23.09.2014 Author: Sofia Pale

China in Africa: a Shift in the Global Manufacturing Center?

34534535Nowadays nobody will be surprised by the fact that all basic goods are produced in the countries of Southeast Asia and East Asia – and first of all, in China.

According to data of China’s Ministry of Commerce, in 2014 the share of the country’s global commodity turnover reached 40%, amounting to nearly half of global export.

These enormous figures have not only impressed economists, who draw up charts of Chinese profits, but also ecologists, who observe smog clouds photographed from space satellites brooding over South Asia.

However, China is endangered not so much by these smog clouds as by the growing standard of life the country’s residents, which has resulted in operating expenses (in the form of increased salaries) making Chinese production distribution even more expensive and thus unprofitable on the global market. Since 2010 the Chinese workers’ wages have increased more than twice; in addition, the level of education has noticeably improved. In order to avoid bankruptcy many factories have had to refuse employment to local Chinese residents and have had to turn to migrant laborers (mostly illegally) from neighboring countries such as Laos and Cambodia who are ready to work for peanuts and survive in difficult living conditions.

Nevertheless, attracting unskilled and low-paid guest workers does not help China much in preserving its ability to compete on the global market and what is more, to boost the export potential for Chinese goods.

To solve this problem Beijing has directed its efforts on searching for a cheap labor force far beyond the country’s borders. And finally a solution has been found in Africa.

Economic ties between China and African countries have been developing intensively since the early 2000s. During those years Africa was considered by Beijing solely as a supplier of raw materials for Chinese factories and plants where final products were rolling off the production lines and were being forwarded for sale on African markets.

During the last decade the Chinese have nearly fully utilized the resource potential of this continent which is rich in mineral resources by building mining complexes in nearly every African country; these are run by Chinese managers. Also, the Chinese have invested huge amounts into infrastructure projects among others.

The Chinese are attracted not only by ‘oil’ countries (such as Angola and Sudan) or ‘gold’ countries (such as Mali), but also by poorest Mozambique, now dependent on Chinese loans and therefore totally supporting Beijing’s position on the world arena.

In general, China has made investments nearly into all countries of Africa. In the mid-2000s, Mozambique was of interest to Beijing due to the fact that GDP growth in this country was one of the most dynamic on the continent and accounted for an average 7% per year. Consequently, investments into the poorest African countries are capable of paying off by bringing profit, provided that correct calculations are made.

Not so long ago European countries tried to join the ‘battle for Africa’ with the aim of weakening Chinese influence, but this resulted only in armed conflict in the oil-rich areas of Mali.

Despite the efforts of the former colonial powers, Africa is unlikely to reject the generous Chinese loans (not to mention the donor aid) in favor of rigid contracts with the Europeans.

Finally, at present the annual turnover between China and African countries has reached 200 billion dollars (in comparison: the turnover between Russia and China made up about 90 billion dollars by 2014).

According to information provided by the publication “Veterans Today” (USA) which is on friendly terms with the online magazine “New Eastern Outlook”, the British Prime Minister David Cameron called the Beijing position as ‘Chinese intrusion’ into Africa with the aim of establishing ‘authoritarian capitalism.

In response, the African countries were unanimous in their opinion that ‘European capitalism’ established since the unpleasant times of ‘European colonization’ is hardly the best alternative for the Chinese ‘occupation’.

It’s remarkable that even in 2002 during the first Forum on China-Africa Cooperation, the president of Tanzania Benjamin Mkapa announced in his speech to the Chinese side: “You understand us better than the people from the West and you can help us fulfill our hopes for an African renaissance”.

It is obvious that the Chinese are closer to the African people than the Europeans, even if we take into account the ethnic aspect. In 2008, the Chinese community living in South Africa (approximately 200 thousand people) succeeded in making the South African authorities recognize their equal rights in regard to the black community (although since the abolishment of apartheid in 1994, the Chinese have had equal rights with the white people in the country). It goes without saying that the equality in rights with the indigenous people of South Africa gives the local Chinese more opportunities; but also one can feel another aspect, such as ethnic proximity aimed at giving more ‘chances’ for non-resident Chinese working in other African countries.

Nevertheless, marriages with African women lower the status of Chinese workers in the eyes of the local people. This testifies to the fact that however close Chinese and Africans may be, the former are still ‘above’ the latter, although probably they would not like to admit this fact.

A huge amount of Chinese citizens visit Africa every year. According to RBK information, only in 2013 more than 200 thousand Chinese specialists arrived in Africa. On the whole, since 2000 up to the present, approximately one million Chinese have arrived in Africa, according to the information published by the above-mentioned “Veterans Today”.

In 2010s the overall African turnover on the global market constituted an insignificant amount – on average 1.5%. Yet in 2014 Beijing decided to send well-trained staff to Africa to teach the Africans how to work on the new manufacturing factories (constructed by the Chinese), which earlier produced goods in China. In all likelihood, these factories will be launched in 2015 and will operate at full capacity several years later.

Very soon the African countries will extend the sales of their goods worldwide, under the responsive governance of Chinese administration and introducing their united label – ‘Made in Africa’.

First of all, the competitiveness of these goods will be backed by the low cost of raw materials extracted from African soils and processed on site. Secondly and most importantly is the fact that successful sales of goods produced in Africa will become possible due to cheap but very skilled labor force.

The Africans are literally a young, sound and very gifted nation able to work tirelessly. Also, the high unemployment rates in African countries almost certainly guarantee the abundance of labor resources.

In that case, the nearest decade will see the global production center – along with the inevitable smog – shifts gradually from Asia to Africa. Or maybe, the huge smoke clouds will cover both continents, simultaneously symbolizing not only ‘African renaissance’, but also the growth of enormous profits on part of China as well.

Sofia Pale, PhD, Researcher for the Center for Southeast Asia, Australia and Oceania, Institute of Oriental Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.