Pri­vate Busi­ness Op­por­tu­ni­ties

Focac bei­jing sum­mit will fur­ther pro­mote chi­nese pri­vate com­pa­nies to par­tic­i­pate in china-africa trade and in­vest­ment co­op­er­a­tion

ChinAfrica - - OPINION - By Cai Li­hua

Born in the be­gin­ning of the new cen­tury, the Fo­rum on China-africa Co­op­er­a­tion (FOCAC) is an im­por­tant plat­form of di­a­logue be­tween the two sides un­der the frame­work of South-south co­op­er­a­tion. In the past 18 years, the fo­rum, as a booster driv­ing up rapid and sus­tain­able China-africa co­op­er­a­tion, has been pro­vid­ing long-last­ing and en­er­getic im­pe­tus to the healthy de­vel­op­ment of bi­lat­eral re­la­tions. The eight mea­sures re­leased at the FOCAC Bei­jing Sum­mit in 2006, and the 10 ma­jor co­op­er­a­tion plans an­nounced at the FOCAC Jo­han­nes­burg Sum­mit in 2015, have par­tic­u­larly ac­cel­er­ated eco­nomic and trade de­vel­op­ment be­tween China and Africa. In this con­text, Chi­nese pri­vate en­ter­prise own­ers should be well aware of the grow­ing im­por­tance and on­go­ing trend of China-africa re­la­tions, so that they can par­tic­i­pate in China-africa co­op­er­a­tion in var­i­ous fields in a more ac­tive way.

Big­ger roles for pri­vate com­pa­nies

En­ter­ing the 21st cen­tury, African coun­tries have been pro­mot­ing in­dus­tri­al­iza­tion. Dur­ing the process, they in­creas­ingly re­gard in­dus­trial parks as an im­por­tant model to at­tract for­eign in­vest­ment and boost in­dus­tri­al­iza­tion. As the eco­nomic and trade ties be­tween China and Africa deep­ened, the main par­tic­i­pants in the field of eco­nomic co­op­er­a­tion have changed, with more and more Chi­nese pri­vate com­pa­nies com­ing to the fore with a flex­i­ble and prag­matic ap­proach.

Ac­cord­ing to the 2016 Sta­tis­ti­cal Bul­letin of China’s Out­ward For­eign Di­rect In­vest­ment re­leased in Oc­to­ber 2017 by the Min­istry of Com­merce, Na­tional Bureau of Sta­tis­tics and State Ad­min­is­tra­tion of For­eign Ex­change, China had 3,254 en­ter­prises with in­vest­ment in Africa. But the re­port, Dance of the Lions and Dragons, re­leased by Mckin­sey & Co. in June 2017, sug­gests that there were more than 10,000 Chi­nese-owned firms op­er­at­ing in Africa. The big gap be­tween the two fig­ures mostly lies in the fact that many Chi­nese pri­vate en­ter­prises did not reg­is­ter with lo­cal com­merce au­thor­i­ties be­fore launch­ing their projects in Africa.

The Mckin­sey re­port notes that around 90 per­cent of the Chi­nese com­pa­nies are pri­vately owned. These com­pa­nies of vary­ing sizes and mul­ti­ple busi­nesses are mostly prof­itable. On the one hand, Chi­nese pri­vate com­pa­nies in dif­fer­ent sec­tors have formed a com­plete in­dus­trial sys­tem, and their in­vest­ment in Africa con­sti­tutes a part of the global in­dus­trial chain; on the other hand, Africa has formed a size­able con­sumer mar­ket with a con­ti­nent of 30.29-mil­lion square km and 1.2 bil­lion in to­tal pop­u­la­tion. In ad­di­tion, African coun­tries are will­ing and have the con­di­tions to con­duct in­dus­trial ca­pac­ity co­op­er­a­tion with China.

