Africa in China's Global Strategy 9781281515025, 9781905068883

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Africa in China’s Global Strategy

Published by Adonis & Abbey Publishers Ltd P.O. Box 43418 London SE11 4XZ http://www.adonis-abbey.com Email: [email protected]

First Edition, July 2007 Copyright 2007 © Marcel Kitissou British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 9781905068548 (HB); 9781905068883(PB) The moral right of the author has been asserted All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transmitted at any time or by any means without the prior permission of the publisher

Printed and bound in Great Britain

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Africa in China’s Global Strategy

Edited by

Marcel Kitissou

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Acronyms ABM ACOTA ADS AGOA ANC APEC BCEG BMD BNC CABC CACF CDB CMEC CNOOC CNPC COMESA CPC CSR CTBT DFA DFEC DRC DWAA EAC EADB ECC EIA EIB FDI FOCAC FTA GDP GNPOC GPOI GWOT HIPC ICC

Anti-Ballistic Missile Treaty African Crisis Operations Training Assistance Approved Destination Status African Growth and Opportunity Act Africa National Congress Asia-Pacific Economic Cooperation Beijing Construction Engineering Group Ballistic Missile Defense Bi-National Commission China-Africa Business Council China-Africa Cooperation Forum China Development Bank China Machinery Equipment Export-Import Corporation China National Offshore Oil Company China National Petroleum Corporation Common Market for Eastern and Southern Africa Communist Party of China Corporate Social Responsibility Comprehensive Test ban Treaty Department of Foreign AID Department of Foreign Economic Cooperation Democratic Republic of the Congo Department of West Asia and African Affairs East African Community East African Development Bank Economic and Commercial Counselor Environmental Investigation Agency European Investment bank Foreign Direct Investment Forum on China-Africa Cooperation Free Trade Agreement Gross Domestic Product Greater Nile Petroleum Operating Company Global Peace Operations Initiative Global War on Terror Heavily Indebted Poor Countries International Criminal Court

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Acronyms

IEITI IMF M&A MC MEND MFA MOC MOFA MOFTEC MOU NGO NEPAD NNPC OECD PEPFAR PRC R&D RMB SACU SARS SASAC SCO SFA SOE TSCTI TWM UN UNCTAD US USAID WTO WWF ZIC ZCCM ZCMT

International Extractive Industries Transparency Initiative International Monetary Fund Merging and Acquisition Multinational Corporation Movement for the Emancipation of the Nigerian Delta Multi-Fiber Arrangement Ministry of Commerce Ministry of Foreign Affairs Ministry of Foreign Trade and Economic Cooperation Memorandum of Understanding Non-Governmental Organization New Partnership for Africa’s Development Nigerian National Petroleum Corporation Organization for Economic Cooperation and Development President’s Emergency Plan for AIDS Relief People’s Republic of China Research and Development Renminbi Southern African Customs Union Severe Acute Respiratory Syndrome State-owned Assets Supervision and Administration Commission Shanghai Cooperation Organization State Forest Administration State Owned Enterprise Trans-Sahel Counter-Terrorism Initiative Third World Multinational United Nations UN Conference on Trade and Development United States United States Agency for International Development World Trade Organization World Wildlife Fund Zambia Investment Center Zambia Consolidated Copper Mines Zambia-China Joint Venture Company

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Table of Contents

Editorial Note

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Introduction Marcel Kitissou ix ………………………………………………………………………………… Chapter 1 Globalization and Fragmentation: The New Era of Africa-China Cooperation Marcel Kitissou 10 ………………………………………………………………………………… Chapter 2 China’s Leap into the Heart of the Twenty First Century Michael Sachs 26 …………………………………………………………………………………. Chapter 3 Talking Points on China’s Foreign Policy Jin Yongjian 38 ………………………………………………………………………………….. Chapter 4 China’s Emerging Interests in Africa: Opportunities and Challenges for Africa and the United States Drew Thompson 45 …………………………………………………………………………………. Chapter 5 U.S. Response to China’s Rise in Africa: Policy and Policy Options Raymond W. Copson 56 ………………………………………………………………………………….. Chapter 6 All-Weather Friends in Need and In Deed: China-Africa Relations Seen from the Eyes of a Chinese Diplomat Liu Guijin 75 ………………………………………………………………………………….. Chapter 7 Chinese Investments in Africa: 87

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A Cross-cultural Management Perspective John Kuada 101 ………………………………………………………………………………….. Chapter 8 China’s Trade Safari in Africa Jean-Christophe Servant 104 ………………………………………………………………………………….. Chapter 9 Bankrolling the “Going Out” Strategy: China’s Financing of African Aid and Trade and Implications for African Debt and Development Michelle Chan-Fishel and Roxanne Lawson 108 ………………………………………………………………………………….. Chapter 10 China’s Corporate Engagement in Africa James Reilly and Wu Na 132 ………………………………………………………………………………….. Chapter 11 Growing Pains and Growing Alliances: China, Timber and Africa Tina Butler 156 …………………………………………………………………………………. Chapter 12 Chinese Drivers for African Development? The effects of Chinese Investments in Zambia Peter Kragelund 162 ………………………………………………………………………………….. Chapter 13 Models of Development: Finding Relevance for Africa in China’s Experience of Development Stephen Little 182 ………………………………………………………………………………….. About the Authors 198 ………………………………………………………………………………….. Index 204 …………………………………………………………………………………..

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Editorial Notes

African Renaissance Book Series: No.1 This is the first in a book series from African Renaissance, a multidisciplinary journal published since 2004. The journal, which is a cross between an academic periodical and any high-quality features publication, started as a bi-monthly, and became a quarterly this year (2007) after 15 consecutive issues without missing a deadline, and after launching a book series early this year. The book series augment the journal in its objectives of advancing both theoretical and empirical research, informing policies and practices and improving our understanding of the interplay of forces that shape the African condition. This volume was inspired by some of the articles on Nigeria published in the journal. I thank the contributors for re-working their original contributions to fit into the framework of this study. More contributions were solicited to fill yawning gaps (please complete in brief…) African Renaissance has emerged as one of the leading platforms for the analysis of the African condition, hopes and aspirations. The journal accepts papers that cover Africa as a whole, as well as those which focus on specific countries on the continent. For details of submission guidelines for the journal or the book series, please visit the website (www.adonis-abbey.com). Alternatively please email the journal’s editor, Dr Jideofor Adibe at: [email protected] For sales enquiries, please email: [email protected] Dr Jideofor Adibe Editor, African Renaissance

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Introduction The current process of globalization lacks leadership. The war on Iraq, the legal limbo of Guantanamo Bay and the Abu Ghraib prison scandal have weakened the moral authority of the only remaining super power, the US. As the June 2007 summit demonstrated, the G-8 lacks political will in addressing today’s challenges, including global climate change and poverty. Some of its leaders are lame-ducks: George W. Bush of the US, Vladimir Putin of Russia, and Tony Blair of the UK will be leaving office in the near future. The US’ ad-hoc approach to globalization (focusing on the global war on terrorism and lacking support for international bodies) and the European approach (with support to the UN, WTO, OECD and other international institutions) have never been harmonized, while the rise of the BRICgroup (Brazil, Russia, India and China), if not taken into account, may make the United Nations and Bretton Woods institutions dysfunctional. Meanwhile extremist religious groups in the Middle East, while able to create turbulence in the international arena, are unable to change the global balance of power. Though influential at times, they lack state instruments of power and negotiation in the international arena. In this context, China is rising as a global power, creating alliances and structures outside US’ control to serve its national interests in a globalizing world. China-Africa cooperation and the creation of the China-Africa Cooperation Forum and related structures are part of this trend. However, one may ask, are the place and role of Africa in China’s global strategy an adequate response to Africa’s own needs and interests in the short and long terms? A distinguished, interdisciplinary panel of experts tries to answer the question in this volume. Coming from different regional perspectives and professional backgrounds, they are Africans, Americans, Chinese, and Europeans with extensive experience with and in Africa and China. They are independent researchers, academics, NGO officials and diplomats. I hope the reader will find this book informative and the analyses it offers helpful for understanding the complex issue of Africa in China’s Global Strategy. Marcel Kitissou, June 13, 2007

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Chapter 1

Globalization and Fragmentation: The New Era of Africa-China Cooperation Marcel Kitissou Introduction A study of the new era of Africa-China relationships should be placed within the current trend of globalization. It should also involve multiple levels of analysis: local impact (both in China and Africa), regional politics and global correlation of forces. Evidently, for the observer of the process of globalization, the significance of the rise of China in African affairs goes beyond the continent and has global dimensions, not only in geography but also in history. China: Space and Time First of all, a prominent role for China in a globalizing world should not come as a surprise. One should even wonder why it did not happen sooner. In terms of geography, China is a big country. Still, it is a little bit smaller than the mega power that dominates the post Cold War era, the United States (US). The area of China is 3,696,521 square miles. That of the United States, including Alaska, is 3, 717,796 square miles. However, China houses one fifth of the world’s population with 1.3 billion inhabitants and the US has 298.5 million people. Is the unipolar geopolitics moving toward a bipolar system of distribution of power in which China will become the number two global power, after the US? In the 1940s, geographer N. J. Spykman ...concluded that no matter how powerful a Soviet Union would emerge from the Second World War, its strategy should be to extend its domination into the Eurasian Rime: failing this, a Eurasian Rime power or alliance of powers would ultimately and successfully challenge for supremacy” (de Blij 2005, p.128).

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It seems that Spykman’s conclusion is being realized by the rise of China into global power. The creation of the Shanghai Cooperation Organization (SCO) in 1996, in which China exercises a lot of influence, may be seen as a sign of fulfillment of Spykman’s conclusion. In terms of history, China is certainly the oldest continuous civilization on earth. Egypt may claim the same status of seniority, but China has remained an empire, which is not the case of Egypt in spite of its regional influence. The role of the state in the survival of the empire has been crucial, particularly in matters pertaining to security. China enjoyed only two centuries of peace in twenty five centuries of history. During its first six centuries, it knew only seventeen years without war (Delmas 1995). It reached an apogee in 206 BC-220 AD, during the Han dynasty and achieved its greatest imperial power during the dynasty of the Qing (Manchu), started in 1644 and ended in 1911. In terms of economic weight, David M. Lampton described the place of China in the world economy before the current era as follows:

…...from the first century AD until the early nineteenth century, China’s economy represented between 22 percent and 33 percent of the total global GDP, peaking around 1820. With the industrialization of Europe, the United States and Japan, China’s share of global GDP declined, down to 4.5 percent by 1950. The figure stayed at that level until Deng Xiaoping succeeded Mao Zedong in the 1970s. This long drop, and the national tragedies it generated, is known to every Chinese chool child as the hundred-plus years of “national humiliation” (Lampton 2007, p.1) In other words, and in absolute terms, China is not really rising. It is recovering its lost time and place in world affairs. It appears that China is now trying to apply a lasting remedy to that long “national humiliation”. Its re-emergence in international affairs is not a result of a sudden “surge” created by circumstances. It is the result of a purposeful, methodical use of state instruments of power to achieve the …greatest short-term regional transformation in the history of humanity...With economic strength comes political clout, and by the turn of the century the outlines of a new geopolitical relationship between the United States and China were visible (de Blij 2005, p. 129).

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This result, achieved in less than three decades, is accompanied by efforts, in the international arena, to construct political alliances in order to ensure the protection of its interests and the continuation of its national growth. Like the two faces of the Roman god Janus, the turning point was September 9, 1976 when Chairman Mao Zedong died and when Deng Xiaoping rose to power and implemented successful economic reforms. China’s awakening and rise have been peaceful. The world leadership position it lost has not remained vacant. It has to negotiate its way back to global prominence while avoiding the destruction of international arrangements that make its success possible. It does not seek to bring down pre-existing powers. The collapse of the former Soviet Union was not of its doing. And it did not rush to take advantage of the implosion of the Soviet empire and replace its influence in the Eastern European satellite states. It did not get involved in the conflicts that inevitably accompanied the dissolution of the Soviet empire in Eurasian countries. Particularly, it did not overtly challenge the prominence of the United States in world affairs as the former Soviet Union did. It is coexisting with the US and is using to its advantage established structures of international society. When examining recent history, this attitude has been consistent in China’s record of foreign policy making: China outlasted the colonialists, ousted the Japanese, and outdid their Stalinist advisors’ communist fervor, all without entering the global stage. Nor did the Chinese retaliate against the Europeans, even allowing the British to reassert themselves in postwar Hong Kong. No state-sponsored violence was directed against Japan, whose dreadful wartime atrocities rouse Chinese passions to this day. And the Soviet advisors were simply sent home, not punished for their despised “revisionism” (de Blij 2005, p. 125).

In addition, among permanent members of the UN Security Council, China is the largest contributor of peacekeepers and military observers. Now the 13th largest contributor of UN peacekeepers, it has provided 1,648 troops, military observers and police to 10 nations. Most of the beneficiaries are African nations such as Liberia, Congo and Sudan. Outside Africa, deployments include Haiti and southern Lebanon, reported The Washington Post (24 November 2006, p. A12).

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Joint exercises with military of Central Asian states, Australia, France, Germany, India, Mexico, Pakistan, Russia and UK were observed or conducted. In 2006, Chinese and US navies conducted a joint searchand- rescue exercise off the cost of California (Lampton 2007). That does not mean diplomatic and military passivity. The panoply of China’s military arsenal is fast modernizing. Its military posture fulfills four functions: protecting the homeland (Chinese military troops estimated at 2.5 million in 2000, of which 1.8 million constituted ground forces, are being reorganized and reduced in order to make them more mobile); deterring potential aggressors (It could have 60 intercontinental missiles by 2010 and has deployed 700 to 800 missiles that can strike Taiwan); projecting power (Its amphibious capacity is increased and its naval and air forces are continually upgraded); and reassuring neighbors through political, economic and military means. All those gestures are instruments of coercive diplomacy. In spite of these efforts, however, China is far from matching the military might of the United States. The evidence suggests that everybody has something to gain in the peaceful rise of Beijing. First, it has no interest in creating disturbance in an international system that has allowed it to rebuild its economy and re-emerge as a global power. Second, the West is profiting from China’s economic growth. It is a mistake to believe that globalization is overwhelmingly favoring Beijing alone. Its share of products’ values is modest. Exports represented over 30 percent of the country’s GDP in 2005. Companies receiving foreign investment were responsible for 57.3 percent of total exports and achieved about 85 percent of high tech exports. “China hosts final assembly stages, which adds less value, while lucrative parts of the production chain remain in other countries” (Lampton 2007, p. 121). Creating disturbance in such an international arrangement will inevitably be detrimental to China as well as to the West and any such policy might end up in a Pyrrhic victory for its initiator. Pursuit of National Interests To protect its interests within the global system, China seeks to build lasting alliances and international structures that guarantee its continuing growth, beyond globalization if necessary. Globalization as we know it today may end, but international relations will certainly

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continue. After all, a former globalization, begun with the industrial revolution, collapsed in1914. It was followed by the bloodiest century in human history, the 20th century, called by the British historian, Eric Hobsbahm, the “Age of Extremes: 1914-1991”. The international structures Beijing is creating are basically outside the control of the lonely super power, the United States. The Shangai Cooperation Organization (SCO), created at a meeting in Shangai in 1996, is made of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan with India, Iran, Mongolia and Pakistan as observers. Members are bound by the “Agreement on Confidence-Building in the Military Field Along the Border Areas”. SCO has created opportunities for energy and military cooperation among member states. China is cultivating friendly relationships with many regimes in countries rich in oil or endowed with strategic location, particularly those shunned by the West, such as Sudan and Zimbabwe. In 2006, Beijing hosted a China-Africa summit which was attended by more than 40 African leaders, assuring China’s continuing access to raw materials and energy sources of the continent. And its leaders have proposed creating free-trade areas within the SCO and APEC –displaying such willingness to go ahead that President Bush was forced to remove the global war on terrorism from the top of his APEC agenda such that, in November, 2006, he called for an APEC free-trade zone. (Drezner 2007, p. 46).

At the November 2006 China-Africa summit, China renewed its commitment to Africa. It declared it would make available for the continent a $3 billion preferential loan package and a $2 billion buyer’s credit over the period of 2007-2009. It will double aid to Africa. It will cancel all African debts that came due in 2005. It will establish a $5 billion China-Africa Development Fund to provide initial capital to Chinese companies willing to invest in Africa. In addition to 14,000 it already trained, China plans to train another 10,000 African professionals. It will create 10 centers of agricultural excellence and establish 5 trade and economic zones in Africa in order to promote trade and investment (Lyman 2006). In building partnerships, China places particular emphasis on the most globalized market commodity, oil. As long as petroleum remains available on the world market, consumers can buy it. However, there is

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no guarantee that oil will always be on the market in sufficient quantity for everybody. Furthermore, China may be deprived of oil supplies should it find itself in conflict with the United States. China seems to be trying to secure access to oil (for reasons more political than economic), should supply-and-demand -induced or conflict-generated scarcity take place on the global market. In that vein, it has recently signed agreements over oil and natural gas with Iran in the Middle East, Brazil and Venezuela in Latin America, and Angola and Sudan in Africa. These agreements can be best explained as political deals since they are not always based on sound economic rationale of cost/benefit calculation. This kind of “business” deals can only be conducted thanks to use of state instruments of power. And such state intervention is sustainable only if it is in the national interest and enjoys political legitimacy and support domestically. China today, like France since the 1960s, is taking the status of a “regional power” in Africa. But China is in Africa, above all, to solve its own internal problems, not Africa’s problems. It is helping Africa in order to help itself. An important challenge Beijing is facing is domestic political stability. The richest 10 percent of households controls more than 40 percent of the national wealth. The poorest 10 percent is left with 2 percent of the national wealth. The per capita GDP of coastal provinces is 10 times higher than that of the poorest provinces of the interior. And there is a concatenation of issues that can be summarized as follows: scarcity of natural resources, challenge of water resources, environmental degradation, gargantuan need for energy supplies, popular dissatisfaction with local governments, and the urgency of nurturing a new generation of civil servants, capable, honest, and devoted to the public good. John L. Thornton reported that, “ According to the government’s own figures, last year [2005] there were more than 80,000 ‘mass incidents’ throughout the country’” (Thornton 2005, p. 138). The pace of urbanization is also unsustainable. By 2020, rural exodus will bring about 300 millions people to cities. Mutatis mutandis, building infrastructures to meet the demands of this scale of mass migration amounts to constructing “a city of the size of New York every four months for the next 14 years” (Lampton 2007, p. 124). Given all these internal pressures and challenges, China has little room for morality in seeking external resources to meet pressing domestic needs and resolve urgent political problems. The legitimacy of the regime is based on economic success, not on electoral democracy.

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Challenge of Managing the New World Order China’s rise also faces resistance in the international arena. The first obstacle resides in the management of globalization. Rising economic and oil nationalisms are not conducive to a global open market. The United States, Europe and China hold different visions of the global world. Washington has adopted an ad-hoc attitude vis-à-vis the global trend. While the US government has invested heavily its military might in the global war on terrorism, the economic and private sectors are left to manage the process of globalization. The US treasury and companies strike bilateral deals with countries while policy makers offer little support to international organizations. Washington did not ratify the Comprehensive Test Ban Treaty (CTBT). It decided to build the Ballistic Missile Defense system (BMD), at the risk of violating Anti-Ballistic Missile (ABM) treaty. It refused to abide by the Kyoto Protocols regarding environment protection. It withdrew its signature from the treaty creating the International Criminal Court (ICC). The importance of sovereign decision making on issues of war and peace has been demonstrated most dramatically in the U.S. decision to invade Iraq in March 2003 despite the opposition of the large majority of states, including several NATO members (Ayoob 2005, p. 15).

European countries, on the contrary, have tried to strengthen those international organizations that are instrumental in governing the process of globalization such as the European Union, the Organization for Economic Cooperation and Development, the International Monetary Fund and the World Trade Organization. These two different visions of how globalization should progress have never been harmonized, and this conflict weakened the foundations of globalization in recent years (Abdelal & Segal 2007, p. 105).

At the same time, a new order is emerging with countries of the BRIC group (Brazil, Russia, India and China). By 2010 the annual growth of the national income of the BRIC countries will surpass that of the United States, Japan, Germany, the United Kingdom and Italy combined. And it will be twice that of the G-7 countries by 2025 (Drezner 2007).

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Responding to a question at a forum the author organized at the US Holocaust Memorial Museum in Washington, DC on February 16, 2007 about the inclusion of China in the G-7, Raymond Copson of Johns Hopkins University expressed the opinion that China purposefully stays away from the G-7 group in order to have a free hand in its foreign and economic policies. The US might need major diplomatic adjustments to cope with a new emerging order in this globalizing world. Europeans might have to adjust as well. They may perceive the gain of newcomers as a loss for their traditional role and status in international affairs particularly in Africa. The UN and the Bretton Woods institutions may suffer from obsolescence if they do not reflect the new balance of power in the making. A “Coalition of the Willing” that includes the BRIC countries will greatly help in managing African development and promoting peace-building processes on the continent. On the contrary, trying to maintain the status quo in the face of the ongoing changes in the world order is more likely to create conflict than the rise of China alone, both in Africa and beyond. If we can learn from history, there are plenty of lessons to be drawn from recent past. Since the beginning of the post Cold War era, the world has lived in a unipolar system where the United States has exercised unchallenged dominance, not merely by “accident” (the collapse the Soviet Union in 1991) but also by design. The US has sought to prevent the emergence of a power that has the capacity to challenge its authority in world affairs, let alone its security. The intervention in the Balkans in the 1990s, the extension of NATO to include former members of the defunct Warsaw Pact, the occupation of Iraq and the policy of nuclear nonproliferation, particularly toward members of the “Axis of Evil” (Iran and North Korea) are part of this rationale. Part of this rationale also are the non-interventions in Rwanda in 1994 (under President Clinton) and in Darfur (under President G. W. Bush). In those two cases, US authority was/is not challenged and its security was/is not directly endangered. If American policy makers see global distribution of power as a zero sum game, then China is challenging the US position in international affairs, however peaceful and “responsible” its rise may be, including in Africa. The US has seen itself in a unipolar leadership world before, right after World War II. The surprise attack on Pearl Harbor in 1941, led the country to invade Japan and Germany and to

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change the international political structure. At the conclusion of World War II, the US was the only country armed with atomic weapons. However, diplomatic miscalculations lead to the emergence of Soviet Union as a hostile superpower. Subsequently, the Cold War broke out. Similarly, if another Cold War-like situation is created between the US and China, it might come from diplomatic miscalculations. It might be created by the US’ –and the West in general- resistance to Beijing’s rise more than by acts of hostility from China. Should this happen, it will have two unprecedented characteristics: the previous Cold War had its basis in latitude; this one will have its basis in longitude. And while the previous one was ideological, this one will involve culture and race. Africa, in a China-US rivalry, as in the past Cold War era, would once again be victim of superpowers’ competition. It is in this context that the new era of Africa-China cooperation will be analyzed in the coming chapters. China’s Policy in Africa China has forged extensive political, economic and military ties with most African countries. As indicated earlier, at least part of its motivation for doing so is a drive to secure a stable source of oil supplies and other raw materials. However, the implications of this policy for the stability of the African countries concerned may not always be positive. The new phase Africa-China relationship began in the last years of the 1980s. The Cold War policy was failing. Under Deng Xiao Ping, Beijing was in transition to a market economy. Emphasis was placed on cultivating relationships with industrialized countries. Then, relationship with Africa was de-prioritized. In 1989, the Berlin Wall fell. In the West, there was a wave of optimism regarding the spread of democracy, the rule of law and the respect of human rights around the world. The same year, 1989, the Tiananmen Square incident took place. Chinese students’ movement for democratic reforms was severely repressed. China’s image in the world and relationships with the West were significantly damaged as a result of this repression. In response, China revised and re-oriented its priorities. Relationships with Africa, which stayed good even though de-emphasized, were re-prioritized. This time, cooperation with Africa was based more on economic interests than on politics and ideology.

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Another important year in Africa-China renewed cooperation was 1998, when China witnessed a devastating flood. The flood was said to have been caused by environmental degradation due to excessive logging. A subsequent ban on heavy logging forced many companies to look for resources outside. Thus, China’s deforestation problems were exported to Africa. That same year, 1998, China gave $107 million in aid to Africa. By 2004, Chinese aid to Africa reached $2.7 billion. Between 2004 and 2005, its trade with the continent rose up 35 percent, reaching $40 billion. China plans to triple its trade with the continent by 2010 (Policy Outlook 2006). In general, China’s presence in Africa is far from being a new phenomenon. Beijing has been active on the continent since the 1950s. It supported revolutionary and independence movements. It sought to balance the influence of the former Soviet Union on the continent. It tried to counter the West as part of the Cold War struggle. However, since the end of the Cold War era, business ventures have replaced military activities. Among many other projects, China is rebuilding the railroad network in Nigeria and building a new one in Gabon. In Rwanda, it paved more than 80 percent of the main roads. In more than a dozen countries, its firms are exploring for oil and gas and rebuilding electricity grids and telephone networks. One of Zambia’s largest copper mines is owned by Chinese companies and a major timber operation in Equatorial Guinea is under Chinese businessmen’s management. In Lesotho, nearly half of all supermarkets and a handful of textile companies are run by Chinese. Economic and political ties are established with Ethiopia, a non-oil producing country, but with a strategic location. The capital of Ethiopia, Addis Ababa, which houses the headquarters of the Africa Union, offers opportunities to meet with many African leaders. The same analysis may apply to Robert Mugabe’s Zimbabwe. Sooner and later, a post-Mugabe Zimbabwe will recover its regional importance and become a powerful ally for China in the southern African region. China voluntarily waived $1.2 billion in sovereign African debt in 2000. That year, the China-Africa Cooperation Forum (CACF) was formed with 45 African countries. Following the 2002 CACF Ministerial Meeting, an African Human Resource Development Fund was created exclusively for the training of African personnel. A subsequent Forum held in Addis Ababa set a three-year program to

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train 10,000 Africans in a variety of fields. In 2004 alone, China invested almost $10 billion in African oil and was represented by more than 600 businesses in 49 countries on the continent. Officially, the raison d’etre underlying the expressed need for that cooperation is to build strong South-South ties. However, to understand that ideological discourse, one should first look at Chinese current domestic needs and international challenges. China, in 2003, was the top buyer of cement in the world, importing 55 percent of global production. Additionally, it bought coal (40 percent), steel (25 percent), nickel (25 percent), and aluminum (14 percent). China was the 2nd largest importer of oil after the US. By 2030, China’s consumption of energy will amount to that of Japan and the US today combined. Inability to supply enough energy for its rapid growth means either domestic instability or increased imports of foreign oil. By 2030, China will need an extra 8 million barrels of oil per day of imports, “requiring a supplier the size of Saudi Arabia to meet demand”, wrote Richard Orange in Knight Tribune Business News (28 November 2004). As a result, China has begun to consider oil procurement a matter of national security, using all state resources to satisfy the nation’s need for energy. Michael Klare noted the security implications of China’s policy for Africa in the global and local contexts. He commented that, to satisfy its growing thirst for petroleum, China will have no choice but to turn to the same source the United States has: the Persian Gulf, the Caspian Sea basin, and Africa. He added that, because Beijing is no less concerned about the security of its imports from these areas than Washington is, Beijing will likely pursue a similar policy of plying oilproducing regimes with arms, advisers, and weapons (Klare 2004). David Zweig and Bi Jianhai also wrote in the September/October, 2005 issue of the review Foreign Affairs that: Another important feature of Beijing’s resource-based policy is that it has little room for morality. Because coveted natural resources are often found in pariah states, Beijing has struck energy deals with governments that do not respect international regimes. This strategy has created a set of complicated problems...It does undermine other US goals, such as isolating rogue governments or punishing them for failing to promote democracy, comply with international law, limit nuclear proliferation, or respect human rights (Zweig & Jianhai 2005, pp. 31-32).

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This may explain the current Chinese policy in Sudan. It is supporting oil contracts with Khartoum by supplying military equipment. It tried to soften UN sanctions against Khartoum for gross violation of human rights in Darfur. Generally, many Chinese companies operating in Africa are government-owned and are less concerned with near term profits. By reaching out to African leaders who are shunned by the West, and investing money in projects Western companies avoid, Chinese officials and businessmen are able to secure more business deals and to build political influence at rapid pace. A similar strategy can be observed in Zimbabwe, commented The Wall Street Journal (29 March 2005). China is participating in the oil boom in Africa, having established ties with regimes of the Gulf of Guinea (from Nigeria to Angola), and others such as Central African Republic, Chad, Congo, Libya, Niger and Sudan where, reportedly, it has 4,000 non-uniformed troops to ensure the security of its oil producing facilities. Africa supplied 28.7 percent of China’s crude oil import in 2004. These policies have some problematic implications for international stability and peace as well. Competition by China with Washington and Moscow is in the making, with risk of local arms races, exploitation and exacerbation of regional tensions. Beijing, Moscow and Washington (and lesser powers), are likely to exploit local divisions in pursuit of their respective goals. When significant amount of investment is made in particular countries, Beijing may have interest in changes in or of local governments in those countries when those changes occur. As it happens with former colonial powers, the temptation of political interference might prove irresistible. The United States has taken notice. No doubt this has implications for China’s interest in Africa. From public pronouncements, an atmosphere of competition is taking place in regard to Africa. Walter Kansteiner, former US Assistant Secretary of State for African Affairs, is quoted to have said that “China has simply exploded in Africa, as in Katie-bar-the-door stuff”, and Rep. Ed Royce of the US House Subcommittee on Africa was said to comment that “China’s increasing engagement in Africa is a concern and we need to focus on it before Beijing becomes fully established”, reported The Wall Street Journal (29 March, 2005).

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Resource-based politics in Africa may exploit local divisions, support unsavory regimes, and wage proxy wars on the continent. Africa offers plenty of opportunities for exploitation of local instability due to endemic conditions: Most of the countries now hit hardest by HIV/AIDS already had “youth bulges” before the virus arrived, meaning that a disproportionate percentage of their populations were under 29 years of age. HIV/AIDS is now exaggerating these bulges, with the greatest percentage of increase in HIV/AIDS appearing in the adolescent/young adult population. In 1975, only 17 countries in the world had youth bulges so severe that more than half of their population fell in the 15-29 age brackets. Today, 37 countries belong to that category, nearly all of them in sub-Saharan Africa. Several studies show that countries that had such radically large youth bulges in the period between 1990 and 2000 were three times more likely to suffer civil wars, coups, or armed insurrections (Garrett 2005, p. 61).

Also, as I wrote in an August/September 2003 issue of Around Africa, a newsletter published by a Washington, DC-based NGO, Africa Faith and Justice Network: In a document, Breaking the War Trap: Civil War and Development Policy (summary in Atlantic Monthly, September 2003), the World Bank reviewed 52 intra-state conflicts from 1960 to 1999. The study concludes that roots of civil strife are more economic than ethnic: in a given five-year period, a low income country has 17.1 percent chance of falling into civil war. That risk drops to 12.3 percent if 2 percent economic growth is sustained for a decade. Economic diversification is also an important factor. If primary-commodity exports (oil particularly) account for 10 percent or less of the GDP, the risk is reduced to 11 percent but rises to 33 percent when such exports exceed 30 percent of the GDP. Similarly, societies with dominant ethnic groups are more likely to fall into civil war compared to those so diversified that no single group can dominate. All things considered, history is the one single predictor of the likelihood of civil war. ‘A country that has just emerged from a civil war runs a 44 percent risk of return to conflict within five years’ (Kitissou 2003).

These endemic risks, exploited by with local political entrepreneurs with external supports, are aggravated by other factors: environmental

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Marcel Kitissou

degradation, uncontrolled urbanization, food shortage and scarcity, and mismanagement of water resources. Most serious is the problem of governance. Generally speaking, African regimes are like minority regimes, ruled by small elites, be they urban, military or ethnic. In the worst cases (such as past Mobutu’s Zaire and Eyadema’s Togo), countries are run as satrapies or military principalities. Political authority is more imaginary than real and policy imagination is authoritarian, imposed top-down and lacking a vision truly collective that is inclusive and perceived as legitimate by a significant part of the population. This results in great instability and an uncertain future for all. Michael Klare and Daniel Volman analyzed how Africa may become a surrogate terrain of a China-US rivalry: Finally, an escalating military competition between the United States and China for power and influence in Africa –in combination with escalating military competition in the Pacific, Central Asia, and the Middle East- will help to tilt the US-China relationship in a more adversarial direction and will make it more likely that their rivalry will spiral into a direct or indirect (surrogate) confrontation. If history is any indication, Africa could well prove to be a future battlefield for proxy conflicts of this sort. For all these reasons, the accelerating ‘oil rush’ in Africa and the growing military involvement of the USA and China deserve to be given a thorough, and critical scrutiny (Klare & Volman 2006, p. 625).

It is in the interest of African countries to skillfully exercise their sovereign attributes and avoid being absorbed into the territorial imperatives of other powers. It would be helpful for their stability if they are not mere extension of other powers’ security apparatus and geopolitical calculations. Lessons for Africa There are lessons Africa could learn from Beijing. China is further north and further south than the United States. The southern part of China is well developed. This is proof that the southern hemisphere can develop and that there is no law of nature that makes it possible for only the northern hemisphere to develop. China is suffering from income gap, regional imbalance, and environment degradation. It also has ethnic diversity. State power can

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Globalization and Fragmentation

be used to address these issues and ensure national unity and growth. African countries could also study the successes and failures of China’s handling of these challenges in order to preserve their own stability, ensure a sustainable development, and make policy decisions that are inclusive and beneficial to all citizens. Finally, African governments could promote a new generation of leaders and civil servants that is visionary, capable, honest and devoted to the welfare of their country. Conclusion Africa and countries that wish to engage themselves in Africa must devote more resources to building a better future for all and eliminate the fear of another Rwanda or Darfur. This can be done with Africans’ own creativity, assertiveness and cooperation, in combination with support from outside sources. If these goals can be achieved, Chinese involvement can bring great benefit to Africa as well as to China, and need not to be a source of tension with the West. However, it is yet too early to tell whether Chinese engagement will take such a positive form or whether it will be fully directed toward China’s geopolitical goals only. References Abdelal, C & Segal, C 2007, ‘Has globalization past its peak?, Foreign Affairs, January/February, 2007, pp. 103-114 Africa Policy Outlook 2006, Washington, DC Ayoob, M 2005, ‘Security in the age of globalization: separating appearance from reality’, in E Aydini & J Rosenau, (eds), Globalization, security, and the nation state: paradigms in transition, State University of New York Press, Albany, pp. 9-26. Collier, P 2003, Breaking the conflict trap: civil war and development policy, World Bank and Oxford University Press. De Blij, H 2005, Why geography matters, Oxford University Press, New York Delmas, P 1995, Le bel avenir de la guerre, Gallimard, Paris. Drezner, DW 2007, ‘The New World Order’, Foreign Affairs, March/April, pp. 34-46. Garrett, L 2005, ‘The Lessons of HIV/AIDS’, Foreign Affairs, July/August, pp. 51-64.

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Kitissou, M 2003, Around Africa, August/September. Klare, M. 2004, Blood and oil: the dangers and consequences of America’s growing dependency on imported petroleum, Henry Holt and Company, New York. Klare, M & Volman, D 2006, ‘The African ‘Oil Rush’ and US national security’, Third World Quarterly, vol. 27, no. 4. Knight Tribune Business News, 28 November 2004, Washington, DC. Kurlantzick, J 2006, ‘Beijing’s Safari: China’s move into Africa and its implications for aid, development, and governance’, Policy Outlook, Carnegie Endowment for International Peace, Washington, DC. Lampton, D. 2007, ‘Three faces of China’s power’, Foreign Affairs, March/April, pp. 115-127. Lyman, P 2006, ‘China ups the ante in Africa’, Africa Online Forum, Center for Strategic and International Studies, Washington, DC, December 1. Lynch, C. 2006, ‘China filling void left by West in U.N. peacekeeping’, Shelton, A 2005, China and Africa: understanding the growing trade and investment relationship, The Corporate Council on Africa, Washington, DC. The Wall Street Journal, March 29, 2005 The Washington Post, November 24, 2006, p. A12 Thornton, J 2006, ‘China’s leadership challenge’, Foreign Affairs, November/December, pp. 133-140 Zweig, D & Jianhai, B 2005, ‘China’s global hunt for energy’, Foreign Affairs, September/October, pp. 25-38

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Chapter 2

China’s Leap into the Heart of the Twenty First Century Michael Sachs

Introduction The People’s Republic of China (PRC) is in the midst of a transformation of global significance. From a closed economy in which the state was the only economic actor of significance, China has moved rapidly towards a system that the Communist Party of China (CPC) defines as market socialism, where a sizeable state sector exists side by side with private enterprises and foreign investors. China’s leap will lift the most populous country on earth into the heart of politics and economics in the coming century, a reality to which we must all adjust. “Development Is the Absolute Principle” Rejecting the ‘ultra-leftism’ and extreme egalitarianism that characterized the decade of the Cultural Revolution (1966 – 1976), Deng Xiaoping inaugurated a new policy in 1978 advancing the slogan: “Development is the absolute principle”. After fundamental debates about the “capitalist” versus “socialist” character of economic change, Deng’s pragmatic ideas had won the day. In a famous aphorism he said, “It doesn’t matter if it is a black cat or a white cat, as long as it catches the mouse”. Deng urged China to cross the river of development by “groping with our feet at the stones under the water”. The experimental pragmatism that characterizes the Chinese approach to “reform and opening up” is described as follows by a government researcher: Reform will lose direction if there is no opening. If there is only opening without reform, it will be difficult for the country to maintain economic stability and political independence. The so called ‘gradualist reform’ model practiced in China is actually a continuous process of exploration, that is of opening the door a bit, discovering a

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Michael Sachs

problem, solving it through reform, and then opening the door yet a bit wider (Ding, 1998).

Double-digit growth in GDP has been sustained for more than a decade, much of it driven by vast quantities of Foreign Direct Investment (FDI) and public infrastructure investment. CHINA’S GDP PER CAPITA IN HISTORICAL PERSPECTIVE 10,000

40%

9,000 30%

% Grow th in GDP per capita [right hand scale]

8,000 7,000

20%

6,000 5,000

10%

4,000 0%

3,000 2,000

-10% GDP per Capita (Yuan) [left hand scale]

1,000

"Great Leap Forward"

Cultural Revolution

2003

2000

1997

1994

1991

1988

1985

1982

1979

1976

1973

1970

1967

1964

1961

1958

1955

-20% 1952

-

Reform and Opening Up

Source: Data derived from China Facts and Figures (2004) The graph above illustrates the spectacular nature of China’s growth, while also placing it in historic context. The stagnation and volatility of GDP per capita during the era of the “great leap forward” and the “cultural revolution” formed the backdrop to China’s shift towards “market socialism”. According to Deng, In the twenty years from 1958 to 1978, the Chinese society was virtually at a standstill or in a lingering state, and the economy of the country as well as the living standards of the people did not achieve much development and improvement (cited in Wang 2000).

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China’s Leap into the Heart of the Twenty First Century

In 1982 he said: We have been making revolution for several decades and have been building socialism for more than three. Nevertheless, by 1978 the average monthly salary for our workers was still only 45 Yuan, and most of our rural areas were still mired in poverty. Can this be called the superiority of socialism? That is why I insisted that the focus of our work should be rapidly shifted to economic development … Our practice since then has shown that this line is correct, as the whole country has taken on an entirely new look (Deng 1982)

It would be wrong to write off the revolutionary period as simply an aberration that delayed the realization of China’s potential as a market economy. Rather, it was the revolutionary mobilization of the people, the radical redistribution of assets (particularly land) and the large investments in human capital that accompanied the revolution which laid the basis for sustained and widespread economic development in the recent period. Prior to the revolution, China had been mired in a century of disunity, chaos and rule by war-lords. The Communist Party’s achievement was to unite the people around a common program and construct a powerful and centralized state apparatus capable of safeguarding China’s national interests, even in the context of rapid integration with the global economy. A number of economic factors can be identified as lying behind China’s rapid growth. These include a virtually unlimited supply of cheap and educated labor, well developed human resources, very high rates of saving, a stable currency, relatively closed capital markets and favorable geographic location. But it is the politics of the developmental state that lies behind the Chinese “miracle”. The state’s role in the economy is not simply a function of the size of the public sector, which is growing smaller albeit from a very high base. Rather it is the capacity of the state to lead and direct the economy that is significant. The state is able to mobilize vast resources and direct them in terms of a long-term vision, which informs short to medium term plans. Aspects of government’s developmental role include:

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Michael Sachs

•

Massive investment in public and economic infrastructure to leverage private investment, both foreign and domestic, toward clearly identified development priorities.

•

The use of non-economic (i.e. political) measures to distort key prices such as the interest rate, the exchange rate, wages and the prices of agricultural products and domestically sourced natural resources.

•

Facilitation, coordination and direction of private investment across economic sectors and geographic regions, in a manner that builds horizontal and vertical linkages and ensures the transfer and diffusion of technology through strong industrial policies.

Linked to the above is the directing role of the state in credit and capital allocations, which is achieved through state control over banking institutions. Aligned to this has been a strategic approach to capital account liberalization, which is necessitated by the resulting inefficiencies in the banking sector, including large quantities of nonperforming loans. •

Investment in human capital with a particular emphasis on science and technology, and a sustained commitment to ensuring that foreign investments lead to the transfer of technology and the acquisition of skills among Chinese.

At the core of the state’s capacity to lead and direct economic development is the leading role of the CPC. The common ideological basis of the Party acts as a powerful countervailing force to the centrifugal tendencies of the market economy. From each village to the central government, in every public institution and parastatal, in every region, city and economic sector, CPC committees ensure that the “mass line” of the party drives the process of change. Party cadres are regularly trained and deployed to the areas in which they are most needed.

