China and the world crisis

Economic guru Jeffrey Sachs added his voice to the growing consensus that the recent G20 meeting marked the end of the era of unchallenged US predominance.
‘The US is not the only economy in this equation’ he stressed. ‘We need a global vision of sustainable recovery that includes leadership from China, India, Europe, Latin America, and, yes, even Africa, long marginalised from the world economy, but very much part of it now.

But the World Bank in a new report says the crisis will slow China’s economy.
The country’s growth rate will fall to 7.5 per cent next year – its slowest for nearly two decades. In its quarterly report on the Chinese economy, the bank reduced its forecast from the 9.2 per cent growth it had been predicting only three months ago. China should do more to rebalance its economy from investment, exports and industry to consumption and services as it rolls out a $586 billion stimulus package, the report said.

“Additional measures are necessary to make headway with rebalancing the pattern of growth,” Steps should include extra spending on health, education and social welfare and raising energy and resource prices, it said.

China’s provincial bosses were reported to be drawing up long wish-lists of roads and other infrastructure projects since central government announced its $585bn stimulus package earlier this month. But there were fears that the package might turn out to include less new spending than originally thought.

According to an analysis in Newsweek, ‘Economists estimate that only a quarter of the $590 billion is new money as opposed to previously announced spending, future tax cuts and unfunded mandates passed down to local governments. There's reason to expect that much of the promised social spending—and the consumer empowerment it represents—may not materialize.

Meanwhile industrial activity in China has slowed so quickly that demand for cobalt has ground to a halt, according to one of the biggest cobalt miners in the Democratic Republic of Congo, the world’s largest source of the metal.

Over a third of China's land is being scoured by erosion that is putting its crops and water supplies at risk, according to a three-year nationwide survey.

The rush for food

There were reports that a South Korean firm had agreed a deal with Madagascar’s government to cultivate an area of the island half the size of Belgium to grow maize and palm oil and pay nothing for the deal.

According to the manager in charge a consortium with a Korean animal feed company and Chinese firms would run the project which would use local labour and some expertise from South Africa.

But later both the Madagascar government and Daewoo, the Korean company were
backtracking.

Brazil, which is already the world’s largest exporter of poultry and second-biggest supplier of soybeans, is asking China, the largest market for its agricultural products, to invest in its ports and roads.

Japan and Saudi Arabia as well as China are among the countries bidding for Brazil’s agriicultural land, which has sent prices soaring.

But as Indian commentator Devinder Sharma warned, ‘Outsourcing food production will leave behind a trail of hunger and food scarcity for the native populations.

piracy

The Suez Canal faces the threat of a dramatic decline in traffic as shipping companies shift to other sea routes to avoid Somali pirates. As the Financial Times pointed out,
‘The Suez Canal is Egypt’s third source of foreign currency revenues after tourism and remittances and earned Egypt a record $5.2bn last year. Even before the piracy threat, the Canal was facing a decline in traffic amid a slowdown in international trade’.

In fact the world’s shipping industry has been facing a slow-motion crisis for months, even without the added impact of piracy.

The successful sinking by the Indian navy of a pirate mother-ship in the Gulf of Aden focused attention on the growing role of India’s naval striking force.

And the hijacking of Chinese ships raised the question of how long China can avoid following India’s example.

China arrives in Latin America

China’s President Hu Jintao completed a succesful trip of Latin America, confirming China’s growing influence in what has traditionally been the USA’s backyard.

In a address to Peru’s Congress the Chinese leader promoted his country’s economic role in helping Latin America through the current turmoil.

US scholar David Shambaugh of Washington University analysed China’s developing strategy in Latin America, which looks increasingly like a rerun of China’s rise in Africa.

China in africa

Trade between Zimbabwe and China
could exceed US$500 million this year from US$275 million in 2006 despite a worsening economic crisis in the country, according to a senior Chinese embassy official..

As South Africa’s Trade and Industry Department prepared to hold talks on the possibility of extending quotas on Chinese clothing and textile imports, the country’s clothing retailers were complaining of being excluded.

Botswana has signed a power deal with China to construct a 600 megawatts power station with four 150 MW units.

Nigeria is seeking a $500m loan from China’s Eximbank to build new satellites.

A delegation from South Africa’s structural steel construction industry went on a two-week fact-finding mission to investigate the facilities and capabilities of their Chinese opposite numbers. They reached agreement on a series of workshops to develop joint design codes

MTN, the South Africa-based mobile telecomms company, has sent a team of engineers to China to assess
cellphone handsets that can retail for about $10, which it believes is crucial if cellular services are to spread throughout Africa.

...and India too

Meanwhile India was also moving to expand its African presence. The Asian country is already Nigeria’s second-biggest employer according to its Deputy-High Commissioner, speaking at a press conference in Abuja to promote next January’s India-Africa trade summit.

Egypt is to set up a special industrial zone for Indian companies.

But Kenya’s Prime Minister has asked India to import more Kenyan goods to offset his country’s current trading imbalance with its sixth-largest trading partner.

∗ Stephen Marks is a research associate with Fahamu’s China in Africa programme.