Disillusioned Zimbabweans are facing a new wave of price increases that will put the most basic of food essentials even further out of reach.

On the streets of Harare, a loaf of bread now costs the equivalent of what a dozen new cars would have cost a decade ago, when factoring current consumer price indicators and inflation figures.

With public wages largely remaining unchanged, up to 3 million Zimbabweans have been forced to take up menial jobs in neighboring South Africa in recent years to support their families back home.

New figures, released by independent economists in the country earlier last week, show that annual inflation has reached 9 million percent.

With the worthless Zimbabwean dollar trading at more than 1 billion to 1 U.S. dollar, the country's central bank announced the introduction of a 1 billion Zimbabwean dollar banknote.

With a sinking economy and hyperinflation that has produced millionaires and billionaires who struggle to feed their families and who have to rely on remittances from South Africa for survival, questions are surfacing as to how President Robert Mugabe has managed to avert a complete state collapse thus far.

Some answers could be found in the much publicized and often controversial Zimbabwean-China relations.

By many accounts, China has become one of Zimbabwe's most important foreign investors, following the exodus of Western multinationals in the mid-1990s, due to the worsening political and security situation in the country after the seizure of white-owned farms.

Last month, Nansheng Yuan, Chinese ambassador to Zimbabwe, announced that a Chinese company was seriously exploring the possibility of investing 500 million U.S. dollars in electricity generation in Zimbabwe.

This comes on the heels of discussions between the two states on expanding bilateral trade and investments.

Over the past two years, China has thrown Zimbabwe's disintegrating economy a lifeline with energy and mining deals, reportedly worth more than $1.6 billion.

It was reported that these deals gave China access to Zimbabwe's precious mineral resources, including the world's second largest deposits of platinum, as well as gold, chrome, coal, nickel and diamonds.

These major investment projects included the construction of three coal-fired power stations to assist the state power company, which was cutting customers' electricity for seven hours a day.

It also included a deal with the China Machine-Building International Corporation to mine coal and build thermal-powered generators in Zimbabwe, aimed at reducing the country's electricity shortage.

Indeed, Beijing's economic support for Harare remains strong and, through its efforts, Beijing has secured the contracts to develop Zimbabwe's agricultural, mineral and hydro-electric resources.

Tobacco counts amongst Zimbabwe's top exports and China is Zimbabwe's largest importer. China has made large investments in the country's tobacco production and processing industry. China also injected a capital injection of more than $200 million into Zimbabwe's farming, manufacturing and mining sectors.

China supplies Zimbabwe with expertise, technical assistance and agricultural equipment, including tractors and agro-processing. Chinese investors also helped Zimbabwe process tobacco into cigarettes and export it as a finished value-added product.

Chinese investors and a local company also undertook a joint venture in the form of a large cement factory in Gweru, in order to meet the national demand for cement.

It seems likely that Harare will become increasingly reliant on Beijing for economic support, as Zimbabwe's economic and political situation continues to deteriorate.

Western analysts and Zimbabwean critics contend that Beijing will continue to support Harare unconditionally, while piling up various claims on Zimbabwe's natural resources and other commodities.

With a lack of direct competition by Western firms in the local market, Zimbabwe will remain one of China's most important resource bases, as long as the incumbent government remains in place.

However, the current fragile state of the country is putting Beijing in an increasingly vulnerable situation, as Western condemnation of China's long-standing ties with the autocratic regime of President Mugabe is becoming increasingly more vocal.

China's continued involvement in Zimbabwe, and in agricultural and mining sectors in particular, furthermore carries significant sovereign risk and Beijing is gambling that it will be able to manage relations, so as to guarantee its claims in what would almost certainly continue to be a chaotic transition period.

The Zimbabwe socio-economic profile has undergone a seismic change. The growing importance of China in the country's economy is evidenced by economic assistance and foreign investment deals in the extractive sector, in state-owned enterprises and in the agricultural sector.

The key to this is China's willingness to use barter trade to secure investment deals, and it appears as though China's motives are actually economic - namely to satisfy its growing economic needs.

A constructive engagement with China will have to be put in place, focusing on improving transparency in contracts, investment deals and loan agreements.

This will be particularly critical in any post-Mugabe economic reconstruction period, if ordinary Zimbabweans were to reap the full benefits of increased Chinese investments, instead of only a handful of the political elite in Harare.

Also appeared in The Japan Times

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