*What Africa Can Learn from China*
**
http://www.indepthnews.info/index.php/global-issues/1072-what-africa-can-learn-from-china
By Dr. Lim Mah-Hui*
IDN-InDepth NewsViewpoint
GENEVA (IDN) - We are living in interesting and perilous times. The Chinese
word for crisis is made up of two characters – danger and opportunities.
Times of danger also offer opportunities to those who are able to use them
to their advantage. The international economy is in its worst crisis since
the Great Depression<
http://www.indepthnews.info/index.php/global-issues/1072-what-africa-can-learn-from-china#>.
There could be a break-up of the Euro zone with momentous consequences for
the world economy; and the U.S. economy is limping along with high level of
unemployment five years after the great financial meltdown.
Growth in these two largest economies is below 2% at best. On the other
hand, the Asian economies, particularly China, though affected are better
off. Growth is forecasted to be about 8% for China and 5.8% for Africa in
2012.
Why has China been able to maintain such stellar economic performance over
the last two decades? To me, the key lies in its ability to combine the
positive elements of a state economy and a market economy. While a rigid
and centrally planned economy of the Soviet type is unsuitable for a
complex modern economy, the free-for-all market fundamentalist economy that
was touted as the end of history is discredited by the present global
economic and financial crisis.
*State and Market – Labour and Capital*
I see two mega-trends or issues for the 21st century. The first is the
relationship between the state and market and what is the right mix between
the two; the second, related to the first, is the contest between labor and
capital for the fruits of growth and its social and political consequences.
On both these issues, the experience of China’s development offers valuable
insights.
China’s spectacular economic growth took off after Deng Xiaoping introduced
market reforms. One of the most important experiments he started in the
late 1970s was the establishment of Special Economic Zones (SEZ) in the
southern coastal region of China that had a rich history of
entrepreneurship<
http://www.indepthnews.info/index.php/global-issues/1072-what-africa-can-learn-from-china#>
.
In 1992 after he made a historic visit to the southern region again, he
declared the SEZs to be a success and he pushed for expansion of market
economy to the whole country. In the same year he appointed Zhu Ronji to
head the powerful state planning committee and later also as governor of
China’s central bank. Zhu took the best of state planning and market
reforms to drive the economy forward. Fortunately, he rejected the
Washington Consensus and the shock therapy model that was foisted on
Eastern European countries after their breakaway from the USSR. He
implemented his famous 16 macro-economic policies that combined capitalist
fiscal and monetary policies with outright state planning and
administrative controls. He was not wedded to a rigid ideology. To
everyone’s surprise it worked. He brought down inflation to 1% but
maintained growth at 9% by 1998 that continued for the next two decades.
China introduced market reforms, but they did not abandon state planning
and controls. His theory can be termed as "managed marketization". He
cleaned up the banking system, reformed state owned enterprises to become
more responsive to market forces, kept a tight control over capital flows,
managed China’s foreign exchange rate, encouraged high savings rate,
provided incentives for selected foreign direct
investments<
http://www.indepthnews.info/index.php/global-issues/1072-what-africa-can-learn-from-china#>,
and drove a hard bargain for technology transfer. In short, instead of
succumbing to neo-liberal market fundamentalism, China combined elements of
state and market economy.
This is perhaps the most important lesson that China offers to countries
that are looking for alternatives to neo-liberalism.
The great financial crisis of 2007-09 called into question market
fundamentalism. The trickle-down theory of market fundamentalism has not
worked. While it has generated growth, some of which are financially
fictitious and unsustainable, it exacerbated inequality, unemployment and
poverty. However, rather than taking corner solutions of either market
fundamentalism or total state control, we should engage in theory and in
practice to find the right mix between the two, realizing that there is NO
SINGLE MODEL for all societies. There is a role for both market and state
forces; and they should be harnessed and regulated to achieve sustainable
development from an ecological, social and economic viewpoint.
This is not to suggest that China’s growth is without problems. There are
three pillars to development – growth, distribution and sustainability.
China combining state and market forces has produced super-charged growth
over the last two decades. But she has not adequately addressed the issues
of distribution and sustainability. This is best captured by Premier Wen
Jiabao's remarks after the National People Congress in March 15, 2007. He
said that although China has experienced steady and fast growth, she cannot
remain complacent. He continued that China's growth is "unsteady,
unbalanced, uncoordinated and unsustainable". How China will address the
last two pillars is crucial not only for China but for the rest of the
world.
