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China's Africa Expansion

By Donna Borak, UPI Business Correspondent
Washington (UPI) Jan 18, 2006
Over the last decade China and the continent of Africa have gradually been building diplomatic and economic ties in the hopes of further advancing globalization and enjoying mutually beneficial cooperation.

But now with a mounting global oil crisis and reforms underway at the United Nations, China has emerged as a growing ally to most of the 57 African territories, stepping up efforts to expand its ties to the continent, host of the world's least-developed countries.

In an effort to raise Beijing's diplomatic profile in the region, Chinese Foreign Minister Li Zhaoxing set out last week on a six-African country tour, including Cape Verde, Senegal, Mali, Liberia, Libya and Nigeria, hoping to secure economic deals and highlight its new strategic partnership with Africa.

China's rapid emergence as a world power and its growing need to meet energy demands, has made Africa one of Beijing's key priorities, as it hopes to meet its demands for oil. After years of economic struggle, analysts say, Beijing now has both the need for economic resources and the economic bank to expand its cooperation with Africa, especially among oil-producing countries like the Sudan, Nigeria, Angola, Gabon and Equatorial Guinea.

"I believe that there is a good potential for the further expansion of trade between our two countries," said Lin Lin, Chinese ambassador to Ethiopia, Xinhua, China's state-owned news agency reported. "The Chinese government is taking a lot of concrete measures to encourage the Chinese firms to import more from African countries."

The Chinese government which already has a $32 billion trade relationship with Africa, formally announced its China African Policy in a white paper last week two days after Li's diplomatic visit commenced. In it, the Chinese government outlined plans to develop a strategic partnership through consistent dialogue and diplomatic visits between Chinese and African leaders, increased trade and economic investment through preferential loans and buyer credits, more agricultural and financial cooperation and improved efforts to encourage Chinese companies to build up Africa's infrastructure.

"China-Africa traditional friendly relations face fresh opportunities under new circumstances," the Chinese white paper said.

With ever growing energy demands, analysts say, Beijing has been reshaping its foreign policy, leaving China's stake in Africa resting firmly on its voracious demand for oil. According to the U.S. Energy Information Administration, China has accounted for 40 percent of total growth in global demand of oil. It surpassed Japan in 2003 to become the world's second-largest oil importer after the United States.

Official customs figures released this week indicated that China-Africa trade increased by 39 percent in the first 10 months of last year, due to a surge of Chinese imports of African oil from the Sudan. According to figures, China's exports to Africa totaled $15.25 billion, while the country's imports from Africa were $16.92 billion.

There are already 750 Chinese enterprises in Africa primarily based in energy and natural resource sectors with a total investment of $1 billion. According to Chinese official sources, Chinese companies have invested a total of $175 million in African countries, primarily in oil exploration and infrastructure.

China is expected to consume more oil this year than the United States. According to the U.S. Department of Energy, China's oil consumption will rise 7.2 percent this year, compared to the 1.7 percent demand for the U.S. market.

While analysts predict that China has begun to craft its foreign policy goals based on attaining resources needed to sustain its economic development, including sources of oil and raw materials, the Chinese government has denied such rumors, stressing that "energy is part and parcel of (China's) overall cooperation with so many African nations."

It appears, however, that China's strategy of give-and-take may be working to its advantage. Last week, the Chinese government indicated plans to secure crude oil supplies in Nigeria. China's top offshore oil producer, CNOOC agreed to pay $2.3 billion for a stake in Nigerian oil and gas fields, making it the largest overseas acquisition.

Nigeria, who has been strongly backing reforms at the United Nations and has spearheaded efforts by the continent to be represented at the Security Council, received the backing of China on Tuesday to endorse an African seat at the United Nations.

"China is in support of Africa's aspirations for U.N. reforms," said Li.

As part of its strategic partnership, China has said it interested in pursuing both bilateral and regional free trade agreements in order to expand its economic relationships with partner countries.

Ethiopia, for example, has reaped the benefits of a preferential trade policy with the Chinese government. It has seen a rise in trade volume from $150 million in 2003 to $250 million during the first nine months of 2005.

The sharp increase of Ethiopian exports to China was due to the Chinese government's zero tariff treatment on exports from African countries which went into effect on Jan. 2005.

China's cooperation with Ethiopia has been focused on agriculture, infrastructure and human resource development.

Source: United Press International

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