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Problem, what problem?

by Mohamed Gueye
Economists in rich nations argue that China’s exchange-rate policy is protectionist. Indeed, Beijing has tied the yuan/renmimbi to the ­­US dollar. As the USA has been hit particularly hard by the global financial crisis and the dollar’s exchange rate is relatively low, the prices of manufactured goods from the People’s Republic are relatively low too. The US government has been pressing Beijing to change its stance, which would give US-based companies more breathing space. Exporters of manufactured goods from other emerging markets in Asia are also complaining about unfair competition from China. From an African perspective, however, things look different. [ By Mohamed Gueye ]

Viewed from West Africa, the yuan’s exchange rate is not a tragedy. To the contrary, many policy makers consider the low exchange rate of China’s currency ­beneficial, because it means that goods imports from China are cheap.

African countries mostly export raw materials. Trade in these goods is dollar-denominated, and a weak dollar means that the export revenues of African countries are worth less. For African eco­nomies, therefore, the real problem is the dollar. This is particularly true of those countries that have tied their currencies to the euro, which has lately been comparatively strong. The CFA franc, for instance, is appreciating along with the euro. The export of manufactured goods from the countries in West and Central Africa that use this currency might therefore become prohibitively expensive – if there were any noteworthy exports to ­begin with.

Africa hardly produces consumer goods, so trade is basically about exporting commodities and importing modern conveniences and even food. In this game, China is beating the rest of the world. Importers from the People’s Republic have been buying commodities in large quantities. The emergence of China as an import nation for raw materials has changed Africa for the better. Before, Western countries were able to import raw materials at very low prices from poorer countries at their whim.

Africans have long been accustomed to foreign forces taking interest in the riches of the continent’s soil but not in the needs of its people. Today, competition is on between China and the rest of the world. Before, Britain, France and the USA were the dominant powers. During the Cold War, the Soviet Union and the West were struggling with one another. Earlier still, colonial powers from Europe had ­divided the continent among themselves.

Most African currencies are not traded internationally, of course. Deals are almost always made in dollars and sometimes in euros, sterling or other internationally used currencies. Even when Africans cooperate with Asian partners, they never see banknotes denominated in yuan, rupees or rupias.

Commodity exports to China, however, have served Africa well. The Chinese are no more generous than others, of course, but their demand has made prices rise. But there are problems too. All too ­often, the goods China exports to Africa are of poor quality. The continent is becoming a dumping ground for China’s second-class industrial scrap that nobody else would buy. Chinese officials insist this has nothing to do with Africa but only reflects the continent’s financial capacity. If, however, the Chinese applied uniform quality standards to industrial production, they would not be selling Africans shoes that fall apart after two days of use.

Chinese business practices are another grievance in Africa. When our governments borrow money from China for the construction of an electric power plant, a road or a stadium, the loan is tied to a Chinese company getting the contract. ­Accordingly, everything the company needs is brought in from the People’s Republic. Even the workers are Chinese. There is no transfer of technology, so African firms typically cannot even take charge of maintenance.

China is not some kind of friend, but just another foreign country with eco­nomic interests in Africa. Many Africans who have been to China, for business or for studies, tell of the suspicions they encountered and how difficult it was to engage in normal relationships with local people. Apparently, racism is not well hidden in China. Then again, that is something all societies are guilty of.