Dangerous Business, Part 2

Yesterday, Businessweek published an article called "Why Taming the China Dragon Is Tricky." "China's $2.6 trillion economy, which blew away market expectations and clocked 11.1% growth in the first quarter, is rushing along like some blisteringly fast, runaway maglev train," writes Brian Bremner.

The world has never seen such a sudden and sustained rise of an economy that was so desperately poor just three decades ago. China has averaged 9.6% growth rates for 30 years and is now the fourth-biggest economy in the worldÑand likely will overtake Germany as No. 3 in the next year or so. It's the third-biggest trading nation: Two-way trade between China and the rest of the world hit $1.76 trillion last year.

And article in Asia Times today reads:

It is now setting the tempo for the global economic orchestra. The transformation is still in the early stages. China will soon move into higher-value-added sectors, such as automobiles, aerospace and pharmaceuticals. A larger swatch of the population has to be incorporated into the new economy. That means that sunny skies lie ahead for most emerging-market countries as they help feed the ravenous needs of the new rising superpower.

This hype might sound familiar. However, the investment that China is taking in other countries is new. Is it possible that instead of outsourcing to China, China's about to outsource to you? Perhaps she already is.

China's relationship with Africa may be helping several countries run up substantial debt burdens, Business Day South Africa reported today. The Chinese Exim Bank, the export credit agency, has, according to media reports, agreed to finance a dam and hydroelectric plant in Mozambique and a credit line in Angola. The interest in oil rights is surely one of the motivating factors (see yesterday's blog). President Kibaki of Kenya and Mr. Jia Quinglin, chairman of the National Committee of the Chinese People's Political Consultative Conference, signed an economic agreement that would allow china to pay 2.1 billion shillings, or almost $31 million, to build a road. Of course, this is not to mention China's investment in Sudan, which exports around 60% of its oil to China and whose conflicted Darfur region continues to struggle with a deadly civil war.

"Our goal is to help Africa develop processing and manufacturing industries to create more jobs and revenues, thus facilitating local economic and social development and improving people's life," Jia told more than 400 officials and entrepreneurs attending the opening ceremony of the China-Kenya Economic and Commercial Cooperation Forum.

Such investment will help Africa if it earns a good return. But it was failed export credit borrowing that made up much of the crushing weight of African debt written off over the past decade by rich countries in what some call a debt-relief scheme.

Sources: Kenyan Broadcasting Corporation, Asia Times, Xinhua Online, BusinessWeek, Business Day,