Chi­nese in­dus­trial parks in Africa, mainly par­tic­i­pated in by Chi­nese pri­vate com­pa­nies, have been grow­ing rapidly. Sta­tis­tics show that there are about 100 co­op­er­a­tion zones and in­dus­trial parks set up with Chi­nese in­vest­ment in Africa. More than 20 in­dus­trial parks with size­able in­vest­ment have ab­sorbed nearly 400 en­ter­prises with com­bined in­vest­ment of about $5 bil­lion and gross out­put value of $13 bil­lion. The East­ern In­dus­try Zone in Ethiopia, China-egypt Suez Eco­nomic and Trade Co­op­er­a­tion Zone and Lekki Free Zone in Nige­ria each has at­tracted more than 50 en­ter­prises, and these big three are play­ing im­por­tant roles in lo­cal eco­nomic de­vel­op­ment and in­dus­tri­al­iza­tion and will be the im­por­tant car­rier of bi­lat­eral in­dus­trial ca­pac­ity co­op­er­a­tion in the fu­ture. The co­op­er­a­tion model based on in­dus­trial parks is also in line with the strate­gic goals of China’s Belt and Road Ini­tia­tive and African Union (AU) Agenda 2063 and can be im­mensely ben­e­fi­cial to China and African coun­tries.

Right con­cepts

Good de­vel­op­ment con­cepts usu­ally lead to good de­vel­op­ment ori­en­ta­tions and re­sults. In re­cent years, pri­vate Chi­nese en­ter­prises de­velop sta­bly in African coun­tries, mainly be­cause of their right de­vel­op­ment con­cepts.

First, the con­cept of pro­tracted de­vel­op­ment. Af­ter FOCAC was es­tab­lished in 2000, more and more Chi­nese en­trepreneurs with in­vest­ment in Africa changed their de­vel­op­ment con­cept of short-term and one-off in­vest­ment and co­op­er­a­tion. They hope to have sta­ble and long-last­ing de­vel­op­ment and co­op­er­a­tion in Africa for long-term re­turns.

Ac­cord­ing to Yin Yiqiao, head of Hubei Cham­ber of Com­merce in Africa, to achieve suc­cess in Africa, com­pa­nies should fo­cus on long-term re­turns, in­stead of seek­ing only short-term in­ter­ests. In March 1997, Yin, then a teacher at Wuhan Univer­sity of Tech­nol­ogy of Hubei Prov­ince, vis­ited Mada­gas­car on busi­ness and found am­ple op­por­tu­ni­ties in the is­land na­tion. He de­cided to stay there and es­tab­lished his Fu­ture De­vel­op­ment Corp. Ltd. with a friend, mainly en­gag­ing in man­u­fac­tur­ing alu­minum al­loy doors and win­dows, and trade in con­struc­tion ma­te­rial. He started out with a small op­er­a­tion and lim­ited staff com­ple­ment, re­ly­ing on the

low ma­te­rial prices in China and the use of ad­vanced tech­nol­ogy, man­age­ment skills and a lo­cal­iza­tion strat­egy. The com­pany quickly grew into the largest en­ter­prise in alu­minum al­loy door and win­dow pro­cess­ing in Mada­gas­car. Cur­rently, it has ex­panded to sev­eral other African coun­tries in­clud­ing Kenya, Uganda, Re­pub­lic of the Congo and Mozam­bique. Yin’s ex­pe­ri­ence shows that hav­ing a long-term strat­egy can help make a Chi­nese pri­vate com­pany suc­cess­ful in Africa. Yin said that he will copy the de­vel­op­ment mode of his Fu­ture De­vel­op­ment Corp. into more African coun­tries, so that he can pro­vide the best prod­ucts and best ser­vices on the con­ti­nent.

