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What Africa Can Learn from China

         Date: 2012-08-01

           Tag: Africa, Africa Learn China

Summary: We are living in interesting and perilous times. The Chinese word for crisis is made up of two characters – danger and opportunities. Times of danger also offer opportunities to those who are able …

We are living in interesting and perilous times. The Chinese word for crisis is made up of two characters – danger and opportunities. Times of danger also offer opportunities to those who are able to use them to their advantage.

The international economy is in its worst crisis since the Great Depression. There could be a break-up of the Euro zone with momentous consequences for the world economy; and the U.S. economy is limping along with high level of unemployment five years after the great financial meltdown.

Growth in these two largest economies is below 2% at best. On the other hand, the Asian economies, particularly China, though affected are better off. Growth is forecasted to be about 8% for China and 5.8% for Africa in 2012.

Why has China been able to maintain such stellar economic performance over the last two decades? To me, the key lies in its ability to combine the positive elements of a state economy and a market economy.

While a rigid and centrally planned economy of the Soviet type is unsuitable for a complex modern economy, the free-for-all market fundamentalist economy that was touted as the end of history is discredited by the present global economic and financial crisis.

Next, I will sketch briefly the areas that China can cooperate with and assist in Africa’s development.

Over the past two decades, China's economic relation with Africa has grown significantly in terms of trade, investments, and official aid.

However, most of these have been concentrated in the extractive industry and the provision of infrastructure related to this sector.

There have undoubtedly been gains for African countries from this expansion of export earnings due to increased commodity demand and prices. The assistance provided by China for infrastructure development has also been favourably commented upon.

However, while the resource rich African countries have benefitted from the commodity boom generated by China, there have also been concerns raised that in many countries there has not been enough diversification of the economies beyond commodities, especially into manufacturing, for example by value addition through more processing of the commodities and manufactures based on the commodities.

Also, there have been concerns about the environmental and distributional consequences of the extractive sector.

It would be useful for African countries to examine more deeply these issues of economic diversification, and social and environmental issues, so that sustainable and equitable benefits can be derived from future commodity production.

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