Hype belies challenges ahead for China-Africa ties

By Ben Blanchard

SHARM EL-SHEIKH, Egypt (Reuters) - Relations between China and Africa may never have been better, with China offering the continent $10 billion in loans, but a host of knotty questions like a trade imbalance pose a big challenge.

Beyond the bonhomie, competition from nimble and low-cost Chinese firms, a feeling that China's capacity to give is endless and an influx of migrants to Africa from the world's most populous nation could sour the tone of ties.

At a just finished summit in the Egyptian resort of Sharm el-Sheikh, Chinese Premier Wen Jiabao promised Africa $10 billion in concessional loans over the next three years, and praised the long and deep friendship between China and Africa.

Yet kind words alone cannot smooth the path ahead. According to a recent white paper by the Rockefeller Foundation, only 15 of Africa's 53 countries run a trade surplus with China.

"The real challenge is that trade is lopsided and the expansion has mainly benefited a handful of states, mostly the resource-rich ones, and the challenge now is to spread it a bit further," said Adrian Davis, the China head of Britain's Department for International Development.

Egyptian Investment Minister Mahmoud Mohieldin said he was concerned about the trade imbalance with China, adding that Egypt imports from China 11 times the amount it exports.

"We need to deal with this particular issue," he told Reuters on the sidelines of the summit.

"We need to encourage more investments from the Chinese side and more cooperation in the investment front... The second way to deal with the issue of the trade imbalance is to encourage more of the trade in services," he added.