Chinese manufacturing units shifting to Africa must be prepared for opportunities and challenges

The audience of 2,000 in Addis Ababa broke into loud applause when Chinese Premier Li Keqiang announced that China would prioritize Africa as the transfer destination for its labor-intensive industries.

Li gave his speech on China-Africa relations on May 5 during his visit to Africa, which ends on May 11.

The 30-minute presentation in the Mandela Hall of the headquarters of the African Union in the Ethiopian capital sent a clear message to the world that the relationship between China and Africa would be "upgraded".

Based on the spirit of equality and sincerity, which has made the relationship more like a brotherhood than one between teacher and student, China's strategic partnership with African countries would be upgraded, Li said, by improving collaboration in six sectors: industry, finance, poverty eradication, environment and ecology protection, people-to-people exchanges, and regional peace and security.

On his visit to Africa last year, President Xi Jiping outlined a framework for China's policy toward Africa. On his trip, Li has revealed a concrete and detailed policy to enrich the partnership.

The six sectors reflect topics of concern related to Africa's development raised by Africans themselves. Industrialization has been a key issue for the AU and most African countries for years, while peace and security are widely regarded as keys to stability and development.

However, Li said these issues were important to China as well, and there could be a strategic match between the two sides.

China is reforming its economic structure and has an urgent need to transfer a significant chunk of its manufacturing sector overseas due to increasing labor costs at home. Its overseas expansion needs a multifaceted financial framework and Africa seems to be a good place to consolidate its financial strength.

China's understanding of Africa also needs to be improved by more frequent communication at a more grassroots level, given that economic and trade ties are becoming closer but mutual knowledge is lagging behind.

As well, playing a role in Africa's poverty eradication, environmental protection and regional security would help China's efforts to image as a responsible rising power. Such a role would also allow China to reveal its evolving foreign policy on some international issues that it once largely ignored.

The commitment to collaborate with Africa on environmental and ecological projects is a positive response to increasing demands for China's participation in global efforts to combat poaching and protect the environment, efforts which accord with China's own future sustainable development.

Of these issues, industrialization in Africa and industry transfer from China attracted the most attention amid a faltering global economic situation. Upgrading industries is crucial to maintaining growth and development in China and Africa.

Li said China will move its factories and plants to Africa to improve the continent's manufacturing and light industry sectors.

Building plants that are closer to raw materials and markets is an obvious choice and many businesses that have done so in recent years have been successful. But this doesn't guarantee that any industry or plant can survive and thrive in Africa.

Investors should not come to Africa solely because of pressures back home. Such a shift of investment should not be done in a panic or without due preparation. It should be based on a localized, long-term strategy suited to particular African markets.

Moving plants and factories is costly, and this should force companies to focus on the quality of their products and the consistency of their management. Otherwise, market forces could wipe them out. Li has made this point whenever he has spoken with the leaders of Chinese companies during his visit.

Localization is not a novel notion to Chinese companies operating in Africa. However, they have not always achieved it because some did not know how to go about it.

Chinese companies need to understand that capacity building, quality control and compliance with local laws are key to becoming localized. Africa, as a place for Chinese investors, must be demystified and decentralized.

When leaders draw up a clear blueprint for development, entrepreneurs can spot opportunities. But for many Chinese entrepreneurs they must be carefully examined, otherwise they will fail in Africa.

The author is China Daily's correspondent based in Nairobi. Contact the writer at lilianxing@chinadaily.com.cn