China's affair with Africa
Given China's focus on Africa and Standard Bank's presence across the continent, the proposed transaction represents a strong vote of confidence in the future relationship between the two regions. In particular, the proposed partnership is anticipated to: establish a significant financial services gateway between China and Africa, enhance the ability to facilitate trade, particularly the high potential for growth in export volumes to China, and assist the stated Chinese government policy of encouraging the establishment of several trading cooperative zones in Africa by 2009.
Trade between Africa and China began to accelerate in 2001 and China is now Africa's third largest trading partner. While China only accounted for 16% of total African exports in 2006, it is likely that the country will take up a larger share of the continent's external trade in the future. Current forecasts suggest that total trade could more than double from its current levels to over US$100 billion by 2010.
From 2001 until last year, African exports to China rose annually at a rate greater than 40%, from US$4.5 billion to US$26.9 billion (US$4.8 billion being from South Africa). During the same period, African imports from China quadrupled to US$22.9 billion (US$5.1 billion being to South Africa), bringing total trade between the two regions to approximately US$50 billion for the year, of which US$10 billion is with South Africa.
Last year oil and gas made up 62% of the continent's exports to China, with non-petroleum minerals making up another 13% and manufactured goods 8%. China exports mainly manufactured goods (45%) and machinery and transport equipment (31%) to Africa.
China's direct investment in Africa to date is mostly in the natural resource sector, focusing on mining, oil and other energy resources. Typically, the Chinese approach is to provide all aspects of the projects in which they are involved, including funding, operations, supplies and labour. These are provided in exchange for preferred resource access.
Estimates suggest that China's direct investment into Africa for the period 2000 to 2006 was US$6 billion with an annual forecast of US$1 to US$2 billion in the short term (Source: Centre for Chinese Research). Furthermore, the Chinese government has earmarked significant funds to support future investments. As part of such support, a fund of US$1 billion is currently being launched and as more Chinese investors participate, the fund will eventually expand to US$5 billion.
Further evidence of China's investment goals is their recent negotiation of a US$5 billion investment to rehabilitate infrastructure and mines in the DRC in return for the rights to access copper and cobalt, and concessions for nickel and gold.
China is expected to lead the way in 2008. According to the Economist, The Tiger is expected usurp Germany and become the world's biggest exporter after the United States. China's GDP (measured at market exchange rates) will push ahead of Germany's to make it the world's number three economy after US and Japan.
This year, the Tiger is also expected to have the largest number of internet users in the world and sadly, the world largest emitter of greenhouse gases. Chinese companies are also expected to dominate international corporate rankings, as by late 2007, three of the world's six biggest companies by market capitalisation were Chinese.