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China’s Leap into the Heart of the Twenty First Century

Social Gains (and Strains) of Development For the vast majority of the Chinese there have been rapid and sustained improvements in the material conditions of their existence in a short period of time. Over the last twenty years, China has witnessed a massive growth in per capita income and a significant reduction in absolute poverty. According to the government, the number of people living in absolute poverty has declined from 250 million in 1978 to only 29 million in 2003, a shift from 30.7 percent of the population to only 3.1 percent. Nevertheless, inequality, relative poverty and unemployment are on the rise, and in 2003 a rise in the number of absolute poor was recorded for the first time. A significant worsening of inequality between urban and rural dwellers is also apparent, a matter of grave concern in a country where 70 percent of the population still live in rural areas. Furthermore, there are rising disparities between the fast growing eastern provinces, where the bulk of industrial development is located, and the western and central regions, which are the traditional sources of natural resources and agricultural products. Professor Justin Yifu Lin of the Center for Economic Research at Peking University believes that one of the reasons for this widening gap has been the suppression of agricultural and natural resource prices, which in turn is one of the factors that has enabled rapid development in the East. In effect the poor provinces have been subsidizing accumulation in the richer provinces. Against the background of these widening inequalities, vast numbers of migrants have left their villages to seek work in the cities. Numbering more than 100 million, these young and relatively educated people increasingly fall between the cracks of society. A form of “influx control” is maintained, albeit weaker than in the past, since many state services are provided only to registered “citizens” of a particular area and denied to “temporary migrants”. Nevertheless, in some areas migrants already constitute a third of the urban population, exercising powerful downward pressures on wages. According to the government the number of workers employed in State Owned Enterprises (SOEs) has declined from 74 million to 36 million over the last twenty years, as the SOEs have been forced to adjust to a market environment.

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Michael Sachs

Severe strains are also emerging in relation to health care for the poorest, while education appears to be increasingly inferior for those still mired in poverty. In part this reflects significant problems of fiscal decentralization in China, where municipalities have considerable financial autonomy. Fiscal transfers from the centre to under-financed municipalities and regions (funded on a project by project basis) have had an impact, but the lack of fiscal capacity in poorer districts has taken a severe toll on services. While state intervention to mitigate the worst features of poverty and unemployment are strong, the Chinese clearly believe that it is economic growth that will provide the final solution to these problems. The CPC aims that by 2010 China will quadruple its GDP in order to become “a relatively well off society” and by 2050 the project of modernization should be completed. Assuming that developments continue along the current path, it is quite possible to imagine that these awesome feats will be accomplished well before the target dates. But the pace and scope of China’s transformation will undoubtedly generate new tensions and challenges within Chinese society. Already, the process of “opening up and reform” has led to massive and rapid changes in Chinese society. New productive and social forces are likely to pose serious problems to future political and social stability, even assuming that growth continues apace. But perhaps the greatest danger of a systemic crisis would be presented by a slow down in growth. A Quiet Rise and a Noisy Decline? Given the abundance of labor and current low levels of GDP per capita relative to the developed countries, there is no objective reason why China should not continue to grow rapidly for at least another two generations. This implies that China is destined to become the largest economy in the world by the mid twenty-first century. Razeen Sally of the London School of Economics regards China’s growth and rapid global integration, together with that of India, as an epochmaking event: What makes the crucial difference to economic globalization today, and probably for the next half century, is the dramatic opening of first China and then India… Their integration into the world economy, still in its early stages, promises to be more momentous than that of Japan

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China’s Leap into the Heart of the Twenty First Century

and the East Asian Tigers, and perhaps on par with the rise of the US as a global economic power in the late nineteenth century (Sally 2004, emphasis added).

Already the fate of the global economic system hangs precariously on Chinese and Asian developments, with global growth in the coming decade depending to a large degree on continued Chinese expansion. What is more, the single most significant imbalance in today’s global economy is the USA’s vast current account deficit, which must be balanced by equally vast capital inflows from the rest of the world. A large and rising share of these savings comes from China. Already in 2002 China was the second largest foreign holder of US long-term debt securities, accounting for $165 billion, or 6.5 percent, of total foreign holdings (IMF 2004). US imports too are increasingly sourced from China. During the recent recovery of the global economy, the structure of American imports changed significantly with imports from China growing by 52 percent between 2001 and 2003 (UNCTAD 2004). A French economist once characterized this kind of relationship as follows: If I had an agreement with my tailor that whatever money I pay him returns to me the very same day as a loan, I would have no objection at all to ordering more suits from him (Jacques Rueff, cited in The Economist 2004).

He was not referring to China, but to the Bretton Woods system of fixed exchange rates that prevailed for thirty years after the Second World War. And indeed, some regard the relationship between China and the US as similar to the old Bretton Woods system: Once again, America is at the centre of the system. The old periphery consisted of Europe and Japan, which used undervalued currencies, supported by capital controls and the purchase of dollar reserves, to rebuild their economies after the war. But the new periphery is made up of China and other Asian economies which, it is argued, also peg their currencies to the dollar at artificially low rates (The Economist 2004).

Unlike the Bretton Woods system, however, these arrangements have not been explicitly negotiated and are not underpinned by the

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Michael Sachs

universal acceptance of U.S. economic hegemony. Since the vast global imbalances we have described cannot be sustained, the question is not if, but when and how the inevitable unwinding of this global disequilibrium will take place: in an orderly and negotiated manner, or through a series of volatile and unpredictable shocks. What is certain is that, as these economic imbalances “unwind”, they will do so against the political backdrop of the emergence of a new global super-power. Rather than a simple acceleration of current imperatives toward “globalization”, the scale of Chinese integration (“on par with the rise of the US as a global economic power in the late nineteenth century”) points to a revolutionary transformation of the global system. Indeed, the USA’s global integration implied a transfer of global leadership from the then hegemonic power, Britain, and a thorough reconfiguration of the politics and economics of global capitalism. But whereas the transition from British to U.S. world hegemony was facilitated by a shared language and culture there are no such cultural factors to lubricate the likely transfer of leadership from the USA to China. The Chinese believe that it would be much better if its “rise” were a peaceful and quiet one. The CPC says, “China’s national development will contribute to world peace and stability; and world peace and stability will contribute to China’s national development”. But Giovanni Arrighi argues that the prospects for global peace, versus the possibility of protracted conflict, hinge more on the willingness of the US to accept the transfer of hegemony to Asia. If the system eventually breaks down, it will be primarily because of US resistance to adjustment and accommodation. And conversely, the US adjustment and accommodation to the rising economic power of the East Asian region is an essential condition for a non-catastrophic transition to a new world order” (Arrighi & Silver 1999, cited in Arrighi 2004).

The real cause for concern, therefore, is not China’s quiet rise but America’s noisy decline. On this score, the quagmire into which the USA has voluntarily plunged itself in Iraq does not bode well. Neither do the cold winds of protectionism and nationalism that are increasingly blowing through both US and European politics. Currently, the most obvious and immediate threat to global peace and stability is not a stand off between the US and China, but a “clash

33

China’s Leap into the Heart of the Twenty First Century

of fundamentalisms”. On the one hand, Anglo-Christian fundamentalism aligned with the most reactionary elements of U.S. capital will staunchly resist the ebb of American power. On the other hand an equally reactionary Islamic fundamentalism will seek to find answers to the global crisis by taking the Muslim world back to an imagined past and attempting to turn back the tide on modernity itself (Ali 2003). In the medium term then, China could well emerge as a moderating force. In sharp contrast to both the USA’s unilateral aggression and the Islamicist’s rejection of universal values, China believes, for now, that its national interest is objectively aligned with multi-lateralism and world peace. China, Africa and South Africa These global transitions form the strategic context in which South Africa must consider its relations with the PRC. Politically, there is much to gain from a strengthened bi-lateral cooperation. China regards South Africa as a strategic partner in building multilateralism and strengthening the position of the South in the global order. Africa too has long argued that its own development requires a fundamental reordering of the global political and economic environment. Already China has made clear its commitment to these goals by investing significant development assistance to the African continent, deploying peace-keepers in Liberia and canceling US$1.27 billion worth of debt owed to it by Africa. Backed by Security Council membership, a vast military capacity and an economic juggernaut, China’s voice in world economic and political forums will become increasingly strong. China too clearly recognizes the importance of the African bloc in multi-lateral forums (Alden 2005). Given that it has opted for “market socialism” rather than American-style free market fundamentalism, China’s influence may also give added impetus to new and heterodox approaches to the resolution of development problems facing the post-colonial world. China’s economic interest in Africa has grown significantly over the last ten years. Trade with the continent has almost doubled while Chinese firms and SOEs have made significant investments in a number of African countries. These investments are focused on securing its access to raw materials, such as oil, cementing its political

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Michael Sachs

ties to African states through significant infrastructure and construction investment, and ensuring food security through the purchase of agricultural lands and enterprises (Alden 2005). Continued flows of Chinese savings, both private and official, could become increasingly important to the African continent, while political alignment on a number of key global concerns, such as U.S. unilateralism, make the political imperatives of our relations with China very strong. But these political imperatives for cooperation could come into tension with the economic consequences of China’s emergence. For South Africa, and for Africa as a whole, the economic implications of China’s growth and the consequent reconfiguration of the global economy are somewhat contradictory. On the one hand, China’s growth is likely to sustain a global boom in the prices of primary commodities on which many African states remain dependent. Already, the prices of commodities such as oil, steel, coal, minerals and agricultural raw materials have risen significantly on the back of Chinese demand. On the other hand are the global consequences of increasing Chinese domination of laborintensive manufactured products. China’s unparalleled capacity to supply these goods at lower cost will significantly reduce their prices on world markets. While South African and African consumers would benefit significantly from these lower prices, the consequences in terms of employment could be significant. “Hollowing out” of domestic industries is a strong possibility, especially for sectors relying on unskilled labor (IMF 2004). Already the consequences of the end of the multi-fiber agreement have been felt, not only in Europe and America, but also in Africa. South Africa’s textile industry, burdened with an uncompetitive production structure, faces decimation in the face of Chinese imports. The Congress of South African Trade Unions has insisted that government impose “countervailing” measures to stem this surge, and has embarked on a national general strike to press home this demand. But such measures cannot be anything more than a short term palliative. What is more, China’s domination of global textile markets is likely to be only the first sector in which its comparative advantage in labor intensive manufactures is felt on the global stage. Another sector where South African production and exports may be threatened in the future is that of automobiles, with China rapidly establishing its

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China’s Leap into the Heart of the Twenty First Century

own export capacity. The Financial Times recently opined: “You bought the t-shirt – next for the west are cars ‘Made in China’” Conclusion There is much that South Africa can learn from the Chinese growth, particularly the unifying and directing role of the developmental state. But the character of South Africa’s political economy means that wholesale replication of a Chinese “model” is simply not possible. Indeed, in the context of our democratic constitution, it is impossible (and undesirable) for South Africa to replicate the coercion of both labor and capital that continues to form a key component of China’s “model”. South Africa’s development must rely to a much greater extent on the construction of a “shared vision” through the mobilization of consent. At the same time, the political and economic implications of China’s growth and development cannot be avoided or ignored. South Africa’s integration into the global economy has historically been driven by “Anglo-American” capital, and a hegemonic shift towards the East will have momentous consequences for the politics and economics of African development as a whole. How we balance the economic and political imperatives implied by this shift will be key to securing our future in a twenty first century world with China at its heart. References Alden, C 2005, ‘Leveraging the dragon: toward an Africa that can say no’, eAfrica, South African Institute of International Affairs, 1 March. Ali, T 2003, The clash of fundamentalisms: crusades, jihads and modernity, Verso. Arrighi, G 2003, ‘Rough road to empire’, revised version of a paper presented at the conference The Triad as Rivals? U.S., Europe, and Japan, Georgetown University, Washington, D.C., April 25-26. China Facts and Figures 2004, New Star Publishers, Beijing. Deng Xiaoping 1982: ‘We shall concentrate on economic development’, September 18, Selected Works, Volume III.

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Ding Ning Ning 1998, ‘A Candid Discussion about China’, Mimeo, September. Dyer, G & Mackintosh, J 2005, ‘Next for the west are cars ‘Made in China’, Financial Times, May 31 2005. IMF: International Monetary Fund 2004, ‘China’s emergence and its impact on the global economy’, World Economic Outlook, chapter 2, April. Lin, Justin Yifu: Interview with the author, Peking University, Beijing, 23 September, 2004 Sally, R 2004, ‘China’s trade policies and its integration into the world economy’, paper prepared for the IGD/SAIIA SACU-China FTA Workshop, Johannesburg, 28-29 September. The Economist 2004, ‘The dragon and the eagle: a survey of the world economy, October 2. UNCTAD 2004, Trade and Development Report, United Nations Conference on Trade and Development Wang Mengkui (ed.) 2000, China’s Economic Transformation of 20 Years, China (Hainan) Institute of Reform and Development, Foreign Languages Press, Beijing.

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Chapter 3

Talking Points on China’s Foreign Policy Jin Yongjian Introduction The world is undergoing complex and profound changes. On the one hand, peace, cooperation and development remain the trend of our times. Majority of the countries in the world are making efforts to promote multilateralism and more democratized international relations. On the other hand, instabilities and uncertainties are on the rise. Regional conflicts have never stopped. Wealth gap is further widening. Serious infectious diseases, environmental pollution and terrorism add to the woes. Peace remains evasive and development becomes more pressing. China’s Foreign Policy China is the largest developing country in the world. Since the late 1970s, China has set in motion the reform and opening-up program, which has brought about economic development, social stability and improved living standards. In the past twenty years or more, China has met the needs for food, clothing and shelter of more than 200 million poor. The market is getting bigger everyday as the lives of its large population continue to improve. China has become another engine for world economic growth. However, China remains a developing country. There is still a long way to go before the 1.3 billion Chinese people can live a better life. Therefore, promoting peace and development will continue to be the top priorities of China’s diplomatic endeavor. China is of the view that in a diversified and interdependent world, no country can achieve development in isolation or confrontation. The interests of the Chinese people are, in the final analysis, consistent with those of the peoples of the world. China is ready to combine its development with other countries and work for peace and common prosperity in a win-win context. China will

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Jin Yongjian

continue the path of peaceful development and the independent foreign policy of peace. It aims to strengthen friendly relations and cooperation with all countries on the basis of the Five Principles of Peaceful Coexistence and contribute to peace, stability and common prosperity in the world. China will base its development mainly on its own resources and its own restructuring and innovation efforts, while also taking an active part in economic globalization and regional cooperation. China continues the process of opening up and promotes cooperation with all other countries on the basis of equality and mutual benefit. China concentrates on development and works to preserve a long-term peaceful international environment and an excellent neighboring environment. China will never seek hegemony and will always remain a staunch force safeguarding world peace and promoting common development. China has energetically worked to develop foreign relations on all fronts. China continues to promote multilateralism and democracy in international relations and diversity in development models, and encourage the progress of globalization in a direction that will benefit all nations. China vigorously advocates a new concept of security, and opposes hegemony, power politics and terrorism in all its manifestations. China continues to work for a peaceful, stable, fair and equitable international order. China endeavors to deepen mutually beneficial cooperation with developing countries and safeguard their common interests. China seeks friendship and partnership with neighboring countries, aiming to strengthen friendly relations and cooperation with them and deepen regional cooperation. China has made efforts to strengthen relations with developed countries, striving to expand common interests and appropriately deal with differences. China actively participates in multilateral diplomacy, aiming to safeguard and strengthen the authority and leading role of the United Nations and the UN Security Council, and works constructively in international and regional organizations. China’s Policy toward Africa Strengthening solidarity and cooperation with the vast number of developing countries has been the cornerstone of China’s foreign policy. The African continent encompasses the largest number of

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Talking Points on China’s Foreign Policy

developing countries and is an important force for world peace and development. China has all along attached importance to China-Africa relations. China and Africa have a long history of friendship. The two share similar historical experience and have sympathized and supported each other in the struggle for national liberation and forged a profound friendship. For over half a century, the two sides have enjoyed close political relations and frequent exchange of high-level visits and people-to-people contacts. The bilateral trade has grown rapidly; cooperation in economic and other fields has yielded good results; and consultation and coordination in international affairs have been intensified. China has provided assistance to the best of her ability to African countries, while African countries have also given strong support to China on many occasions. At the beginning of the new millennium, the two sides launched the Forum on China-Africa Cooperation (FOCAC). It has been shown that the FOCAC is an efficient mechanism for further cooperation. The principles governing the relations between China and African countries put forward by late Premier Zhou Enlai during his tour to Africa in the 1960s are still applicable today. In the early 1980s Chinese leaders proposed four principles on economic and technological cooperation between China and African countries, namely: equality and mutual benefit, emphasis on practical results, diversity in form, and pursuit of common development. During his visit to Africa in May 1996, President Jiang Zemin put forward a five-point proposal on developing a long-term and stable relationship of all-round cooperation with African countries oriented towards the 21st century, the core of which were sincere friendship, treating each other as equals, solidarity and cooperation, common development, and looking to the future, thus expounding the fundamental guidelines of China’s policy in the new century. The new Chinese leadership headed by President Hu Jintao has stressed for many times that China will further strengthen the solidarity and cooperation with the developing countries, including Africa, and will make continued efforts to achieve the goal of common development. The main points of Chinaʹs policy towards Africa can be summarized as follows:

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Jin Yongjian

•

To adhere to the Five Principles of Peaceful Co-existence, to respect the choice of political system and development road made by the African countries themselves according to their own national conditions, not to interfere in internal affairs of African countries; to support their just struggle in safeguarding national independence, sovereignty, and territorial integrity; to support their efforts in maintaining the internal stability and unity, revitalizing national economy and promoting social progress.

•

To support the African countries in their efforts to strengthen unity and cooperation and to resolve the differences and disputes among them through peaceful negotiations without outside interference; to support the positive measures including the implementation of NEPAD adopted by the AU and other sub-regional organizations in seeking peace, stability, and development of the African continent, promoting African unity and realizing political and economic integrity.

•

To strengthen and develop a long-term stable relationship of all-round cooperation with African countries, increase the exchange of visits by leaders of China and Africa, enhance personnel exchanges at different levels and in various fields, enlarge common ground, cement friendship, and promote cooperation.

•

To continue to provide governmental assistance to the best of our ability and without any political conditions, and take measures to improve the performance of the projects built with China’s assistance. With the Forum on China-Africa Cooperation as a new platform, to develop trade and economic cooperation in diversified forms and various fields on the principle of mutual respect, mutual benefit and complementing each other with respective advantages, encourage enterprises on both sides to enhance exchanges, enlarge bilateral trade, increase investment and seek common development.

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To make calls to the international community, especially the developed countries, for more concern and feasible measures for Africa’s peace and development, and to honor their commitment to debt relief, to help Africans solve their problems, promote the economic development in Africa, and enable Africa to eradicate poverty while narrowing the gap between Africa and other parts of the world.

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To support the African countries to participate in international affairs as equal members of the international community, and play a positive role, continue to uphold justice and speak out for African countries in international affairs, strengthen consultation and cooperation between the two sides, work together to safeguard the legitimate rights and interests of the developing countries and strive for setting up a just and equitable new international political and economic order at an early date.

China-South Africa Relations China and South Africa are both important developing countries. The friendship between the Chinese people and the people of South Africa began in the 1950s when China supported the people of South Africa in their struggle against apartheid and for racial equality. China long maintained friendly relations with organizations such as the ANC. On 1 January 1998, the two countries formally established diplomatic relations, opening a new chapter in China-South Africa relations. Since then, the bilateral relations have grown rapidly in an all-round way. The two countries established strategic partnership and launched the Bi-National Commission (BNC). Exchange of high level visits has been frequent and bilateral cooperation has continued to deepen in all areas. The two sides also cooperate extensively on major regional and international issues, and work jointly to safeguard the legitimate rights and interests of the developing countries. China regards its relations with South Africa an important part of China-Africa and South-South cooperation. There has been a frequent exchange of high-level visits between the two countries, which plays an important role in furthering the bilateral relations. From the South African side, Former President Mandela,

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President Mbeki, former deputy President Zuma and others have paid visits to China. On the Chinese side, Vice President Hu Jintao (1999), President Jiang Zemin (2000), Premier Zhu Rongji (2002), Vice President Zeng Qinghong (2004) and others have paid visits to South Africa. In April 2000, Chinese President Jiang Zemin paid a state visit to South Africa. During the visit, the two heads of state signed the Pretoria Declaration, marking the formal establishment of “partnership” between the two countries. In the document, the two sides announced the founding of a high-level Bi-National Commission (BNC) in order to further enhance the partnership and promote the bilateral cooperation in the political, economic and other fields. They committed themselves to working for peace and development of Africa and pushing for a fair international political and economic order. The BNC, which was officially launched during the state visit by President Mbeki in December 2001 soon grew into a useful mechanism with five sectoral committees within its framework. The economic cooperation and trade between China and South Africa has developed fast, though it started late. It was in early 1990s that the two countries commenced direct commercial interflow. The volume of bilateral trade in 1991 was US$14 million and in 1997 over US$1.5 billion. Since the establishment of diplomatic ties, bilateral trade has grown more rapidly. In 2004, it stood at US$ 5.9 billion (China imported US$ 2.96 billion, exported US$ 2.95 billion). South Africa is now China’s biggest trade partner in Africa, with bilateral trade volume accounting for about 20% of the total volume of China-Africa trade. Bilateral trade is mutually beneficial and the two sides pledge to work together to explore its large potential. South Africa officially announced its recognition of China’s market economy status, and announced on behalf of the Southern African Customs Union (SACU) the decision to commence Free Trade Agreement (FTA) negotiations with China. Two-way investment also has been on increase in recent years. Chinese enterprises have invested in the fields of agriculture, textiles, electronics, mining as well as banking, transportation, communications in South Africa, while South African investments in China are also growing. China’s ShenHua Group and other enterprises are discussing with Sasol Synfuels International (Pty) Ltd. on a promising coal liquefaction project in China. Jiuquan Iron and Steel (Group) Company

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made large investment in the ferro-chrome production project in South Africa. South African Pulp and Paper Industries Ltd. made its first investment worth US$ 58 million in China. The two countries have signed a series of government agreements on protection of investments, trade, economic and technical cooperation, avoidance of double taxation, civil air transport, maritime transport etc. The Sectoral Committee on Economy and Trade under the Bi-National Commission serves as a contact channel between the two government departments in charge of economic and trade affairs. They have stayed in close consultations on matters concerning ChinaSouth Africa cooperation in WTO, protection of intellectual property rights and the New Partnership for Africa’s Development as well as specific issues relating to the bilateral economic cooperation and trade. There have been extensive exchanges and cooperation between China and South Africa in culture, science-technology, education, judiciary affairs, health and sports etc..., and official agreements, including several of the above-mentioned fields, have been signed. In November 2002, China and South Africa signed a Memorandum of Understanding (MOU) on the Implementation Plan for Outbound Travel by Chinese Citizens to South Africa. The MOU made South Africa the first country of destination in sub-Saharan Africa for Chinese tourists. There have been brisk exchanges at the provincial and municipal levels. Up to now, 17 Chinese provinces and cities have signed sister-province or sister-city agreements with provinces or cities of South Africa. Conclusion China and South Africa are both important developing countries, and face common challenges in development. To further expand the bilateral cooperation not only serves the long-term interests of the two countries, but also is important in safeguarding the legitimate rights and interests of the developing countries and in promoting a just international political and economic order. With mutual efforts, ChinaSouth Africa relations are bound to have broader prospects for development.

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Chapter 4

China’s Emerging Interests in Africa: Opportunities and Challenges for Africa and the United States Drew Thompson Introduction China’s deepening integration into the global economy and emergence as an economic power has seen its influence expand in Africa, reshaping political and economic relationships on the continent and heightening concern in the United States that China’s rise could challenge the U.S.’ traditional economic and security interests in the region. China has a long history of political links in Africa, but the relatively recent growth of China’s economic and security links in the region pose both challenges and opportunities that will require complex and sensitive diplomatic efforts to ensure that the interests of China, the United States, the European Union and African nations are all protected, and that a regional and global environment that promotes stability and economic growth is fostered. China’s Interests in African Cooperation Many foreign policy experts in the United States feel that one of the greatest challenges facing the U.S. in the 21st century is “managing” the inevitable rise of China. While it is somewhat presumptuous to assume that the U.S. can “manage” China, it must endeavor to successfully integrate China into the global community and ensure that it respects international norms and continues to contribute to global economic growth as well as peace and stability. For the past 25 years, the process of integrating China into the global community has contributed to security and stability in the Asia Pacific region, substantially contributed to global wealth creation and transformed China from an inward-looking nation plagued by famine and internal political unrest into a dynamic, globalized country that increasingly shares mutual interests with other major powers.

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As China’s domestic economy grows, it is expanding and deepening political and economic relations in Africa, primarily to secure access to African markets and raw materials. There is rising concern among some in the United States that China’s growing influence in Africa is a zero-sum equation, whereby China’s rise will ultimately undermine U.S. interests in the region. China’s efforts to access African consumer markets and secure energy and raw materials to fuel its domestic economy are a legitimate interest and should be respected. However, China has placed little emphasis in its relations with African partners on improving governance and building sustainable economies, heightening U.S. concerns that China’s deepening relationships undermine international strategies to reduce poverty, foster stable economies and promote good governance. How the U.S. engages China in this effort (and how China responds) will be critical to Africa’s future. The U.S. and China share the fundamental goal of global peace, stability and sustainable economic growth, though there are certainly some differences in both nations’ strategies, such as the U.S. policy of promoting human rights and democracy. However, by recognizing common goals and reconciling divergent approaches, both nations have the opportunity to achieve significant progress towards realizing their common goals by building sound relations with African nations. China’s oft repeated aspiration to be a “responsible power” is cause for optimism that they are willing and able to cooperate with the international community to help promote sustained security and stability in Africa. This chapter will explore China’s interests in African cooperation, some consequences of closer cooperation and growing economic links, and the implications for China’s growing influence for the United States. China’s growing presence in Africa represents an effort to create a paradigm of globalization that favors China. Historically, China has long sought to portray itself as the leader of the Third World, cultivating relations with African nations by providing aid, technical expertise and diplomatic support in multilateral institutions to better position itself in a more multi-polar post-cold war environment. As a strategic partner, China is attractive to many African countries. As a former colony of European powers, China hopes that African people can favorably relate to China, which portrays itself as sensitive to other countries’ dignity. China’s professed respect for sovereignty and non-

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interference in internal affairs is appealing to many African leaders, some of whom face internal rebellions and ethnic unrest much as China does. China’s interests in Africa have shifted over the past fifty years from a desire to be the leader of the Third World during the cold war to expanding its political spheres of influence and ensuring access to export markets for Chinese manufactured goods and securing supplies of energy and raw materials through diplomacy, investment, aid and trade. Diplomacy, Aid and Trade The Chinese government has invested heavily over the past four years to encourage trade-relations, sponsoring the “China-Africa Cooperation Forum” which provides opportunities for governments and businesses to strengthen economic cooperation. The first ChinaAfrica Cooperation Forum took place in Beijing in 2000, establishing a mechanism for promoting diplomatic relations, trade and investment between China and African countries. In 2000, two-way trade between China and Africa amounted to US$10.6 billion, surpassing 10 billion for the first time, and reached US$18.545 billion in 2003. By 2005, over 700 Chinese companies, both state-owned and private, are operating in Africa. A second China-Africa Cooperation Forum was held in December 2003 in Addis Ababa and was attended by Premier Wen Jiabao, UN Secretary General Kofi Annan and 250 businessmen from Africa and 150 from China, indicating the significant support that the Chinese government provides businesses with interests in China. Follow-up meetings of senior officials were held in Beijing in October 2004, with another scheduled for August 2005, with the next ministers’ forum scheduled for late 2006 in China. Culturally and socially, China has a long history of providing aid to African countries, building goodwill and political support. China’s aid to African countries comprises grants as well as low and no-interest loans. China is also very effective at leveraging loans a second time, forgiving debt for the poorest countries at the high-profile China-Africa Cooperation Forums. China’s aid and debt forgiveness earns China significant leverage among African countries, ensuring that they support China in the UN and other multilateral forums. Chinese technical aid to Africa is becoming increasingly important in building

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China’s influence in the region. In February 2005 in Nairobi, Chinese Vice Premier Zeng Peiyan proposed sweeping technical cooperation with African partners on environmental protection in fields of biodiversity, policy-making and legislation through cooperative technical training of environmental officials and specialists. Chinese medical, agricultural and engineering teams have provided technical aid to African countries for decades to support everything from building projects to treating AIDS patients. Since 1963, a total of 15,000 Chinese doctors have worked in 47 African states and treated nearly 180 million cases. At the end of 2003, 940 Chinese doctors were still working in Africa. Technical support rather than financial aid is a cost effective measure for supporting over 40 countries, which stretches China’s resources and diverts capital from significant financial needs at home. Investing in trade and projects that are more likely to provide political and economic returns are arguably more effective than direct aid and loan programs, particularly because the efforts build personal relationships between Chinese and African officials and experts. Lastly, the Chinese government has actively promoted their economic development and reform model to African countries, encouraging government counterparts in several countries to visit China and learn from their economic development experience. China’s efforts to encourage African governments to fashion economic systems on China’s is an important indication of the soft power that China hopes to ultimately project in Africa as it tries to shape African nations to more closely reflect China. These efforts also contribute to developing African standards that are compatible to Chinese ones, which will help secure future cooperation in many fields. China has invested heavily in African education systems, both by sending teachers to Africa and providing scholarships to African students from across the continent to study in Chinese universities. By the 2000 China-Africa Cooperation Forum, 5,582 African students had enrolled in Chinese universities since educational exchanges began in the mid 1950s. These students typically spend two years learning Chinese, then study technical subjects, particularly engineering disciplines. Currently, about half of African students are pursuing advanced degrees. This support for education improves China’s image in many countries, builds grassroots support in local communities and better understanding of China among the educated elite.

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China has actively pursued its strategic interests in Africa. As China’s space program expands and matures, it is seeking to improve its space tracking capabilities in the southern hemisphere. China operates a space tracking station in Namibia and utilizes South African ports of call to support space-tracking ships. Africa is also a significant market for Chinese military hardware. Chinese-made light arms are sold to many African nations while higher-priced items, such as aircraft, aircraft parts and armored personnel carriers, have been sold to Zimbabwe, Namibia and Sudan. China has also sent its People’s Liberation Army to Africa under United Nations auspices, deploying observers to several African missions, and peace keepers to UN missions in the Democratic Republic of Congo and Liberia and, in accordance with UN resolution 1590, China has pledged engineering and medical troops to support the deployment in Sudan. The deployment of 90 peacekeepers to Liberia in December of 2003 occurred two months after Liberia switched its diplomatic recognition from Taiwan to China, illustrating the strategic importance that African nations hold in the struggle between China and Taiwan in Taiwan’s effort to gain international diplomatic recognition. China’s investments in Africa pay an added dividend in the diplomatic effort to deny Taiwan “international space” through recognition by individual countries and their resulting support in multilateral forums, such as the UN. Six countries in Africa currently recognize Taiwan (Burkina Faso, the Gambia, Malawi, Sao Tome and Principe, Senegal and Swaziland), making up one quarter of the total countries that recognize Taiwan. However, several African countries have played China and Taiwan off against one another, seeking massive aid packages and switching recognition several times since gaining independence. Taiwan must offer substantial aid packages in order to compete with China’s dominating presence and offers of support in international forums. However, Taiwan can concentrate its greater financial resources on the small number of countries that recognize it while methodically approaching other countries that might consider switching recognition to them. China, with fewer resources and more countries to support, must carefully consider its investments in countries that are likely to provide them with a stable return. Chinese oil, construction and telecom companies are increasingly demonstrating that they seek economic as well as political returns on investments that further Chinese foreign policy goals. Unlike Western

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public companies, Chinese corporations seek more than just profit for their shareholders. Chinese firms enjoy strong support from their political leaders who assist in the linkages between diplomatic efforts with commercial ones. These Chinese companies, backed by senior political leaders, government financing and foreign aid, are willing to invest in countries with high political risk. Many of the agreements announced by Chinese firms are judged economically questionable by many international analysts. Politically, the Chinese government considers energy investments a vital diversification of supply to ensure that their energy needs for the next several decades will be met as demand increases and domestic production declines. By investing in energy exploration, extraction, refining and transportation infrastructure overseas, China increases its perceived sense of security. Beijing is counting on the ability to physically direct deliveries from the well, regardless of developments in world trading markets, or long sea lanes of communication which its navy is unable to protect. Political support ensures that large amounts of Chinese government capital are available to Chinese companies who bid on African projects. Foreign aid to many countries is frequently linked to Chinese companies who provide the services in the recipient country. Additionally, China is a member of the African Development Bank, which enables Chinese companies to compete with African, European and American firms for bank-funded projects in Africa. China is the only non-African investor in the Eastern and South African Trade and Development Bank (known as the PTA Bank), which provides development-assistance loans to member countries of the Common Market for Eastern and Southern African States (COMESA). In the case of Angola, China has recently provided US$2 billion in loans through its Eximbank, which Angola is paying back in oil exports to China. This massive loan provided by the Chinese government will pay for major infrastructure construction, with 70 percent of the funds going to Chinese companies who will subcontract the remaining 30 percent to local companies. However, International Monetary Fund officials have expressed concern that China’s large loan undermines their efforts to promote reforms by decreasing Angola’s reliance on IMF facilities. Chinese loan facilities help make Chinese companies in many sectors very competitive. Chinese telecommunications equipment manufacturers, notably Huawei and ZTE have upgraded telecoms systems in several African countries, and invested in assembly plants

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and training centers that improve after-sales service. Construction firms are building roads, dams, railways and buildings across the continent. Chinese construction firms have maintained their competitive edge by bringing Chinese laborers as well as engineers to work on construction projects. Energy and Resources: China’s Investment in Sudan Paying Off In 1993, China became a net oil importer, and energy demand and imports have increased steadily over time with the growth in import volumes significantly exceeding reported GDP growth. In 2003, Chinaʹs imports of oil increased 30 percent over 2002, surprising global energy analysts and Chinese economic planners alike. That same year, China surpassed Japan to become the second largest importer of petroleum after the United States. In 2005, Chinaʹs oil imports are expected to grow by 10 percent to about 7 million barrels a day. To help meet this demand China has invested in oil exploration, extraction, transport and processing in Africa in order to “lock up barrels” at their source. China’s largest international investment in the energy sector was made through the China National Petroleum Corporation (CNPC) and is the most visible and significant investment in Sudan’s oil exploration, transportation and production infrastructure. China’s investment enabled Sudan to begin exporting oil in 1999 and eventually become a net oil exporter. Sudan now has a current production capacity of 310,000 barrels per day, which is relatively insignificant in relation to the global production of approximately 82 million barrels per day. However, Sudan’s oil is high-quality, “lightsweet crude,” which is in short supply in global markets and sells at a premium over Middle Eastern crude which has higher sulfur content. China’s investment in Sudanese oil production capacity has resulted in Sudan’s output now amounting to five percent of China’s total imports. Significantly, China is Sudan’s single largest customer for oil, consuming over half of Sudan’s exports in 2003. This investment and trade relationship with Sudan provides China with significant diplomatic leverage over Khartoum, putting China in a strong position to encourage Sudan to maintain peace with the Sudan People’s Liberation Movement, promote stability in Darfur and even invest in social programs to promote domestic security and stability.

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China has not only partially satisfied its energy needs by securing access to Sudanese oil, CNPC and the Chinese government have gained considerable operational experience in international markets from their operations in Sudan. Following the Sudan investment, China has more actively pursued upstream investments around the world to explore for and process new oil reserves. However, China’s active quest for energy has not been matched by concern for promoting good governance and sustainable economic growth. One Chinese academic described China’s energy strategy as, “find it, buy it, then use it” (zhaodedao, maideqi, yongdehui), with no consideration for fostering long-term sustainability or promoting good governance in the countries where they have invested. China’s willingness to tolerate Khartoum’s involvement in the Darfur crisis, and threats to block UN efforts to stop the atrocities demonstrate China’s strategy of ignoring unsavory political behavior in pursuit of resources. China’s experience promoting trade and investment relations with Sudan illustrate China’s broader interests in Africa in general, as well as some of their competitive advantages when operating in environments where Western companies are marginalized because of unrest or sanctions. Several African countries also present Chinese firms with an investment environment where they can compete effectively against Western multinational corporations that enjoy greater access to international capital and technology. African countries also represent a significant market for cheap as well as higher-technology Chinese-made products, which helps China maintain a favorable global balance of trade and creates jobs in China. Chinese companies have been very active investors in African infrastructure, including telecommunications, hydropower plants, pipelines, factories, hospitals, stadiums, railways and roads. Chinese companies are particularly competitive in countries where unreliable political situations, sanctions or other potential liabilities keep large multinationals from committing themselves. Chinese firms are not hindered at home by legal challenges from non-governmental organizations or concerned about corporate-image liabilities when investing in high-risk markets with unsavory regimes or where severe human rights abuses take place. Lastly, Chinese companies are attracted to the potential for large profits in markets with less competition from multinational firms.

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Increased Commerce Brings Benefits and New Challenges China’s growing engagement is leading to unprecedented flows of people between the African continent and China. Countries are adding direct flights between Beijing, Shanghai and African national capitals, and more and more Chinese are visiting African countries to conduct business and visit African tourist attractions. China has effectively rewarded diplomatic allies by leveraging its growing middle class and the prospect of large numbers of Chinese tourists by removing departure-visa barriers for favored countries by a mechanism known as “approved destination status.” At the 2003 China-Africa Cooperation Forum, Chinese Premier Wen Jiabao announced the granting of approved destination status to Tanzania, Ethiopia, Kenya, Tunisia, Seychelles, Zambia, Zimbabwe and Mauritius, joining Egypt, South Africa and Morocco which had been granted the privilege in 2002. Large numbers of Chinese executives, engineers, laborers as well as small traders are present in many African countries. In some areas, there has been friction between market vendors when Chinese traders enter the market and undercut local vendors with cheap Chinese goods. Other countries are experiencing the emergence of “Chinatowns” where growing numbers of Chinese immigrants and temporary workers settle and conduct business. The increase in commerce and the large numbers of Chinese visiting African nations for prolonged periods of time present a public health concern. During the outbreak of Severe Acute Respiratory Syndrome (SARS) in China in the winter and spring of 2003, there were significant concerns that African traders visiting a major trade fair in South China would carry the disease home. While SARS ultimately did not have a significant impact in Africa, diseases originating in Asia, such as avian influenza, or other emerging and re-emerging infectious diseases could cause havoc in Africa, where public health infrastructure is weak and underlying health challenges are present. Likewise, HIV/AIDS in Africa can potentially be transmitted to visiting Chinese who might inadvertently spread HIV upon their return home. Concerns That China is Undermining U.S. Interests in Africa U.S. primary interests in Africa are largely framed in terms that are similar to China’s, namely access to African markets and resources.

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However, the U.S. has pursued broader strategic goals, including prosecuting the global war on terror, addressing Africa’s development needs, promoting governance and democracy, and fighting Africa’s HIV/AIDS pandemic, arguably the greatest challenge to Africa’s future social and economic security. However, China’s political alignment with the G77 group of developing countries at the 2003 Cancun ministerial meeting of the WTO which effectively stymied U.S. and European Union proposals demonstrates that China’s interests do not always neatly align with western ones. As China’s pursues its interests in Africa and becomes increasingly visible in their efforts, there is growing concern in the United States that China’s rise in the region will ultimately undermine U.S. interests. Much of the anxiety was initially prompted by China’s opposition to U.S. efforts to sanction the Sudanese government which the international community accuses of perpetrating atrocities in Darfur. Subsequent attention has been focused on China’s apparent disregard for human rights abuses and poor governance as it deepens relationships with several countries, notably Zimbabwe and Angola. China has historically held to a strict interpretation of sovereignty and professed its adherence to peaceful coexistence with other nations. While Chinese foreign policy makers have stressed China’s interest to be a “responsible power”, it has strictly avoided imposing political prescriptions on partners. In 2003 Ambassador Zhang Yishan, Deputy Permanent Representative of China to the United Nations, summed up China’s non-interference posture when he stated: Externally imposed conditions do not offer genuine solutions to African problems. In many instances, liberalization, privatization, market reform and other readjustment programs not only are incapable of promoting African economic growth but on the contrary have created serious social problems. The international community should therefore fully acquaint themselves with the real circumstances of the African countries, respect their sovereign choices and development strategies and support the African continent’s efforts to lift itself up by its own bootstraps.

However, while China has broadly supported multilateral goals for sustainable development, such as those set out by the Millennium Development Goals, the New Partnership for Africaʹs Development (NEPAD) in 2001 and the Monterrey Consensus in 2002, China, along

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with a coalition of developing nations successfully resisted U.S. and E.U. efforts to insert language in the Monterrey Consensus draft that would endorse a WTO agreement on transparency in public procurement. By refusing to impose political and economic reform requirements on trade and development partners (other than recognition of the “one China” policy), China’s approach to trade and development fundamentally diverges from U.S. policies, raising concerns about China’s growing role in Africa undermining U.S. efforts to promote good governance and ultimately, democracy. Conclusion Arguably, U.S. concerns are heightened by China’s economic and diplomatic advances globally, not just in Africa. However, China and the U.S. share a common core interest in fostering peace, stability and sustained economic growth in Africa through the provision of aid, enlarged investment and trade, and helping African partners overcome health challenges including HIV/AIDS and malaria, and preventing Africa from becoming a safe haven for terrorists. U.S. and African interests would be best served by quietly encouraging China to use diplomacy, aid as well as trade policy for engaging African leaders to promote good governance, spend oil and natural resource revenues responsibly and manage it as a public good in a transparent fashion in order to attain the mutually agreed upon goals set in broad terms by initiatives such as the Millennium Development Goals. Improving good governance, promoting stability and peace in Africa is ultimately in China’s interest as well as the United States’.

