Recast: Xinhua Insight: Chinese industrial power fuels Africa's growth

The firm behind China's Three Gorges Dam has set its sights on sub-Saharan Africa.

When the China Gezhouba Group Corp. (CGGC) launched the massive hydro project on the Yangtze River in early 1990s, Chinese industrial firms were booming and the country was experiencing double-digit growth.

Today, Chinese companies like CGGC are downshifting following a domestic glut and turning their attention overseas, especially to underdeveloped regions in Africa.

The CGGC bought a 155-million-dollar heavy fuel oil power plant in Liberia in 2014 and is considering cement industry joint ventures in Nigeria and Angola to meet local infrastructure needs.

Another Chinese construction giant, the China Railway Construction Corp. Ltd. (CRCC), has railway projects in Ethiopia and Kenya. It is also discussing building affordable housing and power plants in other African countries including Zimbabwe, Cameroon and Mali.

These projects are in line with national support for a drive the government terms "industrial production capacity cooperation." This cooperation is expected to be high on the agenda for the Forum on China-Africa Cooperation Summit due to be held in South Africa from Dec. 4-5.

Industrial production capacity cooperation refers to moving production lines and setting up factories overseas, building infrastructure and investing in industrial projects with local partners, and employing local people.

Africa is a natural partner for cooperation, Chinese and African economists and officials say.

China is Africa's largest trading partner. Africa's economy expanded by more than 5 percent annually over the past decade, but most of the continent lags behind in industrial production and infrastructure. China's extra industrial capacity, with its low costs and high quality, can fill the gap.

There are more than 3,000 Chinese businesses operating in Africa now in sectors including finance, telecommunications, energy, manufacturing and agriculture. Chinese companies have created more than 100,000 jobs on the continent.

Compared with developed economies such as the United States, Japan and Europe, China brings to Africa not the most advanced or expensive products and technology, but offers advantages in cost and utility, said Zhang Yansheng, an economist with China's National Development and Research Commission.

"China and Africa are the most suitable partners in economic cooperation," he said, noting that Africa has strong demand for Chinese industrial products and technology, which are more affordable and practical than many Western counterparts.

For example, Zhang said, a three-dollar pen produced by European or American companies may be fancier and of higher quality, but a pen from Chinese factories may cost only 80 cents and its quality is good enough for daily use.

Most African nations are developing countries and are in the early stage of industrialization. China is comparatively advanced in industrial developments and has technology and funds. The timing is right for the two sides to cooperate, Yang Fuchang, a former deputy foreign minister, said at a forum in November.

There are a lot of business opportunities for China-Africa cooperation in transportation, power, water supply and health care, Zhang Jun, a CGGC official in charge of Sub-Saharan Africa operations, told Xinhua.

Chinese producers of cement and plate glass, which are facing severe oversupply in China, are doing very well in Africa, he said.

Some high-profile Sino-African projects include the Tanzania-Zambia railway, the African Union Conference Center, and a new standard gauge railway in Kenya.

Major Chinese telecommunication players, including Huawei and ZTE, have helped reduce the cost of telecommunications across Africa, while the China Export-Import Bank has been active in providing soft loans for railways and road networks.

Investing in Africa can help China digest an industrial oversupply that has dragged down its growth, while fueling development and improving life for Africans, Zhang from the CGGC said.

China-Africa cooperation has contributed more than 20 percent of Africa's growth, according to a report of the International Monetary Fund.

Inadequate infrastructure has restricted Africa's sustainable development, and the continent is open to Chinese investors, Victor Sikonina, head of the African Diplomatic Corps and Madagascar's ambassador to China, said in Beijing last month.

China's investment in Africa exceeded 30 billion U.S. dollars as of the end of 2014, an increase of 60 times over the amount in 2000. The country has pledged to bring that figure up to some 100 billion U.S. dollars by 2020.

As China's economy enters a "new normal" of slower growth and industrial upgrades, its labor-intensive industries should be transferred overseas, preferably to Africa, where labor costs are much lower, according to Justin Yifu Lin, professor at the National School of Development of Peking University and former World Bank chief economist.

If successful, that transfer could help Africa sustain high growth for 10 to 20 years, Lin said in a forum earlier this year.

Business aside, a significant factor behind the rise of China-Africa industrial cooperation is that China doesn't attach political strings to investment, observers said.

China and its African friends have agreed on cooperation and non-interference in a country's affairs, said Peter Kagwanja, CEO of the Africa Policy Institute, a Nairobi-based Pan-African think-tank.

China's peaceful development model has struck a chord in parts of Africa that have struggled to shake off Western imperialism, Kagwanja said in a commentary published earlier this year.

Unlike the West, China has a culture of sharing and seeking mutual benefits, and it has avoided invasion and imperialism, said Zhang from the NDRC.

"As long as African people need it, Chinese companies will invest in Africa, even if they can't make much money there," he told Xinhua.

Chinese firms are also working to localize their operations in Africa, training local management staff and employing more locals, said Li Shubin, a manager in charge of overseas projects at a company under the CRCC.

"Western accusations against China about 'exploiting' or 'colonizing' Africa do not fit the facts," Li said.

China has written off billions of dollars of debt owed by African countries so far. It has also rolled out about 900 assistance programs covering agriculture, health, education and other fields and offered training to more than 30,000 local people since 2012. Endi