The United States’ arrival to the global economy during the 1900s ushered in a period of economic growth, market liberalization, and a political and economic assertiveness. Today, the United States, as the first economy has a gross domestic product (GDP) estimated at $19 to $20 trillion. America’s arrival was labeled as America’s century. During the 1970s, the Japanese economy was seen as a challenge to the United States’ economic supremacy in a number of sectors, including the automotive industry. Today, the Chinese economy, estimated at $10 to $11 trillion GDP, has replaced Japan and has relegated the latter to a third place position after the United States and China. Unlike the United States’ political and economic reach and arrival to dominance in the global order, the Chinese economic arrival has been marred by high levels of protectionism of its own internal market, support for its Chinese state-owned enterprises, and copyright violations of intellectual property rights. China’s arrival was based, initially, upon becoming the manufacturing hub of the world, with a significant trade surplus with all its trading partners, particularly the United States, the Europeans, emerging economies, and the African continent.
The population of China is four times that of the United States estimated at 1.4 billion individuals, and the Chinese economy is tech savvy with futuristic industries, such as electric cars and fast railways. China’s arrival is manifest and is built upon economic power and, today, an emerging political assertiveness. The Forum on China-Africa Cooperation (FOCAC) has completed its third summit meeting in Beijing, whereby the majority of African states were represented, including African presidents as well as top ministers and corporate players. At the conference, the Chinese President, Xi Jinping, pledged $60 billion financing for the continent of Africa.
The Chinese government will supply the majority of the funds, including $20 billion in loans, $15 billion in aid, and $15 billion in special funds. The foreign aid offer included grants, concession of loans, and interest-free loans. President Xi stated in his opening speech that China desires economic cooperation with the African continent and will help to build infrastructure connections, promote industry, trade creation, industrial-building capacity, and people-to-people exchanges. Moreover, the Chinese have pledged to increase imports from Africa; whereby, the current balance of trade represents a trade surplus for China. Collateral to the Forum, recently a meeting of African foreign affairs ministers in South Africa with China has called for closer economic cooperation and a desire to help overcome the debt trap that African economies find themselves in.
The meetings in Beijing and South Africa also emphasized the Build Road Initiative (BRI) of connectedness between China, the oil-producing states, the Europeans, and Africa. The purpose is to enhance regional connections and economic integrations for all participants. President Xi declared at the conference that he likes to make sure that the closer economic links between Africa and China are built on the notion that it is a win–win situation for China and Africa. Moreover, he emphasized that, unlike Western-style aid, China pledges no interference in the internal affairs of the African states, nor will it impose its will on these countries, and no political strings will be attached to investment and financial cooperation and linkages.
China represented itself as an emerging economy that will be sympathetic to the obstacles facing the development of the African economies and reemphasize the journey of China from, and in, its early days of independence until today to help reduce poverty and develop world-class industries. The Chinese president indicated that the Sino-African cooperation is reflective of a promising partnership; whereby, improving African infrastructure and industrialization would parallel a similar journey on which China found itself. China’s link to Africa started when the Chinese wanted to assert their sovereign independence and control over the mainland of China 69 years ago. The experiences of China in Egypt, Kenya, Ethiopia, and Nigeria are indicative of the deepening relations between China and the African continent. Africa is a continent with many developing countries, and China is the largest developing country.
China and Egypt established, during 2014, a strategic partnership and a vital bilateral, economic arrangement. The China-Egypt Suez Trade Economic Cooperation Zone is a project that would fit under the BRI initiative. Currently, Chinese firms, private and state controlled, have invested significant amounts of money, exceeding $1 billion in industrial trade projects, creating employment for the Egyptian population and a base for tax revenues for local Egyptian municipalities. These industries are beginning to be competitive by world standards.
In 2015, President Xi, at the summit in Johannesburg, spoke of further evolving and sustainable global partnerships between Africa and China. He clearly emphasized that China will help with African economic sustainable initiatives of the African Union and that of the United Nations. He also reemphasized an assured future between China and Africa.
