I spent this past week in Beijing attending the tri-annual China-Africa Forum on China-Africa Cooperation (FOCAC) meeting.  I attended the first such FOCAC held in Beijing in October 2000 – this was the launch pad of China’s “new” foreign policy toward Africa – no longer framed by ideology and politics but driven by pragmatic commercial interest. FOCAC has become a multilateral forum through which Beijing implements its foreign policy goals toward the continent. Since its launch, China has set out three year engagement plans that it has implemented in Africa. The rapidity and scale of this implementation - though multi-billion dollar transactions and political summits – has resulted in the continent inclining toward China’s commercial sphere of influence. This trend has been accelerated by the (western) financial and economic crisis as the African economies are reorienting toward the emerging rather than developed world. But as China’s strategy toward Africa matures so too must African countries’. Beijing is no longer just an actor in Africa’s resources sector but is broadening the scope of its commercial foray into Africa. African governments need to respond accordingly and be more agile in their policy making vis-à-vis China’s engagement.

What then are the new trends emerging in China-Africa relations?

I believe that China’s Africa policy is increasingly becoming fused with that of the management of its own economy. China’s resource intensive growth model – propelled by heavy infrastructure spending and its manufacturing machine – requires large amount of commodity inputs. Underpinning Beijing’s engagement of Africa has been a desire to secure a number of strategic commodity supplies, in particular oil, iron ore and copper. In the mind of the (very strategically-minded) Chinese Government, its own growth model will become increasingly dependent upon Africa’s ability and willingness to provide these resources. A politically-welcoming environment amongst African governments is of paramount importance for Chinese capital. In Europe, the US and recently Australia, there have been government attempts to block Chinese investors from acquiring local assets – in telecoms, in computer hardware and in mining. In Africa there has yet to be a political obstruction to a Chinese investment in Africa.

It is a massive opportunity cost lost considering few resource-rich (solid minerals) African states have fully comprehended and taken full advantage of the so-called commodity super-cycle driven by China’s insatiable demand for commodities over the last decade. This is unlike the case of Australia where its economy has maintained robust GDP growth despite the economic crisis on the back of enabling infrastructure and strong demand from China. A number of oil economies – led by Angola – are the exception. Few African governments have been as proactive as Luanda to link Chinese investments in resources to mega infrastructure build commitments in their economies. My opinion is that African economies should have been doing more to hitch their resource-reliant economies to the Chinese long term growth train.

But the game is now changing. Whilst resources have underpinned China’s foray into Africa throughout the first decade of its “new” foreign commercial toward Africa, a shift taking place – no longer planned by the government in Beijing but being shaped by market forces. The potential move of manufacturing out of China to Africa is potentially the next thrust.

According to Justin Lin, formerly chief economist of the World Bank and now at Peking University, China is forecast to lose up to 85m labour-intensive manufacturing jobs within the next decade. In the same way that Japan lost 9.7m in the 1960’s and Korea almost 2 ½ million in the 1980’s due to rising wages and production costs, the Chinese economy will undergo a similar (but far greater in number) process. Wages for unskilled workers in China are set to increase four-fold in ten years. This will create opportunities for developing economies with nascent manufacturing sectors over the medium term.

I recall a conversation I had last year with a professor at Tsinghua University in Beijing, one of China’s “ivy league” schools, that left me astounded. It went something like this: The professor, who was also an advisor to the Government’s Ministry of Commerce on “Talent”- said the following: “We currently have 225 million blue-collar low paid workers in China. We have about 100m white-collar qualified professionals with an additional 10m graduates entering the labour market each year. By 2020, we will have over 200m white-collar graduates. How do we replace the blue-collars with the white-collars within the decade and where will they go?”  

These rising cost pressures is resulting in manufacturing already shifting from south & eastern China and relocating to Vietnam, Cambodia and Thailand. Lin has estimated that Africa has roughly 10m low wage manufacturing jobs. A back-of-the–envelope calculation indicates that if only 10% of China’s low-end manufacturing moved to Africa, it would almost double the continent’s manufacturing jobs – perhaps putting Africa on the long-term road toward industrialization.

Not only do African states need to be more “policy agile” to attract this manufacturing capacity, but also create the institutions that can ultimately capture and absorb these technologies from China. We need to have states that are “competitive-advantage creating” and in the same way as China has factored Africa into its own future, African countries must factor China in theirs.


Dr Martyn Davies is CEO of Frontier Advisory, a Young Global Leader of the World Economic Forum and is a member of the Forum’s Global Agenda Council on China.