Maritime Silk Road opportunities abound
Updated: 2015-11-20 08:08
By Frannie A. Leautier, Michael Schaefer and Wei Shen(China Daily Europe)
But a lot of groundwork is needed to ensure that China has got its relationship right with Africa
Historically, China has always regarded Africa as a place of opportunity rather than a source of problems. It has courted African governments as political allies since the very foundation of the People's Republic. Modern Sino-African relations started in the 1950s, with China offering economic and technical assistance to many African countries in their quest for independence during the 1960s.
In return, African nations were among the strongest supporters of the one-China policy, lobbying for United Nations membership of the People's Republic of China and the exit of Taiwan.
Unlike most Western aid, which centered on technical and financial assistance, China used a different approach. By sending many Chinese construction workers and medical teams to Africa as part of its development aid, China's presence in Africa soon became significant.
Chinese policymakers are convinced that the benefits of China's infrastructure-driven development model can also be transferred to Africa. China is eager to use the infrastructure projects to facilitate connectivity between landlocked countries and coastal areas in Africa, with the aim of fostering the same kind of local and regional economic development that China has enjoyed since the 1980s.
As the economy has been growing more slowly, China needs to seek new overseas markets and consumers. Its foreign exchange reserves reached $3.65 trillion (3.4 trillion euros) last year, and this has led to the establishment of several financial institutions such as the Silk Road Fund, the BRICS Bank and, most recently, the Asia Infrastructure Investment Bank to finance these infrastructure projects.
Of course, the focus of the 21st Century Maritime Silk Road on infrastructure development is also a response to China's severe overcapacity in construction and manufacturing.
The State Council says Africa is already the country's second-largest overseas construction site, with more than 1,046 projects completed on the continent, including 2,233 kilometers of railway and 3,530 km of road. With the Maritime Silk Road, China will use its comparative advantage in construction and material surplus and allow more state-owned enterprises to go global.
In addition, the Maritime Silk Road will help China transfer part of the labor-intensive industries to Africa - to benefit from its lower wages and ample labor supply compared with the rising wages and decreasing working population in China.
A major Chinese interest is to expand its trade with Africa and its position as one of the continent's strategic trading partners. In 2009 China overtook the United States as Africa's largest trading partner. Trade was worth $200 billion in 2013. Most African exports are energy and resources such as oil, metals and iron ore, and Chinese exports are mainly transport-related machinery and equipment as well as lower-end electronics and textiles.
As the Chinese domestic market inevitably shrinks as a result of both demographic trends in China and ever-maturing Western markets, China is keen on tapping into Africa's burgeoning consumer markets, which constitute some of the fastest-growing economies.
According to McKinsey's research, Africa will account for one-fifth of the global population by 2025, more Africans will emerge out of poverty, and almost two-thirds of the estimated 303 million African households will have discretionary income. Connectivity by road, rail, sea and air, and digital links will also accelerate industrial efficiency and productivity as well as give rise to new market opportunities for rising Chinese brands such as Haier and Huawei among a young, urban and mobile group of African consumers.
The most important precondition for the success of the Belt and Road Initiative is mutual confidence. Although Chinese involvement in Africa has benefited from deep-rooted goodwill, it has been subject to growing scrutiny in recent years both in the region and globally. Some African leaders have openly expressed concern about China's policies to secure its pragmatic interests in African resources.
Second, Chinese companies need to be better prepared when investing abroad. China's strategy of going global has received a mixed reception from African partners. This is especially true for large-scale state-owned enterprises, which often have difficulties in adjusting to the different political, cultural, financial and legal framework conditions.
Third, as the Maritime Silk Road is still a project in the making, transparency and coordination between China and African countries are vital.
Fourth, as China also has strategic interests in several African countries, careful coordination will be needed to reduce misunderstandings and internal rivalry in Africa.
To ensure effective coordination and transparency, it will be important to establish a multinational coordinating body including stakeholders from all participating countries. This body would have the task of coordinating cross-border projects on the basis of a level playing field, taking the legitimate interests of all stakeholders into account. This approach would create the necessary transparency and trust essential in engaging with China in the framework of the Maritime Silk Road.
Fifth, people-to-people exchanges between China and Africa should be strengthened. Historical legacies and goodwill based on experience will gradually fade away. As the educational mobility between China and Africa is now more one-way traffic from Africa to China, it is in the interest of Chinese policymakers to encourage its young people to study in Africa to better understand its history, languages, religions and societies.
Frannie A. Leautier is chairperson and a founding partner of Mkoba Private Equity Fund and former vice-president of the World Bank. Michael Schaefer is chairman of the Board of BMW Foundation and a former German ambassador to China. Wei Shen is a professor of international business and director of the Confucius Institute at Lancaster University and Jean Monnet chair of EU-China relations. This article reflects the discussions at the BMW Foundation Global Table in Tanzania and Poland, which looked at the opportunities that China's Maritime Silk Road initiative holds for East Africa and the impact of the Silk Road Economic Belt in connecting China, Central Asia and Europe. The views do not necessarily reflect those of China Daily.
(China Daily European Weekly 11/20/2015 page11)