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Chapter 5

The U.S. Response to China’s Rise in Africa: Policy and Policy Options Raymond W. Copson Introduction The rapid expansion of China’s economic and political influence in sub-Saharan Africa is well recognized in the United States and has been the subject of numerous newspaper articles, opinion pieces, seminars, and scholarly papers (Moorcraft 2007; Copson 2006; Kristof 2006; Royce 2006; Traub 2006; Council on Foreign Relations 2006; Lyman 2005). Some have taken a largely negative view of China’s growing role, arguing that the Asian giant is acting out of shortsighted self interest, exploiting Africa’s resources, damaging the environment, and undermining the region’s prospects for balanced growth and self reliance. In setting non-interference in internal political affairs as a positive virtue and abjuring conditions on aid, critics argue, China is worsening grave problems, particularly corruption and a disregard for human rights and democratic principles, that have brought so many African states into difficulties. A More Nuanced View A more nuanced, and perhaps increasingly influential view acknowledges the many problems associated with China’s growing role, but argues that China’s Africa policy is anything but shortsighted. Noting the time and attention being devoted to Africa by China’s highest officials, as well as the full sweep of Chinese engagement with the region, those who take this view maintain that China has clearly made its relationship with Africa a long term strategic priority. Princeton Lyman (2006), a retired diplomat with long experience in Africa and Senior Fellow at the prestigious Council on Foreign Relations, describes the “breadth and vigor of Chinese activity” as “breathtaking” and regards the view that China is interested only in resource exploitation as “short of the mark.” According to Lyman,

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“China sees in Africa not only an important source of raw materials … but also a growing market and possibly a source over the long run for food, manufacturing, and industrial goods.” The more nuanced view also acknowledges that despite drawbacks, China’s African engagement can benefit the region. The global rise in demand for raw materials sparked by China’s surging economic growth has driven up commodity prices and contributed to the positive GDP growth rates now being seen in many African countries. Infrastructure projects, long out of favor among western donors as “white elephants,” are much needed in Africa today as part of regional economic recovery, and here too China is helping. In Angola, a consortium of Chinese companies is rebuilding the Benguela railway (Traub 2006), which once linked Zambia’s copperbelt with the Atlantic before it was destroyed in Angola’s 27-year civil war. Selfinterest is by no means absent in this project – Angola is China’s leading oil supplier, surpassing even Saudi Arabia – but completion of the railway’s reconstruction will likely benefit the entire southern Africa region. In Nigeria, a multi-billion dollar contract has been signed between the government and a Chinese firm for the construction of a railway from the port of Lagos to Kano, the largest city in the north, with an eventual spur to the east ending at Port Harcourt (BBC 2006). This project has the potential to revolutionize transportation in Africa’s most populous country. Again, China’s self interest is clear -- Nigeria is also an important oil supplier -- but China is helping Nigeria get this important project underway with a $2.5 billion loan. All around Africa, meanwhile, Chinese investments in telecommunications, power production, manufacturing, and tourism not only demonstrate China’s optimistic assessment of Africa’s development prospects (Xinhua 2006c), but are also helping to build the capacity that could bring that assessment to fruition. China has made a commitment to peacekeeping in Africa as well, sending hundreds of troops to participate in U.N. operations in the Democratic Republic of the Congo, Liberia, and southern Sudan. For the United States, China’s rise in Africa ought to pose two questions. Is a response required? And if so, what kind of response will best preserve the benefits of China’s growing role, while at the same time mitigating its negative consequences? A new “scramble” for influence in Africa between China and the United States must be avoided, since it could lead to competition in arms sales and in

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currying favor with corrupt and repressive rulers in oil-rich countries. The results would benefit no one over the long term. Instead, U.S. policymakers should be exploring ways in which both China and the United States can make a positive contribution to Africa’s future. At present, U.S. policymakers do not appear to be addressing these issues in a serious way, risking lost opportunities for both Africa and the United States. Is a Response Required? The attention China’s growing Africa role has received from American pundits, scholars and other experts might lead one to expect that there was a consensus in the United States on the need to respond in some way – and soon. However, the evidence suggests that this consensus does not yet extend to decision-making levels of the American government. The Bush Administration’s Assistant Secretary of State for African Affairs, Jendayi Frazer, visited China for discussions in November 2005, and said that she was looking forward to a continuing U.S.-China dialogue on Africa, where there “are many areas where I think we absolutely can cooperateʺ (Fisher-Thompson 2005). A dialogue is not policy, but it would be helpful as part of an exploration process that would lead to a policy. However, while some discussions on Darfur were reported in subsequent months, and representatives of U.S. think tanks as well as other researchers interacted with Chinese counterparts in discussions on Africa, there was no evidence of substantive consultations at official levels. When China’s President Hu Jintao visited President Bush in Washington in April 2006, Africa was not mentioned in public statements, apart from a passing reference by Bush to the possibility of deeper cooperation on Darfur (White House 2006). What can explain this U.S. reticence in moving forward with the dialogue promised by Frazer? The traditional reluctance of top American policymakers to see Africa as a region where the United States has important interests is no doubt part of the problem (Copson 2007). So is the distraction of events in regions they do regard as important, particularly the Middle East. There may also be a sense that the long term importance of China’s role in Africa is overblown by commentators and that there is little compelling need for a U.S. response. Some expect that China will encounter serious difficulties in

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Africa, such as political instability or negative reactions from Africans themselves, that will limit any gains. African criticism of the labor practices of some Chinese firms, or of competition for African entrepreneurs from Chinese merchants selling inexpensive Chinese manufactured goods, are often noted. China’s interest in acquiring rights to African oil fields may be worrisome for some policymakers, but they take comfort in the fact that the allocation of oil blocs is up to African governments, which are not likely to exclude western bidders from competition (Frynas & Paulo 2007). Western firms have deep pockets too, as well as advantages in the exploitation of deep ocean deposits that Chinese firms cannot yet match. If the Chinese challenge is exaggerated, there is little point in raising expectations by undertaking a dialogue that might have only modest results. Another line of argument against dialogue is that China seems intent at this point on pursuing an independent course in Africa, and is likely to see little reason for cooperation, coordination, or collaboration in Africa with the United States or other western countries. While it is probably true that the United States could ignore China’s rise in Africa without suffering irreparable harm to vital interests, doing so would be a mistake. China’s willingness to invest in Africa and to take on high-visibility projects is welcomed in Africa and this, together with its multifaceted initiatives in health, education and other sectors, means that its influence will inevitably grow. If the United States is to remain relevant in Africa and to have a voice in the flow of events, it must compete with China for the favorable opinion of African people. While U.S. policymakers may not typically see Africa as important to the United States, other Americans believe that this is a region where the United States has important historical obligations, such as those arising from the participation of Americans in the slave trade and the damage done during the Cold War. Many Americans, in both the secular and religious communities, want the United States to remain influential in Africa so that it can respond more effectively to its humanitarian emergencies, such as the current crisis Darfur. And many sense, as do the Chinese, that Africa is a region of great if as yet unrealized economic potential, where the United States ought to be deepening its economic engagement rather than losing opportunities to China.

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If the United States were to take up China’s challenge in Africa and compete for influence in a positive way, it might go some distance toward achieving another important goal: the restoration of its reputation as a responsible and largely benevolent actor in world affairs. That reputation has been sorely damaged during the George W. Bush Administration. Key factors include the intelligence fabrications surrounding the launching of the Iraq war, highlypublicized deviations from international norms in the arrest and treatment of prisoners, and the reluctance of the Administration to move forward on global issues, such as climate change and the reduction of trade barriers. The falling U.S. reputation in the world has helped create openings for China to present itself in Africa and elsewhere as a rising, peaceful, and positive actor – and one which respects international diplomatic norms. Restoring the U.S. reputation will require substantial policy changes on issues that extend well beyond Africa, but a generous and supportive Africa policy could be part of the solution. Bush Administration officials maintain that the United States has just such a policy, perhaps hoping that in making this assertion they might ameliorate some of the criticism received on other fronts. Certainly it is true that the President’s Emergency Plan for AIDS Relief (PEPFAR), launched by the Bush Administration in 2003, is helping Africa deal with a grave public health problem. The value of this program in strengthening America’s reputation as a benevolent actor, however, has been damaged by controversies over abstinence until marriage initiatives, condom distribution, and constraints on prevention efforts that focus on prostitutes. The Administration’s Millennium Challenge Account program is also bringing new resources to Africa and a modest re-engagement in supporting infrastructure projects in selected countries. But this program is limited by budget constraints as well as free market/good governance eligibility criteria that restrict the number of participants. Meanwhile, as China is winning praise for its expanding economic commitments, the United States seems heavily focused on waging the Global War on Terror (GWOT) in Africa through various military initiatives. Joint exercises are held regularly with African armed forces in the Sahel, for example, and a large training and equipment program, the Trans Sahel Counter-Terrorism Initiative (TSCTI), has been launched. U.S. troops are now based in Djibouti and operate

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throughout the Horn of Africa in capacity-building efforts. American support for warlords in Somalia, evidently seen as potential allies in GWOT, received extensive criticism when revealed in 2006. In 2007, the United States gave what was widely described as tacit encouragement to the Ethiopian military intervention in Somalia, and launched air strikes against fleeing Islamist militants. Whether an African peacekeeping force might be deployed to Somalia and might prove effective remained to be seen, but renewed instability and clan fighting seemed the most likely result of U.S. Somalia policy. The Pentagon is also moving forward with plans to create an “African Command” aimed at deepening U.S. military involvement in Africa. The net effect of these policies is to create the impression in Africa and elsewhere that the United States no longer gives priority to promoting long-term growth and development. Rather, many have come to feel, the United States is obsessed with the war on terror and favors military solutions to complex social and political problems. The perception that U.S. policies in GWOT are anti-Islamic in character is particularly damaging in the Muslim parts of Africa. A recent academic study found that even in a remote Tanzanian Muslim village, where some young men are attracted to Islamism, there is fear of an American air attack (Becker 2006). Meanwhile, China is gaining recognition as the external actor with the greater commitment to African growth and development. Africans see that China’s foreign minister starts each year with an extensive African tour and that President Hu Jintao is a regular visitor as well. By contrast, visits by top U.S. officials are comparatively rare. China’s success in portraying itself as a friend of Africa was on display at the gala November 2006 China-Africa summit in Beijing, where 48 African states were represented and 43 heads of state were in attendance (Gill et al. 2007). President Hu Jintao promised at the summit that China’s aid to Africa would double by 2009 and pledged $5 billion in new loans and credits. China outlined a series of new development programs and projects in health, education, and agriculture, promised debt forgiveness for Africa’s poorest countries, and extended preferential trade treatment for African exports to China. A $5 billion fund was announced to help Chinese firms invest in Africa, and China also offered to send anti-malarial drugs to Africa, build hospitals and clinics, and increase the number of scholarships for African students to study in China from 2,000 to 4,000 (IRIN News 2006; Xinhua 2006b).

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U.S. aid to Africa has also increased sharply under the Bush Administration, as officials often point out, due principally to the PEPFAR program, and runs at about $4 billion annually including an emergency food aid component of over $1 billion (Copson 2007). Moreover, the United States has its own preferential trade program, known as AGOA for the African Growth and Opportunity Act passed during the Clinton Administration. While officials boast of increased imports from Africa under AGOA, that increase has taken place almost entirely in oil. In any event, it is China, with its high-profile Africarelated events, its investment surge, and its infrastructure projects that is generating the excitement. China’s success in portraying itself as a fellow developing country, a respecter of sovereignty, and a supporter of the United Nations helps to enhance its reputation in Africa. Many are sympathetic to China’s argument that its astonishingly successful development model is relevant to the region (IRIN News 2006). Another reason for the United States to respond to China’s rise in Africa is that doing so could help to mitigate some of the negative consequences of that rise. The list of concerns over China’s involvement in Africa is long and includes its willingness to do business with repressive leaders, such as Zimbabwe’s President Robert Mugabe, and the environmental damage resulting from Chinese logging, mining, and drilling operations. Textiles and light manufactures produced in China and sold globally at low prices are a formidable competitive challenge for Africa, and threaten to deprive the region of the very industries it needs to nurture if it is to boost employment and achieve self-sustaining growth. This, combined with China’s focus on the extractive sector in Africa itself, risks perpetuating the region’s colonial and post-colonial role as a supplier of raw materials to the industrialized north (French 2007; Tull 2006). For those who emphasize these negative consequences, China’s claims that it is pursuing a “win-win” relationship with Africa and is committed to the region’s development must be treated with skepticism. Whatever China may intend for Africa, the challenges it poses to African development are real, and the United States, with the other western donors, has a responsibility to help Africa and Africans meet these challenges. There is, after all, a “Washington consensus,” on the requirements for sustainable development in Africa, and though modified and corrected over the years, it still includes such key elements as increased transparency, improved governance, and growth

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of the private sector. The conditions the west has placed on its aid to Africa are intended to further progress in these areas and their effectiveness is undermined by China’s “no strings attached” approach to aid and loans. The western development ideal also stresses respect for human rights and democratic principles as essential to long term growth and economic stability. Strengthening civil society organizations in Africa is another key component of current western aid programs in Africa. China’s development model is quite different, to say the least, and includes heavy restraints on the exercise of human rights, the practice of democracy, and the activities of civil society organizations. David Shinn, Africa policy scholar and former U.S. Ambassador to Ethiopia points out that China’s stance on human rights and democracy raises no objections from a wide swathe of Africa’s elites (Shinn 2006). Indeed, he writes, most African governments are neither troubled by China’s human rights record nor its human rights policy toward Africa. Those African countries with the worst human rights records welcome Chinese non-involvement in their affairs and even seek Chinese support in the U.N. Security Council and U.N. Human Rights Council, where China and thirteen African countries are members. The support cuts both ways. Most African countries on the Human Rights Council are equally reluctant to criticize China’s human rights record. In effect, China’s position is giving encouragement to those in Africa who would suppress critics and the political opposition – much to the detriment, according to the western model, of economic growth, let alone equity and justice. To be sure, western countries often fail to live up to the model they espouse for Africa. The Bush Administration, like China, is courting Teodoro Obiang Nguema Mbasogo, the notorious dictator of oil-rich Equatorial Guinea, whom Secretary of State Condoleezza Rice has called a “good friend” (U.S. Department of State 2006). Nor, many believe, has the Administration acted as firmly as it should have in defense of democracy, human rights, and transparency in Zimbabwe, Ethiopia, Gabon, and other countries. The seeming inability of the Administration to further efforts to protect human rights in Darfur has come in for much criticism. Nonetheless, the western model is worth defending and this requires engagement with Africa and China in order to counter negative consequences of China’s involvement.

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How to Respond? An effective U.S. policy toward China’s rise in Africa should have two components: positive competition with China in promoting Africa’s development and engagement with China to mitigate the negative consequences of its policies. Positive Competition If the United States is to compete positively with China in Africa, it must find means of engagement with the region that are needed, visible, and likely to generate favorable attitudes toward the United States among African people. Such a policy would require new initiatives in areas where U.S. aid will be most appreciated, including health, education, democracy promotion, human rights, peacekeeping and peace promotion, agriculture, and infrastructure. When recommendations for innovations in these areas are made to U.S. policymakers, they often respond, in effect, that “we’re already doing that,” and certainly it is true that, as discussed above, the United States has a large Africa assistance program and is contributing in other ways as well. But China is winning the battle to portray itself as the true friend of Africa today and will continue to do so unless the United States devotes greater resources and attention to the region. At the most basic level, U.S. friendship for Africa could be demonstrated by regular visits to the region by the President, Vice President, and Secretary of State. It should not be too much to expect that each make a swing through several African countries at least once a year, showing interest in African issues and problems and discussing ways in which the United States might help. Members of Congress should visit the region more often and in larger numbers than is now the case. This would serve not only as gesture of friendship, but also as a learning opportunity that would inform the legislation they enact on aid, trade, global health, and other issues that affect the region. Meanwhile, African leaders, singly and in groups, could be invited to Washington much more often than presently for discussions on important issues. Such exchanges would contribute to the development of more effective African outreach efforts. In the area of health, it is propitious that PEPFAR must be reauthorized by Congress if it is to continue beyond 2008. Renewal will

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offer legislators the opportunity to remove the ideologically-based provisions with respect to abstinence, condoms, and prostitution programs that have drawn so much criticism; and to increase the program’s resources. A major expansion in funds going to prevention, currently limited to 20 percent of total PEPFAR spending, is much needed. Health expert Laurie Garrett of the Council on Foreign Relations has argued persuasively that the United States and other western donors should get beyond their focus on AIDS and a few other specific diseases and instead intensify efforts to strengthen African health systems broadly. This effort would include increased funding and training for thousands of African health care workers (Garrett 2007). Clinics could be built affordably and on a large scale, and African health capacity could be strengthened by sourcing more health system inputs in Africa itself rather than from abroad. The “brain drain” of African doctors and nurses to the west must be eased, in part by boosting salaries in Africa through foreign aid and in part by reducing demand in the United States through an expansion of nursing and medical education for Americans. Initiatives along these lines would benefit Africans immeasurably and at the same time bring credit to the United States. Similarly, in education, there are vast opportunities for the United States to do more at all levels. In primary education, Africans would welcome support for building and equipping primary schools as well as help in acquiring textbooks and supplies. In higher education, the United States has much to offer in terms of strengthening African colleges and universities, and could surely do more to assist Africans seeking higher education in the United States. The demand is strong – and much stronger than the African demand for higher education in China. According to the Institute of International Education, more than 6,500 students from Kenya alone were studying in the United States in 2005/2006, while there were more than 6,000 students from Nigeria (International Institute of Education 2006). However, U.S. campuses report that only about 2,500 students from all countries worldwide were receiving their primary support from the U.S. Government. Clearly there is room for a sharp increase in U.S. scholarship support for African students. In the area of democracy and human rights, the United States is doing valuable work through the Democracy and Governance program at U.S. Agency for International Development (USAID) and through a

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federally-funded foundation, the National Endowment for Democracy. U.S.-funded programs are strengthening national electoral commissions, building the capacity of parliaments, and encouraging the development of civil society organizations, including human rights organizations. These efforts should be expanded because they can help to show the people of Africa that in contrast to China, the United States is working to strengthen the rights of individuals and to further their participation in the political process. Congress can play a role not only by appropriating the necessary resources, but also directly. The House of Representatives has launched a fledgling “House Democracy Assistance Commission” which is promoting exchanges with the parliaments of Kenya and Liberia, but there are many other African parliaments that would benefit from participation as well. The program could be strengthened by broadening it to include members of the Senate and Senate staff. But the possible gains from democracy promotion cannot be realized unless U.S. diplomacy works to the same ends. This will require that U.S. officials refrain from gestures of friendship toward authoritarian rulers, even if they happen to be in control of oil resources coveted by China. In each of the other areas mentioned above – peacekeeping and peace promotion, agriculture, and infrastructure – the United States can also afford to be more engaged and more generous than at present (Copson 2007). Suffice it to say that the United States could do far more to support United Nations and African Union peacekeeping operations and mediate in African conflicts through intensified diplomatic efforts, including the appointment of special envoys for each major conflict. It could do more to support agricultural institutes and agricultural extension services around the region. The United States should do more than pay lip service to lowering trade barriers that discriminate against African cotton and sugar growers. Tax incentives could be given to encourage U.S. private investment in Africa, including U.S. participation in African infrastructure projects. Loan programs as well as investment guarantees could be widened as well (Council on Foreign Relations 2006, p. 123). Many of these proposals could benefit Africa and win friends for the United States despite constraints on providing aid to governments that violate human rights, practice corruption, or fail to implement economic reforms. In other words, there are types of aid and other forms of support the United States can offer Africa without conditions,

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as China does. The United States can and should provide assistance to help African people meet urgent humanitarian needs regardless of the form of government in the countries concerned. Congress supports humanitarian aid, and there would likely be broad backing for an initiative to support the building of clinics, for example, throughout the region – even in countries that are ill-governed (U.S. Foreign Assistance Act of 1961). Scholarships can be offered to African students regardless of the character of the government in their home country. Indeed, doing so would help to prepare the ground for better governance in such countries in the future. Frequent, high-level visits by U.S. officials would show Africans in all countries that the United States is interested in Africa and values its relationship with the region. Visits to countries governed by repressive regimes should be avoided, but that too would send a message of support for the oppressed. Engagement to Mitigate Negative Effects Mitigating the negative effects of China’s role in Africa is going to require active engagement with China on African issues. U.S. policymakers will have to do more than promise dialogue and engage in occasional discussions, and instead seek out Chinese counterparts at all levels for exchanges on African issues. Africa topics – and not just Darfur – should be raised at China-U.S. summits and other high level meetings. U.S. ambassadors in Africa should be holding discussions with Chinese ambassadors on a regular basis, just as mid-level officials should be visiting Beijing for Africa-related talks and inviting Chinese officials to meetings and seminars in the United States. U.S.-based think tanks, such as the Center for Strategic and International Studies in Washington or the Council on Foreign Relations, with offices in New York and Washington, should expand their efforts to engage Chinese think tanks and policy-making bodies in discussions. The purpose of these exchanges would be to persuade China that it has a common interest with the United States in promoting good governance and transparency in Africa and that there are some areas, such as fighting crime and peacekeeping training, where cooperation might benefit both countries and Africa as well. It will not be possible to persuade China to become an advocate of western-style democracy and rigorous respect for human rights in Africa, since Chinese leaders view these concepts as antithetical to their own model of development.

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However, it could prove useful to take every opportunity to remind the Chinese that support for repressive, intolerant, and corrupt regimes in Africa risks alienating African civil society to the detriment of China’s long-term interests. Is there any reason to hope that China would respond to an intensified engagement with the United States on Africa? Several factors suggest that China might be interested in efforts to encourage improved governance. Information is lacking on whether or to what extent Chinese firms are affected by corruption in Africa, but it seems likely that they suffer from this problem just as do other foreign firms and African businesses as well. Chinese living in Africa also suffer from crime. Chinese nationals in South Africa, where as many as 14 were killed in 2006, have felt compelled to establish a special crime fighting fund (Xinhua 2006d). Serious problems with crimes against Chinese have been reported in Zimbabwe and Kenya as well, and Chinese oil workers have been kidnapped in the Niger Delta (Gettleman 2007; Xinhua 2007; Karumbidza 2006). The need to fight crime and corruption gives China an interest in improved governance and enhanced government capacity in Africa. Stronger African capacity is also going to be needed if China’s investments in African infrastructure are going to be protected and maintained. As China’s global interests widen and deepen, it must be concerned about its own reputation as a responsible actor in world affairs. An unfavorable reputation in this regard would only complicate China’s efforts to build and sustain influence in world affairs, as the United States has found to its cost in recent years. China’s concern for its reputation may already be affecting its policy on Darfur, where it has been heavily criticized for obstructing deployment of a United Nations peacekeeping force in the interest of cultivating its oil-based relationship with the Sudanese government. In late 2006, in a seeming change in behavior, Chinese diplomats were reportedly urging Sudan to agree to the deployment of a force. President Hu Jintao said that he had encouraged Sudan’s President Omar al –Bashir to “find an appropriate settlement” to the conflict (Xinhua 2006a). In January 2007, the U.S. Special Presidential Envoy for Sudan, Andrew Natsios, visited Beijing for meetings on Darfur and reported that Chinese leaders were indeed pushing the Bashir regime for a settlement (Cody 2007). Whether China’s support for a resolution of the conflict in Darfur is deep and sincere, or likely to be sustained, is

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not yet known. Some took comfort from reports that Hu had again pressed Bashir on Darfur during a February 2007 visit to Khartoum; others feared that Hu’s promise to build Bashir a new presidential palace reflected a lack of seriousness on the issue. But the Natsios visit at least suggests that dialogue with China can prove beneficial and that China can be persuaded to move in new directions in order to strengthen its image as a positive force in Africa. One practical step the United States might take to engage China in fighting corruption in Africa would be to throw American weight behind strengthening and enlarging the International Extractive Industries Transparency Initiative (IEITI). The initiative, launched by Britain’s Prime Minister Tony Blair at the 2002 World Summit on Sustainable Development in Johannesburg, affirms that the prudent use of natural resource wealth “should be an important engine for sustainable economic growth.” At the same time, the initiative calls for high standards of transparency and accountability, and the disclosure of all payments related to extractive industries to assure that natural resource wealth is used for the benefit of citizens in the countries concerned (Extractive Industries Transparency Statement 2003). Many countries, including the United States, have signed onto the initiative, as have major energy firms and investors, the international financial institutions, civil society organizations, and the New Partnership for Africa’s Development (NEPAD) – the African good governance initiative adopted at the 2001 summit of the Organization of African Unity, now the African Union. But China and Chinese firms have not signed, even though doing so would have obvious public relations advantages for China and potential benefits for Africa as well. The initiative needs additional resources and technical assistance (Global Witness 2006), and the United States can be helpful here -- just as it could be helpful in urging China to join, both in private meetings and through public statements. The International Criminal Court (ICC) is another promising international initiative that could prove beneficial to Africa’s people, and one that would be strengthened by China’s encouragement and support. The ICC aims at putting on trial individuals accused in the most serious crimes of international concern – genocide, crimes against humanity, and war crimes. If it proves effective, the court could be a powerful deterrent to the gravest human rights violations in Africa, as elsewhere.

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The Hague-based court’s first prosecution, which went to court in November 2006, involved Thomas Lubanga Dyilo, suspected of forcing children in the eastern Democratic Republic of the Congo to serve as child soldiers and sex slaves (Simons 2006). Some 104 nations, including 29 in Africa, have become parties to the 1998 Rome Statute, which created the court (International Criminal Court website), but unfortunately neither the United States nor China is among them. The United States alleges that the court has unchecked authority (U.S. Mission to the United Nations 2004) and fears that U.S. military personnel might be brought before it, despite provisions in the Rome Treaty that make this unlikely. China also has a number of sovereigntyrelated concerns with respect to the court (Lu Jianping & Wang Zhixiang 2005). Neither government is setting an example of responsible international behavior on this issue, and their stances might be used all too easily to lend justification to some future effort by an African government to ignore the court. It is too much to expect that the George W. Bush Administration will change its views on the ICC, but perhaps a future Administration will see the wisdom of participation and try to persuade the Chinese to support the court as well. As noted above, China has shown a strong interest in peacekeeping in Africa, and this has also been an area of interest for the United States. The focus of U.S. interest in recent years has been on training African peacekeepers so that the United States will not be pressured to send large numbers of its own troops to Africa. Peacekeeping training is taking place through the African Crisis Operations Training Assistance (ACOTA), which has become part of the Global Peace Operations Initiative (GPOI) launched by the G8 nations in 2004. Since GPOI is already a multilateral effort – Italy, for example, is helping to train gendarme-type forces for participation in peacekeeping – it would seem to offer a ready vehicle for Chinese involvement, perhaps in the provision of training and of equipment, such as trucks and short-range aircraft. Engaging China in GPOI could help Africa in dealing with conflicts and instability, while at the same time building experiences in Chinese cooperation with the United States and other western donors that could prove useful in other areas.

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Can it Happen? While a good case can be made for a new U.S. policy on China’s rise in Africa, prospects for the emergence of such a policy under current circumstances are slim. U.S. policymakers are simply too focused on the Middle East and the Global War on Terror to give China’s growing role in Africa the attention it deserves. China’s success in Africa might seem to be a clarion call for a new American approach, but it is a call to which policymakers will likely continue to be deaf. U.S. ties to Africa will probably deepen in the military sphere, and U.S. imports of African energy resources will probably grow, but neither of these trends will help to restore the reputation of the United States as a positive force in Africa and the wider world. Nor will they do much to improve the daily lives of Africans – indeed to the extent they entrench authoritarian, repressive, or corrupt regimes, they will prove detrimental. Conclusion A change in U.S. policy on China’s role in Africa, or on Africa policy generally, will probably have to await the emergence of a set of policymakers more cognizant of Africa’s importance in world affairs and of U.S. responsibilities there. For years, there has been hope that the humanitarian impulses of the American people, manifested today in the strength of the Save Darfur Coalition, might combine with a dawning realization in the foreign policy community of Africa’s economic potential, to provoke a recalculation of U.S. interests in the region. This may yet happen, and there are signs of progress, as in the decision of the new House of Representatives that took office in January 2007 to increase spending to fight global AIDS. But Africa remains a marginal concern in the executive branch. In the absence of any U.S. challenge, Chinese policymakers will have little near-term reason to alter the course of their country’s Africa policy, which in Chinese eyes is going from strength to strength. Perhaps in the long term, China will come to recognize that it has an interest in strengthening governance in Africa and in distancing itself from repressive regimes, but by the time this realization occurs, much damage will have already been done.

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References Becker, F 2006, ‘Rural Islamism during the ‘War on Terror’’, African Affairs, vol. 105, no. 421, October, pp. 583-603. BBC 2006, ‘China to build Nigerian railway’, October 31. Cody, E 2007, ‘China given credit for Darfur role: U.S. official cites new willingness to wield influence in Sudan’, The Washington Post, 13 January. Copson, RW 2006, ‘China Branches Out’, Los Angeles Times, 13 April. Copson, RW 2007, The United States and Africa: Bush policy and beyond, Zed Books, London. Council on Foreign Relations 2006, ‘More than humanitarianism: a strategic U.S. approach toward Africa, Independent Task Force Report no. 56, New York. Extractive Industries Transparency Initiative 2003, ‘Statement of Principles and Agreed Actions’, London Conference, June 17. French, HW 2007, ‘Commentary: China and Africa’, African Affairs, vol. 106, no. 422, January, pp. 127-132. Fisher-Thompson, J 2005, ‘Stateʹs Frazer discusses U.S.-Chinese cooperation on Africa’, U.S. Department of State, Washington File, December 6. Frynas, J G & Paulo, M 2007, ‘New scramble for African oil? Historical, political, and business perspectives’, African Affairs (forthcoming). Garrett, L 2007, ‘Do no harm: the global health challenge’, Foreign Affairs, vol. 86, January/February, pp. 14-38. Gettleman, J 2007, ‘In Kenya’s capital, a sense that danger is ever stronger’, New York Times, February 3. Gill, B, Chin-hao Huang & Morrison, J. S. 2007, ‘China’s expanding role in Africa and implications for the United States’, Center for Strategic and International Studies, Online Africa Policy Forum, January 25. Global Witness 2006, ‘The Extractive Industries Transparency Initiative: Time to Go Global’, October 16. International Criminal Court website at http://www.icc-cpi.int, click on “About the Court.” International Institute of Education 2006, ‘Data tables: international students 2006’, at http://opendoors.iienetwork.org.

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IRIN News 2006, ‘China to double aid to Africa, 6 November. Karumbidza, JB 2006, ‘Comment and analysis: can China save Zimbabwe’s economy?’, Pambazuka News, December 14. Kristof, ND 2006, ‘China and Sudan, blood and oil’, New York Times, 23 April. Lu Jianping & Wang Zhixiang 2005, ‘Chinaʹs attitude towards the ICC’, Journal of International Criminal Justice, vol. 3, no. 3, July, pp. 608620. Lyman, P 2005, ‘China’s rising role in Africa’, presentation to the U.S.- China Commission, July 21. Lyman, P 2006, ‘China ups the ante in Africa’, Center for Strategic and International Studies, Online Africa Policy Forum, 6 December, at www.csis.org. Click on “Africa.” Moorcraft, P 2007, ‘Why China Succeeds in Africa’, Washington Times, 8 January. Royce, E (Congressman) 2006, ‘Pentagon imperative: focus on Africa’, Christian Science Monitor, 14 November. Shinn, DH 2006, ‘The China factor in African ethics and human rights’, remarks prepared for the 2006 Oxford-Uehiro-Carnegie Council Conference, 7-8 December. Simons, M 2006, ‘Congo warlordʹs case is first for International Criminal Court’, New York Times, 10 November. Traub, J 2006, ‘China’s Africa Adventure’, New York Times, 19 November. Tull, DM 2006, ‘China’s engagement with Africa: scope, significance, and consequences’, Journal of Modern African Studies, vol. 44, no. 3, September, pp. 459-479. U.S. Department of State 2006, ‘Remarks with Equatorial Guinean President Teodoro Obiang Nguema Mbasogo before their meeting’, press release, 12 April. U.S. Foreign Assistance Act of 1961 (Public Law 87-195, as amended), Sec. 620A U.S. Mission to the United Nations 2004, ‘Explanation of position by Eric Rosand, Legal Advisor, on the Adoption of Resolution concerning the Report of the International Criminal Court, in the Sixth Committee, 19 November, 2004’, press release, New York. White House 2006, ‘President Bush and President Hu of Peopleʹs Republic of China participate in arrival ceremony’, 20 April, 2006.

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Xinhua, 2006a, ‘Hu urges to maintain stability in Darfur in talk with Sudanese counterpart’, November 2. Xinhua 2006b, ‘Action Plan adopted at China-Africa Summit, mapping cooperation course’, November 5. Xinhua 2006c, ‘Year-ender: Africa -- a continent stepping onto world stage’, 19 December. Xinhua 2006d, ‘Overseas Chinese in South Africa set up anti-crime fund’, 22 December. Xinhua 2007, ‘Chinese kidnapped in Nigeria to be released safely’, 7 January.

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Chapter 6

All-weather Friends in Need and in Deed China-Africa Relations Seen from the Eyes of a Chinese Diplomat Liu Guijin

Introduction Browsing through recent newspapers, one could easily spot the extraordinarily frequent appearance of both China and Africa in the headlines and comments alike. Presumably, this can be attributed to the G8 Gleneagles Summit, which demonstrates the increasing significance of the developing world. However, as a career diplomat who has been involved in China-Africa relations for over three decades, I was rather more amused by one press clipping which describes how a girl from Kenya took on a journey to find her roots in China. Indeed, China and Africa, despite the geographical hurdles, managed to reach to each other long before the Western colonizers set foot on the continent. That historical link, together with the common experience and mutual support in the struggle for independence, informed the solid foundation for the “all-weather” friendship between China and African countries. Nevertheless, the impact of changes both nationally and internationally over the years on the terrain of ChinaAfrica ties cannot be overemphasized. It is against this backdrop that the adaptation to the new situation on both sides becomes all the more imperative in an effort to further develop the two-way cooperation for the wellbeing of their peoples. The Changing Landscape As a continent richly endowed with brilliant culture and natural resources, Africa used to be a much-coveted target for Western powers. Almost all African countries were subjected to Western colonial rule. The colonial legacy has by no means been conducive to the economic and social development of African countries. It took African countries several decades to consolidate the hard-won political independence.

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Peace, security, economic and social upliftment in African countries have since become a daunting task. The past few years have witnessed profound yet positive changes on the African continent. With the concerted efforts of the African Union and sub-regional organizations, Africa has made great progress toward resolving regional conflicts, resulting in greater peace and stability in its overall situation. Democracy and rule of law have been consolidated in most African countries. By virtue of its abundant natural resources and unique competitive advantages, African countries have spared no effort in exploring a development path in light of their own national circumstances, taking economic growth, poverty eradication and improvement of people’s livelihood as their top priority. The economy of Africa as a whole has grown for ten years in a row. The founding of African Union and the identification of New Partnership for Africa’s Development as its continental development blueprint have added fresh momentum to the continent in seeking selfstrengthening through unity and controlling its own destiny, thus better positioning itself in responding to global challenges. Meanwhile, there has been an unprecedented momentum in the international community to turn attention into action, to help Africa beat poverty and achieve the Millennium Development Goals. An era of African Renaissance is emerging, as Africa is playing an increasingly important role in international affairs. For some years, the trend of globalization has swept across each and every continent. China, the most populous country in the world, cannot and should not insulate herself from this phenomenon. In the wake of the re-configuration of the world economic structure and the rapid development of information technology, China finds herself on the threshold of opportunities and challenges. The emergence of China in economic and trade terms on the international stage has been a result of a reviewing and learning process. There had been setbacks and mistakes in the country’s pursuit of national prosperity after the founding of the People’s Republic in 1949. One of the most important lessons China has learned has been that, as a country, the improvement in the overall national strength and specifically economic development must always remain paramount on the national agenda. The resolution of problems in China can only be found in a clear understanding of the national realities and policies thereof.

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The sustained rapid development of Chinaʹs economy is attributable to the following factors: the governmentʹs adherence to economic development as the central task, and solution to the problems on our way forward and to building socialist market economy as the direction of reform; our relentless efforts for institutional innovation, which has lent a strong impetus to socio-economic development; our policies of ʺinviting inʺ and ʺgoing outʺ and active participation in international economic and technical cooperation and competition in a bid to make full use of both domestic and foreign markets and resources; our recognition of the basic role of market in allocating resources and our application of macro-control measures by economic and legal means. To address the possible contradictions and problems in the process of development, the Chinese Government has drawn up policies and measures, the most fundamental of which is to follow a scientific concept of development and apply this concept to guide our socioeconomic development. Our scientific and sustainable approach to development includes the following main points: first, adopt a human-centered development strategy, bearing in mind peopleʹs fundamental interests in the course of development: we will try to meet peopleʹs growing material and cultural needs, and bring benefits of development to all people; second, take economic development as our central task and promote economic, political and cultural advancement in an all-round way to achieve comprehensive socio-economic development; third, balance urbanrural development, regional development, socio-economic development, harmonious development of man and nature and domestic development and opening-up; fourth, coordinate economic development with population growth, resource availability and environmental protection and stick to a road of sustainable development consistent with the characteristics of a modern society, i.e. high productivity, prosperity and good ecological environment. Given the drastic changes in both China and Africa as well as in the international arena, the traditional China-Africa friendship should not remain stagnant. Injecting new elements in both form and content has always been the consistent concern for China in its African policy. In this February [2005], during his visit to Africa, Chinese President Hu Jintao put forward three-point initiatives, namely: to build on the traditional friendship and push for new progress in China-Africa

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relations; to persist in mutual assistance and mutual benefit and promote the common prosperity of China and Africa; and to cooperate even more closely in an effort to safeguard the rights and interests of the developing countries. He also promised solemnly that together with our African brothers, we are ready to do whatever is helpful to peace and development in Africa, to the friendship and cooperation between China and Africa, and to the maintenance of interests of the developing countries as a whole. New Platform for New Situation In order to further strengthen the friendly cooperation between China and Africa under the above-mentioned new circumstances, jointly respond to the challenge of economic globalization and promote common development, and in light of suggestions of some African countries, the Chinese Government made the proposal on the convocation of the Forum on China-Africa Cooperation (FOCAC) Ministerial Conference Beijing 2000, which was positively responded to by the overwhelming majority of African countries. In my capacity as the Director-General of the Department of African Affairs in the Chinese Ministry of Foreign Affairs, I had the privilege to get personally involved in the whole preparation and establishment of the Forum. I still recall clearly that, the Forum was set to be a new platform established by China and friendly African countries, for collective consultation and cooperation, as well as an effective mechanism to promote South-South cooperation. In light of this, the following should inform the Forum: •

Pragmatic Cooperation: its purpose is to strengthen consultation and expand cooperation with focus on substantial results.

•

Equality and Mutual Benefit: it promotes both political dialogue and economic cooperation and trade on the basis of equality and partnership, with a view to promoting common development.

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The First Ministerial Conference of FOCAC The first ministerial conference of FOCAC was held in Beijing from 10 to 12 October 2000. More than 80 ministers from China and 44 African countries, representatives of 17 regional and international organizations as well as business people from China and Africa attended the conference. Two major agenda items were discussed at the Conference: 1. In what way should we work toward the establishment of a new international political and economic order in the 21st century? 2. How should we further strengthen Sino-African economic cooperation and trade under new circumstances? After lively discussions on the plenary session and four workshops, namely, “Investment and Trade between China and Africa”, “Experience of Reform of China and African Countries”, “Poverty Eradication and Sustainable Development of Agriculture”, and “Cooperation in Education, Science, Technology and Health between China and Africa”, the participants reached broad consensus on important issues. The fruitful result reflected on the two documents adopted on the Conference: •

ʺBeijing Declaration of the Forum on China-Africa Cooperationʺ - An authentic reflection of the common understanding of China and Africa on major international and political issues, especially on the establishment of a new international political and economic order and the shared aspiration to strengthen their friendly and cooperative relations. The two sides agreed to commit themselves to establishing a new, stable and long-term partnership featuring equality and mutual benefit.

•

ʺProgram for China-Africa Cooperation in Economic and Social Developmentʺ - A detailed elaboration on the specific ideas and measures of cooperation between China and Africa in the areas of economy, trade, agriculture, tourism, science, education, culture, health, environment, etc. It puts in place a new framework for the development of Sino-African

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relationship and draws a new blueprint for future cooperation between China and Africa in all fields in the new century. Now that the framework was in place, the two sides worked seriously on the follow-up mechanisms, which is of vital importance to the implementation of the great ideas. According to the ʺProgram for China-Africa Cooperation in Economic and Social Developmentʺ, the two sides agreed to set up joint follow-up mechanisms at various levels. Under these mechanisms, the ministers will meet every three years to evaluate progress made in achieving the goals of the last conference and make a program for further cooperation in the coming three years, senior officials will meet in the second year after the ministerial conference for mid-term evaluation of the follow-up actions of the conference, and competent departments of the Chinese side and African ambassadors to China will meet on a regular basis. The Senior Officials Meetings and the Ministerial Conferences will be convened alternately in China and Africa. Soon after the first Ministerial Conference, the Chinese side established the Follow-up Committee of FOCAC, which consisted of 22 government ministries and financial institutions and was co-chaired by Vice Ministers responsible for African affairs from the Ministry of Foreign Affairs and Ministry of Commerce. I had the honor to be the first Secretary-General of the Committee Secretariat. Some African countries also established corresponding follow-up mechanisms. In July 2001, China and Africa held a ministerial consultation in Lusaka, Zambia, in which the ʺProcedures of the Follow-up Mechanism of the FOCACʺ was discussed. In April 2002, the ʺProcedures of the Follow-up Mechanism of the FOCACʺ formally took effect. The African diplomatic corps in Beijing and the Secretariat of the Chinese Followup Committee have had fruitful dialogue and collaboration in implementing the follow-up actions. Implementation of the Follow-up Actions Political Exchanges Political exchanges and cooperation between China and African countries have been strengthened continuously. Chinese leaders visited Africa on 20 occasions and China received more than 30 presidents,

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.

vice presidents, prime ministers and parliamentary leaders from African countries. China supports African countries in their efforts in safeguarding regional peace and stability. China sent its peacekeeping troops to Africa for the first time to take part in the UN peacekeeping operations in the Democratic Republic of Congo and Liberia. Economic Cooperation The Chinese Government has honored its promise by completing ahead of schedule debt reduction for African countries. By June 2002, China had signed debt exemption protocols with 31 African states, canceling 156 debts with a total value of 10.5 billion RMB yuan. China-Africa trade grows year by year. The total trade volume reached US$18.545 billion in 2003, up by 49.7 percent over the previous year and approximately 75 percent over the year 2000. Exports to China from African countries have gone up substantially, resulting in steady dwindling in their trade deficit with China. China-Africa cooperation in investment is developing fast. China has signed bilateral investment protection agreements with more than 20 African countries, and set up ʺChina Trade and Investment Promotion Centerʺ in 11 countries. One hundred seventeen new Chinainvested enterprises have been established in Africa. China continued to provide, within its capacity, assistance to African countries with no political strings attached. China has signed 245 new agreements with African countries on economic assistance, the amount of which accounted for 44 percent of the total value of new agreements China signed on foreign aid in that period. The Chinese side has set up the African Human Resources Development Fund, sponsored nearly 300 training courses of various forms, trained more than 6,000 African personnel in the areas of diplomacy, economic management, national defense, agriculture, medical treatment, health, education, science, technology and culture, and over 500 visits have been made to African countries by Chinese experts and teachers. China has made contribution to the African Capacity Building Foundation initiated by the IMF and sponsored nearly 20 vocational courses under the framework of TCDC exclusively designed for African trainees.

