Stronger Chinese ties with Africa reduce reliance on EU

By Stuart Wiggin

The new China Africa Research Centre has been created in order to foster economic ties between the two continents. The creation of this think tank is a clear sign that China hopes to reshape the political economy of the world while also highlighting to a lesser extent China's pursuit of Joseph Nye's much debated "soft Power."

However, one might argue that its creation can also be seen as a hopeful attempt to reduce China's dependence upon a much weakened European Union and instead contribute toward the development of a continent which would be able to purchase China's exports and bolster Chinese economic stability. Cultivating Africa over the next few decades may well prove valuable should the European Union falter again, though anyone expecting Africa to become China's main trade partner any time soon will have to adjust their evaluations and accept that China is tied to Europe more tightly than it would care to imagine.

The Chinese economy is intertwined with that of the European Union. Should one of the larger states within the EU27 falter, so too would the rest of the region and with it China. Recently, the largest economy within the European Union experienced a marked improvement in terms of growth, which surpassed analysts' expectations. Germany's recent growth recovery of around 2.2 percent has been attributed to exports in the industrial markets, especially within their automotive industry. The main customer for these German exports: China.

Such a recovery has made it clear that many E.U. states rely upon the emerging Chinese market in order to improve their own. It has also shed light upon the fact that although many felt China emerged relatively unscathed from the economic crisis, it is however teetering on the brink of success and failure so long as it remains so closely tied to Europe in terms of trade.

If Europe is to recover from the slump that so many of the EU27 states have found themselves in, then it will be thanks to China as they drive recovery within certain sectors. China is the key to E.U. trade policy, as it has become the region's second largest trading partner behind the United States. Conversely, the European Union is China's biggest trading partner.

In 2009, the European Union exported 81.7 billion euros worth of goods to China, compared to the 214.7 billion euros they imported from China; an increase of 4 percent from 2008. The lion share of this 81.7 billion euros was made up of industrial products.

China is to Europe as Africa is to China, or at least what China hopes Africa can become. Cheap African deposits of raw materials and minerals may be vital in pushing forward with further development upon the mainland, and through aiding structural development projects with the help of incredibly favorable loans and manpower, China hopes to entrench its interests much like the early explorers of the 19th and early 20th centuries did as they helped to establish a permanent European presence along trade routes within Africa.

And yet, it must be acknowledged that even without the presence of a new think tank, China already manages to acquire the raw materials that it desires from Africa. The policy of structural development pursued by the Chinese government has all but guaranteed a steady supply of raw materials, in particular African oil, and provides work for scores of Chinese migrant workers who now find themselves building African roads and hospitals. What is more, African states are quite open toward cooperation with China, especially as poorer African states find it easier to get on board with China's model of development in contrast to the West's ‘Democracy first' approach.

As a trade partner, however, Africa may turn out being a one-way affair as demonstrated by export figures provided by the European Commission. The figures sum up just how little Africa impacts upon Chinese growth at this moment in time. While the EU27 accept 20.4 percent of Chinese exports, and the United States, 20.3 percent, the next closest African nation (South Africa) takes just 0.6 percent; Nigeria, 0.5 percent; Egypt, 0.4 percent; Algeria, 0.3 percent; Benin, 0.2 percent and Ghana, 0.1 percent. As a destination for goods produced by China's ever expanding economy, Africa may very well prove to be a barren marketplace.

Therefore, one might say that the establishment of the China-Africa Research Centre, under the auspices of the Chinese Academy of International Trade and Economic Cooperation, may be wholly geared towards those Chinese businesses that hope to gain a greater insight into how to conduct business in Africa and thereby cultivate a marketplace for Chinese goods and services. Such an approach must be seen against the backdrop of slow growth in Europe, and the possibility of a second recession stemming from a looming sovereign debt crisis.

Despite a recent lull in terms of coverage relating to the levels of sovereign debt, in Europe the issue is still very much alive. If the European Union fails to check the Greek debt crisis, the problem could easily spread to Portugal, Spain and other euro zone countries, which would leave China on an uncertain footing. At the moment, the austerity measures that the Greek government is pursuing seem to be preventing a second crisis from exploding, and the Spanish government has also started to pursue austerity measure of their own in anticipation of a turndown in the markets, which would leave them stranded in financial terms.

When one assesses Chinese motives against such a backdrop it is clear to all why China would want to attempt to create a marketplace for Chinese goods within Africa. Although the trade figures seem minute compared to those associated with the United States and the European Union, it would be reasonable to state that once civic development is in motion there is a chance that African economies may improve dramatically, and should this happen Chinese businesses will be on standby to reap the benefits.

A further caveat to that which has been mentioned above is to say that the European Union should also be wary of relying on China too much in the face of its very apparent sovereign debt crisis. Despite moderate growth within several larger E.U. economies, it would be dangerous to assume that China will bail them out in terms of providing a market for their goods and services. After all, the amount of red tape through which companies have to go in order to operate in China may prevent most from even attempting to set up shop here. Since 2001, only 14 foreign companies gained telecom licenses, despite the government issuing 22,000. There are certain sectors, therefore, which companies from E.U. member states will find it almost impossible to crack in their pursuit of sales.