Sec­ond, the con­cept of clus­ter-based op­er­a­tion. As the African proverb goes, you can go faster alone but farther to­gether with oth­ers. To in­vest in Africa, Chi­nese pri­vate com­pa­nies need to go to­gether. It can help Chi­nese pri­vate en­ter­prises run

chi­nese com­pa­nies’ in­vest­ment should also be guided by the goals of the focac Bei­jing Sum­mit; they should strengthen in­fra­struc­ture co­op­er­a­tion based on the Belt and road ini­tia­tive, vig­or­ously pro­mote in­dus­trial ca­pac­ity co­op­er­a­tion in var­i­ous sec­tors, and push for­ward in­dus­tri­al­iza­tion and agri­cul­tural mod­ern­iza­tion in Africa.

bet­ter when they op­er­ate in Chi­nese in­dus­trial parks in Africa.

In­dus­trial parks can pro­vide bet­ter in­dus­trial prospects. Each Chi­nese in­dus­trial park in Africa was es­tab­lished based on in-depth mar­ket in­ves­ti­ga­tion and re­search. These parks were de­signed to meet the mar­ket de­mands and de­vel­op­ment strate­gies of the cor­re­spond­ing coun­tries. This can help in­vestors make the cor­rect de­ci­sion. In ad­di­tion, these in­dus­trial parks of­ten en­joy pref­er­en­tial in­vest­ment poli­cies granted by the host coun­tries, as they can help them achieve in­dus­tri­al­iza­tion, pro­vide jobs for lo­cal peo­ple and in­crease govern­ment tax rev­enue.

More im­por­tantly, in­dus­trial parks have com­plete in­dus­trial sup­port­ive fa­cil­i­ties, which can help com­pa­nies con­trol costs and raise ef­fi­ciency. In­dus­trial parks can also pro­vide easy in­vest­ment pro­ce­dures. For most Chi­nese pri­vate com­pany own­ers, they are not quite fa­mil­iar with over­seas mar­kets nor do they have enough in­ter­na­tional in­vest­ment ex­pe­ri­ence. More­over, it usu­ally takes a long time to go through lo­cal in­vest­ment pro­ce­dures. In this re­gard, they can get help from the in­dus­trial parks in

Africa. These parks can also pro­vide on­estop ser­vices for in­vestors, ca­pa­ble of help­ing them solve eco­nomic and trade co­op­er­a­tion dis­putes and seek con­sular pro­tec­tion.

Third, the con­cept of lo­cal­iza­tion. Lo­cal­iza­tion is an im­por­tant cri­te­rion mea­sur­ing whether a com­pany has a long-term strat­egy in the coun­try it in­vests in, as well as an im­por­tant fac­tor eval­u­at­ing a com­pany’s con­tri­bu­tion to lo­cal so­ci­ety. In some African coun­tries, lo­cal­iza­tion is a le­gal re­quire­ment for for­eign in­vest­ment. For in­stance, Zim­babwe passed the Indi­g­e­niza­tion and Eco­nomic Em­pow­er­ment Act in 2007 to elim­i­nate the in­flu­ence of colo­nial­ism, pro­tect na­tional re­sources and safe­guard eco­nomic sovereignty. Hence, more and more Chi­nese com­pa­nies have changed their minds of seek­ing only short-term in­ter­ests; in­stead, they em­brace lo­cal­iza­tion strate­gies to de­velop mu­tu­ally-ben­e­fi­cial and win-win co­op­er­a­tion.

While in­vest­ing in Africa, most Chi­nese en­ter­prises are at­tach­ing great im­por­tance to reap­ing both eco­nomic and so­cial ben­e­fits. For in­stance, Chi­nese shoe­maker Hua­jian Group in Ethiopia has given top pri­or­ity to its lo­cal­iza­tion pol­icy. Of the more than 6,000 com­pany em­ploy­ees, Chi­nese staff num­ber only 160. Ev­ery year it sends 50 African em­ploy­ees to Hua­jian head­quar­ters in Dong­guan of south China’s Guang­dong Prov­ince for a six-month train­ing pro­gram. And ac­cord­ing to the group’s plan, the Hua­jian In­ter­na­tional Light In­dus­try Park will, upon its com­ple­tion in 2020, pro­duce more than 60 per­cent of the shoes, gar­ments and bags made in Ethiopia, and of­fer 30,00050,000 job op­por­tu­ni­ties.