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Social Development China has increased the number of scholarships for African students in China. Some Chinese universities have established contact with their African counterparts for cooperation on laboratory and computer centre development and have sent teachers to some colleges of African countries. China has signed or renewed protocols with 40 African countries on dispatching Chinese medical teams, continued provision of free pharmaceuticals, medical equipment and other hospital materials, and cooperated with Africa in the prevention and treatment of HIV/AIDS, malaria and tuberculosis. China-Africa cooperation in tourism has started, with Egypt, South Africa and Morocco becoming the destination countries for outbound Chinese tourists who cover their own travel expenses. The Second Ministerial Conference of FOCAC The Second Ministerial Conference of FOCAC was convened in Addis Ababa, capital of Ethiopia, from 15 to 16 December 2003. The theme of the conference was “Pragmatic and Action-Oriented Cooperation”. The document emanating from the conference, namely, FOCAC Addis Ababa Action Plan (2004-2006), mapped out a program for China-Africa cooperation in the political, economic, trade and social development and other areas in the next three years to come. In this document, the Chinese Government made the following commitments: 1. Continue to increase assistance to African countries under the FOCAC framework; strengthen cooperation with Africa in human resources development and train up to 10,000 African personnel in various fields in three years; open market and grant tariff-free market access to some commodities from the least developed countries in Africa; 2. Expand tourism cooperation with Africa and give 8 African countries, namely, Ethiopia, Kenya, Tanzania, Zambia, Mauritius,

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Seychelles, Zimbabwe and Tunisia, the approved destination status for outbound Chinese tourists who cover their own travel expenses; 3. Sponsor ʺMeet in Beijingʺ- an international art festival focusing on African arts and the ʺVoyage of Chinese Culture to Africaʺ; Increase people-to-people exchanges with Africa and propose a ʺChina-Africa Youth Festivalʺ to be held in China in 2004. Acknowledging that private sector is one of the driving forces of economic cooperation between China and Africa, the first China-Africa Business Conference was held in parallel with the 2nd Ministerial Conference. Over 500 Chinese and African businessmen attended the conference. Twenty one cooperation agreements were signed with a total value of US$1 billion. Implementation of the Follow-up Actions China and Africa both attach great importance to the implementation of follow-up actions of the 2nd Ministerial Conference of FOCAC and have taken many positive measures in this regard. Now everything is going well in this process. China-Africa political exchanges of high-level visits continue to increase. Since 2004, Chinese President Hu Jintao and other top leaders visited Africa respectively. The Presidents of Mozambique, Madagascar, Tanzania, Uganda, Mali, Namibia, Central Africa, Gabon, Eritrea and the Democratic Republic of the Congo and several vice presidents and prime ministers of African countries visited China successively. China and Africa have further enhanced their cooperation in the field of peace and security. China has dispatched 838 peacekeeping personnel in 8 UN peacekeeping operations in Africa, among which were 776 in the Democratic Republic of the Congo and Liberia. Economic cooperation and trade between China and African countries continue to grow robustly. The total trade volume reached US $29.462 billion, up by 58.9 percent over the previous year. China signed 127 new economic assistance agreements with African nations in 2004. China made direct investment worth US$ 135 million in 2004 in Africa and US$625 million in total by the end of 2004. Sino-Africa cooperation in the financial sector made new progress.

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Cooperation between China and African countries in human resources development has been stepped up. China increased financial input, enlarged the scale of training programs, and established the Inter-Ministerial Coordination Mechanism on Foreign Human Resources Development Cooperation. In 2004, the Chinese side trained over 2400 personnel in various fields and received 332 students from African countries, sent hundreds of experts to African countries to train the local people and launched the youth volunteers service program in Africa. The Chinese side has by and large finished the implementation of the exemption of tariffs for certain commodities exported from some least developed African countries. Twenty five African nations began to enjoy the zero-tariff treatment of 190 kinds of goods exported to China from 1 January 2005. ʺMeet in Beijingʺ, a month-long international art festival with African culture as the main theme and the cultural event ʺVoyage of Chinese Culture to Africaʺ were held successfully from the end of April to early May and July respectively in 2004. ʺChina-Africa Youth Festivalʺ was successfully held in China from 22 to 31 August 2004. China has signed MOUs with 8 African countries, which were given the approved destination status for outbound Chinese tourists who cover their own travel expanses. Chinese tourists started visits to these countries from 15 December 2004. The 3rd Ministerial Conference of the FOCAC is scheduled to take place in the latter half of 2006 in China. One of the agreed themes of the conference has been improving mutual investment between China and African countries. Consultation is currently under way between China and Africa countries on what other actions could be taken to expand and deepen China-Africa cooperation. China-South Africa Relations I was appointed Ambassador to South Africa in 2001, barely three years after the two countries established diplomatic relations. My stay in South Africa has been quite rewarding, thanks to the political will and staunch commitment on both sides to strengthen bilateral ties in various fields. The development of cooperation between the two countries so far can be described as all-round and rapid. Mutual trust is steadily enhanced along with frequent exchanges of high-level visits. In

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April 2000, the two countries signed the Pretoria Declaration on partnership relations, followed by the establishment of the Bi-National Commission (BNC). At the second session of BNC in June last year [2004], China and South Africa further identified their relations as “strategic partnership of equality, mutual benefit and common development”. This identification not only responds to the objective requirements for the deepening of relations between China and South Africa, but also sets even higher goals for the two countries in further elevating their level of cooperation. With a 20 percent share in the China-Africa trade, South Africa is China’s largest trading partner in Africa. For South Africa, China is its fifth largest trading partner with almost even trade balance. Bilateral trade of US$ 5.912 billion was recorded in 2004. It is expected that the bilateral trade could exceed US$ 7 billion for the year of 2005. Two events in June last year [2204] have created fresh opportunities for the expansion of economic cooperation and trade between China and South Africa in particular and that between China and countries in the Southern African region in general. One was the official recognition by South Africa of China’s status as a market economy. The other was South Africa’s announcement on behalf of Southern African Customs Union (SACU) that negotiations will begin with China on the Free Trade Agreement (FTA). As for investment, the total volume of twoway investment between China and South Africa arrives at US$ 500 million. Cooperation between the two countries also progresses smoothly in major projects in mineral and energy sectors. Furthermore, China and South Africa have been cooperating dynamically in many other fields including culture, science and technology, education, justice as well as in the international arena. In April 2003, South Africa became the first country of destination in subSahara Africa for self-financed Chinese tourists. Seventeen pairs of Chinese and South African provinces or cities have signed twinning agreements so far. China supports South Africa in playing an even greater role in African and world affairs and has also responded positively to the call by South Africa for enhanced cooperation among developing countries, especially among major countries in the developing world. Against the backdrop of the above-mentioned, it is fully convinced that the strategic partnership between China and South Africa will enjoy even more promising prospects.

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Conclusion China is the largest developing country in the world while Africa is the continent where the largest number of developing countries is located. There is no reason for the two sides not to deepen their cooperation in as many fields as possible within the framework of South-South solidarity and cooperation. I, as a veteran “Africanist”, couldn’t help but envisage the day when the African Renaissance becomes a reality and the African people all share the benefits of economic prosperity and social advancement. China can always be a trust-worthy partner of all African countries in this process.

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Chapter 7

Chinese Investments in Africa: A Cross-cultural Management Perspective John Kuada Introduction China is one of the fast-growing emerging economies in the world today. It has an impressive growth rate of approximately 9 percent annually. Its contribution to global GDP growth since 2000 has been almost twice as large as that of the three biggest emerging economies that follow it (India, Brazil and Russia) put together. Thus, working with Chinese firms has become a reality for a majority of managers in most parts of the world including African countries. China’s economic policies towards Africa have also changed significantly during the last decade. The first China-Africa Cooperation Forum was held in Beijing in 2000, at which a mechanism for promoting trade and investment relations between China and African countries was established. In 2006 African and Chinese leaders met again in Beijing to re-affirm their bonds of economic and political relations and to define new paths of cooperation. The increasing Chinese involvement in Africa has not gone uncriticized. Some scholars have argued that Sino-African relationships constitute another wave of external exploitation of the rich natural resources in Africa to support the rapidly growing Chinese economy. African nations would ultimately be losers in the relationship when their resources are depleted. Critics further argue that China (like Japan in the 1950s and 1960s) would use African countries as test markets for her cheap low quality products that do not meet the standards required in Western markets. Over time, Chinese companies would be able to correct their production errors and gain access to richer Western markets. This argument is also supported by the evident increase in the imports of Chinese manufactures to Africa. The critics, however, ignore the fact that China’s relationships with Africa does offer African companies ready access to the Chinese high growth market. They also seem to downplay the fact that Chinese

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companies are not merely trading with Africa; they are also involved in production. The establishment of production units allows them to form linkages with the African companies through the purchase of materials and the employment and training of African labour. Added to this, the presence of Chinese managers in Africa offers the African workers and managers the opportunity to learn directly from the Chinese through various training arrangements. China can, therefore, contribute immensely to the process of management capacity development in Africa. This observation justifies the need for African managers and policy makers to gain a comprehensive understanding of Chinese approach to management. It would help them to prepare their employees to learn from the Chinese. Furthermore, an inquiry into Chinese management styles is useful in an African context because barely two decades ago most Chinese businesses were managed in a manner quite similar to African businesses today. But Chinese businesses have achieved remarkable transformation in their strategic and management orientations within this short span of time. This chapter aims at elaborating on this theme and discussing the similarities and differences between Chinese and African management styles and suggesting ways in which business collaborations with Chinese firms can enhance the processes of learning within African organizations and raise their level of competitiveness within the global economy. The remainder of the chapter is organized as follows. The next section provides an overview of the content of African-Chinese business relations. This is followed by a discussion of the cultural foundations of Chinese management as well as its similarities and differences with that of Africa and what African employees can learn from their Chinese counterparts. The final section discusses modes of organizing the learning process. An Overview of Chinese-African Relations Recent studies indicate that Chinese are involved in a wide variety of projects in many African countries (Kuada 2005). Chinese firms are engaged in building railways in Nigeria and roads in Rwanda. They are investing in the copper mines in Zambia and in the oil fields of Gabon. Some are helping Africa to combat HIV/AIDS, while others are

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keeping peace in such African countries as Ethiopia. Chinese investments in Africa are becoming diversified. They have invested in some of the booming sectors such as mines, fishing, precious woods and telecommunications. In addition to that, China buys increasing quantities of African oil and gas and is investing heavily in this sector. Gabon and Sudan have become her key suppliers of crude oil and natural gas. Over fifty percent of Sudan’s crude oil now goes to China. Thirteen of the 15 most important foreign companies operating in Sudan are Chinese and are in the petroleum industry. In 2001, around 25 percent of Angola’s crude oil exports went to China and new investments in the oil sector have been planned. Apart from the oil and gas explorations, Chinese investors are involved in electrical and telecommunications industries. Some of their investments are in industries that Western investors have neglected or even abandoned as less profitable. Trade relations have also experienced rapid development. Trade between China and Africa crossed the $10 billion threshold in 2000 and reached $12.4 billion in 2002 and $18.5 billion in 2003. In 2005, the growth rate of China’s export to Africa was higher than the total growth rate of Chinese exports. At a macro level, China’s investments in human resource development in Africa during the past few years have been impressive. There is now a Chinese fund for African human resources development, which is jointly administered by the Chinese Ministries of Foreign Affairs, Commerce, Education, Science and Technology, Agriculture, and Health. Under this program, 165 Chinese experts have been sent to Africa to assist in staff training and development in 2004. Each year over 1,500 scholarships are provided students from African countries to study in China. The intensity and diversity of Chinese engagement in the economic life of African countries makes them a significant contributor to management knowledge in Africa. It is therefore purposeful to discuss the dominant characteristics of Chinese management, its similarities and differences with African management and key components of knowledge to be derived by African organizations and their employees. This discussion is initiated by first looking at the cultural foundations of Chinese management.

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Cultural Foundations of Chinese Management Style Earlier scholars of management culture endorse the view that cultures serve to regulate individuals’ behaviour and, thereby, ensure equilibrium and internal coherence of the overall cultural systems (Martin 1992). Culture therefore sustains, reproduces and transforms social relations and management practices in all societies (Hofstede 1980; Redding 1980; Adler 1991). That is, people living within a particular culture have their managerial behavior and practices regulated through national and organizational cultural values and orientations. Building on these understandings, it can be argued that Chinese management is greatly influenced by Chinese political history, dominant religious philosophy (Confucianism), as well as the cultural values and norms of the country (Lockett 1988; Redding 1990; Child & Warner 2003). These historical and cultural values find evident manifestations in patronage and the development of cliques, usually based on clans or regions of origin, organizational discipline, adherence to instructions and emphasis on personalised relationships. The implications of these attributes for management development are discussed below. Trust-based Relationships Scholars of Chinese management have observed that Chinese and their families are closely knit and mutually dependent (Lockett 1988; Redding 1990). Within a Chinese family framework, all actions, gains and obligations in life are perceived to begin and end with the family and under the stern supervision of the family head. At the same time, non-kin ties are regarded as extremely important to business performance. The Chinese therefore invest substantial resources and time in building and maintaining long terms relationships with customers and clients with the understanding that personal relationships that are rich in trust lower the economic cost of doing business (Chiu & Stembridge 1998). These personal relationships provide basis for collective action in most business activities and social set-ups, and enhance people’s ability to negotiate or create and share resources (Nahapiet & Ghoshal 1998).

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In economics, trust is believed to be that social attribute that generates a willingness among people in dyadic relations to sacrifice their short-run individual self-interests for the attainment of joint goals or longer-term objectives. People who trust each other believe that their relationships are worth sustaining and therefore actively contribute to its continuity (Fukuyama 1995). These relationships also develop what Nooteboom (2001) describes as “reputational governance”, which is an obligational contract that encourages people to behave decently in order not to lose reputation and forego fruitful relations in the future. Efficiency and Competitiveness Chinese workers are also reputed for their dexterity and organizational discipline – two characteristics that contribute immensely to efficiency and competitiveness of Chinese firms. That is, workers and managers are expected to follow rules and procedures and to apply their energy and talents to their tasks. Organizational performance is held supreme and each individual is judged for his deliverables, and quality of inter-personal relationships. Rule breaking and poor personal relations at work is seen as an affront to one’s workmates. At the same time individuals are expected to act intuitively in situations where such actions are deemed critical to the attainment of organizational goals but may be in violation of existing rules. Thus, rules are broken through wisdom and sense of obligation, but with the individual willing to bear the responsibilities of a possible failure. This approach to management may be termed disciplined flexibility. It allows managers to act in two principal ways that ensure organizational efficiency and effectiveness; they are able to deal with uncertainty by observing a rigorously planned and defined template but at the same time maintain the option of changing the rules when the exigencies demand it. Long-term Orientation and Resource Development According to Hofstede (1991) long-term oriented societies exhibit attributes such as thrift and perseverance. Short-term oriented societies show respect for tradition and fulfilling social obligations. China appeared in Hofstede’s study as a long-term oriented society and this cultural orientation is reflected in Chinese management practices. Thus

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Chinese managers are said to “have one eye on the present task and another on the next level” (Chiu & Stembridge 1998). They therefore strive to achieve efficient use of existing resources as well as explore new resources in order to be prepared for upcoming challenges. This principle contributes to the present high economic growth rate in China. It is perhaps the rationale underlying the new wave of initiatives taken by China in its relationship with Africa. Africans must learn from this and relate to China and other Asian countries proactively and with longer-term objectives in mind. Decision-making Processes Some studies have, however, registered distinctive weaknesses in certain aspects of Chinese management practices. Lockett (1988) describes Chinese organizations as being hierarchically structured. This means Chinese supervisors, junior and middle level managers have less decision-making power when compared with managers at similar levels in Western organizations. The hierarchical structures have rendered decision-making processes rather cumbersome since top managers have to be involved in taking most decisions. Thus productivity tends to suffer in the process. Lockett further argued that Chinese businesses have hitherto been unable to create logistical systems required for modern lean production. In his view “while many Western management experts have commended Japanese materials management, notably ‘just in time’ methods, in China the preferred method is just in case’ (p. 483)”. It is important to bear in mind that some of these management styles have their parallels in Africa. In the next section of the paper I describe some of the similarities and differences in Chinese and African management with a view to highlighting what African employees and organisations may learn from their Chinese counterparts. Similarities and Difference between African and Chinese Management Styles Family-based Collectivism I have argued elsewhere (Kuada 1994, 2006) that familism, religion and adherence to traditional values are among the key cultural factors

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that influence management in Africa. That is, just like China, the relationship between the individual and his family is closely knit in most African societies. This means that all actions of individual members are evaluated by comparison with the fortune of the family as a whole – i.e. in terms of their contribution towards the maintenance, continuity and functioning of the family group. But unlike China, many scholars see the African family system as an impediment to economic achievement. The understanding is that many family members tend to consume more and contribute less in terms of efforts and personal commitment to family businesses. Poverty and inequalities in income distribution in African societies further accentuate the need for relying on the traditional family structures and the acceptance of the moral obligations to help the less advantaged family members. This takes the form of job fixing and intra-family redistribution of resources, either to maintain the subsistence of individuals or to provide minimal capital for investment in ʺinformal sector businessesʺ such as trading. Non-Commitment to Organizational Goals African employees tend to view their work organizations in the same manner of asymmetric dependence in which the employer is expected to act paternalistically and benevolently towards the employees without the latter having any obligation to reciprocate. The same sense of dependence tends to influence superior-subordinate relations in most work organizations. A subordinate tends to believe that his superior is likely to value personal loyalty over and above competence. His commitment is therefore to the boss rather than the organization. Jonesʹ (1986) analysis of management practices in Malawi provides some empirical support for this observation. According to him, Malawian workers basically have instrumental orientation towards work; they expect their jobs to bring substantial benefits to themselves and their extended families but show very little (if any) loyalty and commitment to the organization. Similarly, Montgomery (1987) observes in his analysis of the management practices of African executives in Southern African countries that they typically see their positions in their organisations as personal fiefdoms. They are more

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concerned about personal need fulfilment than about organizational goals attainment. Even arguments and negotiations over public vehicles, housing and equipment centred about the convenience of the individual user more than about the mission of the organization to which they were assigned (Montgomery 1987, p.917).

As indicated above, these dependency relational dispositions are in sharp contrast to Chinese workers’ relationship with their employers and managers. In China, work organizations may be managed as families in a spirit of mutual dependency and unflinching commitment to group endeavor. Every worker in China is expected to acquire the skills that will enable him/her contribute to the organisation (in a manner commensurate with his capacity). Those who do not are penalized in accordance with agreed sanctions. Asian migrants in Africa have exhibited the same kind of commitment and loyalty in their family businesses and draw social capital from ethnic relations to grow their businesses. For example, Himbara (1993) argues that Asian entrepreneurs owe their success in Kenya mainly to the extensive network and social ties that they have created spanning several generations. Collective efforts through industrial associations such as the Federation of Indian Chambers of Commerce of East Africa and the Association for the Promotion of Industries in East Africa were instrumental in generating growth within the Asian owned enterprises. In a recent study covering four African countries (Kenya, Zambia, Zimbabwe and Tanzania), Ramachandra and Shah (1999) noted that indigenous African entrepreneurs do not have access to the types of networks created by Asian and European owned firms. Leadership Styles and Weak Innovation Scholars of African management have argued that management styles in most African organizations remain autocratic, dictatorial and incompetent in both public and private organizations (Kamoche 1997; Nwankwo & Richards 2001; Edoho 2001). Others blame the low level of innovation in African organizations on culture of failure and management ineptitude (Kamoche 1997). It has also been suggested

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that innovation in African organizations may be negatively impacted by certain elements in African culture (Sørensen 2003). As Assimeng (1981) observes, ʺconformity and blatant eschewing of individual speculationsʺ as well as ʺunquestioning acquiescence and accommodationismʺ are dominant characteristics of the behaviour of young Ghanaians. This, he argues, is due to the collectivist social structure that strongly encourages the maintenance of status quo and avoidance of any serious disruption of the specific social order. These viewpoints are consistent with findings from empirical studies on the impact of culture on management practices elsewhere. Hofstede (1980) shows that in cultures with high power distance and autocratic leadership, subordinates are likely to be dependent on top management as centres of excellence and hold their own capacity to learn and take initiatives in check. Most of them would define their role as simply following, responding and carrying out instructions from their superiors. As such they would fail to reflect on work-related problems that they face, let alone consider the possible solutions to them. This pathological state of inaction may be labelled as learned or socialized helplessness (Bate 1984). This brief comparison between Chinese and African patterns of management suggests that when interacting with Chinese organizations African employees may seek to improve their behavioral skills in areas such as trust and non-kin relationship development, organizational commitment, work discipline combined with flexibility as well as long-term orientation in management. Managing the Learning Process Building on the observations above, it makes sense to discuss how interactions between African and Chinese organizations can produce the desired changes in organizational mindset and management practices. Two strands of research in inter-organizational relations should throw light on how the learning process would be expected to proceed. The first is organizational learning and knowledge management and the second is intercultural management studies. First, organizational learning scholars have informed that collaboration facilitates the joint generation of new knowledge as well as the flow of existing knowledge between and within organizations (Inkpen & Crossan 1995). This may happen through a process referred

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to by Brown and Duguid (1991) as “communities-of-practice”. The term community in this regard may refer to members of an organization or a group that interact on a continuous basis in the execution of an assigned task. Learning therefore entails and encourages the emergence and dissolution of specific social orders. Actions, counteractions, reflections and thoughts in turn combine to influence the on-going socio-cultural construction. In other words, individuals’ ability to perceive, interpret and evaluate phenomena depends on the sustained and intensive interactions that they have with other people in a given community or context. These interactions help create shared mental models and enable people to make sense of their environments. Second and similar to the arguments above, cultural scholars have argued that cross-cultural interactions produce changes in the mindsets of people involved in the interactions. Stated differently, through interactions people assign “meanings” to the world around them and act in accordance with these meanings. Thus, it is the reflexivity of individuals over their daily interactions with others that produce changes in their mindset. But the tempo of change is moderated by cultural distance between the interacting parties. The greater the cultural distance, the bigger are the differences in management practices. Arguments from these strands of research suggest that African employees must acquire the desired habits of operation and attitude to work through daily interactions with their Chinese counterparts rather than through classroom lectures. But the effectiveness of this process is contingent on a set of conditions. First, African employees must be conditioned to unlearn some of their existing behaviors. Following Hedberg (1981), unlearning may be described as a process through which learners discard obsolete and misleading knowledge, replacing them with new knowledge. Unlearning, however, is not an act of forgetting; it rather means acceptance of the failure of existing ways of doing things. But unlearning can create cognitive dissonance and therefore disturb the comfort zone of individual learners. Learning therefore entails challenging individuals to extend or transcend their current comfort zone. Thus, building on Brown and Duguid’s concept of communities of practice, it can be argued that through African employees’ interactions with their Chinese colleagues they would be able to

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modify their existing beliefs and behaviour and improve their organizational goal attainment. Second, it is important to adopt an incremental process of learning. Again, it has been argued by knowledge management scholars that the adoption or rejection of externally transmitted ideas depends, to a considerable extent, on their appropriateness to the learners’ operations (Nonaka & Takeuchi 1995). I expect African employees to show greater willingness to accept the aspects of Chinese management that are not radically different from their existing ways of doing things if these new ways are found to produce better results. It is, however, important that Chinese operating in Africa exhibit substantial degree of awareness of the social demands of African culture in order to reduce the incidence of tension and misunderstanding in their interactions with their African colleagues. Such evidence of intercultural competence is essential for the building of strong bond of collaboration between African and Chinese employees, just as it is the case in all types of inter-cultural interactions (Gullestrup 2006). Conclusion The development of human communities through out the world has been influenced by interactions with outsiders. Africa has been part of this historical legacy but has appeared to have received lesser gains than punishments from its interactions with the outside world – the slave trade being one of the distinctive losses. But the new millennium provides an opportunity for a new and positive engagement with the rest of the world and to tap into external knowledge and resources to shape the trajectory of Africa’s development. But this requires Africa to adopt a selective and guided approach to its interactions and to absorb new ideas and resources that it adapts to fit its social and cultural realities. Interactions with China, particularly during the past decade, constitute one example of this new era of Africa’s external engagement. In the past, nearly all African countries have been exposed to Western management thoughts and models that were presented to them as the only successful recipes in the field of management. The Asian approach to management provides a set of alternatives worth exploring. The main argument in this chapter is that interactions between Chinese and African managers and workers would enable the

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latter to identify compatibilities and synergies between Chinese and African worldviews and learn from the process. References Adler, NJ 1991, International Dimensions of Organizational Behaviour, 2 edition, WS-Kent Publishing Company, Boston. Assimeng, M 1981, Social Structure of Ghana, Ghana Publishing Corporation, Accra Bate, P 1984, ‘The impact of organizational culture on approaches to organizational problem-solving’, Organization Studies, vol. 5, no. 1, pp. 43-66. Brown, JS & Duguid, P 1991, ‘Organizational learning and communities-of-practice: toward a unified view of working, learning and innovation’. Retrieved October 31, 2006 from http://www2.parc.com/ops/members/brown/papers/orglearning.html Child, J & Warner, M 2003, ‘Culture and management in China’, Research Papers in Management Studies, The Judge Institute of Management University of Cambridge WP March, 2003. Chiu, RK & Stembridge, A 1998, ‘Exploring managerial success factors of Chinese managers: a comparison between mainland and Hong Kong Chinese males’, Career Development International, vol. 3, no. 2, pp. 67-74. Edoho, FM 2001, Management challenges for Africa in the twenty-first century: theoretical and applied perspectives, Praeger Publishers, Westport. Fukuyama, F 1995, Trust: the social virtues and the creation of prosperity, Penguin Books, Harmondsworth. Gullestrup, H 2006, Cultural analysis – Towards cross-cultural understanding, Business School Press and Aalborg University Press, Denmark. Hedberg, B 1981, ‘How Organizations Learn and Unlearn’, in Nystrom, P & Starbuck, W (eds.), Handbook of Organizational Design, vol. 1, Oxford University Press, Oxford, pp. 3-27 Himbara, D 1993, ‘Myths and realities of Kenyan capitalism’, Journal of Modern African Studies, vol. 31, no. 1, pp. 93–107. Hofstede, G 1980, Culture Consequences, Ed. SAGE, California. Hofstede, G 1991, Cultures and organizations: software of the mind, McGraw-Hill Book Company, London. nd

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Inkpen, AC & Crossan, MM, 1995, ‘Believing is seeing: joint ventures and organization learning’, The Journal of Management Studies, vol. 32, no. 5, pp. 595-618. Jones, M 1986, ‘Management development: an African focus’, Management Education and Development, vol. 17, no. 3, pp. 202-216. Kamoche, K 1997, ‘Competence-creation in the African public sector’, The International Journal of Public Sector Management, vol. 10, no. 4, pp. 268-278 Kuada, J 1994, Managerial behaviour in Ghana and Kenya – A cultural perspective, Aalborg University Press, Aalborg, Denmark. Kuada, J 2005, ‘Learning from Asia: Chinese investment inflows to Africa and their possible impact on African management practices’, African Renaissance, vol. 2, no. 4, pp. 36-41. Kuada, J 2006, ‘Cross-cultural interactions and changing management practices in Africa: A hybrid management perspective’, African Journal of Business and Economic Research, vol. 1, no.1, pp. 96-113. Lockett, M 1988, ‘Culture and the problems of Chinese management’, Organisation Studies, vol. 9, no. 4, pp. 475-496. Martin, J 1992, Cultures in organizations: three perspectives, Oxford University Press, Oxford. Montgomery, JD 1987, ‘Probing managerial behaviour: image and reality in Southern Africa’, World Development, vol. 15, no. 7, pp. 911929 Nahapiet, J & Ghoshal, S 1998, ‘Social capital, Intellectual capital, and the organizational advantage’, Academy of Management Review, vol. 23, no. 2, pp. 242-266. Nonaka, I & Takeuchi, H 1995, The knowledge- creating company, Oxford University Press, New York-Oxford. Nooteboom, B 2001, ‘Learning and governance in inter-firm relations’, paper presented at ASEF Conference, Paris, September. Available at http://www.erim.eur.nl. Nwankwo, S & Richards, DC 2001, ‘Privatization: the myth of free market orthodoxy in sub-Saharan Africa’, The International Journal of Public Sector Management, vol. 14, no. 2, pp. 165-179. Ramachandran, V & Shah, MK, 1999, ‘Minority entrepreneurs and firm performance in sub-Saharan Africa’, Journal of Development Studies, vol. 36, no.2, pp: 71–87.

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Redding, SG 1980, ‘Cognition as an aspect of culture and its relation to management processes: an exploratory view of the Chinese case’, Journal of Management Studies, May, pp.127-148. Redding, SG. 1990, The Spirit of Chinese Capitalism, De Gruyter, Berlin. Sørensen, OJ 2003, ‘Barriers to and opportunities for innovation in developing countries: the case of Ghana’, in Muchie, M, Gammeltoft, P & Lundvall, B-Å (eds.), Putting Africa first: the making of African innovation systems, Aalborg University Press, Aalborg, Denmark, pp: 287-304

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China’s Trade Safari in Africa Jean-Christophe Servant

China first became involved in Africa during the Cold War, when it made friends and did business in parts of the world overlooked by the West and the Soviet Union. Its investment is paying off now in oil and raw material imports and markets for manufactured goods. Some of the Chinese officials, who visited Angola’s president, José Eduardo dos Santos, last December [2004], must have been embarrassed. Nine months before, China’s export bank, Eximbank, had approved a $2bn line of credit to enable Angola to reconstruct its infrastructure - including electricity, railways and administrative buildings - destroyed during 30 years of civil war. In return China would receive 10,000 barrels of oil a day. But just a few days before the visit, the British watchdog on transparency, Global Witness, announced that the money was in danger of being diverted to other uses. Some of the money went to fund government propaganda for the 2006 general election. On 9 December [2004] Chinese pressure forced the business go-between Antonio Pereira Mendes de Campos Van Dunem to resign from his post as secretary of the Angolan council of ministers. In a moment of weakness Chinese business had forgotten a basic principle of its long march into Africa: never get mixed up in the internal politics of countries with which it deals. But there was little danger that this momentary moral qualm, no doubt explained away as a sop to international investors in a notoriously corrupt country, would slow the pace of dealings between China and Africa. China originally broke off relations with newly independent Angola, regarding it as too close to the Soviet Union. Thirty years later it has rectified this mistake. The former Portuguese colony has become China’s second-largest commercial partner in Africa and exports 25 percent of its oil production to China. Direct flights to Beijing are being discussed, as is the establishment of a Chinatown in Luanda as a home for Asian managers.

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The line of credit - at 1.5 percent over 17 years - might look disadvantageous to China in the short term, but Chinese companies will secure the lion’s share of lucrative contracts for national reconstruction. Local people are unhappy. As independent economist José Cerqueira pointed out, “There is a condition in the loan that 30 percent will be subcontracted to Angolan firms, but that still leaves 70 percent which will not. Angolan businessmen are very worried about this, because they don’t get the business, and the construction sector is one in which Angolans hope they can find work”. Times have changed and pragmatism has overcome ideological rhetoric in Beijing, where foreign trade and economic cooperation portfolios are handled by a single ministry. Until the mid-1970s cooperation meant building solidarity between two continents that belonged to the same under-developed world. The Chinese presence in Africa was typified by technicians sent to boost nations newly liberated from colonial tutelage; some 15,000 doctors and more than 10,000 agricultural engineers went to areas of the third world that had become arenas for the Cold War. In its role as an anti-imperialist counterweight to the West, China infiltrated parts of the world overlooked by the United States and the Soviet Union. It took on ambitious projects, such as the construction of the Tanzam railway between Tanzania and Zambia, and concluded agreements for military cooperation, concentrating on ideological friends in east Africa (Ethiopia, Uganda, Tanzania, Zambia) and major non-aligned countries such as Egypt. Between 1955 and 1977 China sold $142m of military equipment to Africa. It also threw open the doors of its universities: 15,000 African students have studied in China since their countries became independent. In 1977 trade between China and Africa reached a record $817m. Throughout the 1980s, when the big Cold War powers were pulling out of Africa and western development aid halved, China kept up its contacts. But it had packed away its revolution to concentrate on fostering external trade and foreign investment. By the time that postCold War geopolitics and developments in the Middle East had drawn the traditional players back into Africa, China had turned itself into the workshop of the world and had its eye on Africa’s raw materials. China is now the world’s second largest consumer of crude oil, bringing in more than 25 percent of its oil imports from the Gulf of Guinea and Sudan. Its thirst is limitless: by 2020 it will be forced to

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satisfy 60 percent of its energy needs from abroad, even from nations such as Chad that have maintained diplomatic relations with Taiwan. Although in 2004 only 2 percent of Chinese trade was with Africa, the continent has done particularly well as China has opened up to the world: during the 1990s Sino-African trade grew by 700 percent and since the first China-Africa Forum in Beijing in 2000, more than 40 agreements have been signed, doubling trade to more than $20bn over the four years to the end of 2004. By the end of 2005, China is expected to become Africa’s third most important trading partner, behind the US and France and ahead of the UK. Long experience of projects with the World Bank will help build a “presence in Africa [that] is illustrative of Beijing’s efforts to create a paradigm of globalization that favours China”. The 674 Chinese state companies involved in Africa have invested not only in booming sectors such as mines, fishing, precious woods and telecommunications, but also in others that the West has neglected, even abandoned, as less profitable. As a result, Zambia’s Chambezi copper mines are being worked again and supposedly exhausted oil reserves in Gabon are being explored. In 2004 Chinese investments represented more than $900m of the $15bn of foreign direct investment (FDI) in Africa. Of the thousands of projects under way, 500 are being exclusively directed by the China Road and Bridge Corporation, a state enterprise, helping to place 43 Chinese companies among the 225 global leaders in the area. In Ethiopia China is involved in telecommunications; in the Democratic Republic of the Congo it has done work for Gecamine, the state-owned mining company; in Kenya it has repaired the road linking Mombasa and Nairobi; and it has launched Nigeria’s first space satellite. As an incentive to Chinese nationals, eight African countries have been officially designated tourist destinations. Beside this economic and commercial offensive there has been intense diplomatic activity. President Hu Jintao has made a muchpublicised visit to Gabon since he came to power in March 2003. China’s ministries of trade and foreign affairs, both of which have African sections, have sponsored 100 official meetings. In countries where relations with the West are problematic, China is benefiting from its policy of non-involvement in internal politics. Its relationship with Sudan, condemned by the United Nations over the situation in

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Darfur, is emblematic of a strategy untroubled by ethical considerations. He Wenping is deputy director of the Department of International Relations in the African Studies Section of the Chinese Academy of Social Sciences in Beijing. “Common sense about human rights and sovereignty is only one of the common values shared by China and Africa,” she said. “There is no doubt that China’s success in Africa has partly benefited from it, and those common values have laid solid foundations for further promoting bilateral relations in future.” China first established a presence in the unexploited Muglad oilfields of southern Sudan 10 years ago. Now it imports 50 percent of the region’s crude oil, and 13 of the 15 most important foreign companies operating in Sudan are Chinese, from the China National Petroleum Corporation to the Zhongyuan Petroleum Corporation. The cynicism of the government in Beijing became apparent in September 2004, when the UN Security Council passed resolution 1564, announcing an embargo on arms sales to Sudan. China’s UN ambassador, Wang Guangya, used the massacres in Darfur as a pretext for threatening to veto the resolution, before finally abstaining. The USproposed resolution had already been significantly watered down. The incident is an indication of the strength of the ties linking the governments in Beijing and Khartoum. Many African despots have echoed Omar Bongo Ondimba, President of Gabon and a long-time friend of China, and praised the spirit of “mutual respect” and the “concern for diversity” that characterize Chinese trade and cooperation. But this safari to Africa has alarmed the multinationals that have traditionally exploited the continent’s resources. And the US, officially committed to fostering good governance, is beginning to lose patience with Chinese economic policy. According to Gal Luft, a specialist in energy security and executive director of a neo-conservative think-tank, the Institute for the Analysis of Global Security, “The Chinese are much more prone to do business in a way that today Europeans and Americans do not accept paying bribes and bonuses under the table. I think that it will be much easier for [some African] countries to work with Chinese companies, rather than American and European companies, which are becoming more and more restricted by the publish what you pay initiative and others calling for better transparency” .

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Rwanda’s minister of finance and economic planning, Donald Kaberuka, says: “It’s a different way of doing business” - an alarming prospect for NGOs already fighting cynical western practices in Africa. In the past international organizations such as the World Bank have been criticized for making loans to countries in need conditional upon non-negotiable demands. Now the situation is reversed, with China granting unconditional, instant credits that encourage white elephant projects, without concern for financial transparency. “My reaction when I hear of this big Chinese loan is that it distorts the whole process and gives a lot more flexibility for Angola not to comply with the conditions of other deals, such as an agreement with the International Monetary Fund,” says Douglas Steinberg, outgoing director of the Angolan program of the humanitarian NGO CARE. “It allows the government to escape transparency”. Environmental organizations are watching the commercial development of a country that emits more pollution than any other and has not signed the Kyoto Protocol: 60 percent of the 4m cubic meters of undressed timber exported from Africa every year go to Asia, almost all of that to China. Chinese arms sales are a cause for concern. In the late 1990s China made more than $1bn out of the war in Eritrea. It has also been suspected of using Sudan as an outlet for military technology. It is still militarily involved in Zimbabwe, another country cold-shouldered by the West. Chinese military attachés have been concentrated in member states of the Southern African Development Community. According to a US analyst, “During the cold war, Chinese arms transfers to Africa were motivated by ideology. Now, profit is the main objective”. What the Chinese see as a win-win situation - a new economic game in which neither partner can lose - can also be seen as fresh neocolonialism disguised as South-South development. Some African analysts are wondering about the limits of Chinese trade policy and the direct competition to Africa’s economy from specific Asian products, from textiles to steel. South Africa was China’s first African partner and, as a gesture of solidarity, broke off relations with Taiwan in 1997. Now, according to the deputy chairman of the South African Institute of International Affairs, Moeletsi Mbeki, China represents “both a tantalizing opportunity and a terrifying threat”. It is a familiar story: “We sell them raw materials and they sell us manufactured goods with a predictable result - an unfavorable trade balance against South Africa”.

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South Africa’s trade deficit with China has risen from $24m in 1992 to more than $400m. In September 2004 a member organization of the powerful Congress of South African Trade Unions threatened to boycott anyone selling Chinese products, which it blamed for rising unemployment. The problem can be seen in the market stalls of the Senegalese capital Dakar, where cheap Chinese imports, from shoes to medicines, elbow rival products aside, while the textile workshops of Lesotho are threatened by the expiry of the multifibers agreement last January [2005]. China has responded with promises, handouts, allusions to the spirit of Bandung and symbolic gestures: since 2000 it has cancelled $10bn in bilateral debt. The Chinese government’s African Human Resources Development Fund pays for 10,000 Africans to be trained in Beijing. From Liberia to the Democratic Republic of the Congo, China is increasingly involved in peacekeeping operations: in 2004 it contributed more than 1,500 troops to the UN presence across the continent. While acknowledging that any final decision rests with the African Union, China has publicly supported the three African candidates - South Africa, Egypt and, in particular, Nigeria - for a permanent seat on the security council. In trade another great leap forward is expected by 2006, with the launch of the New Asian-African Strategic Partnership, oriented towards the private sector, from which China is likely to be the main beneficiary. During his visit to Gabon in 2004 Hu Jintao promised “economic cooperation with emphasis on infrastructure, agriculture and the development of human resources”. This may be no more than a pious hope, but it is certain that “henceforth [China] will act like any other power, in accordance with its own well-known interests. It will concentrate its cooperative efforts in countries where it recognizes high potential, whether it is a matter of raw materials, potential markets or diplomatic influence”. How will Africa’s traditional partners adapt to the Chinese presence, and how far will they be prepared to go? “It is normal and natural that China’s involvement in Africa could lead to some conflict of interest with the former colonial rulers,” He Wenping says. “I don’t think we should worry too much about it. To help African people become better off and benefit from globalization is the common object and aim of people and countries around the world. The Chinese people

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and government would very much like to contribute to this aim. And history shows that this must be a hard and long journey.” According to the IMF, Africa should experience growth of 5.8 percent this year, the highest for 30 years. In part this will be due to China. But is Africa, once a sideshow in the cold war, destined to be at the centre of an intensifying trade war?

