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China Invests in African Expansion... And the West Loses Out

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While the world remained fixated on the Greek debt crisis and its effect on developed nations, few took notice of the unpredictability it is producing throughout the African continent. For the last decade, African leaders, with the help of the World Bank and former politicians like Canada's Paul Martin, have attempted to integrate their economies in order to prepare for future growth and revenue sharing. Ironically, this more cooperative mode has left the continent even more vulnerable than before the recent consolidation efforts.

Still recovering from the devastating global financial crisis, which began in 2008, Africa's fledgling economic union is now in jeopardy. African ministers gathered together in Washington this past week to emphasize this point, and requested that world leaders not neglect Africa in their efforts to bolster the world economy.

While Western investment on the African continent has ebbed and flowed over the last two decades, China has been steadily ramping up their commitments to the African economy and winning a lot of friends in the process. Historically, most Western politicians, bureaucrats and capitalists saw Africa either as a cheap source for raw materials or some kind of rescue mission for their humanitarian impulses. Caught in the loop between those two positions, the West never allowed for an expansion of its own thinking as to how to establish long-term partnerships with Africa on both an economic and human resource capacity.

While the developed nations tinkered, China invested. Nearly 900 Chinese companies were involved heavily in various regions of the African continent. Between 2007-2010 the Chinese government had invested some $20 billion in production and manufacturing, while the World Bank, incorporating investments from all the advanced nations, had contributed only $17 billion.

Things weren't always this way. Up until two decades previous China itself was listed as a developing nation, its infrastructure ancient, its poverty extreme, and its economic vibrancy severely limited. In the 1980s, Japan and China, despite historical animosities, began establishing partnerships on economic cooperation that were to eventually usher China into a new era of prosperity. The partnership actually involved aid from Japan in return for resources produced in China -- a model China is now using in its relationships with the African continent.

The effects of the economic revolution in China were nothing short of remarkable. Since those days of partnership with Japan, poverty in China had gone from 53 per cent of the population to only 8 per cent. In a very real way, this is what is transpiring in various African regions as a result of China's new investments, though nobody seems very interested in talking about it.

As the new millennium approached, China looked to Africa as Japan had once looked to China -- a source of untold riches. It began investing heavily in key African nations. Japan had understood early that China didn't have the financial resources to undertake major projects like the refurbishing of ports, railroads, airports, dams, telecommunications, etc. -- all those portals through which Japan could extract and transport goods to its own shores. China repaid Japan for its investments with coal, oil, minerals, and the like. Then when China's economy began to boom, the infrastructure was in place to make it happen. Nobody really saw it coming, and when it did China was ready to expand.

The same pattern is now developing between China and Africa, only in reverse -- China builds the African infrastructure and Africa ships goods back to the Chinese mainland. Africa was broke, everyone understood that, and while the West continued its interest only in extraction, China constructed roads, ports, dredged harbours, expanded airstrips to handle heavy loads -- all these facilitated the massive shipment of needed resources to China. Cash-strapped African governments possessed the important capital projects needed to expand their economies.

The problem was that all these Chinese/African projects fell outside of the aid and trade envelope established and supplied by Western nations, and it irked them in the process. Between 1985 and 1995, China had been directing 57 per cent of its foreign aid to Africa, even as the rest of the affluent nations had been cutting theirs back. China has earned a steady reputation in Africa as a long-term partner and an ongoing presence throughout the continent.

Should the West continue to ignore the overall needs of Africa's continental economy, then it shouldn't be surprised when it finally decides on long-term investments for natural resources that China has already set up shop and captured most of the contracts. The price to pay for such neglect might very well return to haunt the West's economic recovery and prospects.

Around the Web

In Africa, U.S. Watches China's Rise - WSJ.com

Is the West losing out to China in Africa? - CNN.com

Africa's Friend China Finances $9.3 Billion of Hydropower - Bloomberg

China's economic invasion of Africa | World news | The Guardian