By Long Guoqiang

Research Report Vol.20 No.5, 2018

The friendship between China and Africa dates back a long time. Africa, a continent of hope and full of development opportunities, has reached a new historical starting point. As a crucial component of the comprehensive strategic partnership between the two sides, China-Africa industrial capacity cooperation enjoys broad prospects, but also faces prominent issues. To effectively address these issues and steadily promote China-Africa industrial capacity cooperation, it is necessary to consolidate the efforts of all players, adopt comprehensive policies, and take targeted measures to reduce risks, create a favorable climate of opinion, and safeguard public interests.

I. China-Africa Industrial Capacity Cooperation: Strategic Significance

1. China-Africa industrial capacity cooperation will lay a solid foundation for building a China-Africa community with a shared future

Building a community with shared future for mankind and leading the reform of the global governance system are inherent requirements for China to create and maintain a mutually beneficial relationship with the rest of the world. As an important step and a feasible starting point for building a community with shared future for mankind, a China-Africa community with a shared future will benefit from enhanced China-Africa industrial capacity cooperation. Remaining stable in a rapidly changing world, Africa stands out with its rich resource endowment and development potentials, leading to ever more fierce competitions among the world’s major powers. Traditional powers such as Britain and France are increasing their aid to Africa, the United States is giving even more importance to Africa, and Asian countries such as Japan, the Republic of Korea, and India are beginning to pay special attention to developing relations with Africa. However, as a late beginner in industrialization, Africa suffers from underdeveloped infrastructure and lack of talents capital, unable to transfer its rich resources into strong development drives. Focusing on infrastructure construction, development of energy and resources, and industrial development, China-Africa industrial capacity cooperation mainly takes the form of direct investment, engineering construction contracting, equipment trading, and technical cooperation and plays an important role in advancing industrialization in Africa. In recent years, China-Africa industrial capacity cooperation has continued to produce fruitful results. China has been Africa’s largest trading partner for eight consecutive years and one of its biggest sources of foreign investment. In 2016, the contractual value of contracted projects newly signed by Chinese enterprises in Africa amounted to USD 82 billion, up 8% year on year and the turnover was USD 52.1 billion. Africa has become China’s second largest project contracting market. Chinese enterprises have actively participated in infrastructure development in Africa and played an important role in upgrading sectors such as roads, railways, airports, electricity, and telecommunications. They have actively participated in the processing and development of resources and energy in Africa and contributed to the continent’s industrialization by adding value to its resources and energy, expanding its exports, and helping address the “foreign exchange gap”. Through manufacturing investment and equipment exports, Chinese enterprises have introduced to Africa applicable technologies, non-agricultural employment opportunities, and platforms to train local talents. Responding to the call for industrialization in Africa, China-Africa industrial capacity cooperation has also created many growth opportunities for Chinese enterprises. In terms of soft power, China’s development model is becoming increasingly popular in most African countries which are looking to China on how to develop their economy, creating a unique advantage for advancing China-Africa industrial capacity cooperation. In the long run, Africa may become a new frontier in the global economy as its economic potential continues to unfold. Steadily promoting industrial capacity cooperation with Africa will give Chinese enterprises the first mover advantage and prepare them for market competitions. Therefore, China-Africa industrial capacity cooperation will contribute to and lay a solid foundation for building a China-Africa community with a shared future.

2. China-Africa industrial capacity cooperation will provide strong support as China moves up global value chains

From that among products to that among companies, international economic competition has evolved to today’s new phase of competition among industrial chains. Since the introduction of the reform and opening up policy, China has firmly seized the strategic opportunities of economic globalization, fully utilized its low-cost labor advantage, and successfully transformed from a manufacturer of labor-intensive value-added goods to an active participant in global value chains. As the world’s most important manufacturer and exporter of labor-intensive finished products, China has entered a critical stage of transforming its comparative advantages and upgrading its position in the global division of labor. Capital-intensive products require further expansion into the international market, while labor-intensive industries are under the pressure of transformation and upgrading. How to maintain the lifecycle of China’s industries? International industrial transfer provides an important way out. Experience of some advanced economies in East Asia shows that successful industrial transfer will help export-oriented countries move up global value chains. Past industrial capacity cooperation with Africa has yielded some initial fruits in the transfer of labor-intensive industries, development of resources and energy, investment in processing, and export of equipment and other capital- or technology-intensive products. The successful experience will continue to empower Chinese enterprises to move up global value chains and further drive the upgrading and restructuring of domestic industries. In the long run, China-Africa industrial capacity cooperation will provide strong support as China ascends to a leading position along global value chains.

3. China-Africa industrial capacity cooperation will help safeguard China’s resource security

Because of its national conditions, it’s imperative for China to ensure its resource and energy security on a global scale. China’s present resource and energy import dependency is quite high. As the Chinese economy continues to grow, China’s per capita consumption of resources and energy will continue to increase, resulting in ever more demand for resources and energy. Africa is richly endowed with resources and energy reserves. According to United States Geological Survey, Africa has 91% of the world’s chromite reserves, 88% of its platinum group metals, 83% of its manganese ore, 60% of its diamond, 50% of its gold, 49% of its phosphate, 41% of its cobalt, and 32% of its bauxite[]. Moreover, Africa has some of the world’s largest reserves of copper, nickel, lead, and zinc and an abundant supply of important resources in oil, coal, and uranium, etc. The copper reserves of the Democratic Republic of Congo alone are estimated at 75 million tons, or 15% of the world’s total. The country also holds 50% of the world’s cobalt reserves (4.5 million tons) and 80% of the world’s coltan reserves (30 million tons)[]. In fact, most African mineral deposits are of high quality and distributed close together, making it easier for large-scale extractions. Given Africa’s scarce efforts for mineral exploration in general, it is only possible that more resources and energy deposits will be discovered as more attention is given to this area. In addition, Africa also has 60% of the world’s uncultivated arable land, suitable climatic conditions, and a huge potential for agricultural development. As latecomers to the international resource and energy sector, Chinese enterprises have to face the fact that high-quality resources (high grade, easy mining, sound infrastructure, and low risk) are mostly controlled by Western companies. Africa is one of the few regions that may provide quality resources to Chinese companies. In recent years, China has made use of its collective strengths and developed some new industrial capacity cooperation models that integrate resource development, infrastructure construction, and industrialization. These include the Angola Model and the Sudan model[], both effective in creating a mutually beneficial relationship with African countries in resource development and processing. China-Africa industrial capacity cooperation is of great significance for safeguarding China’s resource security. ... If you need the full text, please leave a message on the website.