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China's Low-Cost Approach Is More Suitable for Africa

2010/06/07, FOCAC website


Before Huawei, a private Chinese telecommunications solutions provider, entered the African market in 1998,Africa's telecommunications sector was dominated by western multinationals like Ericsson and Motorola.

12 years later, the competition caused by Chinese private businesses like Huawei has completely changed the situation, greatly reducing the communication cost and fees in the African continent.

The investment by Chinese private businesses to Africa has not only met the demand of the African people, but also promoted fair competition, said Xie Boyang, vice-chairman of the All-China Federation of Industry and Commerce and vice-president of China Nongovernmental Chamber of Commerce, at the first "21st Century China-Africa Investment and Cooperation Forum" hosted by the 21st Century Business Report and the magazine of China and Africa.

Private enterprises have always been China's main investor in Africa. Xie Boyang received an interview with our newspaper on the same day, talking about the prospects of the investment of Chinese private businesses in Africa. He believes that the low-cost development approach discovered by China after 30 years of reform and opening up is more suitable to Africa than the western model.

21st Century: The economic environment in Africa differs from that of ours. What is the biggest difficulty faced by Chinese private businesses when making investment in Africa?

Xie Boyang (hereinafter referred to as Xie): From the perspective of the businesses, there are indeed many economic opportunities inAfrica. African countries have their unique economic conditions and procedures, and legal environment, which our businesses need to adapt to.

We believe thatChina's policies will be further improved, but the enterprises need to consider the risks when about to invest in Africa, and must act within their capability. Private businesses need to show their flexibility and wisdom, and be bold in making new explorations. They should adapt to the local cultures and be practical and down-to-earth rather than be arrogant.

21st Century: Many Chinese private businesses have the problem of extensive operation in their development of African resources. Is there a systematic reason for that? What are the differences between private and state-owned enterprises when investing in Africa?

Xie: What businesses seek is profit for their investment. We also ask our enterprises to bear social responsibilities, and be responsible for the local environment and economic development, which is a preferred direction and moral pursuit.

This requires a legal and institutional framework, which some African countries are short of. Some countries which were once colonized by the west do have legal frameworks, but the local governments lack of the capability of implementation. Even if there are no strict legal restraints, we do not encourage our enterprises to take the chance. If our enterprises want to go toAfrica, they need to look farther. If they just look at the immediate interests, they should do trade rather than invest.

There is something the SOEs can learn from private enterprises in the market competition. Some people in SOEs believe that they are officials and therefore act by following the old bureaucratic system, thus lacking of flexibility. The SOEs should learn from the flexibility of private enterprises.

We encourage cooperation between SOEs and private businesses. You need to deal with various agencies and sectors when investing in Africa. When SOEs and private businesses join hands and draw on each other's strength, we will see the highest efficiency.

Chinese enterprises have adapted to the investment environment inAfrica. We invest there not simply for resources. In early days after the founding of the New China, the older generation of revolutionaries laid down the China-Africa friendship, driven by revolutionary idealism rather than economic interests. It was pure and had nothing to do with colonization. This remains China's mainstream thinking even up till now.

In the new era, economic cooperation should be mutually beneficial and win-win in nature.China needs global resources which Africa is endowed with. But resources cannot transform into economy without money, technology and manpower. China has the advantage of human resources accumulated over the past 30 years, and has found a low-cost model for development. Although the west has high technologies, they are too costly, and their development yield little returns to African societies.


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