker, is pushing south from its established stamping ground in North Africa. Peer ZTE Corp. <0763.HK> is another Chinese player growing in importance in Africa.

"Not everything is driven by politics -- it's driven by business," said Martyn Davies, executive director of Stellenbosch University's Center for Chinese Studies in South Africa.

"All the companies that are investing in Africa are making a lot of money."

With developed markets either saturated or entry requirements too high, Chinese firms see Africa as a great untapped market, added Duncan Innes-Ker, Beijing-based China analyst at the Economist Intelligence Unit.

"When it comes to other parts of the world, it is true that the requirements that come along with investment, like labor and environment standards, essentially negate the main advantage China has, which is a lot of cheap money and an ability to do things very well at the moderate cost end of the scale," he said.

"A lot of it comes down to where Chinese firms have their comparative advantage, and these are fast-growing markets," Innes-Ker added. "Chinese companies are well placed to exploit that, as unlike a lot of Western companies they're used to operating in a market where you have to be flexible."

(Additional reporting by Emma Graham-Harrison, Editing by Dean Yates)

Copyright 2009 Reuters. Click for restrictions.

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