China Increasing Presence in Sub-Saharan Africa - Assignment Example

? China increasing presence in Sub-Saharan Africa Conclusion Undoubtedly, the presence of China in SSA s has contributed to a remarkable development both in trade and economies’ stability, which numerous Western states failed to ensure in the region up to date. This is regardless of numerous African states being Western states’ former colonies, whereby afterwards they continued to finance them to improve their economies although this is incomparable to China’s recent heavy investing in the region (Taylor 2006). China despite having high population (over 1 billion people) compared to numerous states globally, the state continues to exhibit a remarkable economic improvement each year (Bloomberg 2010). This is due to its insistence on economic investment not only inside the state but also globally whereby China attains incomparable benefits in return. Some of these benefits/returns to the China embrace available market for their exports, raw materials, imports and even oil. The latter commodity (oil) is almost getting exhausted in the states which China used to rely on besides the US developing political interests in these regions with the intention of dominating the states (Middle East states), hence yielding to stiff competition. Relationship between China and Sub Saharan African region that has yielded to current strong involvement between the two sides is mutually beneficial. This implies the involved parties regardless of their varying economic grounds, maximally benefit from each though due to China’s high demand for raw materials it ended up initiating the move. This is evident from the China’s numerous economic activities evident in SSA region contrary to those of the western states that had initially and up to date invested in Africa (Kaplinsky, McCormick, and Morris 2007). Hence, exhibiting China is out to compete with its rivals (Europe and US) though the tactic is not political as witnessed with US seeming to dominate the other region. China in its quest to attain and ensure cordial relationship with SSA region, embarked on heavy investing that will not only guarantee present benefits but also the future (Kaplinsky, McCormick, and Morris 2007). Hence, being prudent in their actions especially in shunning the areas that have for long maintained a high reputation of rich oil reserves, though currently are undergoing depletion (Broadman 2007). This has prompted China to focus on developing SSA region via establishing and supporting varied key projects. Most of these projects encompass those, which for long superpower states (west and US) evaded or heightened their bids especially when negotiating about terms once they finance them. Hence, prompting China to use this opportunity to offer interest-free loans meant for varied states’ projects in this region to back and fund their projects. For instance, this is evident in Libreville where China gave $2 billion and an additional of $6 million loan in return for timber (Ministry of Foreign Affairs, and PRC.2000). This is among numerous interventions and incidences regarding trade, which China has involved itself by concentrating on ensuring cordial relationship with SSA region besides constant flow of raw materials for their home industries. The inception of china’s interest in SSA region started with the tour of President Hu Jintao who ended up entering into various agreements with the key SSA states, for instance, Algerian and Gabon regimes. His core intention encompassed seeking constant suppliers of oil for his states. Consequently, this prompted china to finanncing oil exploration projects after signing an agreement with Omar Bongo in Lbreville (China Monitor 2006). In addition, Sinopec and Total-Gabon company made an agreement where the latter was to export 1Millions tons of oil to china (China Monitor 2006). This prompted China to give a loan of 420 Million euro meant to develop Zarzaitine oil field, which was after signing agreement in 2002 (China Monitor 2006). Hence, this made china establish itself in SSA region compared to its rival western states that had not invested heavily before (China Monitor 2006). China’s intensive investment in other states has enabled it continue enjoying thriving economy each year. For instance in 2006, Central Bank of China anticipated the state’s economy to grow by 9.2 per cent, which it exceeded exhibiting a growth of 11.3 per cent after the second quarter of the same year (Trofimov 2007). Hence, showing the greatest growth in that year globally and overtaking UK to assume the forth position (Ajakaiye 2006). However, this has not stopped whereby currently the state has heavily invested in SSA region with the intention of exploiting numerous resources that for long had remained idle. Since, this will not only be beneficial to the SSA states but also to China. This is because by the time their rival states will have started having interest in the region; China would have established itself through both initiating and supporting varied key projects to the extent of winning the SSA’s trust. Therefore, that time china will be enjoying what it has toiled before SSA states manage refunding the allocated loans. Some of the states which china has heavily invested in terms of supporting key projects embrace Kenya, Benin, S. Africa, Angola, Nigeria and Algeria (Taylor 2006, P. 937-939). China’s investments in SSA region encompass infrastructural projects whereby due its quality services have prompted numerous people deem is proficient in this field. Hence, this won the region’s trust to the extent of oil rich states granting them to undertake oil explorations in the region. Oil was the core reason that prompted china to develop interests in the SSA region. Sautman and Hairong (2007, p.16-18) in their study cite this involvement resulted to a tremendous growth between china and SSA region in the past few decades. For instance, in 2003 this transaction rated at $18.5 billion, which was higher compared to 2002 $12.39 billion (Swartz and Hall 2010). This has continued to exhibit a rapid growth rate over the years whereby in 2005 the transaction was more than $40 billion (Kaplinsky & Morris 2007). In 2010, china’s deepened orientation trade with SSA saw its GDP ratio exceeding 70 per cent. This is because china within these years had developed as an important exporter of industrial products not only in SSA but also to the entire African region besides cited as the leading importer of core and coal (Kaplinsky & Morris 2007). Similarly, the SSA’s exports and exports have showed a sharp increase since the region started trading with china. SSA’s imports raised from 2.60% in 1990, 17.86% in 2005 to 29.78 per cent in 2010 while exports escalated from 0.56% in 1990, 6.46% in 2001 to 22.48% in 2010. Presently, china’s leading infrastructural projects are evident in Kenya, where China Wu-Yi has just completed the 50-km Thika-Super Highway from Nairobi (Sautman and Hairong 2007). This road is one of the modern roads in East and Central Africa that has heightened China’s reputation in terms of infrastructural projects (Sautman and Hairong 2007). Other infrastructural projects handled by this company embrace Hydro electric projects like Sondu-Miriu Phase II situated in western Kenya (Xinhua 2009). Presently, China Road and Bridge Corporation (CRBC) has situated its African regional head office in Nairobi. This gives the company quick access to to regions of interest in eastern African where it is undertaking varied projects besides constructing Tambach-Kabarnet and renovating Mombasa-Nairobi highway (Hanson 2008). China’s warm welcome by SSA region states was due to its stand regarding loan terms, which are contrary to most western states’ (Hanson 2008). This is because western states besides advancing loans with high interests, they demand repayment to be in form of natural resources like oil and other varied raw materials (Brautigam 2003, p.44). In addition, China does not exhibit any interest in political gains or interferences, which is the case with majority of western states that seem to deprive African states their autonomy. This is by imposing neo-liberal reform package, which is common with World Bank. Conversely, china advances zero rate loans with the intention of outbidding its rivals, which is evident in securing Angola’s Shell Oil block project (Alden & Davies 2006). In this project, china outbid India besides other interested western states in the exploration of oil in Angola (Alden & Davies 2006). Consequently, china’s mode of advancing loans has completely won SSA region’s states whereby currently they are exporting oil to the east. For instance, Nigeria, Sudan, Angola and DRC their oil exports to china comprise 86 to 100 per cent. The latter state’s oil export capacity to china is approximately 99.6 per cent, which is higher compared to its counterpart countries or that goes to other regions. Conversely, approximately 10 SSA states their bigger share of imports emanates from china, which basically comprise of manufactured products. However, China’s heavy investment in SSA region states has not gone down devoid of some serious concerns emanating from the party states. This is especially due to the quality of products and services, which china provides in the region, for instance, the phone industry. This was noticeable in Kenya where the regime through CCK ordered termination of over million phones from its networks. Since, most of them were substandard and did not meet the state’s standards. Studies showed that 90 per cent of the switched off phones in Kenyan were from china (Wallis 2010). This raises more doubts concerning china’s products and services, which the state over the past decades has exported to the SSA region. Hence, according to Wallis (2010) this in future might adversely affect cordial trade relationship that is evident between china and SSA, which took long to build up to be who they are currently. However, this to the china might not be detrimental compared to the SSA regions states that significantly depend on china’s industrial cheap products (Alden 2009). China besides relying on SSA region for its raw materials, it has also other numerous sources globally that can adequately avail what they need, for instance, Cambodia, Myanmar and Vietnam (Alden 2009). Hence, these sources act as a fall back base for china because trade with SSA is risky due to varied aspects that characterize the region’s economies. This is because SSA economies solely rely on revenues from taxing external trade and inadequate number of unprocessed products. Hence, this renders SSA states’ economies vulnerable to both trade shock as well as price volatility. This is contrary to the china’s economic base which is strong to the extent of manufacturing its products besides ensuring they are of high quality. This is because china boasts of a complete industrial structure, which is not evident with SSA states. China’s involvement in SSA states has not only boosted their respective economies but also adversely affected their small enterprises. This is to the extent of some becoming bankrupt because of the extremely cheap products imported from china, hence affecting local entrepreneurs (Tull 2006). This is evident in Ethiopia where 2009 study contends out of 94 small and medium enterprises, the emergency of Chinese products forced 30 per cent to bankruptcy, 35 per cent to downsize their activity (Tull 2006). Additionally, china’s involvement in SSA region yielded to fall of micro-enterprises from 8 to 5.1 workers besides those of the small enterprises declining from 46 to 19 employees (Tull 2006). These encompassed some of the detrimental impacts that affected the region though compared to numerous benefits that has emerged due to china’s investing in SSA seem insignificant. Studies contend the involvement of Chinese in SSA region prompted these states shift their attention to importing from china (Tull 2006). This is because the products are cheaper compared to product from other states, which SSA regions states had relied on earlier. The 2009 study in Ethiopia also cited the involvement of Chinese in SSA region will have a significant long term implications on industrialization not only now but also in future (World Bank 2007a). However, the study failed to ascertain both indirect impacts emanating from the Chinese involvement in SSA region and what will happen suppose these SSA states in future wish to diversify. Diversify implies seeking new opportunities in other global states whereby Chinese by the time will not have managed to cater what these SSA wish to have in their market (Morris 2007). References Kaplinsky, R. & M. Morris (2009), “Do the Asian Drivers Undermine Export-Oriented Industrialisation in SSA”, World Development Special Issue on Asian Drivers and their Impact on Developing Countries. Zafar, A. (2009) “The Growing Relationship Between China and SSA: Macroeconomic, Trade, Investment and Aid Links.” World Bank Research Observer 22(1): 103- 130. Read More