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2011 China-Africa Investment Cooperation Symposium
Special> 2011 China-Africa Investment Cooperation Symposium
UPDATED: September 2, 2011
Investing in Africa

In recent years, with the growth of Sino-African economic cooperation, China has faced a stream of criticism for resources exploitation in Africa. During a visit to Africa in June, U.S. Secretary of State Hillary Clinton accused China of neocolonialism and warned that China might "walk away after seizing natural resources and bribing leaders." Wu Fang, assistant researcher at the Chinese Academy of International Trade and Economic Cooperation, believes that the comment of neocolonialism is neither true nor logical as cooperation between China and Africa is based on market disciplines. Her thoughts follow:

As latecomers into the African market, Chinese enterprises operate in accordance with laws and contribute a lot to local employment. Also, they break the monopoly of Western transnational corporations, helping Africa increase its value of natural resources and turn its resources advantage into development advantage. Furthermore, resources development is only a part of Sino-African economic cooperation. China also cooperated with resources-poor countries such as Ethiopia, setting up overseas economic and trade cooperation zones.

Then why are there such negative comments? The answer may lie in the way that Chinese enterprises invest in Africa. First, Chinese enterprises usually invest in low-level industries, such as the manufacturing sector that involves retail and primary-processing industries, while paying less attention to service industries such as finance and tourism. In low-level industries, Chinese enterprises are likely to compete with local private ones. Second, most Chinese enterprises, short of the personnel familiar with international business, lack the capacity for overseas operations. In recent years, Africa has made more stringent requirements on environmental protection and social responsibility for foreign investment, making a comprehensive understanding of the continent's investment policy more difficult for Chinese enterprises.

Third, not hiring Africans isolates Chinese enterprises from local communities. To avoid risks, to decrease management costs and to increase proficiency, Chinese employees are usually preferred to Africans. Fourth, a cultural gap often leads to labor-management disputes and problems concerning environmental protection.

Africa is the traditional export market and raw material source for the West, and also, an important market for competing emerging economies. Due to the fierce competition, the defects of Chinese enterprises were exaggerated and misrepresented as "neocolonialism." Such comments raised anxiety among African people, and some Chinese enterprises were threatened with violence by African extremists. Therefore, the Chinese Government and enterprises must work together to improve the situation through positive policies and measures.

For the government, more attention should be paid to guide and regularize enterprises as China focuses on reinforcing international cooperation and building the image of a responsible great power.

First, related laws and regulations should be released as soon as possible to regularize enterprise behavior and force them to bear social responsibility. Second, in those African countries with a lot of Chinese enterprises, chambers of commerce or industry associations should be established to deal with emergencies, coordinate relations between enterprises and create a public database including such information as product prices. This is in order to promote cooperation based on mutual benefit rather than cutthroat competition. Meanwhile, the government should encourage experts on Africa to provide consulting services for enterprises to assess and avoid risks.

From the part, enterprises should make rational decisions on the basis of a complete insight into local customs and market conditions. Learning local laws and regulations, investment policies, and business rules can help enterprises guarantee their own benefit and reduce risks of investment. Lastly, importance should be attached to localization. Enterprises should hire African employees, contribute to local public welfare involving environment, education and health, and increase exchanges with all sectors of society to win the trust of local people and enhance the capacity of risk response and prevention. Take Touchroad Holdings Group as an example. The privately owned enterprise hired mostly African employees and made great contribution to a local charity. Due to that, its African employees, beneficiaries or tribal leaders would volunteer to defend the enterprise when there is a threat of violence from local extremists. Chinese enterprises should promote cooperation with Western transnational corporations, learning from their experience of international operations and how to reduce risks.

(ChinAfrica VOL.3 August 2011)

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