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China invest $20 billion in Africa

         Date: 2012-07-25

           Tag: China invest, China invest Africa

Summary: China, in the next three years, wants to invest $20 billion in Africa, twice the amount it pledged three years ago. Most of it will be channelled to agriculture, infrastructure and small and medium-…

China, in the next three years, wants to invest $20 billion in Africa, twice the amount it pledged three years ago. Most of it will be channelled to agriculture, infrastructure and small and medium-sized companies.

China Civil Engineering Construction Company (CCECC), the state-owned Chinese firm, just signed $1.49 billion contract to build the Lagos-Ibadan railway.

The reasons for targeting these sectors are not far-fetched. First, regional trade on the continent is minimal, hampered by infrastructure and poorly equipped customs.

Paul Collier, professor of economics at Oxford University, argues that Africa’s integration agenda “is partly a matter of practical trade policy”, for instance, the removal of road blocks and harassment of by customs officials. “It is also a matter of infrastructure: roads need to be built and above all maintained.”

Secondly, and perhaps China’s main intention, the Chinese are losing their low wage labour advantage. To remain competitive, China has to move up the value chain towards high-end services and products.

In addition, China’s export-led growth is waning, the country is looking to keep its economy growing. These structural changes in China’s economy are an opportunity for Nigeria; we can’t afford to miss the boat again.

In a 2009 report, Pat Utomi noted that some Nigerian officials averred that Nigeria-China relations “could offer greater benefits than collaboration with the West” and that China’s no-strings-attached policy made relations on trade and foreign aid “more manageable and user-friendly”.

Nigerians and the business community welcome – and enjoy – lower-cost goods and services from China, opportunities for Chinese-financed projects, and joint ventures with Chinese companies.

But they also moan about product dumping, the ‘slave wage’ paid to locals working for Chinese firms, and the lack of technology transfer.

Even so, China’s star is soaring in Nigeria. According to a June 2010 survey by Pew Research Centre, a think-tank based in Washington DC, 76 percent of Nigerians expressed a favourable view of China as a partner.

Also, 90 percent of Nigerians think that China’s growing economic power is good for the country. The greatest impact, though, could come in what economists refer to as the third wave and last frontier for manufacturing (Africa) and a push to shift low-end manufacturing to the continent due to lower labour costs.

“As China’s economy transitions, shifting labour intensive industry to regions outside of China offers production opportunities,” Zhong Jianhua, China’s special envoy to Africa, said this week.

He added that “African countries should seize this opportunity. They can step into a track that China has taken in the past to develop their own industry.”

Nigeria stands to benefit from this trend due to its large labour force, English speaking populace, nearness to key (Chinese export) markets, such as the European Union and the United States, and relative stability since the return of democratic rule 10 years ago.

Some states in the country are already tapping into this. There is the Lekki Free Trade Zone in Lagos, which is in partnership with some Chinese firms and other special economic zones in Ogun State and Cross River State, where investors can come and plug in for business and build cluster industries.

This is the development path taken by countries such as Indonesia, Malaysia, Thailand and Vietnam, and missed by Nigeria in the past decades. Nigeria should not miss this golden opportunity this second time around.

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