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China smiles at Africa with two faces
By Bright B Simons, Evans Lartey and Franklin Cudjoe
that prices were efficiently set and goods efficiently distributed. But China
understands the input of political costs into the final prices of commodities
too well to trust in such a process.
Thus, according to the standard account, China has arrived in Africa to
safeguard its investment.
The above set of facts inevitably leads one to the track of analysis
illustrated above. But if one were to pay slightly more attention to another
set of relatively less-discussed statistics, a number of
other prospects suggest themselves. To put it simply, there is another China.
China is the world's second-largest polluter after the United States. In terms
of per capita gross domestic product - that is, relative to the share of each
Chinese or American person's share of their country's GDP - however, China far
outstrips the US, perhaps by as much as four times. The inference is that for
every dollar of wealth China creates, it emits a huge amount of pollution, and
expends a profligate amount of resources, for the effort. According to China's
vice minister in charge of the State Environmental Protection Administration,
the country requires as much as seven times the amount of resources as Japan to
create an identical unit of GDP.
When you look at China's energy efficiency and other industrial efficiency
statistics, it immediately hits you how bad the situation is. In the production
of ethylene, an industrial chemical found in a wide range of products, for
instance, China lags behind the rest of the world by as much as 70% in
efficiency. In fact, in many areas of production, it not only lags behind the
West, it also trails behind the world average.
Furthermore, China's vaunted ''export-oriented economy'' that has achieved
near-mythical status because of the country's huge surplus in its trade with
the US shows a couple of serious creaks under serious scrutiny. For one thing,
as many as 55% or more of the goods China sells on the world market are
produced by foreign firms based predominantly in the country's coastal
provinces.
Discounting the surplus with the US, China actually currently records a deficit
with the rest of the world of about US$100 billion per annum, showing an acute
dependence on the US market. Last, as Andrew Leung of London's International
Consultants has calculated, Chinese factories operate on less than a 5% margin
of the selling price of a great many of the goods they produce under foreign
license.
One word sums up all these disparate threads: "innovation", to counter severe
inefficiency within the system.
China's innovation challenge
China needs to innovate to enable its industries to make more efficient use of
raw materials, to enable it to sell more of its indigenously developed brands
abroad and thereby create sustainable, home-grown sprawls of excellence beyond
the coast, emit far less pollution, and enhance the quality of life for its
huge population to forestall social tensions. China, the burgeoning superpower,
and China, the bungling overpopulated Third World giant, can only be fused into
China, the modernizing innovator, or the two will be pulled apart.
The problem is: it is easier said than done. Chinese companies may try to take
on Western behemoths in Western markets or wait until the domestic consumer
becomes wealthy enough to patronize highly innovative products. The risks with
the first route are obvious, as Lenovo's faltering steps since it purchased
IBM's personal-computer division have shown. The second route is what many
economists and business consultants foresee as the likely path to success. But
it is also fraught with risk.
While foreign technology transfer to Chinese firms is accelerating at an
extraordinary pace, the weak intellectual-property environment is interfering
with absorption at one critical layer: the small-to-medium-scale business
level. Given World Trade Organization liberalization, which prospect has driven
thousands of overseas firms to enter the Chinese market, China's middle class,
when it eventually does arrive, cannot be taken for granted in regards to
tastes and shopping habits. And at any rate, Chinese companies have only the
intervening time to build their capacity until the much-touted dramatic
expansion of the middle class becomes reality.
It is against this background that some watchers of Sino-African relations are
interpreting recent trade data showing a substantial African trade shift from
the West and Japan to China. Trade in many, many goods other than those under
the spotlight - oil, copper, bauxite etc - is booming. Importers in many
African nations are turning to Chinese suppliers for a wide range of goods they
once sourced in such places as Turkey, South America and of course the West.
Already Kenya, South Africa and Ghana have begun to mutter about their
fast-expanding trade deficits with China.
It seems to us that Chinese entrepreneurs are increasingly becoming aware of a
vital role for Africa in their quest for presence in the global marketplace.
And no, it is not simply that they see a new destination for their products.
More significantly, they see an environment where less mature innovations may
be tried, tested and honed - a market that Western companies are unwilling to
engage beyond the customary hassling over raw materials, and one in which they
can quickly become benchmarkers.
The early success of South Korean firms Daewoo and Samsung in Africa will
definitely not have been lost on Chinese business strategists. Daewoo's
fuel-efficient small sedans captured cost-conscious market niches in West
Africa well before the company's brand became a global household name.
So just as during the Cold War China found in Africa an exceptional venue to
hone its geopolitical competence, it may very well be that it now perceives the
continent as an optimal environment in which to nurture its geo-economic
competence, with special regard to innovation. This is not to say, of course,
that the raw materials do not matter, but that they are not the whole story.
In Africa, the two Chinas meet in perfect synchronicity.
Bright B Simons is an adjunct fellow at the Center for Humane Education
(Imani). Evans Lartey is director of development at Imani, which is a
think-tank based in Accra, dedicated to researching economic trends to glean
practical public-policy insights for the benefit of government, business and
civil society in Ghana. Franklin Cudjoe is the executive director of
Imani.
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