China-Africa Economic and Trade Cooperation (2013)

Information Office of the State Council

The People's Republic of China

August 2013 Beijing

Contents

Foreword

I. Promoting Sustainable Development of Trade

II. Improving the Level of Investment and Financing Cooperation

III. Strengthening Cooperation in Agriculture and Food Security

IV. Supporting African Infrastructure Construction

V. Stressing African People' s Livelihoods and Capacity Building

VI. Promoting Cooperation under the Multilateral Framework

Conclusion

Appendix I

Appendix II

Foreword

Currently, as the international situation undergoes profound and intricate changes, newly emerging and developing economies have become the major force pushing forward the world's economic development. In tune with the changes in the international environment, China and African countries are, within the framework of the Forum on China-Africa Cooperation (FOCAC), continuing to deepen the new type of China-Africa strategic partnership, vigorously advancing economic and trade cooperation, and actively exploring a common path that reflects both China's and Africa's realities.

China has become Africa's largest trade partner, and Africa is now China's major import source, second largest overseas construction project contract market and fourth largest investment destination. China-Africa economic and trade development has improved people's livelihoods and diversified economic development in African countries, provided strong support for China's socio-economic development, and contributed to promoting South-South cooperation and balanced world economic development.

Through the common efforts of China and Africa, bilateral economic and trade cooperation now enjoys a consolidated foundation and improved mechanisms, with new common interests and growth points in cooperation constantly emerging. In March 2013, China's President Xi Jinping visited Africa and announced a series of new measures to support Africa's development, providing a powerful impetus for the advancement of China-Africa economic and trade relations.

In 2010, the Chinese government published a white paper on China-Africa economic and trade cooperation. This latest white paper provides a further introduction to the progress of bilateral economic and trade cooperation in recent years.

I. Promoting Sustainable Development of Trade

Against the background of sluggish global economic recovery in recent years, China-Africa trade development has maintained comparatively rapid momentum. In 2009, China became Africa's No. 1 trade partner. In the following two years, the scale of China-Africa trade expanded rapidly. In 2012, the total volume of China-Africa trade reached US$198.49 billion, a year-on-year growth of 19.3%. Of this, US$85.319 billion consisted of China's exports to Africa, up 16.7%, and US$113.171 billion was contributed by China's imports from Africa, up 21.4%. Total China-Africa trade volume, China's export volume to Africa and China's import volume from Africa all reached new highs.

The graphic shows China-Africa trade volume from 2000 to 2012. (Xinhua/Ma Yan)
As the volume of China-Africa trade continues to grow, its proportion to China's and Africa's respective total foreign trade volume has also increased. From 2000 to 2012, the proportion of China-Africa trade volume as a part of China's total foreign trade volume increased from 2.23% to 5.13%: the proportion consisting of China's imports from Africa up from 2.47% to 6.23%, and that of China's exports to Africa from 2.02% to 4.16%. On the African side, the changes are even more remarkable. From 2000 to 2012, the proportion of China-Africa trade volume as a part of Africa's total foreign trade volume increased from 3.82% to 16.13%: the proportion contributed by Africa's exports to China up from 3.76% to 18.07%, and that by Africa's imports from China from 3.88% to 14.11%.

Chinese products exported to Africa are generally of fine quality and well-priced, and fulfill the consumption demands of all social strata in Africa. With the scale of trade expanded, the structure of China-Africa trade has been improved step by step. As the consumption capacity of the African market continues to expand, the amount of technical products that China exports to Africa has increased remarkably. In 2012, the proportion of mechanical and electrical products as a part of China's total commodity exports to Africa reached 45.9%. In order to guarantee the quality of products exported to Africa, from December 2010 to March 2011, the Chinese side took special steps to crack down on the potential export to Africa of counterfeit and shoddy products and commodities that violated intellectual property rights. This involved multiple measures, such as prior-to-shipment quality examinations for industrial products that were to be exported to Africa. These measures helped guarantee the quality of Chinese commodities exported to Africa.

Over the past three years, China's import volume from Africa has increased notably, as the trade volume and quantity of bulk commodities, like crude oil and agricultural products, keep rising. Through China-Africa trade, Africa's exporters have obtained access to a stable market, higher pricing and greater benefits. In the meantime, China has vigorously expanded its imports from Africa by enacting tariff exemptions and setting up exhibition centers for African products. Since January 2012, the 30 least developed African countries that have established diplomatic relations with China have been granted zero-tariff treatment for 60% of their exported items. By the end of 2012, 22 of them had seen 910 million yuan worth of tariff exempted, involving US$1.49 billion-worth of goods. In May 2011, an African Products Exhibition Center opened in Yiwu City, Zhejiang Province. By reducing operation expenditures and other supportive policies, the Exhibition Center has attracted over 2,000 salable commodity items from more than 20 African countries.

