Local employment especially crucial in African countries, expert says

Besides the cheap consumer goods, roads and bridges it has taken to foreign nations, China should focus on creating jobs in regions such as Africa where they are needed, a former government official suggests.

Wei Jianguo, former vice-minister of commerce and secretary-general of the China Center for International Economic Exchanges, a top-level think-tank, is urging the authorities to standardize localization efforts by Chinese companies investing abroad, so they recruit more local employees as the world's second-largest economy accelerates the pace of its overseas expansion.

While China's outbound direct investment, or ODI, has increased rapidly in the past five years, since the start of the global financial crisis in 2008, complaints that China is taking advantage of resources in Africa have also been widely circulated.

"Chinese companies have made big contributions to local communities when they expand abroad, such as building roads and schools, but that's not enough yet," says Wei in an interview.

"As far as I know, more than one-third of Chinese companies are still indifferent to the issue of local jobs, although many have local employees, which account for more than half of the total.

"Chinese companies should, from now on, give priority to creating more local jobs and strive to be responsible corporations in foreign communities," he added. "Otherwise, their overseas businesses will neither prosper nor last for long."

The Ministry of Commerce says China's ODI in the non-financial sector last year rose 28.6 percent from a year earlier to $77.22 billion, which made the country the third-largest investor globally, after the United States and Japan.

In the first half of the year, China's non-financial ODI rose 29 percent year-on-year to $45.6 billion. Gao Hucheng, minister of commerce, said in a group interview that such growth momentum would be sustained in the second half.

While expanding its global presence, China has helped build a lot of infrastructure projects and has provided significant foreign aid to many foreign countries, but "more and more foreign countries and officials are increasingly pushing for more local job opportunities, requiring Chinese companies to address this specific issue", says Wei, who is also a guest economist at China Daily.

He specifically cites Africa. "Many leaders from Africa blame Chinese companies for ignoring what they desire most: local jobs. And they strongly expect Chinese companies to recruit more local people in Africa when they expand in whatever way, including setting up plants, working on infrastructure projects and bidding for more engineering contracts."

Last year, South African President Jacob Zuma bluntly warned that an unbalanced pattern of foreign trade between China and Africa was unsustainable.

Wei suggests that Chinese companies increase their investment to provide local employees more training programs tailored for their specific jobs when they expand abroad.

He urges Chinese authorities to issue "detailed and clear rules" to guide domestic companies expanding abroad, so that they recruit a certain proportion of local employees.

Companies involved in natural resources and infrastructure projects should expand the proportion of local employees, he says.

"Chinese companies that strictly implement the rules would be highly recommended for projects abroad. But those failing to meet the requirements should be either punished or banned from further expanding abroad."

In the past few years, an increasing number of Chinese companies have become more aware of localization processes and of creating more local jobs.

A report issued last year by several ministries, including the Ministry of Commerce, says that in 2011, Chinese companies with overseas operations paid local taxes of more than $22 billion and created jobs for as many as 1.22 million people, including 888,000 local jobs.

"There are good examples already, but we need more," Wei says.

In Africa, China's leading telecommunications firms Huawei Technologies Co Ltd and ZTE Corp combined employ more than 37,000 local employees at different levels, including management positions.

But the process also involves companies without a global reputation.

The Shandong-based StarTimes, a private company that focuses on foreign broadcasting projects employs 3,000 local people in 13 African countries, although it only entered Africa three years ago.

"Localization and recruiting as many local employees as possible are becoming increasingly important as China enhances its global presence. Local workers are much cheaper, and above all, those efforts will help China to win more recognition and get more deals worldwide," says Zha Changmiao, deputy director-general of the enterprise culture department of China Communications Construction Co Ltd.

The company has projects valued at $20 billion under construction in more than 30 African countries, including roads, ports, bridges, railways, airports and housing. It has 50,000 local employees in Africa.

The continent is becoming a hotspot for Chinese investors, and the country has greatly boosted its presence in Africa since the beginning of the new century.

China overtook the US as Africa's largest trading partner in 2009, a report by the US Government Accountability Office showed. And according to Chinese data, Sino-African trade has already hit $200 billion, from less than $1 billion in 1992.

"But while China's economic relations and trade with foreign countries improve, Chinese companies still have room for improvement when it comes to addressing the local communities' concerns and creating more jobs abroad," Wei says.

A recent report by the United Nations Economic Commission for Africa highlighted the risk that the continent's relationship with China could hamper its efforts to industrialize.

Meanwhile, China has been granting loans to Africa. The China Import-Export Bank is the continent's largest creditor, and this year China pledged additional loans worth $20 billion over the next three years.

During a six-day visit to Africa in March, President Xi Jinping stressed the need for partnerships by saying that "the development of China will be an unprecedented opportunity for Africa, and Africa's development will be the same for my country".

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