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POLICY BRIEFING
Research and analysis from the
Institute of Development Studies ISSUE 07
POLICY RESPONSES TO THE
GLOBAL FINANCIAL CRISIS
MARCH 2009
IDS IN FOCUS POLICY BRIEFING 7.6 CHINA AND THE GLOBAL FINANCIAL CRISIS: IMPLICATIONS FOR LOW-INCOME COUNTRIES MARCH 2009 www.ids.ac.uk
China and the Global Financial Crisis
’’
Private sector investment in Africa is driven primarily We conclude with two key messages: Credits
by competition between firms in China’s domestic This In Focus Policy
market. Increased competition during a downturn 1. A multi-faceted response to Chinese state and
Briefing was written
may accelerate investment in Africa. Furthermore, private activities is required
by Sarah Cook and
Chinese companies exporting to Europe and Low-income countries are dealing with both Chinese Jing Gu from the
America have to adjust to falling demand by seeking state and private sectors. Private entrepreneurs are Globalisation Team at
new markets: already Africa has been called the transferring part of their value chain to Africa, IDS. The series editor
‘best refuge for sunstroke prevention from the providing Africa with an opportunity to push up the is Clare Gorman.
financial crisis’ by the Chinese media. In a new trend, value chain. These developments require a multi- For other briefs on
entrepreneurs also state their intention to move faceted African response involving government, the the crisis see:
private sector, unions and NGOs. www.ids.ac.uk/go/
from low towards middle-to-high value-added
infocus7
products that they believe have a sustainable 2. The development community needs to understand
demand in African and other markets. This In Focus Policy
and work with China
Briefing series has
Aid flows to Africa will remain stable or may even The development community should take this been funded by the
increase. China has reiterated commitments made opportunity to understand China’s strategic interests UK Department
at the Forum on China-Africa Cooperation and motivations to enhance collaboration in the for International
(FOCAC). During his recent visit to Africa, President pursuit of renewed but sustainable growth, poverty Development (DFID).
Hu Jintao announced increased assistance and a reduction and achievement of the Millennium This briefing does not
reduction or cancellation of debts. Furthermore, Development Goals. The transnational dimensions necessarily reflect the
Chinese aid is provided on a multi-annual line of of the financial crisis require a multilateral response. position of DFID.
credit of at least three years. While aid has increased The development community should develop a Readers are encouraged
significantly and may be important to some African common framework for a ‘global development to quote and reproduce
countries, it remains small as a share of China’s GDP. partnership’, creating a network for bi-, tri- material from issues
It is valued for associated political relationships and and multi-lateral dialogue and cooperation at of In Focus Policy
economic opportunities. China is therefore likely to various levels. Briefing in their own
take this chance to increase its influence in the publications. In return,
region and secure its long-term interests. Further reading IDS requests due
acknowledgement
Chin, G. T. and B. M. Frolic (2007) Emerging Donors and a copy of the
Key messages in International Development Assistance: The China publication.
Ultimately, how African countries fare will be
Case, Canada: IDRC © Institute of Development
determined more by relations with their main Studies, 2009,
trading partners – the US and Europe. While Cook, S. (2009) ‘The Financial Crisis and China: What ISSN 1479-974X
benefiting from their relationship with China, most are the Implications for Low-Income Countries?’
countries remain more dependent on other sources Background paper for DFID, Brighton: IDS
of income, including remittance flows, tourism and Guangdong Daily (2008) ‘Guangdong Businessman
OECD development assistance. However, during the Looking to Africa as Ideal Refuge from the Financial
downturn, China’s continued trade, investment and Crisis’, http://news.dayoo.com/gov/62076/63121/2
aid, may act as a buffer for some economies. 00812/06/63121_4792408.htm (accessed 06/12/08)
George, M. (2009) China-Africa Trade Paper.
If China can steer its own economy through crisis, it
Background paper for DFID, Beijing: DFID
may become a development partner of choice with
increasing ‘soft power’ influence in the developing Gu, J. (2009, forthcoming) China’s Private Investment
world. It may appear as a steadying factor in trade in Africa and the Implications for African Development.
and investment compared to the West. IDS Working Paper, Brighton: IDS
IDS IN FOCUS POLICY BRIEFING 7.6 CHINA AND THE GLOBAL FINANCIAL CRISIS: IMPLICATIONS FOR LOW-INCOME COUNTRIES MARCH 2009 www.ids.ac.uk