Speaking at the ministerial round table of the African Development Bank in Shanghai on Tuesday, Zhou Xiaochuan, governor of People's Bank of China, outlined that a shift of comparative advantages, new trends in saving and capital flow and the deepening of bilateral financial cooperation would jointly provide new momentum in strengthening Asia-Africa trade and economic cooperation.
The attendees at the round table, themed as Africa and Asia: Partners in Development, exchanged views about the roles taken up by Asia and the continent's two emerging powers, China and India, in stimulating African development.
Holding the meeting in Shanghai, said Zhou, presented a unique platform from which to scrutinize the relationship between Asia and Africa.
Asia-Africa trade and economic cooperation offered great potential for future development due to highly complementary economies, which stand as the two fastest-growing continental economies in the world. The last decade has provided continuous reminders of the mutually-beneficial advancements in the Asia-Africa partnership, and strengthening it further will help to take further strides in poverty reduction and development, Zhou emphasized.
Zhou specified that three principal new factors would be the driving force for future bilateral trade and economic cooperation.
The first factor relates to the shifting of comparative advantages. Conventional theory dictates that developing countries produce primary products due to rich natural resources and low labor costs while developed countries corner the high-end side of the market. However, these advantages are slowly shifting due to more graded labor cost and infrastructural investment variations. Increasingly, emerging Asian countries have generated capital flow with certain nations electing to invest in Africa. Although the amount involved may not be very great, the trend marks an important step as world players move to secure their own comparative advantages. New opportunities are coming to the fore as private sector investments and merger and acquisitions take on more active roles, and these opportunities must be seized to ensure the dynamic flow of Asia-Africa economic cooperation, emphasized Zhou.
Secondly, we must look at new trends of saving and capital flow where again old ways are being supplanted by new methods. Previously, habitual capital flow from developed industrial countries to developing countries through investment, loans and financial assistance. However, following the Asian Financial Crisis at the turn of the century, saving rates rocketed across Asia creating avenues for outward investment. Oil and natural gas exports have created global capital while pension reforms spreading across the world have also diversified global capital flow channels. These have enabled more Asian countries to become investors themselves through channels such as pensions and investment funds, and through these, to extend the avenues of progress for Asia and Africa's economies.
Thirdly, Zhou addressed the need for more financial cooperation between Asia and Africa to enhance cooperation. Deepening financial market reforms and ensuring better-quality services among financial institutions will enable optimum mobilization of savings as well as securing the uses of capital. Such security will be beneficial to developing countries in avoiding or at least dampening financial risks.
Zhou announced that China would boost cooperation with African nations in the following areas: financial reform, fiscal-ecological environment improvement and enhancement of macro-financial control. It would also encourage active investment in Africa from within its own business community, focusing on small, medium-sized and private enterprises to boost globalization and the shift of comparative advantages.
Meanwhile, Chinese financial institutions will actively engage in African infrastructural construction, coming as a pillar of support to help boost local development. A welcome has also been extended to African partners seeking to boost their Chinese presence, by opening liaison offices or branches while new avenues of dialogue are being sought to track and promote chances for universal financial cooperation between the two continents.
In closing, Zhou added that China would improve its partnership with African Development Bank and other sub-regional banks in diverse manners, including increasing donations to the African Development Fund, the establishment of bilateral technological cooperation fund and more efforts given over to poverty-reduction activities.
(China.org.cn by staff reporter Li Shen in Shanghai, May 16, 2007)