Positive catalyst for Africa

Some of the major criticisms of contemporary Sino-African ties don't hold water at all, says a report released by Standard Bank in South Africa. Excerpts below:

China has shuffled the relative importance of certain political and economic tools, and offered a different style of engagement with Africa. China's bilateral engagements should be seen as a positive-sum catalyst for African governments to further their own economies and diversify their relations.

Despite widespread views to the contrary, China is not offering an entirely different ideology to the "Washington Consensus" for Africa. Marketization has been a vital ingredient in China's own development strides; no nation has improved its level of economic freedom as swiftly. China's macroeconomic success indicates that more freedom leads to more growth, but stagnant freedom leads to stagnant growth. The weight of commodities in Africa's exports is high in China-Africa trade. However, it is equally high for each of Africa's major export destinations. This questions Africa's level of economic diversity and industrialization.

For now, natural resources remain Africa's core competitive advantage in global trade. Africa must capture and allocate associated revenues in ways that enhance productivity, promote economic diversification and industrialization, and improve living standards. In the meantime, China adds diversity and resilience to Africa's economic thrust and global emergence.

Low-cost products are offering stiff competition to Africa's juvenile manufacturing sector. The important challenge facing the continent is not unique to Africa. For instance, in intra-BRIC trade, the composition of Chinese trade is consistent with Africa's experience. Individual African countries need to be smarter and strategic in building complementary competency with China's that attaches to global supply chains. The lop-sided distribution of economic power, of China over Africa, means that China does have an advantage in negotiating the rules of engagement. However, local considerations have gained traction through learning-by-doing. Meanwhile, China's investment and trade encourage Africa's economic growth, which has altered the way in which the rest of the world views prospects on the continent and Africa's own expectations.

China is not squeezing traditional partners out. In terms of FDI stock and flows, China trails advanced economies and faces stiff competition from other emerging markets. The charge is not only that Chinese support provides fertile soil for poor governance and corruption, but also that the country is free-riding on Africa's past debt relief, adding new layers of additional debt. However, China is a small lender on the continent; Russia forgave $20 billion in Cold War-related debt in 2008. China is offering a different style and tone of engagement with African states. The truth of China's integration and lessons it may equivocate are less mutually exclusive than many superficially envision. China's bilateral investment and trade with Africa should be seen as an enabler for African governments to further their own economies and develop their own brand of development ideology that builds on the current development discourse and empirical evidence.

Expounding intellectual effort to create an institutionally endorsed framework to ensure that Africa benefits from what is undeniably a sea change in attitude towards Africa has overwhelming positive prospects. Granted, the speed of China-African integration has caused some interesting imbalances and challenges. However, that is natural. The policy calculus must withdraw from ideological meandering and target pragmatic solutions, in which an institutionally enforced multilateral agenda punctuates this interesting time for the continent.

(China Daily 05/16/2012 page9)