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China Offers $20 Billion in Loans to Africa

Published: July 19, 2012 | 4:44 pm
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China pledged billions in new aid to Africa and said its companies doing business there would act responsibly, as the country seeks smooth relations with the resource-rich continent despite emerging trade and social tensions.

China will offer $20 billion in loans to African countries to develop infrastructure, agriculture, manufacturing and small and midsize enterprises, Chinese President Hu Jintao said on July 19 during a gathering of African leaders in Beijing. That figure is double what China committed in 2009.

Chinese officials also stressed deepening economic ties with Africa, a major source of China’s oil, metals and other commodities. Mr. Hu said trade between China and Africa doubled in the past six years and totaled $166.3 billion in 2011, while its direct investment there has reached $15 billion.

But South Africa President Jacob Zuma said China’s trade with African nations should be better balanced. While Africa ships large volumes of raw materials to China, China’s exports often include manufactured goods such as machinery and textiles.

“Africa’s commitment to China’s development has been demonstrated by the supply of raw materials, other products and technology transfer,” Mr. Zuma said, addressing Mr. Hu at the gathering following the aid pledge. “As we all agree, your excellency, this trade pattern is unsustainable in the long term.”

China pledged that its companies could help address the imbalance.

“Chinese companies have expressed their willingness to undertake social responsibility,” said Yu Ping, vice president of the China Council for Promotion of International Trade, in a news conference.

He said that effort would include answering African calls for help in upgrading local industries so countries can export finished products, as well as having China pay greater attention to the environment.

In recent years, China has moved aggressively into the resource-rich region. Unlike the U.S. and other countries, China hasn’t attached political or environmental strings to much of its aid.

Though China has gathered political clout in Africa as a result, some have begun to question the country’s role there.

“This trend in Sino-African trade benefits China, which enters African markets to sell its manufactured goods and buys primary products with little added value for Africa,” said Daouda Cisse, a researcher at the Center for Chinese Studies at Stellenbosch University in South Africa, in a note. “With the rising purchasing power among Chinese and a shift towards consumer-driven growth in China, opportunities are presented to move towards a more balanced trade between China and Africa.”

Chinese companies have also been criticized for their environmental and labor practices in Africa.

“China’s central government is very limited in what it can do to control the huge proportion of Chinese activity in Africa,” said Ian Taylor, a professor at the University of St. Andrews in the U.K. “A lot of Chinese corporations don’t take into account environmental sustainability in China itself—why should they be any different in Africa?”

Labor tensions have risen to the fore in recent years, particularly in Zambia, where 13 miners were shot and wounded by some Chinese managers at a Chinese-owned mine during a wage dispute in 2010. The mine has been under scrutiny since over safety and labor issues, and earlier this year a government official threatened to close it.

Responding to a question about how social responsibility would be enforced by Chinese officials, Mr. Yu, the Chinese trade official, said it is a “matter of ethics rather than law, so the best way to strengthen social responsibility is through education and guidance.” He also referred to what he said were “incorrect news reports” about Chinese business there.

Africa has provided huge opportunities for Chinese companies, especially those involved in energy. Sinohydro Corp., which built most of China’s Three Gorges Dam, has capitalized on the continent’s vast hydropower resources by developing projects in 21 African countries.

Big companies such as China Petrochemical Corp. and China National Petroleum Corp. have major oil and gas investments in Angola, Sudan and Libya, all of which are important exporters of crude oil to China.

The two-day gathering in Beijing also included African leaders such as Kenya Prime Minister Raila Amollo Odinga, Equatorial Guinea President Teodoro Nguema Mbasogo, Niger President Mahamadou Issoufou and Ivory Coast President Alassane Dramane.

Source: Wall Street Journal


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