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Chapter 9

Bankrolling the “Going Out” Strategy: China’s Financing of African Aid and Investment, and Implications for Africa’s Debt and Development Michelle Chan-Fishel and Roxanne Lawson

Introduction For many African governments, Chinaʹs emergence from poverty to economic powerhouse serves as an inspirational example. From the mid-1980s, China’s pursuit of market economy with a focus on exportoriented industrialization and inward foreign direct investment helped raise GDP and build infrastructure. In many parts of the African continent China is perceived as an “economic messiah,” i.e., an investor, donor and ally at a time when there is growing dissatisfaction over what African governments perceive to be the patronizing attitudes and failing development models of the West. Currently, there are an estimated 750 Chinese companies operating in 50 countries on the African continent (World Markets Analysis 2006). But Beijingʹs African investments are not just made through Chinese companies -- they also come in the form of debt relief, grants, soft loans and buyer credits provided by Chinese banks. This chapter examines the role of Chinese banks on the Africa continent, from the financing of Chinese multinational corporations and the development of Africa’s natural resource sectors to the provision of foreign aid. Concerns The economic foundation of China’s relationship with Africa is obvious: the procurement of natural resources. However, the country’s clear focus on raw natural resource acquisition has caused some observers to accuse China of leading a new “scramble for Africa.” Others have complained of Beijing’s policy of “non-interference.” China’s only political condition for establishing ties between China and

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African countries is the “one China principle” (refusal to diplomatically recognize Taiwan). Its insistence that outsiders not interfere with China-Taiwan relations is mirrored in Beijing’s own policy of not interfering in the internal matters of other countries. This policy of non-interference has sounded alarm bells in the West, as China has refused to support international efforts to stem the violence in Darfur, for example. Beijing’s “no-strings attached” approach has also been criticized by aid agencies. World Bank President Wolfowitz has accused China of undercutting anti-corruption efforts, such as revenue transparency requirements for extractive industries investments. Similarly, international bankers have complained that Chinese banks’ lack of environmental and social financing standards create a “race to the bottom” in developing countries. In a November 2006 Financial Times article, European Investment Bank president Philippe Maystadt claimed that due to their lack of environmental and social standards, “Chinese banks have snatched projects from under the EIBʹs nose in Asia and Africa, after offering to undercut the conditions it imposed on labor standards and environmental protection . . . ‘Itʹs clear China is trying to build closer links with Africa and build privileged access to resources on this continent’ , said Maystadt” (Beattie & Parker 2006). Among the OECD export credit agencies, concerns have surfaced that China may “unfairly” offer concessional loans to buyers of Chinese products, putting suppliers from other countries at a competitive disadvantage. According to the United States Export-Import Bank, “China intends to use export credits aggressively and expansively on a global basis as they represent critically useful instruments in achieving an improved position for the countryʹs key industries. To the extent possible, the use of the financing instruments will comport with international guidelines and standards; however if necessary to consolidate this position, the financing offered may be extended on terms and conditions that give them a competitive advantage” (ExportImport Bank of the United States 2006). In reply, China and some African observers point out that much of this concern is simply a defensive reaction as China’s rising influence in Africa challenges Western hegemony. Indeed, China is set to eclipse the World Bank as the largest lender in Africa, and its influence is set to grow even more as it increases its lending and aid to the continent. At the 2006 China-Africa summit, Beijing pledged USD 5 billion in soft

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loans and credits, and a doubling of aid to Africa by 2009; Chinese companies committed to invest USD 1.9 billion in African infrastructure, natural resources and finance (Innes 2006), aided by a USD 5 billion fund to facilitate Chinese investment in Africa (Xinhua, 9 November, 2006). Out to Africa Two overarching foreign policy frameworks inform China’s investments on the African continent: Beijing’s “Go Out” strategy and its African Policy paper. The “Go Out” strategy, which encourages Chinese industry to expand abroad, was formally established in China’s 10th 5 Year Plan (2001-2005), and predicated on years of groundwork. Friedrich Wu explains: Between 1991 and 1997, the State Council assembled a “national team” of 120 state-owned industry-groups -- from ‘strategic sectors’ . . . power generation, mining, automobiles, electronics, iron and steel, machinery, chemicals, construction, transport, aerospace, and pharmaceuticals -- that could spearhead the internationalization of Chinese enterprises. . . these enterprise groups were given high levels of protection, generous state financial support as well as special rights in management autonomy, profit retention, and investment decisions. . . echoing government’s drive to nurture globally competitive firms. President Jiang Zemin asserted during the 15th Chinese Communist Party Congress that ‘the state-owned sector must be in a dominant position in major industries. . . we shall effectuate a strategic reorganization of state-owned enterprises by managing large enterprises well. . . China will establish highly competitive large enterprise-groups with ... transnational operations’ (Wu 2005).

In January 2006, Beijing publicly elaborated its foreign policy towards the African continent with the publication its African Policy Paper. According to the Paper, China will strengthen its cooperation with African countries in trade and investment, finance, agriculture, infrastructure, resources, tourism, debt reduction and relief, economic assistance, and multilateral coordination. The focal point of the Africa policy is resource-based and, as the Paper states, it “encourages and supports competent Chinese enterprises to cooperate with African

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nations…to develop and exploit rationally their resources” (China Ministry of Foreign Affairs 2006). As Beijing launched its “Go Out” strategy and its Africa policy, China enlisted its banking sector to play a key role in their implementation. Chinese Banks: Their Role and Key Players Chinese banks are classified into several types; the most relevant in terms of international financing are: Policy banks: the China Development Bank (CDB), Sinosure, and China Export-Import Bank (Chexim). These banks are controlled by the State Council, the highest political body in China, and operate largely according to macroeconomic policy and political directives from Beijing. As a result, they enjoy substantial financial and political support from the central government. State-owned commercial banks including the “Big Four”: China Industrial and Commercial Bank, Bank of China, China Construction Bank, and China Agricultural Bank. These banks are undergoing reforms, including selling some of their shares to private investors. However, the government still holds majority ownership of the Big Four and it is widely thought that lending decisions within these banks are not immune from government influence. These banks focus on a variety of areas; some have traditionally played a specialized role in domestic development, while others have developed expressly to facilitate investment overseas. China Development Bank Historically, China Development Bank has focused on domestic financing, leaving overseas business to China Export-Import Bank. Currently only 1.88 percent of the bank’s loans are for overseas activities, but CDB’s lending abroad is quickly expanding. CDB deals in Africa often are negotiated at the highest levels. For example, in 2006 CDB’s President and Zimbabwean Vice President Mujuru inked an agreement to assist the country with its economic recovery program (Musengeyi 2006). During Premier Wen Jiabao’s visit to Uganda and Tanzania in 2006, the CDB signed an agreement

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with the East African Development Bank to finance development projects through the EADB (Bohnstedt 2006). And after the 2006 China-Africa summit in Beijing, which convened African heads of state, CDB pledged to finance power and oil deals in Uganda, which could include Ayago North and Ayago South hydroelectric dams (Nakkazi 2006). CDB also actively bankrolls Chinese firms’ “Go Out” expansion activities. For example, in July 2006 CDB signed a strategic cooperation agreement with Yunnan Copper, the company that, along with China Nonferrous Metal Mining (Asia Pulse, 6 July, 2006), operates the controversial Chambishi copper mine in Zambia. This agreement particularly helps the company expand its Zambian operations (Reuters, 5 April, 2006). Similarly, backed by a 9.6 billion renminbi (RMB) loan from CDB, Zijin mining company announced in October 2006 plans to buy a 20 percent stake in Ridge Mining, making it the first Chinese company to invest in South Africa’s ferrous metal sector (Comtex News Network, 13 October, 2006). CDB also provided a RMB 10 billion loan to China International Water and Electric Corporation to support its overseas investment (Asia Pulse, 22 September, 2006). This company is one of the builders of the controversial Merowe dam in Sudan, which would displace 50,000 people (International Rivers Network, n.d.). Sinosure China Export & Credit Insurance Corporation (Sinsoure) was established in 2001 as a policy bank to support and promote Chinese exports and foreign investments. Sinosure offers a range of products, including short-term export credit insurance (which guarantees that Chinese exporters will get paid if their overseas buyers default), medium- and long-term credit insurance (which encourages Chinese firms to bid for large construction projects), investment insurance (offered to Chinese companies that want to operate overseas but are worried about certain political risks such as the threat of war), and guarantees (offered to the banks of Chinese exporters that want to participate in overseas projects). Most of Sinosure’s short-term trade financing is focused on exports and imports to/from developing countries. One example is its blanket policy for China Machinery Equipment Import and Export Corporation, which is developing the massive Belinga iron ore deposit

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in Gabon. However, when it comes to medium- and long-term financing, a majority (56 percent) of its medium- and long-term insurance goes to projects in the countries of Iran, Sudan, the Philippines and Pakistan. Sinosure is also financing Chongqing Foreign Construction Corporation, which is building a World Bank-backed highway development project in Uganda; and has various operating and financing agreements with Nigerian oil developers, including Amni Petroleum, Emerald Energy Resources Limited and BlueWater Oil and Gas Investment Company (Africa News, 2004). In addition, Sinosure has cooperation agreements with Chinese oil majors active on the continent; it provides “all sided risk guarantees” for the overseas activities of PetroChina, Sinopec (China Petroleum and Chemical Corporation), and China National Offshore Oil Corporation (Asia Pulse, 15 November 15, 2006). China Export-Import Bank Like Sinosure, the China Export-Import Bank (Chexim) was created to finance the overseas operations of Chinese businesses and promote Chinese exports. Chexim offers loans to foreign buyers who want to purchase Chinese-made goods (export buyer’s credits), such as a 2005 loan to Nigerian customers of Huawei Technologies, a Chinese telecommunications company. It also offers export seller’s credits (loans at preferential rates for Chinese firms wanting to sell their goods abroad) and guarantees (for buyers, sellers and/or their banks in case either side does not fulfill its contract). Chexim also finances Chinese companies’ international expansion activities. The interest rates that Chexim charges for Chinese companies investing abroad reportedly can be 3 percent lower than commercial rates (International Petroleum Finance 2006). This has helped companies like China Minmetals expand; Chexim offered Minmetals a 2005 USD 2 billion line of credit for overseas expansion over the next three years (AFX-Asia 2005). The company currently sources magnetite and iron ore from South Africa, and will begin new mining operations in Mozambique (Asia Pulse, 15 September, 2006 ; Africa News, 15 September, 2006; and China Metals 2006). Other “Go Out” examples include a 5-year USD 3 billion cooperation agreement with the China State Construction Engineering Corporation, which named Africa -- particularly Algeria -- as one of its

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three target markets for expansion (Business Daily Update 2005); and a RMB 10.3 billion financing package for Beijing Construction Engineering Group Corporation (BCEG), the Founder Group and CGC Overseas Construction Company (Export-Import Bank of the United States 2006). BCEG is involved in many projects in Africa, including the new Tanzania National Stadium on the outskirts of Dar es Salaam, a new presidential residence in Lome, Togo and Rwanda’s new Ministry of Foreign Affairs office complex (PANA 2005; BBC Monitoring International 2006; and Africa News, 22 December, 2006). CGC also has African operations, including a major road building project in Ethiopia (Xinhua, 24 June, 2006). Chexim’s annual report notes that in 2005, its international cooperation agreement loans grew by 20 percent and that it made “breakthroughs in market expansion in Africa.” Its growth on the Continent will be bolstered by a 2006 agreement with UK-based Barclays Capital and South Africa-based Absa Capital (an investment bank owned by Barclays Group) to provide 20 large Chinese companies with consulting services in energy, mining and infrastructure (Asia Pulse, 27 October, 2006). Chexim differs from most countries’ export credit agencies because it serves as Beijing’s sole agent bank for extending concessional (lowinterest or subsidized) loans to governments abroad (Standard & Poor 2006). Chexim made USD 800 million in concessional loans to 55 projects in 22 African countries by the end of 2005 (Broadman 2007, p 275). In 2006 Beijing, at the Forum on China-Africa Cooperation, announced that it would make an additional USD 5 billion in soft loans and credits available to African countries. Chexim’s concessional lending program has generated much discussion about how Chinese aid is linked to access to natural resources and contracts for Chinese firms. For example, a press article on 2006 China-Africa summit reported that “Typically, the session with Mauritania involved Chinaʹs Export-Import Bank providing $4 billion loans, while four to five new oil blocks were set aside for Chinese explorers” (Callick 2006). However, Uganda’s Ambassador to China, Charles Wagidoso, points out that this is not always the case; most of the new oil assets which Chinese firms are developing in Uganda’s Albertine Graben region will be destined for domestic consumption, not export. He also maintains that while Chexim’s concessional lending may require the borrowing government to hire Chinese firms,

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in many cases Chinese companies simply win contracts outright through competitive bidding processes (Wagidoso 2006). Chinese state-owned commercial banks State-owned commercial banks, especially the “Big Four”, have more political autonomy from Beijing than the policy banks. However, they still tend to actively finance overseas projects of major stateowned enterprises, including “Go Out” activities, which are of strategic importance to Beijing. For example in 2006, a USD 1.4 billion project finance loan was given to Sonangol- Sinopec International for oil and gas production in Angola’s Block 18. A large international syndicate of 13 banks provided the loan but five Chinese banks provided half of the financing: CDB committed USD 205 million and Chexim contributed USD 200 million. Three state-owned commercial banks -- China Construction Bank (USD 144 million), China Agricultural Bank (USD 76 million) and Bank of China (USD 75 million) -- also participated in the syndicate. Bankrolling the “Go Out” Strategy As the “Go Out” strategy unfolded, Beijing mobilized the banking and finance sector to help implement the policy. China’s central bank exhorted banks to “play a key role in facilitating international capital flows, mergers and acquisitions and in the countryʹs efforts to seek resources” (Business Daily Update 2006). Similarly, the African Policy Paper specifically promised that Chinese banks would play a key role by providing preferential loans and buyer credits to support Chinese companies’ investment in Africa (China Ministry of Foreign Affairs 2006). When “Go Out” was launched in 2001, the primary obstacle to Chinese companies’ overseas expansion was lack of financing. The head of Chexim at the time noted that Chinese companies tended to invest in developing countries, where the financial and political risks were relatively high (Asiainfo 2001). These kinds of risks are ideally mitigated with insurance and guarantee products. So, that year Beijing created Sinosure. Offering export credit insurance allowed Chinese to obtain cheaper export loans from private

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commercial banks like Société Générale, BNP or Citigroup. Sinosure later launched a special service to provide Chinese companies with research and advice on doing business with particular overseas clients and partners. In 2001, its first year of operation, Sinosure’s financing volume totaled USD 2.27 billion; by 2003 the agency set a goal of increasing its business by 16 times by 2007. It is estimated that by 2010, Sinosure’s financing volume will reach USD 1.2 trillion. (Export-Import Bank of the United States 2006). Chexim similarly established a rapid expansion plan, tripling its volume of medium- and long term credits from 2002-2005 (ExportImport Bank of the United States 2006). In 2005 Beijing further strengthened the agency with an injection of USD 5 billion to boost Chexim’s capital base (Sinocast, 23 August, 2005). The United States Export-Import Bank conservatively estimates that by 2010 Chexim’s medium- and long-term financing could reach USD 40 billion, which would make Chexim/Sinsosure the world’s largest export credit agency (Export-Import Bank of the United States 2006). In comparison, the World Bank’s total financing currently stands at about USD 25 billion. Beijing also made “going out” easier by abolishing some financial red tape. The government, which had previously been ultra-protective about controlling foreign currency flows, began increasing Chinese firms’ access to foreign capital. It even encouraged individual banks to launch “Go Out” strategies, prompting ICBC-Asia to buy out Belgiumbased Fortis Bank Asia in 2004, which changed its name to Belgian Bank (EIU Country Finance 2006). Similarly, China Construction Bank bought Bank of America’s Hong Kong-based subsidiary for USD 1.25 billion in 2006 in an effort to support the overseas expansion plans of its clients (Asia Pulse, 23 October, 2006). By 2005, China’s “Go Out” policy reached 200 countries and regions (IPR 2005), with overseas direct investment amounting to over USD 200 billion. Mining and manufacturing investment comprised about 29 percent of the overseas investment, with 57 percent occurring through mergers and acquisitions activity (Xinhua, 14 December, 2006). Key Destinations for China’s Outward Investment Chinese investment in Africa is concentrated on natural resource extraction, including oil and gas exploitation, logging and minerals development. Chinese corporations are also actively bidding on

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infrastructure and building contracts, and participating in construction projects tied to Chinese aid. The following chapter focuses on Chinese involvement in the oil, gas and mining sectors on the African continent. African Oil and Gas Industry Sector Development China’s biggest appetite is for petroleum. To help fuel its booming economy, China is investing in Africa’s oil rich countries like never before. Since late 1990s, China has invested billions in Sudan, Angola, and Nigeria to secure drilling rights. Chinese companies invested USD 175 million on the African Continent in the first ten months of 2005 alone, with most of it going to oil and infrastructure (Pan 2007). Sudan Perhaps the most controversial of China’s oil investments is its operations in the Republic of the Sudan. China is the leading developer of oil reserves in the country (World Tribune 2004) and currently imports 60 percent of the Sudan’s oil output (Africa News, 23 March, 2006). China National Petroleum Corporation (CNPC), which taps a USD 1.27 Chexim line of credit (International Petroleum Finance 2006), is the largest shareholder in the Greater Nile Petroleum Operating Company (GNPOC). China’s involvement in Sudan is controversial because of the atrocities occurring in the western region of Darfur, atrocities many nations have branded genocide. In particular, human rights groups have alleged that Sudan has chased citizens off ancestral lands to clear oil-producing areas (Hurst 2006). Prior to the conflict in Darfur China is suspected of having financially underwritten the 21-year civil war which ended in January of 2005. A report from the Institute for the Analysis of Global Security summarizes these claims: In 2000, Sudanese resistance forces were said to be collecting photographs of Chinese-made weapons as signs of Beijing’s support for Khartoum. In July 2000, WorldNetDaily reported that Sudan had acquired 34 new jet fighters from China. In June 2001, the Mideast Newsline reported that Sudan built three weapons factories with Chinese assistance to halt rebel advances. China also reportedly provided arms to Sudan in exchange for oil (Hurst 2006).

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Similarly, the Council on Foreign Relations writes that China has sold the Islamic government in Khartoum weapons and $100 million worth of Shenyang fighter planes, including twelve supersonic F-7 jets, according to the aerospace industry journal Aviation Week and Space Technology. Experts say any military air presence exercised by the government—including the helicopter gunships reportedly used to terrorize civilians in Darfur—comes from China (Pan 2007).

Angola In 2004, when the International Monetary Fund was chastising Angola for corruption in its oil sector, Chexim offered the government a USD 2 billion oil-backed infrastructure loan to repair railways, construct new governmental offices, etc (Walt 2006). One of the only explicit quid pro quos was that Luanda give preference to an approved list of 35 Chinese construction companies during the public tender process (Broadman 2007, p 272). However, the loan was exquisitely timed, suggesting that implicit agreements were also in effect: shortly thereafter, when France-based Total applied to renew its license on an offshore oil block, Angola refused, handing it instead to Sinopec (Walt 2006). In addition, Shell had recently divested itself of its Angolan assets, leaving its 50 percent equity stake in Block 18 open to new bidders. India was prepared to close the deal, but China entered at the last minute with a winning bid; Chexim’s USD 2 billion soft loan package made India’s USD 200 million railway loan seem paltry in comparison (CRI 2004). After the Block 18 deal was sealed, a consortium of five Chinese banks put up half the money (a USD 1.4 billion project finance loan), the SonangolSinopec joint venture, to develop the concession. In post-conflict Angola, human rights problems are still prevalent. Human Rights Watch reports that Since late-2002, some 30,000 Angolan troops have been deployed in Cabinda, a discontiguous province that produces around 60 percent of the country’s oil revenue… the Angolan army arbitrarily detained and tortured civilians with impunity in Cabinda, and continues to restrict their freedom of movement despite an apparent end to the decades-long separatist conflict (HRW 2004).

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Nigeria Historically, Western firms have dominated Nigeria’s oil sector. However, Chinese companies are breaking in, as illustrated by China National Offshore Oil Company’s (CNOOC) 2005 deal with the Nigerian National Petroleum Corporation (NNPC) to guarantee supplies of some 30,000 bpd for one year. Today, some of China’s most important Nigerian investments include Sinopec’s joint venture with NNPC to develop Oil Mining Leases 64 and 66; and CNOOC’s 45 percent stake (USD $2.7 billion) in the offshore Akpo field, which currently constitutes the firm’s largest overseas acquisition (Hurst 2006; Argus 2007). In addition, “in exchange for a USD 4 billion infrastructure investment package” (Hurst 2006), including USD 2 billion to improve Nigeria’s Kaduna refinery, CNPC was given first refusal rights on four oil blocks, including two coveted onshore concessions (Argus 2007). CNOOC and CNPC’s Nigeria expansions are backed by Chinese bank lending. In particular, CNOOC has a 10-year Chexim line of credit worth USD 1.62 billion, which is partially used to finance its Nigeria operations (International Petroleum Finance 2006). PetroChina, a CNPC subsidiary, also receives a RMB 20 billion (USD 2.41 billion) line of credit from Bank of China, the largest of its kind in China, to support the company’s long-term development (People’s Daily, 2000). Oil-related conflicts in Nigeria are well-known and are largely rooted in regional instability and violent conflicts between the government and local rebels. Nigerian militant groups, like the Movement for the Emancipation of the Nigerian Delta (MEND), have demanded more benefits-sharing. MEND has warned foreign oil firms to “stay well clear” of the oil producing Niger delta or risk facing attack. Previously, MEND attacked facilities belonging to Royal Dutch shell, Nigeria’s largest oil producer, in operations that coincided with hostage-taking. (Mahtani 2006). Threats to Chinese companies and employees came just days after China inked the $4 billion infrastructure deal for the refusal rights on four oil blocks. African Mining Sector Development China is the world’s fastest-growing market for minerals. China’s appetite for African strategic resources goes beyond petroleum. In

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2004, the mining sector accounted for over 30 percent of China’s overseas investment. Copper in Zambia Copper is Zambia’s leading export commodity and production is soaring. The Chamber of Mines forecasted production of more than 600,000 tons in 2006. And as miners try to extract more and more copper ore from the ground, the accident rate is rising. At least 71 people died in Zambian mining accidents in 2005, according to the Mineworkers Union of Zambia. “Weʹre worried about the accident trends,” said Mavuto Gondwe, a union director with responsibility for health and safety (Range 2005). A 2005 explosion at BGRIMM Zambia was the biggest single accident in Zambian mining history. BGRIMM is controlled and 60 percent owned by China Non Ferrous Metal Industries, a Chinese government-owned company backed by the China Development Bank. The bubbling resentment against unsafe mines operated by Chinese companies and the proliferation of cheap Chinese imports manifested itself in Zambiaʹs 2006 presidential elections. Leading opposition candidate, Michael Sata, ran on an anti-China platform, promising to kick out Chinese investors, and accusing Beijing of vote-tampering via Chinese-made computers. The comments prompted Zambia’s Chinese Ambassador Li Baodong to imply that Beijing might pull its investments if Sata prevailed (Dickson 2006). Sata only received 29 percent of the votes but support was high in some areas and, after the elections, Chinese-owned businesses were attacked (Blair 2006). Coal and Platinum in Zimbabwe Shunned by Western investors, Zimbabwe has begun a determined campaign to hitch its plummeting fortunes to Chinaʹs rising star. Zimbabwe’s President Mugabe calls the policy “Look East.” It has resulted in tremendous growth in trade and economic cooperation between Zimbabwe and China. Many joint venture companies have been formed, involving Zimbabwe state firms and Chinese companies such as Norinco and CATIC, illustrating China’s “win-win mindset” (Mushayavanhu 2006). Zimbabwe also receives soft loans from Chexim (Africa News, 6 April 6, 2006), and the CDB is an active financier in the country, as illustrated by its USD 1.3 billion energy and mining investment package (Meldrum & Watts 2006).

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The two banks have also agreed to assist Zimbabwe with its economic recovery program. Reportedly, in exchange for Chinese technical knowledge and CDB money, Zimbabwe will offer China access to its minerals deposits (Musengeyi 2006). Other press reports stated that Harare will likely “mortgage its mineral proceeds to attain the [Chexim] loan facility from the Chinese government. Shares in state parastatals are also rumoured to be used as collateral for the financing” (Fourie 2006). Although officials at the Zimbabwe Embassy in Beijing play down such political “direct exchange deals,” they admit that at times Harare has made mining rights available to Chinese firms by buying back concessions that were already held by Western or South African companies (Mushayavanhu 2006). Cobalt in Congo According to the Cobalt Development Institute, in 2005 China was the world’s leading cobalt producer. Approximately three quarters of all cobalt made in China in 2005 is derived from imported concentrates, of which almost 90 percent came from the Democratic Republic of the Congo-DRC- (RIA 2006). While DRC is transitioning after a four-year civil war, the major regional and international mining houses are anticipating stability in the country. In Katanga, Chinese companies Colec and Feza Mining are starting copper and cobalt mining and processing projects (Africa News 2005). In 2006, Nanjing Hanrui Cobalt Co., Ltd, one of the largest conglomerates in China, purchased three high-grade copper-cobalt mines in Lubumbashi (China Construction Project 2006). Other Chinese mining investments in DRC include Xingrong Bicycle Company’s manganese mining project, and Wanbao Mining’s smelting plant in Katanga, which is supposed to generate a yearly output of 4,000 tons copper and cobalt alloy (China Metals 2005). In 2005, press reports indicated that China Development Bank was willing to finance Kovek Company to develop mining projects in the DRC (RTNC-TV Kinshasa 2005); in 2004 CDB and China Non-Ferrous Metal Corporation signed an agreement with KGHM Polska Miedz (Poland) to develop copper and cobalt in the DRC and Zambia (Africa Mining 2004).

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Iron and Manganese in Gabon In 2005, 70 conservation experts released a Regional Action Plan for the Conservation of Chimpanzees and Gorillas in Western Equatorial Africa. The plan classified the Belinga-Djoua region as a Priority Important Area, noting that “this site in North-East Gabon is important for ape conservation but threats will increase significantly in the near future as iron reserves at Belinga are mined and a railway built to export the ore to Libreville” (Tutin, C et al. 2005). Historically, the Belinga deposit had difficulty attracting investors because of the lack of infrastructure; prospective developers had to build roads, 200 kilometers of railways, electricity resources, ports, etc. in order to extract the ore. In 2006 China National Machinery & Equipment Export-Import Corporation (CMEC) won a USD 3 billion contract to develop the ore mine as well as a port, rail system, and two dams. At the end, a Gabonese government minister said that there was “no contest” between CNME’s bid and the others, “The Chinese state offered to guarantee the project financially and promised to buy the entirety of Belingaʹs production” (AFP 2006). CMEC is financed by a RMB 8 billion line of credit from the Bank of China (2002) and a 3 year RMB 8.28 trillion line of credit from Chexim (2003). Other Chinese mining investments in Gabon include the Ndjole manganese mine, which is operated by the Ferroalloy Smelting Company, owned by the Xuzhou Huasu Group (China Metals 2005). In addition, Sinopec has come under fire from environmentalists for prospecting for oil in Gabon’s Loango National Park without an approved environmental impact assessment (Alfroy 2006). Debt and Development Africa’s Debt Crisis and Western Aid Shortfalls As illustrated above, Chinese banks offer African governments both commercial and concessional loans. The rise of China as a major aid provider has not escaped the notice of the West. Recently, Richard Manning, Chair of the Organization for Economic Co-operation and Development’s (OECD) Development Assistance Committee, warned that China’s easy loans to African governments could undermine international debt relief efforts.

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But it is important to note that Western efforts to increase aid and reduce debt in Africa have been sorely lacking. Since 1970, Western donors have promised to provide 0.7 percent of their national income in aid. Thirty years later, only a handful of donors have provided this promised aid and the annual shortfall of undelivered aid totals USD $130 billion. For the impoverished countries of sub-Saharan Africa, the cumulative international aid shortfalls for the past 30 years equal USD 4,000 billion (Oddone 2006). During this same time period (since 1970), the external debt burden of sub-Saharan Africa has grown to approximately USD $294 billion. Despite repaying more than 90 percent (USD 264.6 billion) of this debt in disbursements, the region remains strapped with a USD 240 billion debt burden, according to the United Nations Conference on Trade and Development (AFSC 2005). The debilitating burden of external debt has left even “Washington Consensus” proponents to conclude that in the past two decades, official lending -- most of it at concessional rates -- has failed to catalyze the increased growth and new economic activities needed to finance the existing debt and end African impoverishment. So, Western governments implemented a program of limited debt cancellation, largely in response to the demands of African governments and global civil society groups. But the 2005 Group of 8 initiative to cancel the debt of the 18 Heavily Indebted and Poor Countries (HIPC) has proven to be riddled with problems and is far from a solution to the continent’s debt crisis. The initiative has cancelled the debt of only 14 African nations and only 15 percent (USD 36 billion) of sub-Saharan Africa’s debt, leaving many countries in dire economic straits (Dembele 2006). Moreover, as a condition of debt cancellation, Western lenders have demanded that African countries take measures that result in funding cuts for health, education, development and poverty alleviation spending in order to service remaining debt. African nations have also been pressured to turn to promoting export-led growth driven by raw materials and cash crops, contributing to widening trade deficits (AllAfrica.com 2006).

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China Steps In Against this backdrop of Western conditionality and unfulfilled aid promises, China has promised that it would “do its best to provide and gradually increase assistance to African nations with no political strings attached” (China Ministry of Foreign Affairs 2006). Since 2005, China has become a net provider of African aid (Davies 2006), and provided USD 1.3 billion in debt cancellation to 31 countries, effectively doing in one year what Western donors had failed to do in twenty (MINSA 2006). Looking to the future, China has pledged to provide USD 10 billion in concessional loans and preferential export credits to developing countries between 2005 and 2008, with the lion’s share of this money going to countries on the African continent (Davies 2006). For many African governments, China has emerged as an ideal aid and trade partner. With its ample hard currency reserves, China offers development opportunities which eschew the “Washington Consensus” and stress the common experiences between Global South countries on the African and Asian continents (Davies 2006). In addition, Beijing’s policy banks are developing a welcome reputation of forging collaborative win-win agreements with African countries. “The World Bank arrangements were skewed in favor of the donors,” said Charles Wagidoso, Uganda’s Ambassador to China, adding that much of the World Bank’s aid winds up being spent on Western consultants. In contrast, he explained, “China says, ‘What do you want? Here is what we want’” (Wagidoso 2006). Especially in the aftermath of HIPC debt cancellation and its conditionalities, many Africans welcome this new player in international development. But China’s rising influence clearly poses a threat to Western donor hegemony, particularly at a time when core institutions like the IMF have weakened. The 1997 Asian financial crisis resulted in the shrinking of the IMF’s loan portfolio from over USD 100 billion to USD 35 billion -- its smallest since the 1980s (Moffett & Davis 2006). China’s growing role in Africa is starting to break the monopoly power Western donors have historically had, power which allowed them to impose conditionalities on the continent. While global civil society groups welcome the opportunity to cast off the harsh conditionalities of Western aid (e.g. cuts in critical social spending), there is also a fear that the next generation of odious debt

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could be accumulating with China’s lack of transparency and governance requirements. Conclusion: Challenges, Opportunities and Implications By creating competition with the West, Chinese aid and investment helps to challenge the status quo and provide African governments with freedom to maneuver, leverage and choose their path of development. Chinese investment, free from the historical inequalities of Western investment, seemingly offers Africa a genuine co-ownership of economic policies. However, it is unclear whether big development projects bankrolled by Chinese aid (such as the Merowe dam in Sudan, which will displace 50,000 people) will generate greater development benefits than those financed by Western donors. Similarly, on the commercial side, it is unknown whether Chinese corporate investment offers better results for African economies. Conventional wisdom posits that Chinese multinationals treat workers and the environment worse than Western multinationals although not enough research has been done to actually prove this hypothesis. What is clear is that Chinese companies are quickly generating the same kinds of environmental damage and community opposition that Western companies have spawned around the world. For communities adversely affected by any of these development projects -- regardless of the corporate sponsor -- the question is first of all about political participation (“do they give their free, prior and informed consent to investment?”). If the answer is affirmative, only then should the question of the benefits and beneficiaries (“who gives the better deal?”) be considered. Communities and governments obviously should negotiate with project sponsors to receive the best deal possible, in terms of economic benefits-sharing, human rights, sustained livelihoods, environmental quality, cultural/ community integrity, etc. Evaluated this way it is clear that, in some cases, what Western companies can provide through “corporate social responsibility” (e.g. health clinics that may or may not be furnished with medicines, books for local schools, etc.) pales in comparison to the deals that Chinese state-owned companies can offer (debt relief, concessional lending, etc.).

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African leaders and policy makers face an additional, broader question: Is the Chinese model of development, which admittedly has been characterized by spectacular economic growth, one to emulate? Based on the unfettered extraction of natural resources, ultra low-wage manufacturing and the export of cheap goods (especially to “throwaway” societies in the West), this paradigm -- which is truly the familiar old model of corporate globalization, not a new Chinese prototype -- is simply not sustainable. It is tempting for African leaders to accept what China offers, in terms of aid, trade, and development paradigm. And while African leaders are not naïve enough to assume that Chinese investment and debt cancellation is the panacea to the chronic underdevelopment that afflicts them, they nevertheless can appreciate the leverage they are offered. But ultimately, it will also be important to realize that this lowprice / high-cost paradigm will not work for Africa, China nor the rest of the world. This model comes at a very high cost to societies as well as to the environment. The untold story of China’s rapid economic growth is one characterized by vast levels of income disparity, unfair treatment of workers and lost livelihoods (especially in rural areas), problems so acute that they threaten political stability. On the environmental front, breathing the air in China’s most polluted cities is the equivalent of smoking two packets of cigarettes a day. Its forest resources have been largely depleted, forcing the country to source timber from abroad. On an international level, the effects of corporate globalization -particularly to perpetuate Western consumption patterns -- are leading to the destruction of the ecological support systems on which all life depends. References AFP 2006,’ China given monopoly to work Gabonʹs untapped iron ore resources’, Agence France Presse, 2 June, 2006. AFSC 2005, AFSCʹs perspective on the G-8 agreement 2005, American Friends Service Committee, Washington, DC. Retrieved December 17, 2006, from http://www.afsc.org/africa-debt/news/afscperspective-debt.htm. Africa Mining Intelligence 2004, ‘China Development Bank’, 16 June, 2004.

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Africa News 2004, ‘Nigeria; Diamond Bank signs pact with Chinese Insurance Corporation, 27 December. Africa News 2005, ‘Big mining companies anticipate growing stability’, Africa News, 29 September. Africa News 2006, ‘Chinaʹs Great Leap into the continent, 23 March. Africa News 2006, ’Zimbabwe: Sino-Africa relations beneficial’, 6 April. Africa News 2006, ‘Minmetals signs iron ore import agreement with Palabora, 15 September. Africa News 2006, ‘Rwanda: $8 million foreign affairs complex plan launched, 22 December. AfroNews 2005, ‘China, Angola sign 9 cooperation agreement, 7 March. AFX-Asia 2005, ‘Export-import bank of China to offer China Minmetals 2 bln used credit line, 11 November. AllAfrica.com 2006, editorial, AllAfrica.com, 26 April. Retrieved from http://allafrica.com/stories/200604260312.html. Argus China Petroleum 2007, ‘China strengthens African oil links’, 18 February, in Business Day (Nigeria), online at http://www.businessdayonline.com/?c=52&a=11343 Alfroy, P 2006, ‘Chinaʹs Sinopec ʹillegallyʹ destroying Gabon, SapaAgence France Presse, 29 September, in Business in Africa online at http://www.businessinafrica.net/news/west_africa/789099.htm Asia News [online] 2004, ‘Beijing wants more African oil, 16 December, 2004, at http://www.asianews.it/index.php?l=en&art=2126. Asia Pulse 2006, ‘China development bank signs coop agreement with Yunnan Copper, 6 July. Asia Pulse 2006, ‘Chinaʹs Minmetals purchases magnetite from South Africa’, 15 September. Asia Pulse 2006, ‘China int’l water and electric corp obtains US$1.26 Bln Loan’, 22 September. Asia Pulse 2006, ‘China construction bank to acquire Bank Of America subsidiary’, 23 October. Asia Pulse 2006, ‘Chinaʹs Exim Bank, Barclays join hands to tap African market’, 27 October. Asia Pulse 2006, ‘Chinaʹs policy insurer helps energy firms go global’, 15 November.

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Asiainfo 2001, ‘China: Investors to look abroad’, Asiainfo Daily China News, March 20. BBC Monitoring International 2006, ‘China-funded new presidential residence inaugurated in Togo’, BBC Monitoring International Reports, 25 April. Beattie, A & Parker, G 2006, ‘ EIB accuses Chinese banks of undercutting Africa loans’, Financial Times, 29 November. Bohnstedt A 2006, ‘China Development Bank and East African Development Bank sign co-operation agreement’, Global Insight, 29 June. Blair, D 2006, ‘Rioters attack Chinese after Zambian poll’, The Daily Telegraph, 3 October. Broadman, H 2007, Africa’s silk road: China and India’s new economic frontier, World Bank, Washington DC. Business Daily Update 2005, ‘CSCEC deal propels ʹGo Globalʹ scheme’, 29 December, 2005. Business Daily Update 2006, ‘Policy banks should play key role in international trade, 29 April. Callick, R 2006,’ China promises bonanza for Africa, The Australian, 6 November. China Construction Project 2006, ‘Nanjing Hanrui Cobalt purchases three overseas copper-cobalt mines’, China Construction Project Net, 13 April at www.SinoCast.com. China Metals Report Weekly 2005, ‘Feeling the pressure: Chinaʹs metal companies rushing’, China Metals, 2 September. China Metals Weekly 2006, ‘Agreements reached with Chinese companies’, 4 June. Comtex News Network 2006, ‘Zijin said to erect $275mn copper plant’, 13 October. China Ministry of Foreign Affairs 2006, ‘China’s African policy’, China Ministry of Foreign Affairs, Beijing, 12 January, 2006. Retrieved November 9, 2006 from http://www.fmprc.gov.cn/eng/zxxx/t230615.htm. CRI Online 2004, ‘China beats India for Angola oil deal’, 19 October 19. Davies, P 2006, ‘From illegitimacy to responsibility: transforming development finance’, proceedings of the Eurodad Annual Conference, Hotel Christophorus, Evangelisches Johannesstift Berlin, October 2006, p 6.

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Dembele, D 2006, ‘The Least Developed Countries (LCDs) perspective on the debt crisis’, proceedings of the International Conference on the Cancellation of Illegitimate Debts, Hotel Atlet Century Park JI, Pintu Satu Senayan, Jakarta, Indonesia May 28, 2006. Dickson, R 2006, ‘Africans lash out at Chinese employers’, Los Angeles Times, October 6. EIU Country Finance 2006, ‘Banks: domestic banks’, Economist Intelligence Unit Country Finance Subscription, 21 August. Export-Import Bank of the United States 2006), Report to the US Congress on Export Credit Competition and the Export-Import Bank of the United States for the Period January 1, 2005 through December 31, 2005, United States Congressional Publications, Washington DC. Fourie, T 2006, ‘China and Zimbabwe to negotiate possible US$2bil. loan facility’, Global Insight, 22 December. Human Rights Watch 2004, ‘Angola: in oil-rich Cabinda, army abuses civilians, 23 December 23, at http://hrw.org/english/docs/2004/12/23/angola9922.htm. Hurst, C 2006, ‘China’s oil rush in Africa’, Institute for the Analysis of Global Security, Washington, July 2006 at http://www.iags.org/chinainafrica.pdf Innes, C 2006, ‘Sino-African summit ends with major Chinese aid package. Retrieved November 6, 2006, from http://www.globalinsight.com/. International Petroleum Finance 2006, ‘Beijing bankrolls Big Threeʹs overseas adventure’, International Petroleum Finance, 7 November. International Rivers Network (n.d.) 2006, IRN’s Merowe Campaign. Retrieved November 6, 2006, from http://www.irn.org/programs/merowe/. IPR Strategic Business Information Database 2005, ‘Go Out’ covers 200 countries and regions, 26 October. Mahtani, D 2006, ‘Stay away from Delta, Nigerian rebels tell China’, Financial Times (London Edition), 1 May. Meldrum, A & Watts J 2006), ‘China gives Zimbabwe economic lifeline’, The Guardian (London), 16 June. MINSA 2006, ‘Beijing cancels debt of 31 African nations: the Chinese capital is preparing to host the third summit of the Forum, to be attended by African Heads of State and ministers’, Missionary

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International Service News Agency, 18 October at http://www.speroforum.com/site/print.asp?idarticle=6172 Moffett, M & Davis, B 2006, ‘Booming economy leaves the IMF groping for mission’, Wall Street Journal, 21 April at http://www.globalpolicy.org/socecon/bwiwto/imf/2006/0421mission.ht m Musengeyi, I 2006, ‘China to aid Zim economic programme’, The Herald Online, 19 June. Retrieved June 19, 2006, from http://www.xignite.com/xWorldNews.aspx?articleid=AFP20060619516 001. Mushayavanhu, T 2006, author’s interview with Taongo Mushayavanhu, Minister Counsellor, Embassy of the Republic of Zimbabwe on November 29, 2006, Beijing. Nakkazi, E 2006, ‘Chinese to invest in power, oil’, East African, 28 November. Oddone, F 2006, ‘Debt sustainability or defensive deterrence? The rise of new lenders and the response of the old’, proceedings of the Eurodad Annual Conference, Hotel Christophorus, Evangelisches Johannesstift Berlin, October 2006, p 6. Pan, E 2007, ‘China, Africa and oil’, Council on Foreign Relations, 26 January, at http://www.cfr.org/publication/9557/ Panafrican News Agency (PANA) 2005, ‘Strike hampers stadium construction in Tanzania’, Daily Newswire, 22 July. People’s Daily 2000, ‘Bank of China backs oil giant’, People’s Daily, 25 August. Range, J 2005, ‘Zambia’s miner pay high price for copper boom’, Dow Jones Newswires, 12 October at http://www.minesandcommunities.org/Action/press791.htm RIA Oreanda 2006, ‘China becomes world leader in production of cobalt’, RIA Oreanda, 28 March. Reuters 2006, ‘Chinese firms eye copper ore, new smelter in Zambia’, in Minerals Engineering International, 5 April, online at http://www.min-eng.com/ops/af/165.html. RTNC TV-Kinshasa 2005, ‘China Development Bank said ready to fund mining activities in DRCongo, 18 October, via BBC Worldwide Monitoring, 30 October, 2005. Sinocast 2005, ‘China Exim Bank wins bailout’, SinoCast China Financial Watch, 23 August.

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Standard & Poor’s 2006, Export-Import Bank of China: Bank Credit Report, 10 August 2006, New York Standard & Poor’s. Tutin, C et al. 2005, Regional Action Plan for the Conservation of Chimpanzees and Gorillas in Western Equatorial Africa, Conservation International, Washington, DC at http://www.cbfp.org/docs_gb/great_apes_act_plan_english.pdf Wagidoso, C 2006, author’s interview with Charles Madibo Wagisdoso, Ambassador to China, Embassy of the Republic of Uganda, November 30, 2006, Beijing. Walt, V 2006, ‘Chinaʹs appetite for African oil grows – African governments view China as a more cooperative partner than the West’, Fortune Magazine, 15 February. World Markets Analysis 2006, ‘Chinese ODI in Africa: oil, arms, aid and non-interference’, 17 February. World Tribune 2004, ‘China concludes oil, gas agreement with Algeria’, 9 February. Wu, F 2005, ‘China Inc., International: how Chinese companies have discretely internationalized their operations’, The International Economy, 22 September. Xinhua 2005, ‘China’s overseas investment totals 5.5 billion US dollars in 2004’, 2 September. Xinhua 2006, ‘Beijing Summit invigorates private sector SinoAfrican trade. Retrieved November 9, 2006 from http://www.china.org.cn/english/international/188472.htm. Xinhua 2006, ‘Chinese firm wins massive road projects in Ethiopia’, June 24). Xinhua Economic News Service 2006, ‘Transnational M&A makes up 57 pct of China’s direct investment overseas, 14 December.

