Thursday, November 1, 2007

China: Doing Deals that Last?

The R36.7bn direct investment by the state-controlled Industrial & Commercial Bank of China in Standard Bank is yet another stepping stone in China's quest towards being the world's number one economic powerhouse. And in Africa, it not such a bad idea to partner with a bank who has vast experience in unlocking the value of the continents' natural resources.

There is however legitimate concern on the sustainability of natural resource extraction and the resulting impacts on the environment in Africa. The Dragon is certainly not perceived to be very green. During 2006, the Chinese state Environmental Protection Administration published an official estimate of environmental losses of $84bn or 3 percent of GDP for 2004. Other estimates put the costs as high as 8-13 percent of GDP, effectively wiping out all the gains of economic growth.

On the other side, many African countries have also experienced that large capital inflows on the basis of natural resource booms contribute little to poverty alleviation and may even delay the diversification of the economy.

Africa’s history of natural resource exploitation and a lack of environmental control in China itself can easily lead to the conclusion to limit entertaining the Dragon on African soil. In fact, such sentiments, although not in relation to environmental management, have already started to surface with a comparison of China’s interest in Africa to colonialism and opposition politics in Zambia.

At least two aspects need further attention before we come to such a conclusion: the direction of change in China, and the need for clear rules of engagement in Africa. For the full story read the special issue of The China Monitor: http://www.ccs.org.za/downloads/monitors/CCS%20China%20Monitor%20March%2007.pdf

1 comment:

martin de wit said...

See also: http://forums.csis.org/africa/?p=33

Highlights need for transparency and diversification of African economies