Financing the Frontiers

The recent news that China has become the second biggest economy by GDP may be unsurprising, but to dismiss this jump as nothing more than a nominal milestone would be remiss. Whilst changes to GDP league tables may have little or no impact on China's foreign policy towards the West, its growing economic clout will likely lead to increased efforts to court emerging economies.

China's investment in Africa is growing at an unprecedented rate (at present there are an estimated 800 Chinese companies working in at least 12 African nations) and criticisms around China's approach abound. China is widely accused of giving with one hand and taking with the other; building stadia, mines, roads and refineries and in return bleeding the continent dry of its natural resources. To dismiss China's intentions as little more than a grab for Africa's mineral wealth however, overlooks the complexity of the relationship and more importantly underestimates the contribution China makes to shaping young nations.

The World Bank and the IMF may offer financing but China also provides labourers to do the work. True China has a nasty habit of awarding contracts for infrastructure projects to Chinese firms (all four new world cup stadia were built by Chinese companies) who ship in Chinese workforces wholesale, but this is no different from the way American and British companies operated in the past. Furthermore, many of the projects China funds run at a loss, effectively making such initiatives a form of aid.

Critically, China provides insight into building new states that the West simply cannot. To many frontier market economies China represents an ally and guide that can help them mature through their industrial age, providing a road map to an economic independence that has long eluded them.

NS