Sino-African bilateral trade has great potential due to the complementary conditions on both sides, and is significant for the economic development of both China and Africa. China will take multiple measures to promote the healthy development of China-Africa trade. These include implementing the "Special Plan on Trade with Africa," which will expand the scope of zero tariff treatment for African products exported to China and increase China's imports from Africa, and improving the brand building, marketing channels and quality of China's commodities exported to Africa. In addition, China will help African countries improve their customs and commodity inspection facilities by mobilizing aid for trade, provide support for African countries to promote trade facilitation, and push forward trade development within Africa.

II. Improving the Level of Investment and Financing Cooperation

A poor economic foundation and insufficient construction funds have always been factors limiting the development of African countries. The Chinese government encourages and supports enterprises and financial institutions to increase investment in Africa, striving to improve the quality and level of China-Africa cooperation.

Since 2009, Africa has seen a decrease of foreign direct investment, but an accelerated growth of direct investment from China during this same period. From 2009 to 2012, China's direct investment in Africa increased from US$1.44 billion to US$2.52 billion, with an annual growth rate of 20.5%. Over the same period, China's accumulative direct investment in Africa increased from US$9.33 billion to US$21.23 billion, 2.3 times the 2009 figure. The rapid growth of China's direct investment in Africa is indicative of Africa's development potential and investment appeal, and also points to the mutually beneficial nature of China-Africa cooperation.

While increasing aggregate investment, China is also improving the level of its investment in Africa. Currently, over 2,000 Chinese enterprises are investing and developing in more than 50 African countries and regions, and cooperation fields have expanded from agriculture, mining and building industry to intensive processing of resource products, industrial manufacturing, finance, commercial logistics and real estate.

In recent years, China has improved its mechanisms for investment in Africa. By the end of 2012, China had signed bilateral investment treaties (BIT) with 32 African countries, and established joint economic commission mechanisms with 45 African countries. The China-Africa Development Fund, established as one of the eight pledges China made at the FOCAC Beijing Summit, had by the end of 2012 agreed to invest US$2.385 billion in 61 projects in 30 African countries, and had already invested US$1.806 billion for 53 projects. According to preliminary statistics, the agreed upon investment projects will bring US$10 billion worth of investment to Africa, increase local exports by about US$2 billion annually, and benefit more than 700,000 people. China's financial institutions have actively expanded financing support for Africa. At the Fourth FOCAC Ministerial Conference in 2009, China announced the establishment of "a special loan for small and medium-sized African businesses." By the end of 2012, the special loan service had promised to offer loans totaling US$1.213 billion, with contract value of US$1.028 billion and loans granted worth US$666 million, providing strong support for the development of agriculture, forestry, animal husbandry, fishing, processing and manufacturing, trade and logistics, and other industries closely associated with people's livelihoods in Africa.

Energy and mineral resource exploitation is the major impetus for the economic booms of many African countries. In this area, Chinese enterprises have helped African countries establish an upstream-downstream-integrated industry chain, transforming resource advantages into economic growth opportunities, and actively participated in local public welfare infrastructure construction. In the Democratic Republic of the Congo, Chinese enterprises have built highways, hospitals and other public infrastructure while extracting copper-cobalt ores. In the Republic of South Africa, Chinese mineral exploitation and processing enterprises have set up endowment funds to sponsor medical care, poverty reduction and education in local areas, and built advanced water treatment facilities. Chinese enterprises have sponsored the "Brightness Action" and organized first-rate ophthalmologists to perform cataract extraction surgeries for 623 patients in Zimbabwe and Zambia.

Manufacturing is China's key investment field in Africa. From 2009 to 2012, Chinese enterprises' direct investment volume in Africa's manufacturing sector totaled US$1.33 billion. By the end of 2012, China's investment in Africa's manufacturing industry had reached US$3.43 billion. Mali, Ethiopia and other resource-poor countries have also attracted a large amount of Chinese investment. Chinese enterprises have invested in sugar refineries in Mali, set up glass, fur, medical capsule and automobile factories in Ethiopia, and invested in textile and steel pipe manufacturing projects in Uganda. All of these investments have compensated for these countries' unfavorable natural conditions and resources, increased their tax revenues and employment, and extended the value adding chain of "made in Africa" products.

Chinese enterprises' investments have brought about changes to all dimensions of Africa's social development. For example, those that invest in cash crop cultivation in Zimbabwe have provided interest-free loans to local farmer households, improved production infrastructure, offered technical guidance for the whole production process, organized local employees to visit China, and funded local schools and orphanages. These have promoted the positive interaction and common development of Chinese enterprises and local society.

