Chinese Premier visits Africa - Expect higher commodities

June 28,2006

From June 16-21, Premier Wen Jiabao visited the heads of state of Egypt, Ghana, Republic of Congo-Brazzaville, Angola, South Africa, Tanzania and Uganda. The purpose of the visit was to prepare for the Beijing Summit of the Forum on China-Africa Cooperation to be held in the fall. More than 71 trade agreements were signed, which included China’s continued support for infrastructure construction, medical care and technical training. China will use its position on the UN Security Council to draw attention to conflicts in Africa. This trip follows President Hu Jintao’s visit in April to Saudi Arabia, Morocco, Nigeria and Kenya.

China and Africa combined contain one third of the world’s population.  The China-Africa Cooperation Forum, established in 2000, resulted in a trade volume of $40 billion, with China’s trade deficit at $2.4 billion. China has remitted 10.5 billion yuan of debt, removed tariffs for 190 commodities, and trained 10,000 Africans. China invested in over 900 infrastructure projects, including a railway from Tanzania to Zambia. It dispatched 16,000 doctors who provided medical treatment to 240 million Africans.

Here are some highlights from the trip:

• Egypt - Signed Implementation Outline on Deepening Strategic and Cooperative Relations. Celebrated 50th Anniversary of Diplomatic ties between the two nations.
• Ghana -- Continued discussions on the Bui Dam project. Chinda also constructed the road linking the capital Accra with inland Kumasi, and built the National Theater.
• Republic of Congo-Brazzavile -- Discussed further expanding trade in oil and natural resources.
• Angola -- Angola is China's second largest trading partner in Africa, and its largest supplier of oil. China will help Angola with technology training.
• South Africa -- The first China-South Africa Business Cooperation Forum was held in Cape Town. Signed 13 trade agreements in the areas of technology, health, infrastructure construction, biotech, training for 300 in the next three years, and Chinese language teaching.
• Tanzania -- Increase imports from Tanzania. In return, China will assist Tanzania in building the agricultural demo center and anti-malaria demo center and produce anti-malaria drugs.
• Uganda -- Signed a number of trade agreements in agriculture, education and health. It was the first visit of a Chinese Premier to Uganda.

What It Means:
China is continuing to strengthen trade relations with key energy and commodity producers in Africa, Central Asia and Latin America. Instead of aid, China offers acceptance of current political structures that the West denounces, and technical assistance rather than aid. By offering long-term assurances of demand for goods, these agreements also offer protection for the countries which produce the commodities. Result: higher commodity prices in the long term, especially for countries that are not China.

Action Steps:
Talk to your financial advisor about making sure you have commodities funds in your portfolio.

Source: Ministry of Foreign Affairs of the People’s Republic of China.