China Captures African Markets

China is emerging as a major investor in the African continent by forging trade ties with as many as 40 African countries and bagging lucrative deals...

The positive business environment in Africa has already been noticed by the international community and investments into Africa have been flowing from various countries around the world. China, one of the fastest growing economies in the world, has already started making inroads into the African markets and established a special China-Africa Business Council recently. Trade between China and Africa has been registering an unprecedented growth and stands at approximately $50 billion. Trade analysyts expect this figure to reach a whopping $110 million by 2008.

More than 40 African countries have trade agreements with China and Chinese companies are engaged in a wide range of economic activities – a railway project in Nigeria, a Sheraton hotel in Algeria and a mobile telephone network in Tunisia – China is all over Africa now.

China’s growing involvement in Africa is necessitated by it’s growing need for natural resources, in particular for imported oil, of which 25 per cent now comes from Africa. As the world’s largest oil importer after the United States, China has oil interests in Sudan, Chad, Nigeria, Angola, and Gabon.

China National Petroleum Company has acquired a 40 per cent stake in one of Sudan’s major oil exploration project and Chinese workers built a 1,600 kilometre long pipeline in Sudan in just 11 months. In fact, China has been actively partnering with African governemnts to meet its rising demand for oil. The Chinese governemnt has also extended a soft loan of $2billion to Angola to secure a regular supply of 10,00 barels of oil per day.

China is also a major investor in the lucrative copper industry of Zambia and Congo. It is a major buyer of timber from Gabon, Cameroon and Mozambique. The Chinese also procure platinum, iron and coal from Africa to meet the rising demand of its booming industrial sector.

In Zimbabwe, China has reportedly finalised a deal to supply the African nation with fighter jets and other military goods worth $200 million. Trade and tourism ties between China and Zimbabwe have been flourishing in recent years. A growing number of Chinese citizens are now travelling to Zimbabwe to enjoy the many tourist attractions that the country of Robert Mugabe as to offer. The increased trade and tourism ties between Zimbabwe and China has resulted in the announcement of twice-weekly direct flights between Harare and Beijing. In fact, speculation is rife that most western farmers in Zimbabwe will eventually be replaced by Chinese investors eager to invest in Zimbawe’s ailing tobbaco farming industry. Chinese companies are also reportedly vying to gain a major share of Zimbabwe’s lucrative mineral extraction industry.

In Zambia, Chinese contractors have said to have won a contract worth $600 million to build a hydroelectric plant at Kague Gorge. Other Chinese construction companies are also reportedly working on lucrative contracts to build hotels, roads and bridges in Botswana and South Africa. High level delegations from China have been busy forging trade ties with various African countries and have bee touring countries like Nigeria, Gabon, Sudan, Kenya, Tanzania and Uganda.

On the other hand, exports from Africa to China have also been registering a healthy growth in recent years. South Africa’s exports to China have more than doubled in the last five years. Notable among these exports are raw materials needed to meet the rising demand for China’s manufacturing sector – commodities like coal and gold. Chinese companies have also been using African factories to stitch garments using Chinese raw materials and cloth for exports to the United States under the AGOA agreement that allows duty free imports from certian African countries into the US.

However, the main products China exports to Africa are machinery and electronics, textile and apparel, hi-tech product and finished goods, while imports from Africa concentrate on crude oil, iron ore, cotton, diamond and other natural resources and primary goods.

To further boost trade with Africa, China has declared to exempt import tariffs on certain commodities from 25 African countries so as to facilitate their entry into the Chinese market. These countries enjoy zero tariff treatment and the special preferential tariff rate, for exports of some 190 tariff lines of products to China, ranging from food, mineral product and textile, to machinery and electronics.