Service industries that produce zero pollution and consume little energy have become a new highlight of China-Africa cooperation in recent years. Chinese enterprises have invested in finance, trade, science and technology services, power supply and other fields in Africa. By the end of 2012, China's direct investment in Africa's financial sector had reached US$3.87 billion, accounting for 17.8% of its total investment volume in Africa. To some extent, this was able to make up for the lack of sufficient development funds available to local enterprises. In the field of commerce and trade, the construction of the Angola International Trade Center, jointly initiated by Chinese and local enterprises, has been started. When completed, the project will be the largest commercial logistics, convention and investment service center in southwest Africa. There are now also a large number of small and medium-sized Chinese investors engaged in agricultural and sideline product processing and petty commodity production in Africa. Their products and services are closely linked with African people's livelihoods, playing an active role in meeting local needs, boosting local employment and promoting China-Africa trade contacts. As the mutual understanding between Chinese and African peoples is deepened and the cooperation between Chinese and African governments enhanced, these small and medium-sized Chinese investors will further incorporate into local society and share the fruits of development with local people.

In recent years, as the economic strength of African countries has increased and China-Africa relations have grown closer, African enterprises have started to invest in China. By the end of 2012, the volume of African countries' direct investment in China totaled US$14.242 billion, increasing by 44% over 2009 levels. Of that, the figure for 2012 was US$1.388 billion. Investing countries included Mauritius, Seychelles, South Africa and Nigeria, and their investments covered petrochemical industries, manufacturing and processing, and wholesale and retail, among other fields.China-Africa investment and financing cooperation has solidified the foundation of Africa's economic development, increased Africa's capacity of independent development, improved Africa's competitiveness in the global economic sphere, and advanced Chinese enterprises' internationalized development. In the future, China will further expand investment and financing cooperation with Africa, fulfill its commitment on the provision of US$20 billion-worth of loans to Africa, which will be used for infrastructure construction, as well as the development of agriculture, manufacturing and small and medium-sized enterprises. China will give guidance to its enterprises on the establishment of processing and manufacturing bases in Africa, and increase investment in business services, transport, consultation management and other service industries. China will also encourage its enterprises to carry out multiple-field investment cooperation in Africa, and help African countries improve their external economic development environments.

III. Strengthening Cooperation in Agriculture and Food Security

Agriculture is crucial for stable development and poverty reduction efforts in Africa. It is a pillar industry and a priority field for development in most African countries. China and Africa see favorable conditions and broad prospects for future agricultural cooperation. The Chinese government attaches great importance to its mutually beneficial agricultural cooperation with Africa, and works hard to help African countries turn resource advantages into developmental ones and sustainably develop their agricultural capacities.

In recent years, Sino-African trade in agricultural products has grown quickly. From 2009 to 2012, China's agricultural exports to Africa grew from US$1.58 billion to US$2.49 billion, an increase of 57.6%. During the same period, China's agricultural imports from Africa grew from US$1.16 billion to US$2.86 billion, a 146% increase. Most imported agricultural products are non-food items, including cotton, hemp, silk, oilseeds and other such products.

A major reason for the rapid increase in Chinese imports of African agricultural products is the zero-tariff policy that the Chinese government adopted in 2005 for some African products. Agricultural products are a major category benefiting from this policy and, as a result, the export of specialty African agricultural products to China has grown rapidly. One example of the impact of this policy is provided by sesame. China started importing small amounts of sesame from Africa in 2002. After the zero-tariff policy was adopted, sesame imports grew rapidly, from US$97 million in 2005 to US$441 million in 2011, an annual increase of 28.7%. This rate of import increase is higher than the average growth rate of all products imported from Africa during the same period.

In recent years, Chinese enterprises have invested in Africa in such fields as breeding improved seeds, planting grain and cash crops, and processing agricultural products. From 2009 to 2012, China's direct investment in African agriculture grew from US$30 million to US$82.47 million, a 175% increase. Investment by Chinese enterprises in African agriculture has increased grain supplies in the countries concerned and enhanced the comprehensive agricultural productivity of those countries. In Mozambique, for example, 300 hectares of experimental paddy fields supported by Chinese investment yielded 9-10 tons per hectare for three successive years. With the help of Chinese rice experts, local farmers see their paddy fields yield five tons per hectare, two tons more than previous yields. In Malawi, Mozambique and Zambia, Chinese enterprises and the China-Africa Development Fund jointly invested in a cotton planting and processing project modeled on having enterprises work with farming households. The project was able to involve tens of thousands of local growers, effectively enhancing local capabilities in cotton processing.

Chinese enterprises have also worked to improve local farmland, water conservancy and conditions for agricultural production. Currently, the biggest agricultural project in Rwanda is a farmland improvement project supported by investment from the African Development Bank and contracted to Chinese enterprises. When completed, the project will effectively control major rivers and improve the utilization of water resources in Rwanda.

