China’s continuing African trade investment and aid could act as a buffer for African economies, a recent report suggests. And if China can steer its way through the crisis it could become a ‘development partner of choice’, increasing its ‘soft power’ influence in the developing world and acting as a steadying factor in trade and investment compared to the West, writes Stephen Marks.
China’s continuing African trade investment and aid could act as a buffer for African economies. And if China can steer its way through the crisis it could become a ‘development partner of choice’, increasing its ‘soft power’ influence in the developing world and acting as a steadying factor in trade and investment compared to the West.
These are among the main conclusions of a policy briefing ‘China and the global financial crisis: implications for low-income countries’ from the UK-based Institute of Development Studies, part of a series funded by Britain’s Department for International Development [DFID].
China’s financial institutions are relatively insulated from the direct impact of the crisis, and the Chinese government has announced a major stimulus package. As a result, the paper argues, China’s trade, investment and aid to Africa are unlikely to see any significant downturn, at least in the short to medium term.
Chinese demand for commodities such as oil, cotton and copper should be maintained, especially since the stimulus package is heavily focused on infrastructure, and African demand for consumer and light industrial products is unlikely to be affected, so trade volumes over the next three years will probably continue increasing, if at a slower rate, the briefing predicts.
Nor should investment volumes fall off, as China’s state enterprises are using the opportunity of the crisis to increase their investments, especially in the energy and food sectors. And increased competition between private firms in China’s domestic market could actually accelerate their investment in Africa. Falling demand in European and American markets could also increase the attraction of African markets.
China’s aid flows should also remain stable the briefing predicts, as it is provided on multi-annual lines of credit of at least three years and while important to some African countries, is still a small share of China’s GDP.
The briefing concludes that these developments require ‘a multi-faceted African response involving government, the private sector, unions and NGOs’.