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Chapter 10

China’s Corporate Engagement in Africa James Reilly and Wu Na

Introduction One of the most striking elements of China’s foreign policy in Africa from 2000-2006 has been the involvement of a diverse array of bureaucratic, corporate, and individual Chinese actors. This innovative approach represents one of the more sophisticated and coordinated Chinese foreign policies in recent years. China’s “corporate engagement” strategy in Africa consists of several elements. Top Chinese leaders and diplomats create a favorable environment for Chinese investment in Africa through a mixture of prestige diplomacy, economic assistance, and diplomatic support for African leaders. At home, China’s economic bureaucratic agencies encourage Chinese state-owned enterprises (SOEs) to increase their investment and trade with Africa. China’s SOEs implement China’s aid projects, extract strategic natural resources for export back to China, and expand their manufacturing bases in China. Chinese workers staff Chinese projects efficiently and at low cost, while Chinese migrants build trade networks linking China and Africa. In only a few years, this impressive policy juggernaut has advanced China’s core strategic, economic, and diplomatic objectives in Africa at minimal cost. Chinese corporations have secured long-term access to key strategic resources. Economic policymakers have used Africa to encourage China’s transition from export-led development into a globalized economy led by large transnational corporations. African states have also proven valuable diplomatic allies as China seeks to transform itself into a global power. Yet as China’s corporate engagement in Africa deepens, the Chinese government is beginning to find itself hamstrung by a powerful “principal-agent” dilemma. China’s Africa strategy relies heavily upon state-owned corporations, the agents, who are on the ground in Africa. Multiple government bureaucracies, the principals, are tasked with ensuring that these corporations act in ways that advance China’s overall national interests in Africa. Given the existence

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of multiple principals and agents, conflicting interests, and incentives for agents to evade monitoring by principals, principal-agent theory suggests that government agencies will have difficulty monitoring and enforcing their preferences on Chinese corporations in Africa. The evidence emerging from Africa and from Beijing’s policy pronouncements indicates that the Chinese government is just beginning to confront this emerging challenge in its Africa policy. China is also becoming more deeply embedded in Africa, while its government agencies and state-owned corporations are developing vested interests in Africa. China’s ability to rely upon its corporate agents to reliably advance its strategic, economic, and diplomatic interests in Africa is thus likely to erode in the future. This article develops the preceding argument in several stages. We first review China’s strategy of corporate engagement in Africa, noting its emergence, tactics, and successes. We then describe the corporate agents and government principals tasked with implementing China’s Africa strategy and then turn to some pressing challenges raised by the complex relationships between them. China’s Corporate Engagement in Africa: Background, Objectives and Successes During the Cold War, China was in Africa, countering the West and balancing the influence of the Soviet Union. China provided African allies with development assistance, trained students, and promoted trade and military cooperation. Throughout the 1980s, when the major Cold War powers were pulling out of Africa and western development aid halved, Chinese foreign policy continued to afford a prominent role to diplomatic engagement with Africa even as Chinese material aid to Africa declined. Chinese foreign ministers retained a tradition of making their first foreign trip abroad to Africa, and Chinese leaders regularly toured Africa and received African delegations in Beijing. China’s engagement of Africa began to pay dividends by the mid1990s. During his May 1996 tour of Africa, President Jiang Zemin issued a “Five Points Proposal” establishing the terms of a new relationship with Africa: reliable friendship, sovereign equality, nonintervention, mutually beneficial development, and international cooperation. At the heart of this policy shift was Beijing’s recognition

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that Africa offered valuable opportunities for trade, investment and, particularly, extraction of natural resources (Alden 2005, p. 147). Since 2000, China’s Africa strategy has been driven by three interlocking objectives: • Strategic: Securing Access to Natural Resources Rapid Chinese economic growth coupled with dwindling domestic Chinese petroleum and mineral deposits have encouraged Beijing to look abroad for resources. In 2004, China became the worldʹs secondlargest consumer of petroleum products and its imports of natural gas, copper, cobalt, and other key resources are rising by as much as 20 percent annually (Eisenman & Kurlantzick 2006, p. 220). China’s leaders have repeatedly offered economic inducements to African countries in exchange for access to natural resources. • Economic: Constructing a Global Economy in China Since 2002, Chinese government has begun to try to transform its large state-owned corporations into globally competitive transnational corporations. Africa provides a particularly promising base for Chinese overseas manufacturing and infrastructure construction firms. The Chinese government also promotes Africa as an export market, preferably for high value-added and technologically sophisticated products. • Diplomatic: Building Diplomatic Supporters in Africa African states can provide China with valuable diplomatic support in international institutions. Depicting China in Africa as a generous, visionary world leader enhances Chinese leaders’ prestige both at home and abroad, while countering “China threat” fears in Asia and the West. China’s outreach to Africa also reduces the diplomatic space for Taiwan by engaging the few states which still recognize Taiwan instead of the PRC. China’s Success in Africa By 2006, the “Year of Africa” in China, China’s strategic approach to Africa had advanced all three objectives. Most importantly, China has succeeded in locking in oil supplies from Africa’s largest oil producers. Up to three-quarters of the oil production of Sudan, Africa’s

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third largest producer, now goes to China, supplying 5 percent of PRC oil needs. Angola, Africa’s second largest producer, sends a quarter of its production to China, as does Nigeria, Africa’s largest producer. Overall, China now imports about 28 percent of its oil and gas from sub-Saharan Africa (Sautman 2006, p. 8). China’s trade and investment in Africa have also grown rapidly. From 2002 to 2003, trade between China and Africa doubled to $18.5 billion, reached US$39.7 billion in 2005, and is predicted to surpass US$50 billion by the end of 2006. China is now the continentʹs third most-important trading partner, behind the United States and France, sustained by trade agreements reached with forty African countries (Sautman 2006, p. 9). Although Africa represents only 5 percent of Chinese total outward Foreign Direct Investment (FDI) flows, Chinese outward FDI to Africa posted the highest growth rate of any region from 2003 to 2004, at 327 percent (Boardman 2007, p. 100). Finally, China has reaped diplomatic benefits from its Africa policy. From 1994 to 1998, five African countries switched their recognition from Taiwan to the PRC: Lesotho, Niger, the Central African Republic, Guinea-Bissau and South Africa. Liberia switched recognition to Beijing in 2003, and Senegal switched to recognize Beijing in October 2005 (Brookes & Shin 2006). China has also reaped diplomatic support by African allies in the international arena, such as on the UN Human Rights Council. In 2006, Ethiopiaʹs parliament even approved a resolution in support of Beijingʹs anti-secession law on Taiwan (Eisenman & Kurlantzick 2006, p. 221). Explaining China’s Success: China’s Corporate Engagement in Africa From 2000 to 2006, Chinese leaders designed and implemented a sophisticated strategy in order to achieve their three core objectives in Africa. This strategy combines a mix of familiar and innovative techniques in Chinese diplomacy: sophisticated “prestige diplomacy,” strategic government economic assistance, and adherence to the principle of “non-interference in domestic affairs”. Most significantly, this strategy relies heavily on the involvement of Chinese corporations. China’s corporate engagement of Africa began in 2000 with the China-Africa Cooperation Forum (CACF) held in Beijing and attended by 44 African countries. The CACF established a pattern of ChinaAfrica conferences held every three years. The second CACF was held

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in Addis Ababa in 2003, along with the first Sino-African business conference, which resulted in agreements on 20 projects with a total value of US$680 million. At the third CACF held in Beijing in 2006, Chinese media proclaimed the “three 50s”: 50 years of Chinese-African cooperation, 53 African countries attending the conference, and US$50 billion in two-way trade, a projected figure for 2006 (Kahn 2006). China’s “prestige diplomacy” affords Chinese leaders an opportunity to demonstrate their political leadership and economic largess to Africans, Chinese citizens and the world. The summits also offer African leaders a rare opportunity to be treated with respect by a global power, useful for their own domestic legitimacy. The meetings’ consultation mechanism provides a useful mechanism for China to demonstrate its sensitivity to African concerns, ameliorating potential tensions. The issue of debt forgiveness, for instance, was placed on the 2000 CACF agenda at the insistence of African leaders. Despite initial resistance by Chinese leaders, China wrote off $1.2 billion in African debt at the 2000 summit. At the 2003 meeting it forgave another $750 million (Alden 2005, p. 151). To support its economic engagement on the continent, China has provided substantial economic assistance. China provided $1.8 billion in economic support to all of Africa in 2002, the last year in which China reported aid figures (Boardman 2007, p. 275). Chinese assistance goes to a great variety of projects, including hydo-irregation and small scale agricultural production, as well as turnkey projects such as provision of a nuclear reactor to Algeria, modern telecommunication systems to Ethiopia and Djibouti, and even full funding for the civil service in Central African Republic and Liberia (Alden 2005, p. 151). China has also dramatically expanded its training programs for Africans in recent years, training over 16,000 Africans from 2001 to 2006 in China (Servant 2005, note 15). In combining economic assistance, debt relief, and expanding market access for African states, China’s Africa strategy is similar to the West. China is unique, however, in the emphasis it places upon promoting business collaboration and encouraging Chinese investment in Africa. The Chinese government promotes business ties with Africa by providing information, coordination mechanisms and financial assistance for Chinese investments in Africa. In the first CACF in 2000, China established the China-Africa Joint Business Council, as well as providing government support for

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investment by Chinese enterprises in African countries and establishing an array of economic partnerships (Beijing Declaration 2000). At the 2006 CACF, China pledged US$3 billion in preferential loans and US$2 billion of export credits to African states over the next three years, as well as creating a special fund of US$5 billion to encourage Chinese investment in Africa and establishing the ChinaAfrica Joint Chamber of Commerce (Xinhua, 4 November 2006). Beijing has also set up 10 centers for investment and trade promotion in sub-Saharan Africa. Those centers provide business consultation services as well as special funds and simplified approval procedures for Chinese enterprises seeking to invest in Africa. (Boardman 2007, p. 243). In November 2004, China established the China-Africa Business Council (CABC) jointly with the United Nations Development Program in order to support Chinaʹs private sector investment in sub-Saharan Africa. The CABC, a unique public-private partnership, replicates aspects of China’s poverty-focused “Guangcai Program” which encouraged investment and philanthropic links between coastal and inland regions of China (Jiang 2004) China’s policies appear to be filling a critical gap for Chinese investors. A World Bank survey of Chinese firms in Africa found many Chinese firms lack information on the Chinese government procedures required for external investment, and on the investment conditions in African countries. Chinese construction firms operating in Africa frequently received export credit for feasibility studies, government guarantees for bank loans, export credits for financing the operational cost of projects, and lines of credit for capital goods and machinery. Such government support was listed by Chinese firms as the secondmost important factor in their decision to invest in Africa (Boardman 2007, pp. 98, 272, 304). “Going Out” to Africa: the Role of Chinese Corporations and Individuals China’s outreach to Africa emerged around the same time that Chinese economic strategists were developing ways to create globally competitive corporations out of China’s massive state-owned enterprises. China’s “Go Out” (zuo ququ) policy, launched in 2002, is designed to select 30 to 50 “national champions” from the most promising or strategic state-owned enterprises in China by 2010. These

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large corporations enjoy a range of benefits from the government including information-sharing networks, domestic tax breaks, cheap land and low-interest funding from state-owned banks. The policy is designed to develop these corporations’ technological skills and knowhow, exploit China’s comparative advantages, gain access to key inputs, open new markets abroad, create global Chinese brands, and help China avoid becoming over-dependent on export-led development (Accenture 2005, p. 5). China’s more dynamic and more profitable small and mediumsized enterprises have also been expanding beyond China’s borders looking for growth and business opportunities. By 2004, more than 7,000 Chinese enterprises had invested in 160 countries and regions around the world. China’s outward foreign investment stock and flows have been estimated at around $50 billion and $5 billion respectively in 2005 (Accenture 2005, p. 8). The combination of the “Go Out” policy with China’s Africa outreach has resulted in a dramatic expansion in Chinese corporations trading and investing in Africa. Approximately 700 Chinese companies have set up cooperative projects in Africa. Most of these firms set up their operations after the onset of the “Go Out” policy and are affiliates of a parent SOE in China, particularly in the capitalintensive resource extraction and construction sectors (Boardman 2007, p. 314). The following section reviews the activities of Chinese corporations in Africa. Chinese Oil Companies China’s state-owned oil firms are most closely linked with China’s Africa strategy. In Africa, and around the world, China’s top leaders have encouraged state-controlled companies to seek out exploration and supply contracts with countries that produce oil, gas, and other resources (Zweig & Jianhai 2005, p. 26). For instance in 2006, Nigeria agreed to give Chinese firms four oil exploration licenses in exchange for a commitment to invest about US$4 billion in refining and power generation in Nigeria. Chinese firms have tended to purchase equity shares in established oil fields rather than buying rights for future exploration and development. Encouraged by the Chinese government, they coordinate investments in pursuit of vertical integration— ownership of production facilities through transport tankers—in hopes

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of providing oil to Chinese consumers below the international market price (Alden 2005, p 148). One of the most striking examples has been Chinese firms’ involvement in Sudan. China National Petroleum Corporation (CNPC) first established oil exploration rights in Sudan in 1995. Two years later, when Washington cut ties with Sudan, Chinese companies filled the void, developing oil fields, building refineries and laying two oil pipelines. Today, 13 of the 15 largest foreign companies operating in Sudan are Chinese, primarily in the oil industry (Servant 2005). CNPC owns a 40 percent stake in the Greater Nile Petroleum Operating Company, pumping over 300,000 barrels per day. Another Chinese firm, Sinopec, is constructing a 1500 kilometer pipeline to Port Sudan on the Red Sea, where Chinaʹs Petroleum Engineering Construction Group is building a tanker terminal. Sudan, which was an oil importer before Chinese firms arrived, now earns some US$2 billion in oil exports each year. Due primarily to oil-oriented investment, Sudan is now the largest recipient of Chinese overseas investment in Africa (Bajpaee 2005). . Construction, Manufacturing and Trading Firms in Africa The majority of Chinese firms in Africa are involved in building transportation, electrical and communications infrastructure. Chinese construction firms have been particularly competitive in large-scale infrastructure construction projects in Sub-Saharan African countries, due primarily to their efficiency and low costs. Chinese firms operate mainly in the physical construction services sector, in road construction, water and sewerage, and construction of government buildings and bridges. By 2005, the accumulated value of Chinese firms’ construction contracts in Africa had reached US$34 billion, which has helped place 43 Chinese construction companies among the 225 global leaders in this sector (Sautman 2006, 31). Large Chinese SOEs dominate most large-scale infrastructure projects, at least as the lead contractor (Xiong 2006). The China Road and Bridge Corporation, a state enterprise, is directing over 500 projects in Africa. Chinese firms have also taken on large-scale construction projects such as Sudan’s Merowe Dam (US$650 million) and a hydroelectric plant at Kafue Gorge in Zambia (US$600 million). In South Africa and Botswana, Chinese firms are building hotels and

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other elements of the tourist infrastructure. A Chinese firm even launched Nigeria’s first space satellite in 2005 (Servant 2005). Chinese textile manufacturing companies have expanded operations in Africa, primarily to take advantage of the preferential trade agreements between select African countries and the US and Europe such as in Côte d’Ivoire, Mauritius, Rwanda and Swaziland. Due in part to exports from Chinese firms, China’s three largest import items from Africa are cotton (8 percent), footwear (5 percent) and fabrics (5 percent) (Boardman 2007, p.122). Chinese firms have also begun to invest in agriculture projects in Africa, with joint ventures in fish processing in Gabon and Namibia, and leases for agricultural land in Zambia, Tanzania, Mozambique and Zimbabwe (Polgreen 2006; Alden 2005, 149). Chinese Individuals in Africa Chinese workers and migrants play a critical enabling role for China’s corporate engagement in Africa. Chinese workers provide lowcost expert and manual labor for Chinese construction and manufacturing corporations while Chinese migrants facilitate trade ties between China and the continent. There has been a surge of Chinese migration to Africa which began in the mid-1990s and accelerated in the past decade, rendering most existing population estimates obsolete. The largest Chinese population is in South Africa, estimated at over 100,000. Recent estimates also point to up to 50,000 Chinese living in Nigeria, 10,000 in Zimbabwe, 8,000 in Algeria and 5,000 to 10,000 in Sudan (Sautman 2006, p. 29). There are approximately 74,000 Chinese workers involved in Chinese projects in Africa on a temporary basis, ranging from higherpaid “foreign experts” to menial laborers (Sautman 2006, p. 31). While this represents a small percentage of the almost 4 million Chinese sent abroad to work through November 2006, their presence is concentrated in high-profile Chinese construction projects, drawing attention from international media and Africans. Chinese workers tend to be paid much less and live more frugally than Western expatriates doing comparable work (Policy Explanations 2006). Most long-term Chinese residents in Africa are small merchants who sell what one Kenyan has called “down-street merchandise,” often with very little capital. In Senegal, small-scale Chinese enterprises have sprung up, importing

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inexpensive goods and running restaurants and Chinese medical clinics (Polgreen 2006). In addition to Chinese students, who are primarily in South Africa, over 110,000 Chinese tourists visited Africa in 2005, a 100 percent increase over 2004 (Boardman 2007, p. 343). The growth in Chinese workers and tourists create markets for small-scale Chinese entrepreneurs to open restaurants and small stores. Chinese migrants to Africa also help to build interpersonal trade networks linking China to Africa (Brautigam 2003, p. 448). To encourage such trade linkages, the Chinese government has promoted ties between “overseas Chinese” and the mainland through its Overseas Chinese Affairs Bureau (Nyíri 2006, p. 93). In sum, China’s policy of promoting deeper economic ties with Africa has been an astounding success. Relying upon Chinese corporations, entrepreneurs and individual migrants has enabled China to achieve its core objectives in Africa rapidly and with minimal cost. Role of Government Agencies in China’s Africa Policy China’s rapidly expanding corporate involvement abroad, supported by the “Go Out” strategy, has led to an expansion and reorganization of oversight government agencies. The following section introduces some of the main government agencies involved in China’s corporate engagement of Africa (see chart 1). State-owned Assets Supervision and Administration Commission (SASAC) As part of its reform of key economic governing institutions in 2003, China created the State-owned Assets Supervision and Administration Commission of the State Council (SASAC; in Chinese: guojia zhican weiyuanhui or guozhiwei). The SASAC is a Ministrylevel bureaucracy directly under the State Council, which operates similar to a Cabinet. The SASAC has an operational relationship (yewu guanxi) with 138 China’s national-level state-owned enterprises (SOEs), excluding financial institutions (such as China’s state-owned banks). The SASAC is either the sole owner of these SOE or else maintains a controlling share in the public SOEs (at least 40 percent of all outstanding stocks). The SASC’s primary task is to increase the value of these corporations, and ensure quality management. The SASC’s

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main tool to achieve this goal is its authority to hire, oversee and remove the management of all national-level SOEs. The national-level SASAC also has an administrative relationship (xingzheng guanxi) over the 31 provincial-level SASCs. Province-level SASAC’s have operational authority over province-level SOEs and administrative authority over city-level SASACs, which in turn have operational authority over city-level SOEs. In other words, the SASAC is the “state” in China’s state-owned enterprises. Given that most of China’s large SOEs are now listed on either the Chinese or international stock markets, the SASAC is constrained by the stock market: if the SOE’s stock goes down, as the largest shareholder, the SASAC has the most to lose. The SASAC thus has a clear incentive to maximize value and profit in these enterprises, much like a board of directors. The national-level SASAC has an equivalent bureaucratic rank with the Ministry of Commerce and Ministry of Foreign Affairs; as such, it would take direction from the State Council to resolve a dispute between these agencies. Ministry of Commerce The Ministry of Commerce (MOC) was created out of the former Ministry of the Foreign Trade and Economic Cooperation (MOFTEC) in 2003. Since then, the MOC has played a central role in Africa policy. Indeed, perhaps no where else in the world is the Commerce Ministry so central to China’s foreign policy. Three offices within the MOC are directly involved in China’s Africa policy. The Department of West Asia and African Affairs (DWAA) of the MOC provides policy advice on Africa to top Chinese policymakers and encourages investment and trade with Africa by distributing information on the local economic, political, legal and social environments in Africa to Chinese firms. The DWAA also plays a coordinating role on Africa issues across the MOC. The Department of Foreign Economic Cooperation (DFEC) of the MOC is responsible for regulation of all Chinese companies involved overseas. All Chinese corporations with overseas investments over US $10,000 are required to register with the relevant level of MOC before investing abroad, though the repeated reiterations of this policy suggest that adherence is spotty at best. The DFEC maintains a registry of approved corporations and the locations of their overseas operations. To implement its regulatory authority, the DFEC has the

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authority to fine or remove the permission to operate overseas for corporations which fail to adhere to MOC regulations and Chinese laws. The DFEC also regulates Chinese overseas labor corporations, in effect making the MOC responsible for the treatment of China’s overseas workers by Chinese corporations. The MOC’s Department of Foreign Aid (DFA) plays the central role in administering China’s aid projects. Much of China’s aid is in the form of concessional loans to African governments for infrastructure projects, many of which are implemented primarily by Chinese corporations. The DFA approves all corporations permitted to tender bids on aid projects, manages the bidding process and oversees the project itself. The DFA takes direct responsibility for the safety and quality of the construction in China’s aid projects. The MOC also has operational authority over the Economic and Commercial Counselor’s office (ECC) and most likely provides staff for these offices (Lu 1997, p. 36, note 13). The MOC treats the ECC office as the local MOC representatives in Africa, even though the ECC offices are located inside local Chinese embassies or consulates and are subject the embassy’s administrative authority. Finally, the MOC offices at the provincial and city levels have regulatory authority over all companies registered at that level. Ministry of Foreign Affairs The Ministry of Foreign Affairs (MOFA) is responsible for advising China’s leaders on foreign policy and implementing China’s foreign policy. MOFA divides African responsibilities across two desks: West Asia and North Africa, and Africa. Given that Chinese diplomatic visits to Africa frequently encompass large business delegations and result in prominent economic agreements, diplomats responsible for Africa often work closely with the business community and MOC. MOFA also oversees all China’s embassies and consulates in Africa, which are responsible for all Chinese citizens in their jurisdiction. As noted above, each Chinese consulate and embassy in Africa has administrative authority over the Economic and Commercial Counselor’s office (ECC) in their locale.

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Chinese Banks The most important Chinese bank in Africa policy is China’s Export-Import Bank (Ex-Im Bank) which was established in 1994 as a state policy-bank directly under the leadership of the State Council. The Ex-Im Bank is the sole state-owned entity the Chinese government uses to dispense official economic aid worldwide, including to Africa. The Ex-Im Bank provides low-rate “concessional” loans and “nonconcessional” loans, often at or near commercial rates. The Ex-Im Bank also provides Chinese firms in Africa with export credit, loans for overseas investment and construction projects, and international guarantees. The Ex-Im Bank coordinates with the Ministry of Commerce to approve the Chinese firms permitted to tender bids for China’s aid projects. Total Ex-Im Bank loans to sub-Saharan Africa appear to amount to over $12.5 billion as of mid-2006 in the infrastructure sector (excluding projects in the petroleum and mining sectors). Of this total, concessional loans may be up to $800 million. Of all Chinese loans, 80 percent go to five countries: Angola, Nigeria, Mozambique, Sudan and Zimbabwe. Support to the power sector makes up about 40 percent of total commitments, followed by “general” or multiple sector commitments (24 percent), transport (20 percent), telecom (12 percent) and lastly water (4 percent) (Export-Import Bank of China 2005; Boardman 2007, pp. 272-5). China’s state-controlled banks also play a key role in Africa policy by making foreign capital available to Chinese corporations for investment abroad, often with political intervention or encouragement from top leaders. China has the largest foreign currency holdings in the world, nearly $1 trillion USD. Access to these funds at preferential rates has supported Chinese state-owned firms in their expansion into Africa. In December 2004, for example, the China Development Bank issued a low-cost US$10 billion loan to Huawei, a major Chinese technology company, to promote its international operations. Soon afterwards, Huawei won contracts worth $400 million to provide cell phone service in Kenya, Zimbabwe and Nigeria.

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Provincial and City Governments Provincial governments in China play an important role in Chinese foreign economic policy, particularly in Africa. Various Chinese cities have hosted African trade delegations or sent trade delegations to Africa. Chinese city and provincial governments have leadership authority over the MOC offices in their locale, which have regulatory authority over private companies registered at their locale. They also have administrative authority over the local SASACs, which effectively “own” local state-owned enterprises at the city or provincial level. Province-level SOEs make up approximately 88 percent of all Chinese firms engaging in FDI abroad, giving provincial governments a powerful stake in Chinese firms overseas (Boardman 2007, p. 304). Major export-oriented cities, such as Shanghai and Shenzhen, have also encouraged local SOEs and private companies to expand their operations in Africa. For instance, the Qingdao municipal government recently used a local SOE to invest in an industrial park in Zambia, aimed at exporting primarily textiles to the US (Alden 2005, p. 149).

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Principals and Agents in China’s Corporate Engagement As noted above, a key reason for China’s rapid success in Africa has been its strategy of leveraging Chinese corporations to achieve its foreign policy objectives. This strategy generates a problem, however, of coordination among the diverse actors implementing China’s Africa policy. The political science theory of principal-agent relations offers useful insight into the complexity of this problem. Principal-agent theory holds that whenever a principal, or lead actor, designates another actor, the agent, to advance certain goals on their behalf, a number of conditions make the problem of coordination particularly difficult. The conditions which exist in the case of China’s Africa policy include the following: •

Multiple principals: an agent can play one principal off against another in order to pursue their own interests. In this case, coordination among the multiple bureaucratic agencies overseeing Chinese corporations involved in Africa is difficult, enabling the companies to escape effective oversight by the Chinese government.

•

Multiple agents: the multiplicity of Chinese companies involved in Africa impedes effective regulation and control by the Chinese government. These companies are ranked at different levels (city, province, national) and responsible to different bureaucracies, further impeding effective oversight.

•

Scarcity of information: given the limitations of bureaucratic capacity, geographical distance and companies’ incentives to hide information, regulatory government agencies are likely to have difficulty in accessing timely information sufficient for oversight.

•

Conflicting interests: the interests of Chinese corporations and supporting bureaucratic agencies of the Chinese government may conflict with the interests of other bureaucratic actors in a number of settings in Africa.

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The logic of principal-agent theory suggests that Chinese companies operating in Africa may act in ways which damage China’s overall foreign policy objectives. Learning about and addressing these behaviors in a timely manner will be difficult for the oversight agencies. Tensions are particularly likely in three areas. Chinese Companies Generating Local Resistance China’s policy of promoting the expansion of Chinese companies into Africa assumes that this is a win-win situation for both China and Africa: yielding economic benefits for both sides and a diplomatic payoff for China. However, Chinese companies’ pursuit of profits may lead them to operate in ways that generate local resistance, potentially undermining China’s broader diplomatic and economic objectives. Instances of Chinese business practices giving rise to African indignation are certainly mounting. In October 2006, Gabon ordered the Chinese energy firm Sinopec to halt exploration in Loango national park after a US conservation group accused it of desecrating the forest and operating without an approved environmental impact study. In Zambia, mineworkers rioted at a Chinese-run mine over poor working conditions and a failure to pay wages (Economy & Monaghan 2006). Concerns have also been raised over the environmental impact of various Chinese-run mining operations in Africa, including copper mines in Zambia and Congo, and titanium sands projects in ecologically sensitive parts of Mozambique, Kenya, Tanzania and Madagascar. There have been anti-Chinese protests and scattered violence in the Zambian copper belt and Lesotho, as well as in other parts of the continent. Chinese businesses have also been implicated in ivory smuggling, notably in Sudan and Zimbabwe (Alden 2005, p.157; Schiller 2005). One problem is that Chinese firms, new to Africa, are rarely familiar with local customs, laws or institutions. Furthermore, Chinese firms face sharp cost-based competition among each other, forcing them to cut costs by reducing wages, working conditions and safety standards. One impact has been frequent strikes at Chinese construction and manufacturing firms in Africa. The Ministry of Commerce recently admitted that Chinese workers in Africa frequently protest at local Chinese embassies and in the streets and are even getting into conflicts with local African police (Policy Explanations 2006).

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In response, the MOC established an office for addressing grievances by Chinese workers and passed new regulations protecting the rights of overseas Chinese workers (Ministry of Commerce 2006b). The multiple layers of Chinese business involvement in Africa may also give rise to animosity among different groups. Large Chinese SOEs involved in resource extraction generate fears of Chinese dominance among some African and international leaders, and among international NGOs. Mid-level Chinese manufacturing and construction firms generate tension with African businesses which see their market shares eroding, while individual Chinese entrepreneurs and low-cost workers are criticized for taking African jobs and undermining traditional markets and goods (Voice of an Experienced Person 2006). As Chinese involvement in Africa grows at all three levels, local animosity is also likely to worsen. One of the most visible cases of negative backlash against Chinese businesses has been in Zambia, where on April 20, 2006 an explosion at a Chinese-owned copper mine killed 51 workers (China’s Investment 2006). Although China has invested over US$300 million in Zambia and employed more than 10,000 Zambians, presidential candidate for the October 2006 elections, Michael Sata, repeatedly criticized the safety record of Chinese-owned mines and Chinese immigrants for undermining Zambian small businesses and workers. The Chinese ambassador initially threatened to sever relations with Zambia if Sata won, but Beijing later distanced itself from his remarks and Sata lost the election (Hanson 2006). The Zambia case finally sparked the Ministry of Commerce (MOC) into action. Citing the Zambian mine incident as an example of how Chinese business practices in Africa are feeding “anti-Chinese sentiment” in Africa, MOC promulgated new regulations calling for Chinese companies to act responsibly in Africa “to protect our national interests.” The regulations urge companies to practice “localization”: hiring local workers, respecting local customs, adhering to African and international safety standards and, generally, avoiding practices which have given rise to local tensions (Ministry of Commerce 2006a). The MOC regulations stress the role of the Economic and Commercial Counselor’s office (ECC) based in the local Chinese embassy. However, relying upon local ECC staff in Africa to ensure the timely flow of information and rigorous enforcement of Chinese corporations in Africa may prove difficult in all but the most egregious

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incidents. As chart 1 demonstrates, the ECC has no direct lines of authority over Chinese corporations in Africa. Without such authority, the low-ranking staff officer of an ECC office in Africa is unlikely to negatively report on, or try to curtail, the operations of a nationallyranked Chinese SOE, which almost certainly has the support of powerful officials in Beijing and has been dubbed one of China’s “national champions” in the Go Out policy. Since the MOC has only “operational authority” over the ECC office rather than “administrative authority”, the ECC has additional leeway to avoid following MOC regulations in such instances. In addition, the MOC itself does not have direct authority over any of the SOEs operating in Africa (see chart 1). As noted above, the SASAC at the national, provincial or city levels is in effect the “owner” of these SOEs. The SASAC interest is exclusively in maximizing the economic performance of these companies. Given that the SASAC bureaucratic ranking is equivalent to the MOC, state-owned corporations can likely turn to their SASAC bureaucratic allies in resisting direction from Commerce officials which they view as detrimental to their business operations. The Ministry of Commerce also has conflicting interests, given its dual responsibilities to support Chinese corporations going overseas and to regulate these companies. If a Chinese corporation is economically successful in Africa but is acting illegally in its labor or environmental policies, the MOC has to choose between support or punishment of the firm. Given China’s overarching priority on promoting overseas economic development, robust enforcement of the new MOC regulations in all but the most egregious cases seems unlikely. Finally, Chinese corporations often have powerful bureaucratic allies within provincial or city governments, which may further impede local enforcement in Africa. The large telecommunications company Huawei, for example, is registered with the city of Shenzhen, which gives Shenzhen city leaders an interest in Huawei doing well abroad. If a local Chinese embassy official tries to challenge Huawei in Africa, say to encourage better environmental or labor practices, Huawei’s powerful bureaucratic allies in Shenzhen are likely to provide sufficient backing for the company to ignore the local embassy. In sum, Chinese corporations’ behavior is beginning to give rise to backlashes in parts of Africa, a trend that will continue as China’s

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engagement in Africa continues to deepen. In such instances, the combination of China’s priority on economic development, the dizzying array of government principals and corporate agents in Africa with different bureaucratic rankings, and the scarcity of reliable and timely information is likely to combine to undermine effective Chinese government oversight and enforcement of its own regulations on Chinese companies in Africa. Implementation of China’s Aid Projects A second area where tensions are likely is in China’s aid policy, given the potentially conflicting priorities of key actors. The Ministry of Foreign Affairs and China’s top leaders view China’s aid program as primarily a diplomatic tool designed to improve China’s bilateral relationships, often to secure access to natural resources. The Ministry of Commerce (MOC) prioritizes the economic benefits for China in the aid program: jobs for Chinese workers and contracts for Chinese firms. Chinese firms prioritize completing projects as quickly and cheaply as possible. Given sharp cost-based competitions, these firms reduce costs through lax safety and labor policies (Voice of an Experienced Person 2006). Such firms are usually affiliated with different city or province governments in China, which tend to encourage them to establish a foothold in China’s aid projects in Africa. The combination of multiple oversight bureaucracies (principals), competing companies (agents) and their conflicting interests suggests that Chinese firms are likely to act in ways which undermine the diplomatic objectives of the aid program. Indeed, in October 2006, the MOC formulated new regulations for Chinese firms implementing aid projects abroad, indicating that this problem is already emerging. The regulations prohibit, for the first time, the practice of transferring aid contracts to another firm and only permit sub-contracting to a firm already approved by MOC. The new MOC regulations also require the Economic and Commercial Counselor’s office (ECC) in the local Chinese embassy to quickly report incidents of worker death to MOC. In “large-scale accidents” (defined as over 30 deaths), the MOC itself must report directly to the State Council within 12 hours. Any corporation involved in a safety incident leading to the death of workers is barred from participating in Chinese aid project for two to four years (Ministry of

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Commerce 2006c). The MOC also recently required local ECC staff to certify the Chinese firms approved to use Chinese overseas labor locally, in an effort to enhance MOC monitoring capacity of this booming industry (Ministry of Commerce 2006b). While MOC’s standards appear rigid and comprehensive, as noted above, the local ECC offices based in Chinese embassies in Africa are unlikely to be willing or able to enforce these regulations on the African branch of powerful Chinese companies, given the ECC’s relatively low bureaucratic ranking and lack of direct authority over these companies. MOC’s reliance upon local embassy staff in Africa for oversight of China’s aid projects suggests that effective monitoring and enforcement of the new regulations is unlikely in most instances. Chinese Companies Loosing Money Abroad By providing government support for Chinese companies and asking them to implement projects with political rather than purely economic objectives, the Chinese government is setting up a classic moral hazard problem. Chinese corporations may feel free to act in a fiscally irresponsible manner since they can rely upon China’s statecontrolled banks for financial support in disregard of their economic performance. It is precisely this problem that has generated the massive non-performing loans held by Chinese banks. In Ethiopia, some PRC construction firms have been instructed by their provincial governments to make unprofitable bids to get a foot in the door for future undertakings (Sautman 2006, note 123). Such practices may secure market access but can also lead to long-term financial dependency upon the Chinese government. Similarly, industry analysts believe that Chinese firms have purchased overvalued shares in African national petroleum companies in order to secure a market position. This may also be true for the newly privatized industries that Chinese investors have bought in Zimbabwe and Mozambique (Alden 2005, p. 154). Finally, it is worth recalling that China’s newly-crowned “national champions” at the head of the Go Out strategy are the same large-scale, inefficient, highly-subsidized state-owned enterprises which have resisted all previous reform efforts in China. It is unlikely that they have suddenly become models of efficiency simply because they are operating abroad, particularly given the political interests, lack of

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experience and moral hazard problem. Indeed, the World Bank recently reported that one-third of Chinese enterprises had lost money on their foreign investments and that 65 percent of their joint-ventures had failed (Accenture 2005, p. 6). Conclusion: the Costs of Becoming Embedded in Africa While China’s corporate engagement in Africa has yielded an impressive slate of strategic, economic and diplomatic successes in only a few years, a closer inspection suggests a fundamental underlying problem. Relying upon state-owned corporations to implement China’s foreign policy in Africa has created a classic principal-agent problem for China’s oversight agencies. Peeling back the multiple layers of corporate actors and government agencies reveals that China’s primary oversight agencies do not enjoy direct lines of authority over Chinese corporations overseas. Although the Chinese government is now busily passing regulations aimed at controlling Chinese corporations in Africa, this bureaucratic morass suggests that they are unlikely to be rigorously enforced. The very success of China’s corporate engagement strategy has also embedded China deeper within domestic politics in Africa, as seen by the example of the Zambian elections. Signing long-term oil deals, basing Chinese manufacturing in Africa and strengthening ties with Chinese migrant communities all render China vulnerable to domestic developments within some of its key partner states in Africa. The emergence of political instability or international disrepute or, most likely, a combination of the two in countries like Sudan, Angola and Zimbabwe will compel a Chinese response. Concerns with stability in Africa have led to a recent rise of Chinese peacekeeping in Africa. As these trends advance, the ineffective bureaucratic controls over Chinese corporations in Africa may become more costly and worrisome for Chinese leaders. In the near future, the parallel developments of China becoming more deeply involved in Africa and the worsening principal-agent dilemma underlying China’s corporate engagement strategy will increasingly converge. Only time will tell if Chinese policymakers can react to this challenge with the same sophistication and creativity which have characterized China’s Africa strategy in recent years.

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References Accenture Consulting Group 2005, China spreads its wings: Chinese companies go global. Alden, C 2005, ‘China in Africa,’ Survival, vol. 47, no 3 (Autumn), pp. 147-164. Bajpaee, C 2005, ‘The eagle, the dragon and African oil’, Asia Times Online, 12 October. Retrieved November 12, 2006 from http://www.atimes.com/atimes/China_Business/GJ12Cb01.html Beijing Declaration 2000, The China-Africa Forum on Cooperation Ministerial Meeting, Beijing, 12 October, 2000. Retrieved November 15, 2006 from http://www3.itu.int/MISSIONS/China/chinaafricaforum/forum008.htm Boardman, H 2007, Africa’s silk road: China and India’s new economic frontier, The World Bank, Washington. Brautigam, D 2003, ‘Close encounters: Chinese business networks as industrial catalysts in Sub-Saharan Africa’, African Affairs, vol. 102, pp. 447-467. Brookes, P & Shin JH 2006, ‘Chinaʹs influence in Africa: implications for the United States’, Heritage Foundation Backgrounder, no. 1916. Cen Ken 2007, ‘Zhang xingying: ‘lixing sikao’ de beihou’ (‘Zhang Xingying: Behind the ‘rational thinking’,’ Caijing Guancha Bao (The Economic Observer), 1 January, p. 21. Economic Observer (Caijing Shibao) 2006, ‘China’s investment in Africa will be more regulated in measures which take strict precautions against problems’ (Woguo jiang dui feizhou tozi larui guanli yanfang chuxian wenti xiangmu) October 7. Economy, E & Monaghan, K 2006, ‘The perils of Beijing’s Africa strategy’, International Herald Tribune, 2 November. Retrieved November 15, 2006 from http://www.cfr.org/publication/11886/perils_of_beijings_africa_strateg y.html?breadcrumb=default Eisenman, J & Kurlantzick, J 2006, ‘Chinaʹs Africa strategy’, Current History, May, pp. 219-224. Export-Import Bank of China 2005, Annual Report (Nianbao), Beijing.

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Hanson, S 2006, ‘Zambiaʹs vote: the China issue,’ Associated Press, 2 October. Retrieved December 10, 2006 from http://www.cfr.org/publication/11552/ Jiang Z 2004, ‘Council promotes Sino-African cooperation,’ China Daily, 18 November. Retrieved November 12, 2006 from http://www.chinadaily.com.cn/english/doc/200411/18/content_392419.htm Kahn, J 2006, ‘Beijing courts a continent’, New York Times, 3 November. Lieberthal, K 1995, Governing China: from revolution through reform, Norton, London. Lu N 1997, The dynamics of foreign policy decision-making in China, Westview Press, Boulder. Ministry of Commerce 2006a, Explanation regarding the ‘suggestions for strengthening the human safety and protection of workers for Chinese enterprises and organizations overseas, (Dui ‘guanyu jiaqiang jingwai zhongqiye jigo yu renyuan anquan baohu gongzuo de yijian’ de jiedu) August 31. Retrieved from: http://hzs.mofcom.gov.cn/aarticle/bk/200608/20060803022750.html Ministry of Commerce 2006b, Provisional measures for Chinese overseas commercial enterprises invested in service sector (Zhongguo qiye jingwai shangwu touxi fuwu zanxing banfa), August 24 (regulation no. 16, 2006). Ministry of Commerce 2006c, Administrative measures regarding safety and production on comprehensive aid projects (October 1, 2006). Retrieved from http://www.mofcom.gov.cn/aarticle/b/bf/200608/20060802970939.html Ministry of Commerce 2006d, Policy explanations, April 4. Retrieved December 20, 2006 from: http://hzs.mofcom.gov.cn/aarticle/bk/200605/20060502146224.html Nyíri, P 2006, ‘The yellow man’s burden: Chinese migrants on a civilizing mission’, The China Journal, Issue 56, pp. 83-108. Polgreen, L 2006, ‘China makes Africa its business’, The New York Times, 18 August. Retrieved November 12, 2006 from http://www.iht.com/articles/2006/08/18/news/africa.php Sautman, B 2006, ‘Friends and interests: China’s distinctive links with Africa’, Center on China’s Transnational Relations, working paper no. 12.

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Schiller, B 2005, ‘The China model.’ Retrieved December 2, 2006, from: http://www.opendemocracy.net/democracychina/china_development_ 3136.jsp Servant, J 2005, ‘China’s Trade Safari in Africa,’ Le Monde Diplomatique Online. Retrieved December 2, 2006 from http://mondediplo.com/2005/05/11chinafrica Thompson, D 2005, ‘Beijing’s participation in UN peacekeeping operations’, China Brief, vol. 5, issue 11, May 10. ‘Voice of An Experienced Person’ 2006 (Guolai renshuo), Modern Manager (Dangdai Jingliren), December 4. Retrieved December 15, 2006 from http://finance.sina.com.cn/leadership/mroll/20061204/10333132131.sht ml Xiong SH 2006, ‘Zou ququ de jingtan: zhongguo qiye zai feizhou’ (The experience from ‘Going Out:’ Chinese Enterprises in Africa), Nanfang Xinbao (Southern News). Retrieved November 20, 2006 from http://www.southcn.com/news/international/zhuanti/zflt/zgqy/2006110 20824.htm Zweig, D & Jianhai, B 2005, ‘China’s Global Hunt for Energy,’ Foreign Affairs, vol. 84, no. 5, September/October, pp. 25-39.

