China in Africa

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China has come under a lot of adverse press during the last year or two over its investments in mining resources around the world, particularly in Africa. The suggestion is that China is trying to corner the world market on raw materials, depriving the rest of the world from access. What is the reality, and are these accusations justified?

It is not widely commented on, but those paragons of world trade and responsibility the Japanese have been quietly investing in mining capacity for decades. Mitsui Group control over 10 iron ore mines around the world equivalent to 45.285 million tons of iron ore, accounting for 7.87 percent of the total trade volume. In addition, the Japanese steel industry is in a much better position to control the market domestically and hence have influence internationally as only six of its mills control 81% of its total iron and steel industry, whereas in China more than 40 mills account for less than 75% of production creating a much more fragmented and disorganized market. Judging by reports earlier this year, the world’s largest steel producer Arcelor Mittal is on the verge of creating its own iron ore hub in West Africa which will control most of the region’s production.

As Britain’s former Foreign Minister Jack Straw is reputed to have said, Most of what China has been doing in Africa today is what we did in Africa 150 years ago scrabbling to gain access to resources needed for domestic consumption. In the process, China is investing in railways, bridges, roads, schools and airports as part of the tradeoff for access to mineral rights. China is pouring billions into new mine developments and re-opening old mining facilities abandoned by western firms or confiscated and then under-invested by successive west African governments. Surely better that than simply buying a western mining company and diverting existing supplies to China? Rather than isolating and scare mongering, we would be better engaging the Chinese in joint ventures with western companies as has happened in Australia – but then, the Aussies always have been a clubby lot.

–Stuart Burns

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