China firing up African growth

February 17, 2011

, NAIROBI, Kenya, Feb 17 – What does a country with an economy estimated at $5.8 trillion hold for developing economies in Africa, such as Kenya, where it is seen to have a lot of interest?

That is the question on everyone’s lips since it emerged that China, a key development partner for African states, had overtaken Japan as the world’s second largest economy.

Ten years ago, Chinese investments in Africa were estimated at $10 billion (Sh813.4 billion). The investments are likely to keep rising and are expected to hit the $114 billion mark in 2011.

The economic super power’s interest is being driven by the relative low-cost of natural resources that meets the growing demand back home.

In return, China has contributed immensely to development of infrastructure seen as a key component of unlocking wealth.  The infrastructure developments are geared towards growing economic sectors such as manufacturing, service and trade while rising incomes and rapid industrialisation drive demand for electricity, transport, telecoms and housing.

“The growth of the African economy has ridden on the coattail of China,” Rich Investments Chief Executive Aly-Khan Satchu said on the prospects for the continent.

“Their demand for oil and other resources has in turn seen them unlock credit to finance development projects at attractive rates,” Mr Satchu added.

China has invested heavily in Kenya’s ports and is part of a $22 billion project announced by the government in 2008 that includes a rail line and a motorway linking neighboring Ethiopia, Southern Sudan and Rwanda to the port at Lamu.

It also has substantive investments made in hydro and wind power projects. However, it is in the road sector that most Kenyans know China.

Major construction firms such as the China Road and Bridge Corporation, Shengli Engineering and the China Wu Yi Company have been at the forefront of road construction and are working on Thika Super highway among other key roads.

The government is currently in talks with China’s Export-Import bank (Eximbank) to finance the Sh17.1 billion southern by pass project.

“The trade relation seems to have grown and China is in the hunt for resources,” Mr Satchu said.

In 2010 Chinese companies shipped in goods worth Sh82 billion an increase of 52 percent from the Sh54 billion bought over the corresponding period last year, according to data from the Kenya National Bureau of Statistics. During the same period imports from the US declined by almost 18 percent from Sh33 billion to Sh27 billion during the underlining the growing ties between China and Kenya.

The analyst was however quick to point out that, China’s growing economic influence has raised eyebrows especially from western countries that fear economic ties may grind down its influence both politically and economically.
He said china has emerged as a ‘darling’ to African affairs where they have little if nothing to say on how leaders manage their country affairs.

“China has a, don’t ask don’t tell approach to the way they do business and this has worked well for them. China is strictly doing business and not meddling in governance issues,” he said adding this had seen most African leaders drift towards there direction.

According to Wikileaks cables released last year, showed that the US government was uncomfortable with China’s increasing influence on Kenya and termed relations as a means of implementing their own reform agenda here. 
“Whatever the case, Kenya’s economic growth will, largely, be hinged to how it does business with China,” he said.

The Kenyan economy is expected to grow by between five and six percent.

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