Bingu goes China to save Malawi economy

Malawi President Bingu wa Mutharika is piling pressure on China to save the country’s economy teetering on the brink of collapse after traditional donors rebuffed his zero budget financial plan, a report by African Development Bank (AfDB) has said.

But analysts say opening up to China, especially in the private sector, can strangle indigenous business ventures as most Chinese investors are eyeing traditional small scale trade in rural Malawi.

The report, issued in August, puts Chinas loans and grants to Malawi at US$270 million(about K45 billion) and a significant private sector investment that has dwarfed donations Malawi gets, often with conditions, from usual donors.

Look East: Malawi's Mutharika and Chinese President Hu Jintao

Britain, Malawi’s long standing financier has led the economic assault on its former colony citing poor human rights and mediocre economic management, forcing Mutharika regime to seek refuge from Beijing.

“Chinese investments are highly visible. The impression is that China is the leading partner. The number of migrants from China adds to this impression,” reads the report in part, adding that, ventures in several construction projects in has created many jobs and helped the country develop its infrastructure.

AFDB says the presence of Chinese and Indian investments in Malawi provides lower prices of goods as compared to those products from traditional partners.

“Their goods potentially increase consumer and total surplus due to the fact that for the same amount of money, Malawians can access more and a broader variety of goods and services,” observes the report.

Democratic Progressive Party (DPP) heavy weights have also intensified ties with Beijing cajoling the communist power house to release more funds ahead of the 2014 general election polls.

“China is currently seen as a global economic muscle following the deep economic recession that has hit Europe and America and I see no problem why Malawi should not seek financial help from the East, “said an official from Reserve Bank of Malawi.

He said even Europe was also wooing China for bailouts funds for the Euro zone currently in financial meltdown.

“Loans and grants from China have no dubious conditions like those from other donors so I can understand the political will behind the move,” he said.

Mutharika has instructed Reserve Bank of Malawi (RBM) to lend government some cash, in the face of budgetary constraints by issuing unprecedented volume of Treasury bills on the market which increased by K1.2 billion in August to hit K20 billion from July.

Malawi and China formally established diplomatic relations in 2007 after Mutharika dumped the country historical ally Taiwan on understanding that Chinese ventures would concentrate in cities but recent reports indicate that some greedy Chinese have invaded rural areas pushing out locals out of business.

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