The Chinese government has tried to enhance Africa's self-reliance capacity to develop its agriculture by providing assistance in the construction of demonstration centers of agricultural technology, and sending senior agricultural experts and technicians to teach the locals managerial experience and practical techniques in agricultural production. Since 2006, China has helped set up 15 agricultural demonstration centers in Rwanda, the Republic of Congo, Mozambique and some other countries, and is planning to establish another seven. At the same time, China has sent technical groups and several hundred technicians to Africa to provide policy consulting, teach practical techniques and train local staff. With China's aid in a project to breed high-yield and high-quality crop varieties, Chad sees its yields grow by over 25% on over 500 hectares planted with improved varieties, and several thousand farmers trained.

In the future, China will advance agricultural cooperation with Africa in all respects while ensuring that this cooperation puts both parties on an equal footing, is mutually beneficial, and advances common development. It will work to establish and improve a mechanism for bilateral agricultural cooperation, and strengthen Sino-African cooperation in the sharing of agricultural technologies, resource varieties and agricultural information, the processing and trade of agricultural products, agricultural infrastructure construction, and human resource training. China will continue to encourage and support investment by established Chinese enterprises to put money into agriculture or technological cooperation in Africa. It will arrange and launch an appropriate number of agricultural demonstration centers in African countries, depending on their actual needs. China will also work to deepen Sino-African cooperation within the frameworks of the United Nations Food and Agriculture Organization (UNFAO) and the International Fund for Agricultural Development.

IV. Supporting African Infrastructure Construction

Infrastructure construction is a starting point for improving the investment environment and people's livelihoods in Africa, and is of great importance for poverty reduction and development on the continent. The Chinese government encourages enterprises and financial institutions to participate in African infrastructure construction, including transportation, communications and electric power projects, in a variety of different ways. In 2012, Chinese enterprises completed construction contracts worth US$40.83 billion in Africa, an increase of 45% over 2009, accounting for 35.02% of China's overseas contract work completed. Africa has been China's second largest overseas contract market for four successive years. Capital, equipment and technologies from China have effectively helped reduce construction costs for African countries and, as a result, their infrastructure situations have gradually improved.

Chinese enterprises have built numerous city roads, expressways, flyovers, railways and ports in Africa, effectively improving traffic conditions there and enhancing economic and trade development and personnel exchanges between African countries. In Angola, Chinese enterprises undertook the contract for a project that involved repairing a railway running from east to west through the country.

Chinese communication enterprises have participated in the construction of communication facilities in Africa, such as backbone fiber-optic transmission networks, fixed-line telephone lines, mobile communication and Internet facilities, expanding the coverage of Africa's telecommunication network, raising the network's performance quality and reducing communication costs. A contract to build a fiber-optic transmission backbone network in Tanzania was also taken on by Chinese enterprises. The network will cover major provinces and cities in Tanzania, link it with six neighboring countries and connect it to seabed optical cables in East and Southern Africa. After the network is completed, there will be three backbone loops, one each in northern, southern and western Tanzania, and eight international transit links, making communications of East Africa more integrated.

China has also worked closely with African countries in building hydropower stations and power grids, alleviating power crises that have long plagued some African countries. In 2010, Chinese enterprises started to build the Malabo Gas Plant in Equatorial Guinea. After the plant is completed, the country will have a complete power supply system, from power generation to power transmission and power transformation. This will improve the power supply conditions of Malabo City and Bioko Island while promoting agricultural irrigation and ecological tourism in surrounding areas.

The Chinese government and Chinese financial institutions have offered a great number of concessional and commercial loans to Africa for its infrastructure construction. From 2010 to May 2012, China approved concessional loans worth a total of US$11.3 billion for 92 African projects. For example, the Addis Ababa-Adama Expressway of Ethiopia and the Kribi Deep-water Port of Cameroon were both funded by concessional loans from China. Some of China's main commercial banks have also started buyer's credit businesses in Africa, supporting the power grid in Ghana, hydropower stations in Ethiopia, a west-east expressway in Algeria, and other projects.

While undertaking infrastructure projects in Africa, Chinese enterprises have paid attention to localized operation and management styles, and taken an active part in programs benefiting local people. For example, large Chinese communication companies in Africa have raised their localization rate to above 65%. They have also cooperated with 1,200 local subcontractors, indirectly providing more than 10,000 job opportunities. In Zambia, Chinese enterprises have repaired roads, hospitals and houses of some mines, and donated sports facilities for communities and money for charity activities, making positive contributions to local development.

Infrastructure construction is a significant part of Africa's further economic and social development. China will deepen cooperation with Africa in transportation, communications and other infrastructure fields to improve people's livelihoods, steadily push forward Sino-African trans-national and trans-regional infrastructure construction partnerships, and enhance exchanges and cooperation in the field of regional integration so as to help Africa improve its capacity for integrated development.