The future of the further deepening of economic linkages and trade between China and Africa must solve, however, the debt trap that many African states find themselves in. So, the conference is being seen as “debt diplomacy” to help improve the image of China for some projects that were initiated in Africa, which are beginning to be subject to criticism by a number of African policy makers. China has lent African countries an estimated $125 million during the last decade, and a number of these loans must be converted to interest-free loans and be subject to credit forgiveness. There is a fear among leading policy makers in Africa that the continent could become a client continent to the Chinese government. The recently completed railway in Kenya has prompted accusations that these economic development projects are not living up to the expectations of the African populace and have led to high levels of corruption.
Today, China has surpassed the United States as the biggest trading partner to the African continent, and if the proposed overall framework for economic cooperation is to succeed, Chinese companies must invest significant funds in Africa within the next few years so that African industrialization will bring about growth of an African private sector that could compete and level the balance of the existing trade deficit with China. The Chinese must commit to a kick-start African manufacturing capability in order to increase African exports to China. Currently, the emphasis on exports is on resource-based commodities (oil and copper, among others), and building industrial competencies. Manufacturing capabilities in the African state should be possible given the low wages of African labor.
The pledge by the Chinese government to channel funds and loans to Africa is creating a wave of anger within China. There is significant criticism of Chinese aid to Africa by many bloggers in China. Some bloggers indicate that China is an emerging poor country, and the Chinese aid to Africa could be better spent in the country itself. This criticism is equally paralleled by some members of the Chinese silent majority. The Chinese government is beginning to spend more on scholarships for foreign students, Africans and others, than some would indicate is being spent on supporting Chinese primary and high school education. This soft power has resulted in spending over $50 million on what have been labeled as “Silk Road Scholarships.” Moreover, there is significant criticism in Africa as well. The majority of the African populace has raised concerns saying that Chinese aid has promoted corruption and has gone to the pockets of the African elites.
The economic promise of Africa is immense; however, the earlier experience of Western economic trade and investment linkages has not fully resulted in developing the needed infrastructure that is currently lacking in Africa, and that is needed to promote local business linkages and industrial infrastructure and capabilities, as well as the ability to help the promising African continent, which could achieve significant economic growth rates in GDP approaching 8% annually. Without Chinese aid, the African continent could not achieve its promise as a developing continent; however, the successful implementation of this link would allow for Africa to achieve its economic promise and potential for the African populace and the contribution of Africa as a functioning region to the global economy.
As we head toward our semester breaks, we may find ourselves in need of distraction during the long winter/summer days. The Journal of Asia-Pacific Business aims to please, so we present these four articles for your divertissement. Our first article, “Applying Psychic Distance to Services Internationalization: A Case Study of Thai Caregivers and Japanese Elderly,” by Nuttapol Assarut of Chulalongkorn Business School and Patnaree Srisuphaolarn of Thammasat Business School, both of Thailand, is an examination of cultural divergence in service expectations and performance. The second article, by Jabir Ali, Nadia Yusuf, and Tabassum Ali of Institue of Cooperative & Corporate Management, King Abdulaziz University, and Arabi-Farsi University, respectively, is “International Export Orientation and Firm’s Performance: Evidence from Enterprise Survey Data of India.” This study examines various factors’ influence on internationalization and offers suggestions for streamlining export enterprises.
Our third article, “Is the Foreign Exchange Market Efficiency-Adaptive? The Empirical Evidence from India,” is by Sashikanta Khuntia, J. K. Pattanayak, and Gourishankar S. Hiremath, all of the Indian Institute of Technology. The article’s abstract poses several questions regarding market adaptability and suggests ways to find efficiency in major currency pairs. Our final offering of the year is, “Classifying Consumer Purchasing Decision for Imported Ready-to-Eat Foods in China Using Comparative Models,” by Apichaya Lilavanichakul, Ravipim Chaveesuk, and Ajchara Kessuvan, all of Kasetsart University. It explores the different marketing factors designed to encourage Chinese consumers to buy imported ready-to-eat foods.
As always, we are grateful to our readers, submitters, and reviewers for their continued support of our humble scholarly endeavor. We wish you much success in your own academic and business pursuits in the new year.