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Chapter 11

Growing Pains and Growing Alliances: China, Timber and Africa Tina Butler

Introduction There are many reasons to account for this seemingly unlikely set of alliances with a most distant neighbor. Among them is the diminished presence of the United States and other Western powers on the continent, with the majority of the attention focused presently on the Middle East. The standard response of the United States in recent years to local conflict in African nations has been to withdraw both troops and civilians, reduce military aid and issue security advisories to would-be visitors and investors. During the Ethiopia-Eritrea war in the late 1990s, Chinaʹs government, viewing the war as an opportunity, in the absence of an American presence, sent over even more citizens to expand its influence on, and strengthen its connections to Ethiopia. Today, the strong Chinese presence in Ethiopia is representative of other African nations. Beijing, representing the whole of the governing body of China, is pushing broadly and laterally into the continent nurturing deep economic, political and militaristic ties, and angling for prime access to Africaʹs vast natural resource base. At Stake: More Than Potential Economic Gains In fostering these relationships, China seeks to establish and maintain geopolitical alliances that will aid in maneuvering the country into the status of a global superpower. China is concerned with reasserting political authority over Taiwan -- its wayward and arguably, economically and socially superior cousin -- as well as establishing a certain degree of political muscle against the US and its manifestation as the dominant global force in international organizations like the United Nations.

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Into Africa China is pushing into Africa on a diverse range of fronts. In Nigeria, where oil is abundant, China is rebuilding the railways. In Rwanda, Chinese companies have paved more than 80 percent of the main roads, and in Zambia, Chinese companies own one of the countryʹs largest copper mines. In more than a dozen countries, Chinese firms are searching for oil and gas while rebuilding electrical grids and telecommunications networks. The investment interests range from massive state-funded projects to small private ventures as Beijing pushes for its government, corporations and citizens alike to set up shop. Some government officials from the US have taken notice of this activity and have growing concerns about Chinaʹs increasing monopolistic influence on Africa. Among other resources, the continent is becoming a major global supplier of timber and China may soon control access to this resource. And unlike the US, which bars companies from doing business with outlaw regimes, Beijing expresses no qualms about dealing with Africaʹs most brutal and corrupt leaders, while Chinese businessmen take on and fund projects that Western countries reject on principle alone. Chinaʹs ties to Africa go back to the 1950s when Beijing supported various independence movements as a means of countering US and Soviet influence in the region. Beyond establishing control over African resources, China is looking to position economically marginal nations to serve as producers of, and markets for its products in the future. As China gains ground in these markets, the US stands to lose out; in spite of a trade pact signed with Africa in 2000, American influence has leveled off and even declined in many of the continentʹs nations. Chinaʹs Quest for Resources Chinaʹs insatiable demand for resources is directly correlated to its tremendous economic growth. With growth rates exceeding 7 percent, it is estimated that by 2020 the GDP of China will exceed that of Japan, behind only the US and EU. Chinaʹs need for resources, encompassing everything from aluminum to crude oil to wildlife parts, has driven its government to pursue resources far beyond its borders.

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Recent domestic misfortunes and mismanagement of resources by Chinaʹs governing bodies have made foreign sources for raw materials an even greater imperative. In 1998, devastating flooding of the Yangtze River resulted in more than 2500 deaths and caused billions of dollars in damage. Blaming rampant logging in the region for the floods, the Chinese government summarily banned the harvesting of timber in large areas of the country. Orders were issued to protect healthy forests, rehabilitate compromised regions and replant many woodland areas that had been cleared for agricultural use. Furthermore, officials launched a crackdown on illegal logging within China. Environmentalists viewed these new precepts, provisions and activity as a reason for hope that China might be altering its environmental course for good, but their optimism was short-lived. While the ban has improved forestry management in China, environmental groups charge that the government now goes elsewhere for the wood it needs, accelerating timber poaching in other nations and the government is on course to become the main hub of a global network of trade of illegal timber. China Wants Wood Chinaʹs need for timber is evident, but the government is quick to deny the controversial means for supplying that need. The Chinese government has continually claimed that their country has a selfsustainable timber industry, but then has gone on to slash tariffs on imported timber. The State Forest Administration (SFA) recently completed a five-year survey of the countryʹs forests that found consumption and production of timber to be evenly balanced and the industry capable of continuing to meet Chinaʹs need for wood from its own forests for the foreseeable future. According to The Economist, a senior SFA official has said, ʺIt is out of the question that the country would satisfy its domestic demands by increasing tree-felling from neighboring countries.ʺ The choice of the term ʺneighboring countriesʺgives China a convenient exception clause as it excludes Equatorial Guinea, along with other African and as well as South American nations. When one puts these kind of assertions from the government, exception clauses or not, next to figures from various environmental

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groups, the expansive chasm between the two becomes increasingly glaring and difficult to reconcile. According to conservationists and some fairly compelling statistics, China is already importing vast quantities of timber, much of which is illegally harvested. Imports of industrial wood - used in construction, furniture-making and pulp mills -- have more than tripled since 1993. Even if the allegations put forth by various green groups are false, Chinaʹs predicted growth rates and recent forest preservation measures in the country strongly suggest that the nation cannot possibly support itself on domestic supply alone. According to the World Wildlife Fund (WWF), Chinaʹs demand for imported industrial wood -- timber, paper and pulp -- will grow by at least 33 percent within the next five years, from the current 94 million cubic meters to 125 million cubic meters. One of the major contributing factors accounting for the rapid growth of the industry is construction, says Zhu Chungquan, forest program director of the local WWF agency based in Beijing. To put a number on the level of demand in perspective, one government initiative, a housing reform package set out in 1998 ironically enough, calls for the construction of five billion square meters of new housing and two billion square meters of renovated housing by 2005. This package is part of the countryʹs urbanization policy to increase living spaces and quality of life in the ever more crowded conditions in Chinese cities. What is more, the Chinese government plans on moving 300 million rural people into the cities. China now trails only the US in wood consumption and with the countryʹs projected growth rates, China is sure to assume frontrunner status for consumption. According to the WWF, the flourishing construction and furnishing sectors accounted for the consumption of 90 million cubic meters of timber in 2003, or 65 percent of the total consumption rate for China - 138 million cubic meters. Beyond the construction of living quarters, Chinaʹs economic growth results in emergent wealth. With greater spending power and economic means, people are replacing furniture at a faster rate and also remodeling. Adding fuel to the fire, by 2010, the WWF predicts that China will be able to meet only half of its demand for industrial wood. The Britainbased environmental group, the Environmental Investigation Agency (EIA) asserts that China imported one million cubic meters of logs in 1997 and 16 million cubic meters in 2002.

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In China, as in so many areas of the world where problematic environmental practices have seductive and undeniable economic benefits, all of this reportedly illegal timber is providing a great number of jobs. According to The Economist, the small town of Nanxum near the port city of Zhangjiagang used to produce only small amounts of wooden floorboards up until about five years ago. Today, there are 500 floorboard factories and about 200 sawmills, which the EIA says together process one merabu log, a type of sturdy tropical hardwood, every minute of every work day. The explosion of work opportunities and production from this industry is clear, but the origin and sheer quantity of the supply is certainly troublesome. The government-issued statements and actual directives simply do not add up. Logging cannot be limited as supply and production soar. What the Chinese government does and does not endorse as the truth aside, other organizational bodies assert some disturbing claims for logging activity in several African nations. According to the British website www.globaltimber.org.uk, China - along with Russia, Brazil, Myanmar and Papua New Guinea - is also taking significant amounts of wood from forests in Cameroon, Congo, Equatorial Guinea, Gabon and Liberia. With the damning effects of deforestation being proven time and time again, this growing activity does not bode well. In Cameroon, 50 percent of exports of timber are illegally performed. The figure is 90 percent in the Democratic Republic of the Congo, as dealers with political ties flagrantly disregard laws requiring log processing prior to export. In Equatorial Guinea, exports are again at 90 percent with the same indifference to laws concerning maximum allowable cut and de facto concession size (largely attributable to one company and its sponsors, most of which supply Chinaʹs imports). Gabon comes in at 70 percent, while Liberia again reaches 90 percent, with a recent surge in trafficking linked to the civil war. Illegal exports, the species from which the wood-based products that China exports in greatest quantity, are generally not declared in national trade statistics, and for obvious reasons. The result of the secrecy is that there is no way to determine the true extent of illegal logging and exporting activity; it may be even worse than reported, but impossible to track. What is more, a large proportion of these exports comprise commodities, notably furniture, for which unlike most other trading nations, China chooses not to declare weight or other physical measures of quantity. This provides a convenient bureaucratic loophole

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through which literally tons and tons of timber can pass though undocumented. As imports soar along with corruption and incompetence within the sector, it seems this situation will only worsen until the industry implodes from its own ill-conception and operation. Conclusion Given Chinaʹs reportedly poor environmental record and current practices, this burgeoning stronghold on African resources is a grave matter. Back in the Beijing office of the WWF, Chungquan is lobbying Chinese sourcing companies to join the Chinese Forest and Trade Network, a business-environmental partnership for certified wood. Despite the figures and unsustainable trajectory, Chungquan retains some optimism for Chinaʹs future, and hopefully, some peripheral benefit for the African nations it imports from. He believes that Chinaʹs admittance into the WTO and APEC may encourage importers to use certified wood as tariffs are lowered. Few on the environmental side may share this opinion, but there is always hope.

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Chapter 12

Chinese Drivers for African Development? The Effects of Chinese Investments in Zambia Peter Kragelund Introduction Chinese presence in African economies has regained its importance. While the end of the cold war left large parts of Africa marginalized in the eyes of western governments and private investors, “new players” took over. Within the last few years, Chinese economic and political interests in Africa have increased considerably. China’s significant presence in Africa in areas such as resource extraction, development aid, and military support, as well as in business has triggered massive media interest. Nevertheless, hardly any academic analyses of the consequences for local development of this trend have been conducted. Rather, the current debate is characterized by the conflicting political interests of China and the United States. Four main reasons for China’s current interest in Africa have been singled out: its energy dependence; its desire to expand national representations abroad; its concern with western, especially American, hegemony; and its search for new markets and investment opportunities (Alden 2005). While the first three issues increasingly come to the fore also in academic publications (Jaffe & Lewis 2002; Taylor 2006), the last issue has only received scholarly attention very recently. A number of publications recognize that trade between China and Africa is increasing and attempt to examine the broader consequences of this trend (Kaplinsky, McCormick & Morris 2006), but although some publications mention that Chinese companies, assisted by the Chinese government, are investing in Africa, few have attempted to examine the consequences of this trend. This paper contributes to an improved understanding of the effects of Chinese Foreign Direct Investments (FDI) on local producers in African economies. In order to achieve this, this paper uses Zambia as a paradigmatic case: China has been present in Zambia since independence in 1964; Zambia is one of the three most important

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destinations of Chinese FDI in Africa (Lafargue 2005); Chinese companies currently invest in most sectors of the Zambian economy; more than 180 Chinese companies have invested in Zambia (Times of Zambia, 2006a); and accumulated Chinese investment in Zambia reached USD 316 million in 2006, making China the third largest investor in Zambia after South Africa and Great Britain (Xinhua, 2006). These figures are likely to increase significantly in the near future as Hu Jintao, during his most recent visit to Lusaka (February 5, 2007), inaugurated the first of three to five African Economic and Trade Cooperation Zones. During the next three years this Zone will foster Chinese FDI of USD 800 million into Zambia (China Daily, 2007). This paper is structured as follows. Section 2 critically examines the role of FDI in Africa’s future development. It firstly argues that FDI is only a source of external finance for very few African countries and secondly, it maintains that as a rule FDI is neither good nor bad: rather, it depends on the motive, time frame, local absorption capacities, and mode of entry of the investment. Based on these conclusions, section 3 discusses whether or not South-South FDI is any different. In theory, it is, but data from Africa cannot yet confirm this. Section 4 delves into a certain type of South-South FDI namely Chinese FDI in Africa. It scrutinizes available data and concludes that even though Chinese FDI in Africa gets lots of publicity, in aggregate terms it is not different from other FDI: FDI to Africa by and large targets resource extraction activities and confirms the current economic position of Africa as commodity supplier. However, detailed studies of Chinese FDI in certain sectors display a different picture. Chinese FDI may act as a catalyzer, a competitor or a capacity builder for African development, depending on the characteristics of the FDI as well as on the characteristics of the sector. Section 5 delves with this in a Zambian context. Conclusions are offered in section 6. Investments for development in Africa The majority of African economies are dominated by external finance such as development aid, remittances and FDI, while internal forms of finance such as taxes and tariffs only play a significant role in a few African economies. Until recently, donors perceived development aid as the most important source of external finance in Africa, but even though development aid to Africa is currently

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increasing, Africa still needs to fill an annual resource gap of USD 64 billion in order to meet the millennium development goals (Asiedu 2004). Hence, Africa must seek capital from other sources to fill the gap. FDI is often seen as superior to other forms of capital as it is perceived to be substantially more stable and to bring along issues of utmost importance for development such as technology transfer, access to international markets, employment creation etc. This section will briefly discuss these issues. Table 1: FDI flow 1970-2005 (million USD) Average 70-79

80-89

90-99

2000

2001

2002

2003

2004

2005

Total

24124

93887

401028

1387953

817574

678751

560115

710755

916277

Developing countries

6109

21356

121769

252459

219721

157612

172033

275032

334285

Africa

906

1273

4323

6202

14700

8862

10599

11294

17934

Africa (÷South Africa)

813

1259

3472

5314

7911

8105

9836

10495

11600

Africa in % of total FDI

3,8

1,4

1,1

0,4

1,8

1,3

1,9

1,6

1,9

Africa in % of dev. Country FDI

14,8

6,0

3,5

2,5

6,7

5,6

6,2

4,1

5,3

Source: (UNCTAD, 2005: table 1; , 2006: Annex Table B1) Seen both in a long- and short-term perspective, FDI to Africa has increased substantially (table 1): FDI to Africa reached a historical height in 2005, almost touching US$ 18 billion – approx. 60 percent higher than the previous year. Table 1, however, also reveals that most FDI to Africa targets South Africa and that compared to total FDI as

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well as to FDI to developing countries in general, Africa has lost significant ground compared to the 1970s. Furthermore, FDI to Africa is very unevenly distributed among African countries. In 2004, ten African countries received three quarters of the total FDI flow to Africa (see figure 1). Apart from Côte d’Ivoire and to some degree also Congo and South Africa FDI flows to Africa are concentrated in the oil industry: the greater part of the remaining FDI flows are concentrated in natural resource extraction activities (Mlambo 2005). UNCTAD (2006, p. 41) even goes as far as to state that the most recent increase in FDI to Africa primarily is a consequence of the boom in the global commodity prices caused by especially China’s rising demand. Taken together, however, FDI figures for Africa first inform us that even though FDI to Africa grows in absolute terms, relatively Africa is lacking behind. Moreover, FDI is not yet an option for external finance for the majority of African countries: only a few oil-rich countries receive the bulk of FDI, while the remaining nations receive only very little. Nevertheless, FDI may turn out indeed very important as for these countries. Notwithstanding their small absolute size, FDI to small African countries are significant when accounted for as a proportion of annual investments (Sumner 2005).

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Figure 1: FDI flow – ten most important economies in 2004 (million US$)

Source: Calculated from www.unctad.org/fdistatistics Even though FDI is often portrayed as being stable, it is not. In fact, it seems that FDI to Africa is highly unstable. Thus, single investments, often in the form of mergers and acquisitions (M&A) may radically change the FDI flow in small African economies from one year to the other. Figure 1 depicts the highly uneven annual flow of FDI to Africa. The crucial role of single M&As is illustrated by the large inflow of FDI to South Africa in 2001, which by and large is made up of AngloAmerican’s acquisition of De Beers (Mlambo 2005, note 1). Less illustrative but equally important are two other M&As, namely Anglogolds with Ashanti Goldfields in Ghana, and Norimet with Gold Fields in South Africa in 2004. These two M&As alone comprised 21.3 percent of all FDI to Africa in 2004. African governments, therefore, cannot base their policies on FDI flows. Proponents of FDI point to other positive aspects of FDI than capital formation. FDI is said to create employment, facilitate technology transfer and improve competitiveness. This perception of

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the developmental effects of FDI is widespread among donor organizations as well as among developing country governments, and it has led to liberal investment policies. African governments are no different. They seek to attract FDI via tax advantages, tariff exemptions, and environmental exceptions. However, empirical studies of the developmental effects of FDI are ambiguous. Broadly speaking, these studies either aggregate the effects of FDI on a whole industry or dig deep into the effects of M&A for a single case, generally the acquired company. The former type shows that the effects of FDI firstly vary from sector to sector and from one country to the other and secondly, depend on local technological capabilities as well as on the motive for the investment. Lastly, this type of study points to relatively few positive horizontal spillovers of FDI, i.e. spillovers in the same sector and hardly anyone in a developing country context (Blomstrom & Kokko 1998; Gorg & Strobl 2001). However, it is important to keep in mind that positive horizontal spillovers may take time to materialise as negative effects tend to dominate immediately after the investment (Meyer 2004). Moreover, these aggregate studies tend to set off positive and negative effects. The latter type, that is, case studies of FDI effects, in contrast, have demonstrated positive effects of M&As via technology transfer such as product and process upgrading and productivity improvement. Nonetheless, these studies also point to negative consequences of M&As. According to Portelli and Narulas (2006), the result of these case studies largely depends on the motive for the investment. Motive, time, and technological capabilities, however, are not the only parameters that determine the outcome of the FDI. Of importance, especially as regards employment creation and technology transfer, is the mode of entry: while greenfield investments by definition create employment as a new company is established via the investment, M&As may cause loss of employment as M&As often involve reorganizations that necessitate job closings. In contrast, linkages to local suppliers and retailers and, thereby the possibility of transferring technology, may be retained in M&As, while greenfield investments by definition have to establish new linkages in order to transfer technology. Range and type of effects of FDI thus depend on a whole range of variables, such as the absorptive capacity of the local economy, the orientation of the investment, as backward linkages to local suppliers

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tend to be stronger and more numerous if the multinational corporation (MC) targets a local market compared to an export market; and the “nationality” of the MC. Furthermore, the FDI-literature also points to different direct mechanisms that may generate effects. Among these are the cooperation between MCs and local firms; demonstration effects; the flow of workers away from the TNC towards domestic companies; establishment of training programmes with local institutions; and regular human interaction between employees performing similar jobs for different companies. Spillovers may occur indirectly via standards of quality, reliability and speed delivery that are forced upon suppliers as well as from competition between MCs and local companies (Alfaro & Rodríguez-Clare 2004; Blomstrom & Kokko 1998). The FDI literature distinguishes between two different roles vis-àvis the domestic private sector, namely crowding in or crowding out. Crowding in here denotes the development and upgrading of private firms to benefit from linkages with MCs. Crowding out, in contrast, denotes the distortion of growth of the domestic private sector either directly via competition on the market or indirectly via limiting access to finance and skills (Kumar 2003). This distinction between capacity builder on the one hand and competitor on the other, however, does not take the catalyzing role of FDI into account: FDI may catalyze domestic private sector development directly through investments in dormant sectors of the economy or improvement of infrastructure and indirectly via, for instance, increased attention to the domestic market. New investment tendencies in Africa South-South collaboration, especially in the form of third world multinationals (TWM), has regained its scholarly importance (Aykut & Ratha 2004; UNCTAD 2006). TWMs now invest all over the world, but South-South investments have increased very rapidly during the past decade. FDI from TWMs has been characterized by geographical closeness to the home economy, which is perceived to minimize economic risks due to ethnic and cultural affiliations. It seems, however, that this tendency of closeness may be changing. Ever more TWMs are now investing far away from their national base: in Africa, South African TWMs no longer limit their investments to Southern Africa but invest all over the continent, as well as in other continents;

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Malaysian, Chinese, and Indian companies invest all over Africa; and Brazilian companies now also invest in some African countries. FDI from TWMs are often singled out as an alternative development path. TWMs are often portrayed as being superior to MCs in challenging business environments due to their familiarity with lack of transparency; and they make appropriate products using appropriate technologies (Battat & Aykut 2005). Moreover, TWMs are said to be a major reason why Africa has experienced an absolute increase in FDI (see also table 1). In Africa four countries dominate the new South-South investment picture: China, India, Malaysia and Taiwan. As will be apparent in the next section, Chinese companies invest in all sectors of the host economies, but concentrate investments in resource extraction. Indian companies have until recently focused their investments in service and manufacturing, mostly in East Africa, but have recently begun to collaborate with Chinese companies in resource extraction activities. Current investment trends indicate that in the future Indian firms will pay even more attention to the primary sector. Malaysian firms invest in the oil, telecommunication and service industry and Taiwanese firms have used Africa’s preferential access to the European and American markets to invest in the textile and garment sectors (Chen et al. 2005; Hart 2002; Lijun 2006; Offei-Ansah 1999). Thus, with the exception of Taiwanese companies, the investment pattern of TWMs in Africa tend to resemble that of MCs, i.e. using Africa as a commodity supplier (UNCTAD 2005). Chinese investments in Africa Many publications uncritically state the importance of Africa for Chinese FDI (Chen et al. 2005, p. 53). But while there is hardly any doubt that Chinese outward FDI is increasing, the importance of Africa sometimes appears exaggerated. Wong and Chan (2003, figure 2), for instance, report that while only 4 percent of Chinese outward investments went to Africa in 1991, this figure increased to 16 percent in 2001. This trend contrasts to other, more recent figures. Official data for Chinese outward FDI indicates three synchronous trends. First a significant decline in China’s relative interest in Africa since the 1960s and 1970s compared to other areas; second, a very recent rapid growth of FDI to Africa (outnumbering all other regions in 2003-2004); and

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thirdly, a significant reorientation of interest within Africa towards resource extraction activities (Broadman 2007; Liu, Buck, & Shu 2005). Table 2: Approved Chinese FDI flow to the African continent (USD million)

FDI

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

1.5

7.7

14.5

28

17.7

NA

NA

NA

42.3

85

24.5

30.1

60.8

Source: (UNCTAD, 2006: Box table II.1.1) Even though the importance of Africa for Chinese FDI may seem exaggerated, Chinese FDI is indeed very important in some sectors in some countries in Africa. Taking the deficiency of data into consideration, Chinese FDI in Africa is nevertheless increasing. Whether one examines the approved Chinese investments by national investment centers on the African continent, which is displayed in table 2, or news and other unofficial sources, displayed in table 3, the trend is the same: Chinese investments are becoming ever more important in Africa. These tables, however, also tell a different story. They inform us that Chinese FDI no longer only consists of large state-owned Chinese companies pursuing strategic aims in Africa, such as acquiring oil and minerals for the rapidly growing demand in China. A growing number of smaller (partly) privately owned Chinese companies also invest in Africa. Based on figures from approved investments in Ghana as well as from the World Bank’s recent survey of 450 companies in four African countries, it seems that these companies concentrate their activities in the manufacturing, construction and service sectors (Broadman 2007; GIPC 2005).

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Table 3: Chinese companies on the African continent 2000-2006 2000

2002

2003

2004

2006

Number of companies

499

585

600+

674

900

FDI stock (million US$)

990

NA

NA

NA

1.250

Source: (Africa Res Bull Econ 2004, 2006; Broadman 2007; Hilsum 2005; Taylor 2006; Wenping 2006) Nevertheless, in dollar terms resource extraction still dominates the picture of Chinese FDI in Africa. Figure 2 displays Chinese FDI flows to Africa in 2004 based on China’s official statistics. It clearly demonstrates the importance of natural resources, especially oil, in China’s approach to Africa. Unfortunately, no readily available cumulative figures exist for the China’s FDI to Africa. Undoubtedly, however, these figures would include also Senegal and Mali, which alongside Zambia, South Africa and Tanzania all figure on the top-30 list of Chinese outward FDI 1999-2002 (UNCTAD 2004, Annex table A.I.12). Figure 2: Chinese FDI flow to Africa, 2004 (million USD)

Source: (Broadman 2007, p. 10) In 2001, South Africa received by far the largest number of Chinese investment projects in Africa (Wong & Chan 2003), and it is still

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perceived as the largest “non-oil” recipient of Chinese FDI. Compared to the size of the national economy, however, Chinese investments in Zambia are of greater interest. According to the Chinese embassy in Zambia, the stock of Chinese FDI in Zambia reached USD 316 million in 2005, and FDI flows reached USD 41 million in 2005 (FOCAC 2006). The commitments from investors compiled by the Zambia Investment Centre (ZIC) also point in this direction. According to these figures, Chinese investment commitments comprised 12 percent of all commitments in Zambia in 2004. Chinese investments in Zambia Chinese investments in Zambia cover a wide array of sectors including mining, textile, construction, banking, agriculture and health. These investments provide Chinese companies access to the local Zambian market as well as the global export markets. In order to further our understanding of the effects of Chinese FDI, it is therefore of utmost importance to determine what characterizes the Chinese FDI and how Chinese FDI is linked to Zambian companies. In order to analyze these characteristics three sectors within the Zambian economy have been chosen, namely the mining sector, which is important in economic and political terms for both China and Zambia, where investments are of a long term nature, but which is characterized by foreign ownership and few backward linkages; the textile sector, which has considerable spin-off effects on the rest of the economy; and the construction sector that is characterized by a mix of local and foreign ownership and by a close link between Chinese investments and Chinese aid. These sectors also illustrate the potentially different roles that Chinese FDI may occupy vis-à-vis the local private sector (see also table 4).

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Table 4: Chinese FDI in Zambia: catalyser, capacity builder, or competitor?

Impact T y p e

Direct

Indirect

¾ Catalyser

¾

¾ Capacity builder

¾ ¾ ¾

Competito r

¾

FDI to sectors

dormant

Technology transfer Employment creation Upgrading Displacement of local producers Access to low-cost capital via linkage to aid

¾

¾ ¾ ¾ ¾

Case

Chinese demand influences world market prices Appreciation of kwacha Preferential access to markets in the North Demonstration effect Low-cost infrastructure Forces companies increase productivity

local to

¾

Mining sector

¾

Textile sector

¾

Constructi on sector

The mining sector is of great economic and political importance in both Zambia and China: 99.8 percent of Zambia’s exports in 2003 comprised non-fuel minerals and the copper mines in Zambia produce almost 60 percent of Africa’s copper (Hilson & Haselip 2004, pp. 29-31). The growing Chinese demand for copper, a key component of electrical wire and cables, is driven up by China’s economic growth. The great importance of copper mining for Zambia has not been unproblematic. Since the peak in the 1970s Zambian copper output fell year by year for almost three decades and, while the economic crisis intensified, the government’s debt increased steadily. Only very recently production resurrected. The copper mines again remain at the heart of the Zambian economy. Driven by the International Financial Institutions, privatization of the Zambian mining sector was set in motion in the beginning of the 1990s. Not before the late 1990s, however, the privatization process

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really took off. Among the mines that were advertised for privatization during this process was the relatively small Chambishi mine, which was privatized in June 1998. NFC Africa, a subsidiary of the state-led Chinese group, Non-Ferrous Metals Industry Corporation of China, bought a 85 percent share of the almost dormant mine for $20 million (the largely state-owned Zambia Consolidated Copper Mines (ZCCM) retains a 15% share in the mine). Chambishi Mine is Chinaʹs first and largest overseas nonferrous metal mine and, since the acquisition of the shares, the Chinese group has invested more than $150 million in the mine, which now employs approximately 2000 people and produces 50,000 tonnes of copper concentrates. According to Carroll (2006), the NFC Africa is planning to build a leaching plant so that the mine can refine its own ores. Even though the Chinese group has since bid for other mines in Zambia, such as the small Nchanga and Nkana mines, it has not been able to buy majority share in other copper mines (Africa Confidential 1998, 1999; Craig 2001; EIU 2005; UNCTAD 2005). To date, however, six other Chinese companies have invested in the Zambian mining sector; among them Chiman, which is currently investing in the mining and processing of manganese in Kabwe, and Collum Coal Mining that began production of coal in 2003 (Taylor 2006; Times of Zambia 2006b). No doubt, “Chinese investments in Zambia’s copper industry … rejuvenated an industry that had been dead on its feet in the 1990s” (Taylor 2006, p. 179). Moreover, the copper mines earn Zambia much needed hard currency and investments in the Chambesi mines have reportedly created almost 2000 jobs. On the contrary, the mining sector is characterized by only very few forward and backward linkages. Hence, direct capacity building effects of Chinese FDI are probably limited. In addition, while increased Chinese demand for copper drives up prices and, thereby, leads to increasing copper production, this may also lead to an appreciation of the kwacha and thus uncompetitive industrial development (Economist 2005; EIU 2005, pp. 31-39; Taylor 2006). In contrast to the mining sector, the textile sector has considerable spin-offs to other sectors of the society. Like the mining sector, the Zambian textile sector is of major economic importance. Its total contribution (for the full cotton - textile - apparel value chain) to GDP is estimated between 16 and 20 percent, and it is important for employment generation as cotton is the main cash crop for Zambian

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small farmers. It is grown by an estimated 140,000 contracted small scale farmers every year for the local industry as well as for the export market (RATES 2003). The textile industry was also privatized in the 1990s. The result was the establishment of six large companies of which one is on majority Chinese hands: in 1997, a Chinese state-led company, Qingdao Textile Corporation, bought 66 percent of the shares in the former state-owned textile mill, Mulingushi. The Mulingushi mill was built in 1983, financed by Chinese aid and inaugurated with an interest-free loan from Beijing. When Qingdao offered to buy shares in the Mulungushi mill in the mid-1990s, it had been shut down for a while due to operational problems. Since then, USD 24 million has been invested in the Mulungushi Zambia-China Joint Venture Company (ZCMT), based in Kabwe, which now is Zambia’s largest textile company. The company, which employs approximately 2000 employees, has now become the largest producer of African-print cloth in Zambia. In addition to the textile mill, ZCMT has two ginneries and, according to People’s Daily (2003), it contracts 5,000 farmers controlling 10,000 hectares of cotton farms. Recently, it began employing extension staff to manage the contracted farmers (RATES 2003). These contracts, however, were not originally part of Qingdao’s investment plans but were introduced when sourcing of Zambian cotton via Zambian companies were too costly (Taylor 2006). ZCMT is the only company in Zambia that, apart from growing seed cotton, ginning and spinning also weaves yarn into cloth and produces garments. ZCMT thus controls the whole chain from seed cotton, over cotton lint, cotton yarn, woven fabric, to garments. Downstream, the ZCMT moreover controls the marketing network: in 2003, it had 18 stores across Zambia and two subsidiary companies in Tanzania and Namibia. Like elsewhere in Africa, the Zambian textile sector is changing rapidly. The Multi-Fiber Arrangement (MFA) ended in January 2005 and the African Growth and Opportunity Act (AGOA), which offers increased preferential access for African exports to the US market, may not make up for the preferences provided by the MFA (Gibbon 2003; Morris 2006). Nevertheless, both ZCMT and the Zambian State seem eager to take advantage of the opportunities offered by AGOA: ZCMT has thus recently reached an agreement with Wyler Team International Corporation (a Wal-Mart agent) to finance the expansion of its capacity to take advantage of AGOA, and the Zambian State encourages

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Chinese Drivers for African Development?

farmers to plant more cotton to provide raw material for textiles producers to benefit from AGOA. Exactly in relation to AGOA, the capacity building role of Chinese investments may turn out most important, as these investments entail that Zambia can continue to take advantage of AGOA indefinitely whereas other African countries, dependent on imports of fabric, yarn and thread will lose preferences after 2007. As depicted, the SinoZambian textile mill experience is largely positive. Indeed, it is perceived as so encouraging that “…whenever Sino-Zambian ties are mentioned in the Zambian or Chinese media, as well as by either Chinese or Zambian politicians, the ZCMT is held up as the example of success and co-operation…” (Taylor 2006, p. 178). Nevertheless, the ending of the MFA may have turned out too challenging even for the Chinese investors: news reports now state that ZCMT is temporarily shut down due to problems paying the workers’ wages. While the construction sector also contributes significantly to Zambia’s GDP, in many ways it differs from the two other sectors. The Zambian construction sector is dominated by locally-owned companies – only a tiny share of the total of almost 1300 registered construction companies in Zambia are foreign owned – among these approx. 20 are Chinese; all of which have been established during the past ten years. Half of these are privately owned (Centre for Chinese Studies 2006, p. 55ff). Moreover, the construction sector is very labour-intensive. The Zambian liberalization and privatization programs of the 1990s markedly affected the construction sector. The construction sector is directly linked to infrastructure. Due to Zambia’s land-lockedness, transport costs in Zambia are above African-average. Moreover, the construction sector has a large potential for employment creation (NCCZ 2004). Therefore, the Zambian government wanted to attract investments in Zambian construction sector. Large-scale construction projects in Zambia are by and large donor-financed. Competition for large-scale construction projects first and foremost takes place among foreign companies in Zambia – not with domestic companies. Lately Chinese companies have won the bulk of the large-scale tenders. Among the most well-known construction projects in Zambia currently executed by Chinese contractors are: the Government Complex, including a museum, a banquet hall and a conference centre; the Football House, a new headquarter for the Football Association of Zambia; Lumwana Power

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Project, a power supply for the Lumwana copper mine; Lafarge Cement Plant outside Lusaka; the Lundazi-Chama road; and the hydroelectric plant at Kafue Gorge in southern Zambia (Centre for Chinese Studies 2006; Economist 2004; NCCZ 2004). Domestic small-scale construction companies, in contrast, are concerned with the delivery and maintenance of buildings and infrastructure. In many cases they also supply the Chinese (and other foreign) companies with timber, river sand, bricks, concrete and occasionally also steel products. Lately, however, several Chinese supply companies have been established in Zambia. This may alter the situation for the local companies. Conclusions China’s presence in Africa is often portrayed as either a huge concern or a potential way forward: seen from Washington, China’s trade, aid, military support and investments undermine human rights, transparency and good governance. In contrast, Beijing keeps its past rhetoric and portrays Sino-African relations in a solemn vocabulary, such as the win-win situation portrayed in China’s Africa Policy, which highlights the equality, the mutual trust, the mutual exchange and learning (Government of China 2006). In Africa, attitudes towards the Chinese also differ: while the African elite welcomes the Chinese presence as it enlarges its room for manoeuvre as well as offers a development path without strings attached, the trade unions fear that Chinese trade and investments will drive the local private sector out of business and complain that Chinese business practices do not comply with international regulations. The effects of the growing Chinese presence in Africa, however, do not resemble these dichotomous attitudes. By analysing Chinese FDI in three sectors of the Zambian economy, this paper points to the complexity of the local consequences. Chinese FDI in Zambia is neither good nor bad. Besides the magnitude and rationale of the FDI, the effects on local producers depend on the structure of the sector in the host economy as well as on the composition of resources and capacities of local and other firms. Moreover, these effects can be both direct and indirect. Three roles of Chinese FDI were singled out: that of the catalyzer, the capacity builder and the competitor. The role of Chinese FDI in the

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mining sector mainly is that of catalyzer, as it provides FDI to a dormant sector. Due to China’s huge demand for natural resources these activities also influence the value of the local currency and thereby act as competitor for other sectors. Chinese FDI to the Zambian textile sector, in contrast, is primarily that of the capacity builder. Due to the extensive linkages to the local private sector, these investments can trigger an upgrading process that eventually may be decisive for Zambia’s possibility to make the most of preferential trade arrangements. Even though the competitive role of Chinese FDI may come to fore in the analysis of the mining and textile sectors, e.g. in the form of subsidized credits, this role is likely to be more significant in the Zambian construction sector, where Chinese construction companies’ relation to Chinese aid may displace competitors. On the contrary, Chinese FDI in the construction sector endows Zambia with low-cost infrastructure that may catalyze further industrial development. In order to pursue these effects further, more research is needed to gather additional insights into the effects of Chinese FDI. References Africa Confidential 1998, ʹZambia: the China re-connectionʹ, Africa Confidential, vol. 39, no. 15, pp. 5-6. Africa Confidential 1999, ʹZambia: down, not outʹ, vol. 40, no. 11, pp. 3 4. Africa Res Bull Econ. 2004, ʹAfrica-Asia. Growing tiesʹ, Africa Research Bulletin, Economic, Financial and Technical Series, vol. 41, no. 5, pp. 16108-16110. Africa Res Bull Econ. 2006, ʹAfrica-China. ʹWin-winʹ strategy, Africa Research Bulletin, Economic, Financial and Technical Series, vol. 43, no. 6, pp. 16999-17001. Alden, C 2005, ʹChina in Africa. Survivalʹ, vol. 47, no. 3, pp. 147164. Alfaro, L & Rodríguez-Clare, A 2004, ʹMultinationals and linkages: an empirical investigationʹ, Economia, vol. 4, no. 2, pp. 113-169. Asiedu, E 2004, ʹPolicy reform and foreign direct investment in Africa: absolute progress but relative declineʹ, Development Policy Review, vol. 22, no. 1, pp. 41-48. Aykut, D & Ratha, R 2004, ʹSouth-South FDI flows: how big are they?ʹ, Transnational Corporations, vol. 13, no. 1, pp. 149-176.

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Battat, J & Aykut, D 2005, ʹSouthern multinationals: a growing phenomenon. Southern multinationals: a rising force in the world economyʹ, IFC-Financial Times, Mumbai, India. Blomstrom, M & Kokko, A 1998, ʹMultinational Corporations and Spilloversʹ, Journal of Economic Surveys, vol. 12, no. 3, pp. 247-277. Broadman, HG 2007, Africaʹs Silk Road. China and Indiaʹs New Economic Frontier, The World Bank, Washington, D.C. Carroll, R 2006, ʹChinaʹs goldmineʹ, Guardian Unlimited, March 28. Centre for Chinese Studies 2006, Chinaʹs interest and activity in Africaʹs construction and infrastructure sectors, Centre for Chinese Studies, Stellenbosch University. Chen, M-X, Goldstein, A, Pinaud, N & Reisen, H 2005, China and India: Whatʹs in it for Africa? (Draft), OECD Development Centre. Paris. China Daily 2007, ʹChina opens 1st African economic zone in Lusakaʹ, 5 February, 2007. Retrieved February 6th, 2007, from http://www.chinadaily.com.cn/bizchina/200702/05/content_801329.htm Craig, J 2001, ʹPutting privatisation into practice: the case of Zambia Consolidated Copper Mines Limitedʹ, Journal of Modern African Studies, vol. 39, no. 3, pp. 389-410. Economist 2004, ʹChinaʹs business links with Africa: a new Scrambleʹ, 25 November. Economist, 2005, Nov 18). ʹChinaʹs copper crisisʹ, 18 November. EIU 2005, ʹCountry profile 2005ʹ, The Economist Intelligence Unit, Zambia, London. FOCAC. 2006, Interview: ʹZambia, China benefit from increasing bilateral trade, investmentʹ, May 19. Retrieved June 14, 2006, from http://www.fmprc.gov.cn/zflt/eng/zxxx/t253426.htm Gibbon, P 2003, ʹThe African Growth and Opportunity Act and the global commodity chain for clothingʹ, World Development, vol. 31, no. 11, pp. 1809-1827. GIPC 2005, ʹInvestment report under GIPC Act 478, The Quarterly Report, vol. 1, issue 3, Investment Promotion Centre, Accra: Ghana. Gorg, H & Strobl, E 2001, ʹMultinational companies and productivity spillovers: a meta-analysisʹ, The Economic Journal, vol. 111, no. 475, pp. 723-739. Government of China 2006, Chinaʹs Africa Policy. Hart, G 2002, Disabling globalization. Places of power in post-apartheid South Africa, University of California Press, Berkeley.

