BEIJING– Headlines all over the world this week are trumpeting the visit of Chinese president Xi Jinping to Africa. Xi praised Africa’s economic growth and reaffirmed China’s pledge of $20 billion in loans to Africa over the next three years. He also signed an agreement to build a major port and industrial zone in Tanzania, which officials say could cost up to $10 billion.
In response to persistent fears that China is re-colonizing Africa (critics often point to mineral projects by China in Africa.), Chinese leaders staunchly defend their role there. And African leaders, obviously, are embracing China and, of course, China’s money. China Daily reports that trade with Africa “has swelled over the past decade from about $10 billion in 2000 to $198.4 billion in 2012.” China has been Africa's largest trading partner since 2009.
With that backdrop, I often find myself talking about Africa during my company visits in China.
The African market is much closer and more accessible to many Chinese fabless companies than we think, thanks to a number of whitebox vendors in China who have the wherewithal to ship their non-branded products anywhere in the world.
One company, however, is working on its Africa strategy much more methodically than the rest of the crowd--Spreadtrum Communications (Shanghai).
France Telecom (whose cellular operator division is known as Orange) has a big presence in Africa.
China sees, correctly, that Africa is a source for many of the raw materials it needs. If anyone can help elevate many of these countries past their historic corruption, the African market is huge both as a supplier and a consumer.
The "Africa strategy" discussed here is only a strategy for selling products to Africa. The problem is, having an Africa that can sustain its own buying power.
Many African countries, and here I'm talking mostly about Sub-Saharan and Eastern, have a way of being on a roller coaster ride. When they have good leadership, they might even begin to develop an industrial base, to become self-sustaining. Then that good leadership moves on and they slide back to importing everything.
African countries lucky enough to have abundant natural resources are almost cursed by this, because it becomes so easy to use the income to import, rather than using that income to develop their own industrial base.
China has discovered Africa recently. I don't see how this will change anything, though.
I would think that in 10 or 15 years there will be other nations/areas that can and will be cost competitive to China for manufacturing. It only makes sense, if there is money to be made and cheap labor available business will flock to capitalize on it, no matter what the location. Right now it is China, tomorrow Vietnam, next ...
I sort of agree at the 30,000 ft level, but China is having its own problems to deal with. Which is why already they are looking to move their manufacturing elsewhere, including places like Vietnam.
None of this is static. We simply see history repeating itself, as previously underdeveloped countries pull themselves up by their bootstraps. When the standard of living gets up where people want it to be, you inevitably see that manufacturing costs become too high, and that country loses its cost-competitive advantage.
Nothing to get too alarmed about. As long as one continues to provide value added to mankind one way or another.
China has absorbed most technologies from the West and now has Western trained experts who can carry them forward. For most products in demand in Africa or the rest of the World, China has competitive/ cost lead over the West. We already see the loss of Western competitiveness in the weaker economies of Europe and even Japan. Ultimately most of the rest of the World incl. Australia, Canada, Brazil and even the US will become just source of raw materials for Chinese manufacturing. Outsourcing manufacturing to China will go down in history as the greatest folly and as an act of mass suicide instigated by Wall St. cabal.
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