In the recently concluded Rio Plus 20 summit in Brazil, all countries
agreed to intensify the implementation of sustainable development, which
incorporates the three dimensions of economic growth; social development,
social inclusion and social equity; and environmental protection. All three
have to be integrated in an appropriate model of development in the future.
Of course each country and each region is free to choose how to do this.
But both China and Africa have to reconsider their development strategy to
take social distribution of benefits, and environmental sustainability into
account, when planning economic growth.
*Lessons for Africa*
Next, I will sketch briefly the areas that China can cooperate with and
assist in Africa’s development.
Over the past two decades, China's economic relation with Africa has grown
significantly in terms of trade, investments, and official aid. However,
most of these have been concentrated in the extractive industry and the
provision of infrastructure related to this sector. There have undoubtedly
been gains for African countries from this expansion of export earnings due
to increased commodity demand and prices. The assistance provided by China
for infrastructure development has also been favourably commented upon.
However, while the resource rich African countries have benefitted from the
commodity boom generated by China, there have also been concerns raised
that in many countries there has not been enough diversification of the
economies beyond commodities, especially into manufacturing, for example by
value addition through more processing of the commodities and manufactures
based on the commodities. Also, there have been concerns about the
environmental and distributional consequences of the extractive sector. It
would be useful for African countries to examine more deeply these issues
of economic diversification, and social and environmental issues, so that
sustainable and equitable benefits can be derived from future commodity
production.
Going forward, more emphasis should be placed on developing the
manufacturing capabilities of the African countries be it the forward and
backward linkages of extractive industries, agriculture, manufacturing for
exports, as well as small scale manufacturing industry. Some Chinese firms
have set up export manufacturing platforms in the textile and apparel
industry in East Africa to take advantage of trade preferential status
given by the U.S. and EU countries to Africa.
Another area that China can assist is to assist African countries to build
up their capacity in the pharmaceutical drug industry. Africa like other
developing regions urgently require access to affordable medicines, not
only for HIV-AIDS and malaria, but also for a wide range of diseases and
this need will increase in the future. China has increasingly efficient
drug companies that have the potential to develop and produce more
medicines in the future.
It would be useful to consider setting up joint ventures between Chinese
and African companies. This is especially because African countries that
are LDCs enjoy exemption from implementing the TRIPS agreement with respect
to patents in medicines until 2016, and this exemption may also be extended
after 2016. Through such joint ventures, African companies may seek to gain
technology transfer from Chinese companies, while the joint venture
companies may enjoy exemption from patents, thus facilitating their ability
to produce generic medicines and to export them to other African countries.
Special Economic Zones have been a major catalyst for growth in China. In
2009, China announced the setting up of 7 Special Economic Zones in several
African countries. This is an important experiment to build manufacturing
capability, but whether this success can be replicated in Africa depends of
the presence of enabling local conditions such as good infrastructure and
institutional governance.
China has introduced bilateral local currency swaps with important trading
partners in Asia and Latin America recently. The same could be done with
African countries to generate greater trading and investment opportunities.
Finally the present global financial and economic crisis gives China an
opportunity to consolidate its relationship with Africa. It is clear that
there is no political will at the international level to institute any
meaningful changes to the international financial architecture.
Hence, the next best solution is to look for regional support and
solutions. The alternative of promoting regional cooperation and groupings
and a multi-polar world instead of nationalism or a single super power
world should be further developed. Asia is in the process of doing it.
Likewise Africa and Latin America are doing it. Continued assistance by
China to Africa will serve China's long-term strategic and political
interests.
*This Viewpoint is based on a talk by Dr. Lim Mah-Hui on behalf of the South
Centre <
http://www.southcentre.org/> at a Seminar on Trade and Export
Development in Africa, in Beijing on July 13, 2012. The seminar was held in
conjunction with the 19th General Meeting of Shareholders of African
Export-Import Bank. It is being republished by arrangement with the South
Centre. [IDN-InDepthNews – July 31, 2012]
2012 IDN-InDepthNews | Analysis That
Matters<
http://www.indepthnews.info/index.php/>
Picture: African Students at Huazhong Agricultural University, Wuhan |
Credit: Wikimedia Commons
Received on Fri Aug 31 2012 - 21:58:09 EDT
