China's investment in Africa - Supports emerging markets

June 3, 2006

A recent OECD report indicated that China invests about $1 billion per year in Africa to build the infrastructure needed to obtain commodities such as cotton and oil. China is importing 30% of the oil from Sudan and Angola, and 30% of Burkina Faso’s cotton. Overall, China’s investment in Africa has increased 300% in the past ten years. China’s investment in Sudan is helping this war-torn country reach 14% GDP growth this year.

What It Means:
China’s goal to become self sufficient in energy means it is taking the steps now through trade negotiations, partnerships and ownership of energy resources. It remains committed to its economic objective - which is to double the GDP per capita in 20 years. This type of focus on growth is a new force in emerging markets, and one that will help stabilize the volatility these markets have traditionally experienced.

Action Steps:
Experts are recommending an ideal portfolio allocation of between 10 - 30% emerging markets. Talk to your financial advisor about what percent makes sense for your portfolio, but make sure that you aren’t out completely. These funds have seen tremendous growth in the last few years, and so may suffer a temporary setback. However, they still make sense for long term growth - in other words, your retirement fund.

Source;
Voice of America, China Rapidly Expanding Links with Africa, May 24, 2006
China, Libya and Others Investing in Sudan’s Booming Economy,May 30, 2006