China Should Invest In African Factories -Consultant

LONDON -(Dow Jones)- China should invest in African factories, not just in resources, if it wants to improve its image there, a renowned consultant on Sino-African trade said in an interview.

Within a few years, China has become the continent's third largest trading partner as it seeks to tap Africa's oil and minerals to satiate its economic boom.

Trade between China and Africa reached a record $106.8 billion in 2008, up 45.1% from a year earlier.

But the Asian powerhouse has come under criticism for not creating much needed employment along with its investment.

In a telephone interview, independent consultant Andrew Leung said: "China needs to invest not just in raw materials, to improve its image it needs to build a manufacturing capability" on the continent.

China has become known for its mass manufacturing of cheap consumer goods.

But except for low end production like T-shirts, China won't face competition from any manufacturing capability it builds in Africa, he said.

The Asian nation "is now getting more expensive with production moving to the inner provinces. It is upgrading its technology" and moving to the high-end of industrial manufacturing, Leung said.

The consultant said that, on the other hand," African countries are starting to create special economic zones," which will improve the rationale to invest there.

"The first step will be textile, which depend on low skills and local crops," he said.

Leung said delocalization of Chinese textile production has already started because of China fears of Western protectionism.

The Asian nation faces trade disputes with the E.U. and the U.S. as their economies are still strained by the financial crisis.

-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@ dowjones.co