New poli­cies ex­pected

The forth­com­ing FOCAC Bei­jing Sum­mit will present new op­por­tu­ni­ties for Chi­naAfrica co­op­er­a­tion. Ac­cord­ing to Dai Bing, Sec­re­tary Gen­eral of the FOCAC Chi­nese Fol­low-up Com­mit­tee and Di­rec­tor Gen­eral of the De­part­ment of African Af­fairs of the Min­istry of For­eign Af­fairs, pro­mot­ing China-africa eco­nomic and trade trans­for­ma­tion and up­grad­ing is one of the five goals of the sum­mit. He also noted that Chi­naAfrica co­op­er­a­tion is trans­form­ing from be­ing guided by the gov­ern­ments to be­ing ori­ented by the mar­ket, up­grad­ing from com­mod­ity trade to in­dus­trial ca­pac­ity co­op­er­a­tion, and mov­ing from engi­neer­ing con­tract­ing to project in­vest­ment and op­er­a­tion.

As a mem­ber of an or­ga­ni­za­tion ac­tively pro­mot­ing Chi­nese pri­vate en­ter­prises’ par­tic­i­pa­tion in China-africa co­op­er­a­tion, I have high ex­pec­ta­tions of the sum­mit.

The Chi­nese and African lead­ers should make more pi­o­neer­ing ef­fort in de­sign­ing fur­ther prag­matic mea­sures for China-africa co­op­er­a­tion. China should adopt more poli­cies such as pro­mot­ing ren­minbi (Chi­nese cur­rency) set­tle­ment in China-africa trade to ef­fec­tively sup­port co­op­er­a­tion be­tween medium, small and mi­cro-sized Chi­nese

As the eco­nomic and trade ties be­tween china and Africa deep­ened, the main par­tic­i­pants in the field of eco­nomic co­op­er­a­tion have changed, with more and more chi­nese pri­vate com­pa­nies com­ing to the fore with a flex­i­ble and prag­matic ap­proach.

en­ter­prises and their African coun­ter­parts. On the other hand, African coun­tries can also con­tinue their “Look East” pol­icy, with a view to draw­ing Chi­nese cap­i­tal and tech­nolo­gies with a more trans­par­ent, fa­vor­able and clean in­vest­ment en­vi­ron­ment.

China-africa co­op­er­a­tion should be in line with the AU Agenda 2063, the 10 ma­jor China-africa co­op­er­a­tion plans and the con­struc­tion of con­ti­nen­tal high-speed rail­way, high­way and avi­a­tion net­works and in­dus­tri­al­iza­tion, and con­stantly im­prove the qual­ity of Chi­nese com­mod­ity ex­ports to Africa. Chi­nese com­pa­nies’ in­vest­ment should also be guided by the goals of the FOCAC Bei­jing Sum­mit; they should strengthen in­fra­struc­ture co­op­er­a­tion based on the Belt and Road Ini­tia­tive, vig­or­ously pro­mote in­dus­trial ca­pac­ity co­op­er­a­tion in var­i­ous sec­tors, and push for­ward in­dus­tri­al­iza­tion and agri­cul­tural mod­ern­iza­tion in Africa.

* The author is deputy sec­re­tary gen­eral of china Africa Joint cham­ber of com­merce and in­dus­try * Com­ments to niyan­[email protected]­

The in­vest­ment of pri­vate Chi­nese com­pa­nies in Africa is driv­ing agri­cul­tural mod­ern­iza­tion

Cai Li­hua and Ju­liao Dmande, head of Mozam­bique Cham­ber of Com­merce, cel­e­brate the sign­ing of a co­op­er­a­tive agree­ment in Hangzhou in April

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