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Hilson, G & Haselip, J 2004, ʹThe environmental and socioeconomic performance of multinational mining companies in the developing world economyʹ, Minerals and Energy - Raw Materials Report, vol. 19, no. 3. Hilsum, L. 2005, ʹRe-enter the dragon: Chinaʹs new mission in Africaʹ, Review of African Political Economy, vol. 32, no.104/105, pp. 419425. Jaffe, AM & Lewis, SW 2002, ʹBeijingʹs oil diplomacyʹ, Survival, vol. 44, no. 1, pp. 115-134. Kaplinsky, R, McCormick, D & Morris, M. 2006, ʹThe Impact of China on sub-Saharan Africaʹ (Dfid Agenda Paper), Institute of Development Studies, Sussex. Kumar, R 2003, ʹChanging role of the public sector in the promotion of foreign direct investmentʹ, Asia Pacific Development Journal, vol. 10, no. 2, pp. 1-27. Lafargue, F 2005, ʹChinaʹs presence in Africaʹ, China Perspectives, vol. 61, September-October. Lijun, Z 2006, November 2). ʹGrowing teamworkʹ. Beijing Review, vol. 49, 2 November, pp. 10-11. Liu, X, Buck, T & Shu, C 2005, ʹChinese economic development, the next stage: outward FDI?ʹ, International Business Review, vol. 14, no. 1, pp. 97-115. Meyer, KE 2004, ʹPerspectives on multinational enterprises in emerging economiesʹ, Journal of International Business Studies, vol. 35, no. 4, p. 259. Mlambo, K 2005, ʹReviving foreign direct investments in Southern Africa: constraints and policiesʹ, African Development Review, vol. 17, no. 3, pp. 552-579. Morris, M 2006, ʹChinaʹs dominance of global clothing and textiles: is preferential trade access an answer for sub-Saharan Africa?ʹ, IDS bulletin, vol. 37, no. 1, pp. 89-97. NCCZ 2004, Development of contractor registration scheme with a focus on small scale civil work contractor, National Council for Construction, Lusaka Zambia. OECD 2005, China, OECD Economic Surveys, vol.13, Paris. Offei-Ansah, J 1999, ʹMalaysians stimulate economyʹ, African Business, vol. 242, no. 34. Peopleʹs Daily 2003, ʹNew form of Chinese aid revives Zambiaʹs largest textile company. Zambia-China Mulungushi Textile Joint

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Venture Ltd. (ZCMT) is the largest textile company in Zambiaʹ. Peopleʹs Daily, 27 November. Portelli, B. & Narula, R. 2006, ʹForeign direct investment through acquisitions and implications for technological upgrading: case evidence from Tanzaniaʹ, European Journal of Development Research, vol. 18, no. 1, pp. 59-85. RATES. 2003, Cotton - textile - apparel value chain report Zambia, The Regional Agricultural Trade Expansion Support Program, Nairobi. Sumner, A 2005, ʹIs foreign direct investment good for the poor? A review and stocktakeʹ, Development in Practice, vol. 15, no. 3/4, pp. 269285. Taylor, I 2006, China and Africa. Engagement and compromise, Routledge, London and New York. Times of Zambia. (2006a, April 25). Chinese ambassador donates to judiciary. Times of Zambia. Times of Zambia 2006b, ʹChinese firm to invest $200m in manganese processingʹ, 9 June.. U.S. Department of State 2006, Zambia. 2005 Investment Climate Statement. Retrieved June 11th, 2006, from http://www.state.gov/e/eb/ifd/2005/42202.htm UNCTAD 2004, World investment report 2004: the shift towards services, United Nations Conference on Trade and Development, New York and Geneva. UNCTAD 2005, Economic Development in Africa. Rethinking the Role of Foreign Direct Investment, United Nations Conference on Trade and Development, New York and Geneva. UNCTAD 2006, World investment report 2006: FDI from developing and transition economies: implications for development, United Nations Conference on Trade and Development, New York and Geneva. Wenping, H. (2006, November 2). Partners in Development. Beijing Review, 49, 14-17. Wong, J & Chan, S 2003, ʹChinaʹs outward direct investment: expanding worldwideʹ, China: an International Journal, vol. 1, no. 2, pp. 273-301. Xinhua 2006, ʹZambia, China benefit from increasing bilateral trade, investmentʹ. Retrieved May 24th, 2006, from http://www.tralac.org/scripts/content.php?id=4850

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Chapter 13

Models of Development: Finding Relevance for Africa in China’s Experience of Development Stephen Little

Introduction This chapter discusses the value of China as a source of models of development relevant to Africa. In addition to benefits of direct investment and trade engagement between China and key African economies, China’s own approach to the problems of rapid growth and development should be of interest. Despite obvious and significant differences, the Chinese pattern of modernization and the problems it has uncovered offer lessons of potential value to African decision makers. China and Africa in the Age of Global Integration In an age of global integration and increased flows of resources, including human and intellectual and social capital, Africa and, in particular, sub-Saharan Africa, has been marginalized in a system dominated by three major nodes of development. Ohmae (1995) speaks of the end of a cold war bipolar divide and its replacement by the triad of Europe, North America and East Asia. China is now supplanting Japan as the key economy of the East Asian node, if not in terms of current size, in terms of perceived growth and potential for investment. While the Cold War lasted, African nations were courted by both sides of the ideological divide. With the resolution of that form of conflict, Africa became relatively neglected. During the cold war Chinaʹs interest in Africa was restricted by distrust of the Soviet Union and states aligned with that country. However, while Japan pursued a low key and economically directed aid program (Yasutomo 1986), China offered education and the high profile Tanzam railway project, a

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political and economic resource in the struggle against minority white rule. China’s current interest in Africa rekindles competition for African resources and attention, contributing to an end of post Cold War neglect. China follows a long line of inward traders drawn to African resources through history, but with the insight of a nation that historically has had itself confronted the problems of outside interests and incursions. Both have to some degree dealt with the development and infrastructure consequences of infrastructure optimized around the outward movement of resources rather than internal development (Headrick 1981). In this context the construction of the 1,860 km Tanzam (now Tazara) line between 1970 and 1975 was a key event. The project was financed through an interest-free loan of $500 million from the Peoples Republic of China. The Tanzania and Zambian authorities responsible for the line are now considering the role of Chinese investors in the future, with engagement with Chinese entrepreneurs for the refurbishment and turn around of the railway (Edwin 2006). This continuing engagement with China in the new twenty-first century context exemplifies both continuity and change in China’s engagement with Africa. China is seeking energy and other natural resources essential to modernization from Africa. Shaxson (2006) plots China’s energy footprint in Africa and its rapid expansion between 2000 and 2006. He argues that Chinese demand for oil from Africa offers the prospect of negotiation of better prices and revenue shares. However, in the case of Chad he suggests that an equal driver of engagement is the threat from rebels using small-arms both imported into Africa from China and produced in Chinese built factories in neighboring territories. Wissenbach (2007) reviews the dramatic recent increase in trade between China and Africa. He argues that pragmatic approach taken by China means that the European Union must formulate a strategy for ‘soft power’ (Nye 1990a) based on more than development aid. China offers its alternative route to successful development with fewer conditions that the engagement offered by western Europe and the United States. Wissenbach sets out the eight steps to strategic partnership offered by Chinese President Hu Jintao at the Africa-China summit in November 2006. These cover both inward investment and capacity

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development within Africa through direct training of African professionals, the support of agricultural experts and the support of integration. Such improvements in capacity and capability through contact with alternative models are a key to the problem of the knowledge divide (Chataway et al. 2003) which restricts indigenous development and integration into the global economy from the African side. For Africa contact with China offers the obvious economic benefit of trade and inward investment into resources, and an alternative market to that offered by the West. However, China’s own approach to the problems of rapid growth and development may also have value for Africa, despite obvious and significant differences. China’s internal processes of development must tackle problems familiar to African policy makers, despite the different resources available. Recent Chinese policy statements have acknowledged uneven development and the need to redress both the outcomes and the governance of the development process. These and related issues are highlighted in the 11th five year plan announced in 2006. While the differences between Africa and China in scale and economic activity, population and global influence are obvious, there is a shared understanding of the impact of external intervention and incursion, and the subsequent legacy of patterns of development influenced by external interests. These similarities and differences are examined next. China and Africa: Similarity and Difference Despite the diverse problems of the mid 1990s, the East Asian development model retains its allure for much of the world (Thorpe & Little 2001). The fact remains that in 1960 Ghana had a higher per capita Gross Domestic Product than South Korea but that by 1997 Korea had broken the US$10,000 barrier and the country had embraced manufacturing successfully and moved into key fields of high technology and innovation. There are, however, both internal and external dimension to the development trajectory pursued by the nations of East Asia. Internally Africa and China share the problem of uneven development between centre and periphery and the need to reconsider the policies and technologies deployed. While the twenty-first century

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may rightly be described as the ʺAge of Migrationʺ (Castles & Miller 1993), for both China and Africa the major flows are internal ones brought about by uneven development, resource shortages and, in Africa’s case, related conflict. Externally China’s entry into a networked global economy has been as the manufacturer for the world. While Africa has been able to learn from East Asia in the past (Kaplinsky 1994) the advantage of scale and incumbency that China has created may well have removed this strategy from serious consideration by any potential competitor in Africa. However, the role of the overseas Chinese communities in this engagement with the world economy remains of relevance to Africa, as a continent with an equally impressive set of diasporas. China provides an opportunity for Africa to observe an alternative pathway to a high technology, high performance economy from a predominantly agricultural base than that followed in the West. China is dealing with the problems of development driven by the pull of its huge market potential for inward investment, and its low cost infrastructure for global manufacture A key difference between China and Africa is that between a territory government by a single state and one with more than fifty sovereign countries. Ohmae (1995) advocated regional synergies, across national boundaries and there is evidence of a toleration of local policy determination within the Chinese structure of government that can be regarded as a softening of central determination in favor of de facto federalism (Zheng 2006). However, for Africa dealing with issues at a scale which is internal for China requires cross-border regional collaboration. The implications of this can be seen in policies and outcomes in a number of sectors. Water policy in Africa and China is one area that reveals both similarities and differences between the two locations. Lee (2006) provides an account of the political economy of water policy in the Shanghai region. Increasing awareness of water degradation in area of key economic development shows Chinese awareness of the need to combine environmental protection and reinstatement with sustainable economic development. Both central and local government, nascent NGOs and the emerging civil society are engaged in a process which indicates an appreciation of the longer term cost of short term solutions. Africa is facing similar problems of equity of access to available water supplies, and the policies of liberalization and

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privatization of water resources have come under increasing scrutiny (Swatuk 2002). While large scale power and irrigation project such as the Kariba and Volta dams have lost favor in Africa, China remains attracted to mega-projects (Flyvbjerg, Bruzelius & Rothengatter 2003), even those first proposed in the 1950s. Following the Three Gorges project, the South-North Water Transfer project to move water to relatively arid north began construction at the end of 2002. It involves three canals running 1,300 kilometers across the eastern, middle and western parts of China, linking the countryʹs four major rivers -- the Yangtze, Yellow, Huaihe and Haihe. The project is expected to take 50 years to complete and cost 59 billion US dollars. Whether or not projects of this scale are appropriate to African needs, Gathanju (2006) demonstrates the problems facing them by describing the jurisdiction of the Nile waters. Post colonial problems have been created by adherence to a 1929 treaty drawn up by the colonial power, Britain. This privileges Egyptian use of Nile water over the claims of ten upstream countries including Ethiopia, Sudan and Kenya. Such legacies require sensitive negotiation around conflicting interests, yet even where cross-border interests are not in conflict, working across separate national jurisdictions can cause difficulties. The different levels of reform across borders are compromising attempts to deliver critical telecommunications infrastructures in an affordable format. The set of projects intended to provide a circumcontinental undersea fiber optic trunk is a key step in bringing to Africa the communication infrastructure enjoyed by competing regions. However, the control of access to the cable by incumbent telecommunications carriers has led both to criticism, and to a project by Globacom which will duplicate the initial SAT-3 cable along the west cost of Africa, at least as far as Nigeria with a competing cable. Such competition may be regarded as healthy in more developed locations, but in Africa it represents unnecessary duplication. The business plan for the proposed East African Submarine Cable System (EASSy) has drawn similar criticism from NEPAD. While the intention is to prevent the dominance of one partner, there remains a disagreement over the definition of “open access”, with NEPAD and other NGOs arguing that this means all operators having equal access in terms of capacity and pricing to bandwidth and the 31 telecommunication companies in the EASSy consortium of investors

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seeing “open access” meaning that every country has a stake in the cable, which does not necessarily include access to equal capacity and prices (Gedye 2006). The rapid development of communication infrastructure in China points to a more successful transition from state monopoly control to a regulated market environment. Nevertheless, where access to affordable and reliable technologies is available, African users have demonstrated a capacity to make effective use of them. In this regard, both the Economist (2005) and Vodaphone (2005) have argued that cell phone technology has been highly effective in triggering grass-roots economic activity across Africa, with rapid and high levels of take-up and widespread access. In many respects Africa has matched China in accessing the potential benefits of mobile telephony, if not in business and high profitability for indigenous manufactures and providers, in impact on economic activity. This example should be borne in mind when considering the potential lessons that might be applied in Africa from the development patterns in China. China: Internal Development As with many African countries, growth and development within China highlights the problems of unevenness of infrastructure with a bias towards the best connected and outward facing coastal provinces. Developing adequate infrastructure and maintaining human resources for the development of interior regions is problematic. Given its size and population it is not surprising that China faces significant geographical challenges to its development. Access to information and communication technology is variable, with a wide “digital divide” between urban and rural regions. The number of Chinese Internet subscribers and users is large but still small in relation to the total population. The 111 million subscribers online in 2005 represented just 8 percent of the Chinese people, compared with around 50 percent in OECD countries. However, closing this digital gap has become government policy (OECD Observer 2006). China shares with Africa a history of foreign intervention and the current imbalance of development mirrors the post-colonial situation in many African countries, in particular the draw of China’s developed

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costal regions compares with the draw of many capital cities and their immediate surrounds in African countries. As noted above, Africa’s transport, both ground transportation in the form of railways and air transportation in the form of post-colonial airline routes has been patterned around external priorities. China has set an example of how to establish a major airline system geared to current priorities in a relatively short space of time. As the driver of the national economy, the Shanghai region has long been favored; manufacturing has become concentrated in southern China, with high technology industries clustered around Beijing. The pressure on these growth centers, and the movement of population towards them has led to significant problems of urban poverty (Wang 2004). The threat to national cohesion posed by a continuing imbalance is well understood. Increasingly foreign investment is being directed to areas away from the most developed coastal locations with a view to redressing imbalances. Comparable development poles for sub-Saharan Africa are emerging in Nigeria and South Africa. The regional policies being developed in China may offer insights into the prospects for more multilateral patterns of development across the African continent. The formal policies of the Chinese government offer a means of benchmarking that country’s performance against aspirations. The 11th five year plan devotes chapters to ʺPromoting Balanced Development among regions’ and to ʺBuilding a harmonious socialist societyʺ. It emphasizes overall planning of both urban and rural employment and improving the employment support system for ʺdisadvantaged regions, sectors and groupsʺ. The outline emphasizes improvement of healthcare for the public and the problems of difficult and expensive access to medical care. There has been deterioration in the availability of health care since the modernization program of the 1990s diverted resources from social to economic development. While leading institutions in urban centers operate at the cutting edge of global medical innovation, rural areas have at best a basic level of health care which is no longer free at the point of access. The plan contains strategies for rejuvenating the country through science and education and strengthening the nation with talented people, making scientific and technological advancement and innovation an important driving force for economic and social

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development, putting education and training of quality talents at a prominent strategic position while striving to build an innovative country with rich human resources. The plan proposes an increase in the proportion of financial expenditure for education to 4 percent of GDP by the end of its timeframe. Research and development is also identified as a priority with domestic innovation in all high-technology sectors targeted with greater investment and domestically-owned patents aiming to reduce dependence on foreign technology and intellectual property rights. The energy and resource use of current development activities has led to concerns over pollution and local environmental impacts. International concerns over climate change are threatening some options and China faces the dilemma of maintaining growth by different routes than those taken by the first generation industrial economies. A significant portion of scientific and technical research is now directed at the better use of existing resources, such as cleaner coal combustion, use of GM for improved agricultural production and the use of distance learning and communications technology to redress regional resource imbalances. The concept of ʺGreen GDPʺ has been adopted to measure domestic wealth against environmental losses and set out in a national accounting study report (Gore 2006). The Five Year Plan highlights a number of concerns of equal relevance to African countries. The practicalities of servicing outlying regions may hold examples and approaches relevant to African context – poor infrastructure, cultural diversity and underdevelopment of human capital. The needs of China’s remoter areas are being met through alternative routes, with extensive deployment of solar technologies in Tibet and other western areas. China’s high technology agenda and the scale of application mean that the cost of these technologies to countries in Africa will change dramatically. Equally, the commitment to coal fired power generation for the foreseeable future has led to significant advances in clean combustion technologies, which will allow African reserves to be considered in future planning. China enjoys greater leverage with potential collaborators than any African nation and can negotiate transfers of knowledge and technology to address problems. For example, pressure is being put on international companies around issues of corporate social

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responsibility (Zheng & Chen 2006). However, it may be possible to develop an African agenda around equivalent demands for the reciprocal input of intellectual capital into the development equation. Issues of scale and cost will be crucial in the identification and selection of opportunities to adapt components of the Chinese approach where these are deemed appropriate from an African standpoint. The external connections to the global economy are a dominant issue for the continent, but management of internal relationships is equally important. The complex network of regional economic grouping and cross-border arrangements reflects the preand post-colonial origins of the nation states and their pathways to independence. Regional and continental collaboration has waxed and waned, but the revival of entities such as the East African Community (EAC) after a lapse of more than twenty years is encouraging. Equally important is the emergence of new forms of cooperation, such as the Interregional Route Development Forum which seeks to optimize African air routes for African needs, and to remove the remnants of colonial frameworks which have in the past required journeys within Africa to be made via Europe. External dimensions of Chinese development The success of the Asian economies and China in particular in capturing the major proportion of global manufacturing activity has depended on the widespread use of information and communication technologies. Dicken (1998) demonstrates that information and communication technologies underpin the global system, offering opportunities for participation in the “information economy” to peripheral areas. However, the reliable and economic physical movement of materials, products and labor is an equally essential element of the system, and this infrastructure of physical and electronic communication allows other forms of interaction and transfer, not least in culture and identity. The Chinese diaspora played a key role in investment prior to the wider acceptance of China as an investment destination. Redding (1996, 1998) has analyzed the nature of capital accumulation and the characteristics of Chinese family business networks. In the past they have accomplished significant international mobilization of capital.

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Financial remittances from international migrants have become recognized as a significant resource for development in less advantaged regions. Both foreign exchange and household income are enhanced in the country of origin. Ammassari and Black (2001) provide an overview of the complexities of migration and return flow in development in West Africa. There are well established links between many African countries and their overseas population (Henry & Mohan 2003). Such linkages are able to mobilize more than financial capital. The social capital created by movement between cultures and locations can provide a critical contribution to development and resource mobilization. Newland (2004), in a review of the role of diasporas in poverty reduction in their countries of origin, argues that policy in support of such networks should take as much account of the social and political activities of these trans-national communities as the straightforward financial dimension of their interaction. For many countries, transnational communities of professionals are a major source of foreign direct investment, market development, technology transfer and more intangible flows of knowledge, new attitudes and cultural influence. This human capital and capacity has been termed ʺsocial remittanceʺ. Levitt (1998) defines social remittances as the “ideas, behaviors, identities and social capital that flow from receiving country to sending country communities” (Levitt 1998, p.357). This social remittance is reflected by the emergence of various technological, scientific and social networks connecting migrants with each other and with home countries. Saxenian (2002) suggests that Asian engineers working in ʺSilicon Valleyʺ retained and cultivated links with engineers and businesses back home through various social networks and aided development, particularly that of the Indian software industry by providing knowledge and market access. Kale et al. (2005) showed the important role of overseas Indian scientists working in the development of R&D capabilities in Indian pharmaceutical firms. Social linkages and return migration are a significant resource for development in both Africa and China, as ʺbrain drainʺ becomes ʺbrain circulationʺ. China has benefited from the circulation of human capital since the Indemnity Scholarships, set up by the United States in the first decade of the twentieth century with money taken from China as compensation for the Boxer uprising. These skill transfers set a pattern

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for the return of educated individuals which continued after the Communist revolution in 1949. This intellectual capital flow contributed to key modernizations and technical developments in science and technology in the 1950s and continues with specific encouragement from the present government. In this context the ability of African nations to attract return migration and foster overseas linkages becomes critical. The attractiveness to emigrants of return, either on a permanent or temporary basis, becomes an important factor in harvesting social capital flows. Chinese input to African economies may make an important contribution to make return attractive. The China Africa summit of November 2006 announced plans for a new strategic partnership between China and Africa featuring “political equality and mutual trust, economic win-win co-operation and cultural exchange”. The economic declaration covered agriculture, investment, business co-operation, trade, finance, infrastructure construction, energy and natural resources. In the social sector, the action plan includes development and assistance, debt reduction, training of professionals, culture, education, public health, environmental protection, and tourism. This continuing development of human capital is important in its own right, but Florida (2002) argues that the presence of a creative class and related cultural activities contributes significantly to the attractiveness of a location for inward investment. Africa may find advantage here, having made significant contributions to global music and art during the twentieth century, both directly and through the diaspora. The continuing cultural creativity of Africa is a resource which can draw both returnees and new incomers, shifting their perceptions. The EAC revival has allowed the development of an East African Single Tourist Visa valid for the three current member states (Kenya, Tanzania and Uganda) which will make travel to that region easier and more attractive. The China-Africa summit saw China to extend Approved Destination Status (ADS) to a further nine African countries bringing the total to 26. The number of Chinese tourists to Africa reached 110,000 in 2005, doubling the 2004 figure, according to the ExitEntry Administration Bureau of the Public Security Ministry (China Daily 2006).

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In an increasingly sophisticated market, tourist destinations need to develop their image, but in doing so can benefit not just incomers, but also established residents who may find a new appreciation of their location and its qualities. The ʺroots tourismʺ which attracts members of a diaspora to their point of cultural origin can also serve to reconnect with them. Tourism represents an opportunity to engage with negative images of Africa and to develop ʺdestination imagesʺ which motivate both diasporic and indigenous contributors to African development. Learning from China: Africa’s Potential for ʺSoft Powerʺ The term ʺsoft powerʺ (Nye 1990) describes the ability of a state or other political body to indirectly influence the behavior or interests of other political bodies through cultural or ideological means. ʺSoft powerʺ distinguishes the subtle effects of culture, values and ideas from more direct means, such as military or economic incentives. Thompson (2004) argues that China has incorporated this approach in their economic strategy in Africa and Wissenbach (2007) suggests that the European Union needs to reconsider the ʺsoft powerʺ element of its own policy in the face of this. Africa too has an opportunity to utilize ʺsoft powerʺ in dealings with trading partners. The continent offers key natural resources to the world economy, but has other cultural resources of its own that may be of greater value in the new “world order” emerging from China’s development. There is a ʺsoft powerʺ dimension to interactions with the diaspora; the overseas population carries the culture to remote locations, generating both markets for cultural goods and demand for physical visits. Miller and Slater (2000) have shown how information and communication technologies can assist the maintenance of identity in diasporic communities. The use of the internet as a social space by Trinidadians away from their home is mirrored in the use of the internet in support of both cultural and business activities in the African diaspora (Little, Holmes & Grieco 2001). The global success of the Fair-trade movement represents a campaigning use of ʺsoft powerʺ, and the response of corporations can be seen in the raised profile of corporate social responsibility (CSR) activities. The success of the campaigns of African activists, leveraged

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by the internet, over access to AIDS medication (Grieco & Little in press) demonstrates the potential of ʺsoft powerʺ to change conditions. This use of the latest generation of communication technology builds on the use of earlier technologies, such as the development of social capital around indigenous capacity in radio broadcast (Mytton 2000) and African forms of social use for a technology – the portable radio – that has become a personal artifact in the West (Spitulnik 2000). Similarly there is distinctiveness to African usage of mobile telephony (Gough & Grezo 2005). This appropriation of key technologies is essential to any knowledge-based self-development strategy (Okpaku 2006). Conclusion All of this suggests that Africa is in a position to appropriate those elements of China’s development policies that can be deployed in an African context. The ʺinformation challengeʺ (Grieco, Colle & Ndulo 2006) presented by the demands of the global economy has been met by China and Africa is engaging with it with increasing effectiveness for both economic and human development. References Ammassari, S & Black, R 2001, ʹHarnessing the potential of migration and return to promote development: applying concepts to West Africaʹ, Sussex Migration Working Paper 3, Sussex Centre for Migration Research, Brighton. Castells M 1997, The Power of identity: economy, society and culture, vol. 2, Blackwells, Oxford. Castles S & Miller MJ, 1993, The Age of migration: international population movements in the modern world, Macmillan, London. Chataway, JC, Gault, F, Quintas, P & Wield, DV 2003, ‘Dealing with the Knowledge Divide’, World Summit on the Information Society, United Nations and the International Telecommunications Union, November, 2006. China Daily 2006, ‘26 African nations now approved destinations’, China Daily, 8 November. Dicken P 1998, Global shift: transforming the world economy (3rd ed.), Paul Chapman, London.

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The Economist 2005, ‘Mobile phones and development’, July 7. Edwin, W 2006, ‘Tanzania, Zambia in talks over sale of joint railway’, The East African, 25 April. Florida R 2002, The Rise of the creative class: and how it’s transforming work, leisure community and everyday life, Basic Books, New York. Flyvbjerg, B, Bruzelius, N & Rothengatter, W 2003, Megaprojects and risk: an anatomy of ambition, Cambridge University Press, Cambridge. Gathanju, D 2006, ‘The Nile Basin: water …’, The World Today, vol.62, no.8-9, August-September, pp.30-31. Gedye, L 2006, ‘Not so EASSy’, Mail and Guardian online, 19 March, at http://www.mg.co.za/articlePage.aspx?articleid=267024&area=/insight/i nsight__economy__business/ accessed 05 April2007. Gore, LLP 2006, ‘How green GDP become fashionable in China’, EAI Background Brief, no.273, East Asian Institute, National University of Singapore, Singapore. Gough N and Grezo, C, 2005, ‘Introduction’ in ʹAfrica: the impact of mobile phonesʹ, Vodafone Policy Paper, Series no. 2, March. Grieco M, Colle R & Ndulo, M (eds.) 2006, Meeting the information challenge: the experience of Africa, Cambridge Scholars Press, Uxbridge. Headrick DR 1981, The tools of empire: technology and European imperialism in the nineteenth century, Oxford University Press, Oxford. Henry, L & Mohan, G 2003, ʹMaking homes: the Ghanaian diaspora, institutions and developmentʹ, Journal of International Development, vol. 15, no.5, pp. 611-622. Kale, D, Wield, D, Little, S, Chataway, J & Quintas, P 2005, ʹDiffusion of knowledge through migration of scientific labor in Indiaʹ, paper presented at Colloquium on Researching Innovative Themes in Skilled Mobility, Centre for the Study of Law and Policy in Europe (CSLPE), University of Leeds. Kaplinsky R 1994, Easternization: the spread of Japanese management techniques to developing countries, Frank Cass, Ilford. Lee, S 2006, Water and development in China: the political economy of Shanghai water policy, World Scientific Press, Singapore. Levitt, P 1998, ‘Social remittances: migration- driven, local level forms of cultural diffusion’, International Migration Review, vol. 32, no. 4, pp. 927- 957.

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Little S & Grieco, G. (in press), ‘Big pharma, international labor, social movements and the internet: coordination and critical perspectives on international business’, European Journal of Industrial Relations. Little, S, Holmes, L & Grieco, M. 2001, ‘Calling up culture: information spaces and information flows as the virtual dynamics of inclusion and exclusion’, Information Technology & People, vol.14, no.4, pp.353-367. Miller, D & Slater D 2000, The internet, an ethnographic approach, Berg, Oxford. Myers M 2000, ‘Community radio: development: issues and examples from Francophone West Africa’, in Fardon, R. & Furniss, G (eds.), African Broadcast Cultures: Radio in Transition, James Currey, Oxford. Mytton G 2000, ‘From saucepan to dish: radio and TV in Africa’, in Fardon, R & Furniss, G (eds.), African Broadcast Cultures: Radio in Transition, James Currey, Oxford. Newland, K 2004, ‘Beyond remittances: the role of diaspora in poverty reduction in their countries of origin’, Migration Policy Unit, Washington, D.C. Nye, JS Jr. 1990, ‘Soft Power’, Foreign Policy, vol. 80 (Autumn), pp. 153-171. Ohmae, K 1996, The end of the nation state: the rise of regional economics, Simon and Schuster, New York. O’Neil 2003, ‘Brain drain and gain: the case of Taiwan’, Working Paper, Migration Policy Institute. Okpaku J Jr. 2006, ‘Towards a knowledge-, science- and technology-based African self-development strategy’, in Grieco, M, Colle, R & Ndulo, M (eds.), Meeting the information challenge: the experience of Africa, Scholars Press, Uxbridge, Cambridge, pp.15-24. Rawnsley, GD 2006, ʹThe media, internet and governance in Chinaʹ, Discussion Paper 12, China Policy Institute, Nottingham. Redding, SG 1996, ‘Weak organizations and strong linkages: managerial linkages and Chinese family business networks’, in Hamilton, G (ed.), Asian Business Networks, Berlin deGruyter. Redding SG 1998, ‘The changing business scene in Pacific Asia’, in McDonald, F & Thorpe, R. (eds.), Organizational strategy and technical adaptation to global change, Macmillan, London.

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Saxenian 2002, ‘Trans-national communities and the evolution of global production networks: the case of Taiwan, China and India’, Industry and Innovation, vol. 9, no 3, pp. 183-202. Shaxson, N 2006, ‘African oil production: bursting with confidence’, The World Today, vol.62, no.12, December, pp.11-13. Spitulnik, D 2000, ‘Documenting radio culture as lived experience: reception studies and the mobile machine in Zambia’, in Fardon, R & Furniss, G (eds.), African Broadcast Cultures: Radio in Transition, , James Currey, Oxford. Swatuk, L 2002, ‘The new water architecture in southern Africa: reflections on current trends in the light of ‘Rio+10’, International Affairs, vol. 78, no.3, p.507-30 Thompson, D 2004, ‘Economic growth and soft power: China’s Africa strategy’, China Brief, vol. 4, issue 24, 7 December. Thorpe, R & Little, SE (eds.) 2001, Global change: the impact of Asia in the 21st century, Palgrave, London. Vodaphone 2005, ‘Africa: the impact of mobile phones’, Vodafone Policy Paper Series, no. 2, March, available at http://www.vodafone.com/assets/files/en/GPP%20SIM%20paper.pdf Wang, YP 2004, Housing, urban poverty and social change in China, Routledge, London. Wissenbach, U 2007, ‘Africa’s Attractions’, The World Today, vol. 63, no. 4, April, pp.7-8 Yasutomo, DT 1986, The Manner of giving: strategic aid and Japanese foreign policy, Lexington Book, Lexington MA. Zheng, Y-N 2006, ‘De-facto federalism and dynamics of centrallocal relations in China’, Discussion Paper 8, China Policy Institute, Nottingham. Zheng, Y-N & Chen, M-J 2006, ‘China moves to enhance corporate social responsibility in multinational companies’, Briefing Series Issue 11, China Policy Institute, Nottingham.

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About the Authors Some of the chapters of this book were initially published as articles in the July/August 2005 issue of the journal African Renaissance, devoted to China’s policy in Africa: That issue was entitled: “The Chinese Are Coming”. Contributors to that volume whose articles are reproduced with the permission of the journal, include: Butler, Tina, freelance writer based in San Francisco, California. She has traveled in Southern Africa and has a particular interest in issues regarding the environment, conservation and sustainable development in the African continent and beyond. Jin Yongjian is the President of the United Nations Association of China. He was Under Secretary General of the United Nations (19962001), Ambassador and Chinese Permanent Representative to UN Office in Geneva and other International Organizations in Geneva (1992-1995) and Ambassador and Chinese Deputy Permanent Representative to the United Nations (1990-1992). Liu Guijin is China’s Ambassador to South Africa. He was previously the Director-General of African Department at the Chinese Ministry of Foreign Affairs. Sachs, Michael is Research Coordinator at the Office of the Secretary General, African National Congress, Johannesburg, South Africa. Servant, Jean-Christophe was born in Latin America and educated as a music critic. In the past 10 years, he has been a regular contributor on geopolitical issues in sub- Saharan Africa. Thompson, Drew is the Assistant Director of the Freeman Chair in China Studies at the Center for Strategic and International Studies in Washington, DC. He lived and worked in Beijing, Nanjing and Shangai for seven years in the 1990s, and studied at the Hopkins-Nanjing Center in 1992.

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About the Authors

The other contributors are: Chan-Fishel, Michelle: since 1995, she has coordinated Friends of the Earthʹs Green Investments project, which brings environmental advocacy to Wall Street. She is the President of BankTrack, an international NGO advocacy network on finance, which she founded as an NGO capacity building project in 1998. She serves on several advisory committees, including the Dow Jones Sustainability Index and Social Investment Forum’s Public Policy & Advocacy Group. Michelle has published numerous articles on corporate accountability, socially responsible investing, green banking, and on the role of private capital in international development. Copson, Raymond W. is an independent scholar specializing in African affairs and U.S. relations with Africa. He teaches courses on African politics at the Elliott School of International Affairs, George Washington University, and the Johns Hopkins Nitze School of Advanced International Studies. Copson has recently completed the draft of a monograph on Africa policy in the George W. Bush Administration, published by Zed books in June 2007. An op-ed of Copson’s on China’s growing influence in Africa appeared in April 2006 in the Los Angeles Times. From 1978-2005, Copson served as a Specialist in International Relations at the Congressional Research Service (CRS), focusing on African affairs, African development issues, the AIDS pandemic, and U.S. aid to Africa. For many years, he was head of the Middle East/Africa/Latin America Section. Kitissou, Marcel directed the Institut Superieur de Presse (du Conseil) de l’Entente at the Université du Bénin, Togo. He also served as Associate Director of the Ecole Nationale d’Administration of Togo. In the US, he taught history, political science and public administration at the State University of New York at Oswego where he later created and directed the Peace Education and Conflict Ethos (P.E.A.C.E.) Institute from 1998 to 2001. Kitissou assumed the positions of Executive Director of the Africa Faith and Justice Network (a Washington, DC-based research and advocacy NGO) from 2001 to 2005 and of Faculty Director of the Global Humanitarian Action Program and of the Summer Institute on

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About the Authors

International Development at George Mason University. He is Senior Visiting Research Scholar with the Center for Global Studies of George Mason University, and is just appointed faculty at the Union Institute and University at Cincinnati, Ohio. Kragelund, Peter is a researcher at the Danish Institute for International Studies, Copenhagen. He holds a MSc. (Economic Geography) from University of Copenhagen and a PhD in international development studies from Roskilde University. His research deals with aspects of private sector development in Africa. Among his most recent publications are ʹThe Embedded Recipient and the Disembedded Donor: Private-Sector Development Aid in Ghanaʹ, Forum for Development Studies, vol. 31, no. 2, 2004, pp.307-335; ʹBuilding technological capabilities in Ghanaian SMEs through private sector development programsʹ, in Internationalization and Enterprise Development in Ghana, edited by J. Kuada, Adonis & Abbey Publishers, London, 2005; and ‘Donor, Dollars, and Development. Insights into the Impacts of Danidaʹs Private Sector Development Program in Ghana’, Roskilde University, Roskilde, 2005. Kuada, John is Associate Professor in International Management at Aalborg University. He received his BSc and MBA degrees from the University of Ghana and PhD from Copenhagen School of Business. Dr. KuadaError! Bookmark not defined. has extensive experience as a business consultant, and training advisor in areas of management, marketing and cross-border inter-firm relations in Europe and Africa. He is author or editor of some 7 books on management and internationalization of firms in developing countries and has written over 100 articles in refereed scholarly and professional journals. He serves on the editorial review boards of a number of marketing/management journals focusing on business and management in Africa. He is editor of the African Journal of Business and Economic Research (AJBER). Lawson, Roxanne is an International Policy Campaigner for Friends of the Earth-US. At Friends of the Earth, Roxanne works to promote community rights related to natural resources and the environment on the African continent, with a particular emphasis on the impacts of international financial institutions and multinational companies. Prior

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About the Authors

to her work at Friends of the Earth-US Ms. Lawson worked for the American Friends Service Committee as the National Liaison to United for Peace and Justice, Stop the FTAA Coalition and AFSC’s Life Over Debt Campaign aim at canceling the illegitimate debt of African nations. She is a founding member of Black Voices for Peace, BEATS for PEACE and numerous other organizations.

Reilly, James is the Quaker International Affairs Representative for Northeast Asia for American Friends Service Committee, and is a Ph.D. candidate in the Political Science Department at George Washington University. He received a M.A. from the Jackson School of International Studies, University of Washington, and a B.A. from Guilford College. His articles have appeared in China: An International Journal, Asian Survey and Survival. Wu Na is the National Director for China and North Korea for the American Friends Service Committee, based in Dalian, China. She was born and raised in China and was educated at the Beijing Physical Education University and the University of Washington. She was a national competitive swimmer in China and worked as a university instructor in Beijing. She worked for several years in Washington, DC, on policy advocacy on behalf of refugees from Southeast Asia.

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Index

A Abu Ghraib, ix Adibe, Jideofor, viii Administration Commission of the State Council, 141 Africa’s HIV/AIDS pandemic, 54 Africa-China cooperation, 18 African family system, 93 African Growth and Opportunity Act, iv, 62, 175, 179 African Policy Paper, 110, 115 African Renaissance, viii, 76, 86, 99, 198 Agreement on ConfidenceBuilding in the Military Field, 14 Anglo-Christian fundamentalism, 34 Annan, Kofi, 47 Anti-Ballistic Missile, iv, 16 Axis of Evil, 17 B Ballistic Missile Defense system, 16 Beijing, iv, 13, 14, 15, 18, 19, 20, 21, 22, 23, 25, 36, 37, 47, 50, 53, 61, 67, 68, 78, 79, 80, 83, 84, 87, 101, 102, 103, 104, 106, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 120, 121, 124, 127, 128, 129, 130, 131, 133, 134, 135, 137, 148, 149, 153, 154, 155, 156, 157, 159, 161, 175, 177, 180, 181, 188, 198, 201 Bi-National Commission, iv, 42, 43, 44, 85 Bretton Woods institutions, ix, 17

Bretton Woods system, 32 BRIC-group, ix Burkina Faso, 49 Bush, George W., ix, 14, 17, 58, 60, 62, 63, 70, 72, 74, 199 Butler, Butler, vii, 156, 198 C Center for Economic Research, 30 Chan-Fishel, Michelle, vii, 108, 199 Chexim, 111, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122 China Export-Import Bank, 111, 113 China National Petroleum Corporation, iv, 51, 104, 117, 139 China’s “Go Out” policy, 116 China’s Africa policy, 56, 142, 146 China’s deforestation problems, 19 China’s economic growth, 13, 173 China’s rise in Africa, 57, 59, 62, 64, 71 China-Africa Cooperation Forum, iv, ix, 19, 47, 48, 53, 87, 135 China-Africa Development Fund, 14 China-Africa summit, 14, 61, 109, 112, 114, 192 China-US rivalry, 18, 23 Chinese Foreign Direct Investments, 162 Chinese managers in Africa, 88 Chinese society, 27, 31 Chinese state-owned enterprises, 132 Chinese think tanks, 67 Chungquan, Zhu, 159, 161 Cold War, 10, 17, 18, 19, 59, 101, 102, 133, 182 Common Market for Eastern and Southern African States, 50

Index

Communist Party of China, iv, 26 Comprehensive Test Ban Treaty, 16 Confucianism, 90 Congo, iv, 12, 21, 49, 57, 70, 73, 81, 83, 103, 106, 121, 147, 160, 165 Copson, Raymond W, 72, 199 Côte d’Ivoire, 140, 165 Council on Foreign Relations, 56, 65, 66, 67, 72, 117, 130 Crisis Operations Training Assistance, iv, 70

Forum on China-Africa Cooperation, iv, 40, 41, 78, 79, 114 Frazer, Jendayi, 58 G G77, 54 Global Peace Operations Initiative, iv, 70 Global War on Terror, iv, 60, 71 globalized country, 45 Guantanamo Bay, ix Guijin, Liu, vi, 75, 198

D

H

Darfur, 17, 21, 24, 51, 52, 54, 58, 59, 63, 67, 68, 71, 72, 74, 104, 109, 117, 118 Department of Foreign Aid, 143 Department of Foreign Economic Cooperation, iv, 142 direct economic development, 29 Djibouti, 60, 136 DRC, iv, 121

Huawei, 50, 113, 144, 149 Human Rights Council, 63, 135 I International Criminal Court, v, 16, 69, 70, 72, 73 J

E

Jintao, Hu, 40, 43, 58, 61, 68, 77, 83, 103, 106, 163, 183 Johns Hopkins University, 17

Eastern and South African Trade and Development Bank, 50 Eastern European satellite states, 12 Economic and Commercial Counselor’s office, 143, 148, 150 Enlai, Premier Zou, 40 Ethiopia, 19, 53, 63, 82, 89, 102, 103, 114, 131, 135, 136, 151, 156, 186 Eximbank, 50, 101

K Kragelund, Peter, vii, 162, 200 Kuada, John, 200 Kuada, JOhn, vii, 87, 89, 93, 99, 200 L Latin America, 15, 198, 199 Lawson, Roxanne, vii, 108, 200 Liberia, 12, 34, 49, 57, 66, 81, 83, 106, 135, 136, 160 Little, Stephen, vii, 182, 184, 193, 194, 195, 196, 197 Lyman, Princeton, 14, 25, 56, 73

F FDI literature, 168 Foreign Trade and Economic Cooperation, v, 142

203

Index

M

President’s Emergency Plan for AIDS Relief, v, 60 Putin, Vladimir, ix

Marcel, Kitissou, ii, iii, vi, ix, 10, 199 Mauritius, 53, 82, 140 Members of Congress, 64 Memorandum of Understanding, v, 44 Millennium Development Goals, 54, 55, 76 Ministry of Commerce, v, 80, 142, 144, 147, 148, 149, 150, 151, 154 Ministry of Foreign Affairs, v, 78, 80, 110, 114, 115, 124, 128, 142, 143, 150, 198 Monterrey Consensus, 54 Mugabe, Robert, 19, 62, 120 Multi-Fiber Arrangement, v, 175 multilateralism, 34, 38, 39

R Reilly, James, vii, 132, 201 Rice, Condoleeza, 63 Russia, ix, 13, 14, 16, 87, 160 S Sachs, Michael, 26 Servant, Jean-Christopher, vii, 101, 136, 139, 140, 155, 198 Severe Acute Respiratory Syndrome, v, 53 Seychelles, 53, 83 Shangai Cooperation Organization, 14 Shenzhen, 145, 149 Shinn, David, 63, 73 Sinosure, 111, 112, 113, 115 South Africa, 34, 35, 36, 42, 43, 44, 53, 68, 74, 82, 84, 85, 105, 106, 112, 113, 114, 127, 135, 139, 140, 141, 163, 164, 166, 171, 179, 188, 198 State Owned Enterprises, 30 Sudan, 13, 14, 15, 21, 49, 51, 52, 57, 68, 72, 73, 89, 102, 103, 104, 105, 112, 113, 117, 125, 134, 139, 140, 144, 147, 152, 186

N Nairobi, 48, 103, 181 National Offshore Oil Company, iv, 119 New Partnership for Africaʹs Development, v, 44, 54, 69, 76 Nigeria, viii, 19, 21, 57, 65, 74, 89, 103, 106, 117, 119, 127, 135, 138, 140, 144, 157, 186, 188 O Organization for Economic Cooperation and Development, 122 Overseas Chinese Affairs Bureau, 141

T Taiwan, 13, 49, 103, 105, 108, 134, 135, 156, 169, 196, 197 Tanzania, 53, 82, 83, 94, 102, 111, 114, 130, 140, 147, 171, 175, 181, 183, 192, 195 Tanzanian Muslim village, 61 Thompson, Drew, vi, 45, 58, 72, 155, 193, 197, 198 Tiananmen Square, 18

P Pentagon, 61, 73 People’s Republic of China, v, 26 Port Harcourt, 57

204

Index

X

Trans Sahel Counter-Terrorism Initiative, 60

Xiaoping, Deng, 11, 12, 26, 36

U

Y

U.S. Agency for International Development, 66 UN Security Council, 12, 39, 104 unipolar system, 17 United States, v, vi, 10, 11, 12, 13, 14, 15, 16, 17, 20, 21, 23, 45, 46, 51, 54, 55, 56, 57, 58, 59, 60, 61, 62, 64, 65, 66, 67, 68, 69, 70, 71, 72, 102, 109, 114, 116, 129, 135, 153, 156, 162, 183, 191

Yongjian, Jin, vi, 38, 198 Z Zambia, v, vii, 19, 53, 57, 80, 82, 89, 94, 102, 103, 112, 120, 121, 130, 139, 140, 145, 147, 148, 154, 157, 162, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 195, 197 Zedong, Chairman Mao, 11, 12 Zemin, Jiang, 40, 43, 110, 133 Zimbabwe, 14, 19, 21, 49, 53, 54, 62, 63, 68, 73, 83, 94, 105, 120, 121, 127, 129, 130, 140, 144, 147, 151, 152

W World Bank survey of Chinese firms in Africa, 137 WTO, v, ix, 44, 54, 55, 161 Wu Na, vii, 132, 201

205