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China in Africa: A Modern Story of Colonization?

Posted by hkarner - 26. Oktober 2015

By and on October 23, 2015  RGE EconoMonitor

China in Africa: A Modern Story of Colonization?

China’s economic growth has been a key narrative in the story of economic miracle over the past two decades. Its Outward Foreign Direct Investment (FDI) in particular has played a prominent role in economic interactions with many developing countries. China, once a major recipient of foreign direct investment (FDI) has recently become one of the largest ‘emerging’ investors, especially in Sub Saharan Africa countries, with its biggest investments being in Nigeria, Sudan, South Africa and Angola among others. In recent times China has become an important partner of East Africa with some of its biggest projects in Uganda with an estimated total investment of $596m in 2012 alone (Jaramogi, 2013). With a recently agreed $2b oil field contract with China’s national offshore oil corporation CNOOC, Kenya has now an estimated total investment of $474m in 2012 (Xinhua, 2013). Tanzania sees an even larger investment, estimated to be $1bn (Tanzania Invest, 2012). However China’s increased presence in East Africa has gradually raised concerns about the economic development of these countries as well as the environmental and social sustainability of their natural resources; what remains unclear is whether China’s recent FDI in East Africa has any real intention in helping to promote economic growth and development in these countries. In recent times, China has undertaken multiple investments in sub Saharan Africa that most people believe is due to China’s search for natural resources to feed its industrial output. But it has not always been the case.

Until a decade ago, China’s influence in Africa was very limited. Between the 1980’s and 1990’s, there was a great economic change in the East African region as a result of the adoption of economic liberalization policies. These changes were brought about by the governments of various countries in the region resolving to use the private sector as its main catalyst for economic development. Since allowing access, China’s involvement in Africa has increased significantly.

Its issuing out of foreign aid was hardly significant, and as a highly populated country, it was not very active in the global market. However, in recent times, China’s economic reawakening – especially in foreign markets – has demonstrated that the era of observers regularly naming the US, France and the UK as the only foreign powers to have substantial interests in sub-Saharan Africa is coming to an end.

Over the past decade China has established itself as an increasingly influential player across the continent. Given the impressive scale and scope of its engagement, China’s return to Africa may turn out to be one of the most significant catalysts for developments for the region (Tull, 2006). Such growth is expected to continue, with forecasts suggesting trade between these two partners reaching $1.7t by 2030, up from a mere $200b in 2012 (UNCTAD World Investment Report, 2013). Den Rest des Beitrags lesen »

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Strange Bedfellows: Europe’s Innovations, China’s Capital

Posted by hkarner - 19. Oktober 2015

By and on October 16, 2015  RGE EconoMonitor

In March 2015, the China-led International University Innovation Alliance Start-up Competition UK held its inaugural session in London, with UK startups pitching innovations specifically to Chinese investors.[1] Sun Wansong, Deputy Director of China’s Investment Promotion Agency of Ministry of Commerce, explained in his opening speech that China is proactively turning itself from the “world’s factory” into a creator of innovation-driven ideas.[2] Even though China still accounts for making about 80% of the world’s air conditioners, 70% of mobile phones, and 60% of shoes, the country has been gradually shifting away from the role of manufacturing nation.[3] This is perhaps not surprising since labour cost has been rising continuously in China and companies are reallocating their production facilities to neighbouring Indonesia and Vietnam, whose labour wages are only about 31% and 24%, respectively, of that of China.[4] While other Asian countries are busy competing for China’s manufacturing businesses, China has set itself on the path to engage higher value activities that offer better profit margin, including deploying robotics to increase efficiency and reduce dependency on cheap labor.[5]

However, engaging higher value activities requires more than just lifting productivity; it also has to take on more innovations. While this shift in focus from manufacturing to innovation has been a goal of China’s for some time now, the outward pursuit of innovation through capital investment is a new strategy.[6] Previous efforts to invest capital in R&D and promote innovation internally have not translated into meaningful innovation. For example, although China has now surpassed the United States in patent applications, the value of these patents is questionable. For one, motivation to apply for patents increased after 2009 due to new application subsidies provided by China’s Ministry of Finance.[7] Even more telling, however, despite the growth in filings, is the fact that less than 5% of Chinese patent holders sought international patent protection.[8] Den Rest des Beitrags lesen »

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