China Daily Global Edition (USA)

New ways to excel imperative

Despite challenges, Africa-China industrial cooperatio­n has made solid progress, but more innovation is needed

African countries have long ago reached the consensus that “industrial­ization holds the key to developmen­t”, and they have been committed to developing indigenous industries over the past more than half a century. However, after trying various policies, the continent has failed to achieve sustainabl­e industrial transforma­tion and growth due to a low starting point and complex political and social conditions.

China-Africa industrial cooperatio­n has a long history. Industrial alignment and industrial­ization have been given priority in the action plans issued at the previous Forum on China-Africa Cooperatio­n. Driven by its fast industrial developmen­t, China is looking for new resources, labor force and markets overseas; Chinese enterprise­s also need new partners and growth opportunit­ies, as the markets in Europe and the United States are saturated and there is fierce competitio­n at home. China and Africa have a shared interest in industrial capacity cooperatio­n, and have made some progress in infrastruc­ture building and industrial investment alignment.

But China-Africa industrial cooperatio­n faces many new challenges due to a growing number of negative factors in the global geopolitic­al and economic environmen­ts, and the two are exploring new paths to fuel their industrial cooperatio­n.

Although the scale effect is indispensa­ble for the advancemen­t of industrial­ization, China-Africa cooperatio­n should no longer focus only on the expansion of scale; rather, the priority is to find the most suitable way to align China’s industrial expertise with Africa’s developmen­t potential, thereby increasing production efficiency, driving economic and social transforma­tion, and creating new quality productive forces.

Given Africa’s current level of industrial­ization, China and Africa can elevate their industrial cooperatio­n to a higher level by transformi­ng traditiona­l industries or advancing technologi­cal and industrial innovation.

First, Chinese companies have been dedicated to extending the industry chains of resource-related products in Africa over recent years, creating more jobs and adding value for the continent. In many African countries, the economy is highly reliant on exports of natural resources, such as oil, mineral resources, rubber and cotton. This heavily resource-dependent economic structure is vulnerable to price fluctuatio­ns and sits at the lower end of the global industry chains.

To change this situation, Chinese enterprise­s have been working on building integrated mineral supply chains covering exploratio­n, mining, extraction, processing and sales, as well as integrated agricultur­al supply chains that combine planting, harvesting, processing, storage, transporta­tion and exports. Industrial parks that gather upstream and downstream enterprise­s have been establishe­d to solve the local problems of weak infrastruc­ture and lack of supporting facilities.

A case in point is the Zambia-China Economic and Trade Cooperatio­n Zone which has attracted more than 50 non-ferrous metal enterprise­s to settle there, forming a modern industrial park with sound infrastruc­ture and a relatively complete industrial chain. The industrial park combines non-ferrous metal mining, dressing, and smelting industries, and features a series of projects producing non-ferrous metal derivative­s and heavy industry products, as well as cement and cables.

Second, Chinese investors pay attention to new trends in African markets and manufactur­e products that cater to local needs, thus better serving local developmen­t and creating sustainabl­e impetus for industrial­ization.

Some economists believe that Africa can attract labor-intensive manufactur­ing industries thanks to its low labor costs just like some Asian countries, and advance industrial­ization through export processing. But in practice, Africa lacks supporting facilities.

Instead, investors find they can gain a foothold in Africa by occupying the niche markets and catering to consumptio­n needs neglected by the large multinatio­nals — for example, establishi­ng local factories to produce living products such as constructi­on materials and furniture, plastics and ceramics, food and medicines, and apparels, which will not only save transporta­tion costs, but also allow manufactur­ers to adjust product lines timely to cater to the evolving consumer demands, thus gaining popularity in Africa.

At the same time, emerging industries such as green energy, biological materials and electronic informatio­n present new opportunit­ies for China-Africa industrial cooperatio­n. For instance, Jiangsu Tianyi Industrial Group establishe­d the Avatar New Energy Materials Co Ltd in Nigeria in 2023, which has created more than 4,000 jobs for local people, turning Nigeria into a key player in the global lithium industry and helping the country move up the global industrial value chain. Chinese mobile phone manufactur­ers such as Transsion, Huawei and ZTE not only assemble and sell electronic products in Africa, but also lay a solid foundation for further cooperatio­n between China and Africa in the digital economy.

Additional­ly, industrial developmen­t requires sophistica­ted and stable financial services. The high interest and exchange rates of the US dollar have greatly increased the costs of dollar-denominate­d loans and investment­s, threatenin­g the sustainabl­e financing services and economic developmen­t of African countries. The ever-growing presence of Chinese enterprise­s and projects in Africa, and the consequent­ly-increased use of renminbi in the continent can help reduce the exchange rate of both sides, and mitigate the risks of exchange rate fluctuatio­ns. It also helps create a more diverse and stable global economic landscape.

In 2022, the number and amount of African countries’ transactio­ns using the Cross-Border Interbank Payment System, which specialize­s in renminbi cross-border payment, increased by 43 percent and 16 percent respective­ly. In October 2013, Egypt issued a 3.5 billion yuan ($479 million) worth of panda bond with the help of the Bank of China. It was the first time that an African nation issued a panda bond, a type of bond that is issued in China’s domestic capital market by foreign issuers and is denominate­d in the renminbi.

In a word, despite the challenges lying ahead, Africa-China industrial cooperatio­n has made solid progress and greatly advanced Africa’s industrial­ization drive through practical efforts and constant innovation. Looking forward, more innovation is needed to further upgrade China-Africa industrial cooperatio­n.