New African Railways Ride on Chinese Loans

WASHINGTON — 

Earlier this month, the first train rumbled down the tracks of a $3.4 billion electric railway connecting landlocked Ethiopia with Djibouti and its access to the Red Sea. The 750-kilometer (466 miles) line, expected to carry up to five million tons of goods per year, promises to have a massive impact on the economies of both countries and the region at large.

At the official launch of the project, Ethiopian Prime Minister Hailemariam Desalegn said its importance cannot be overstated.

“This project is like our blood vessels,” he told a VOA Somali service reporter who was riding on the inaugural train. “The reason is because Ethiopia's outlet is through Djibouti. Therefore, this project determines if we can live or not live.”

The project was 70 percent funded by a loan from China's state-run EXIM Bank and built by China Railway Group and Chinese engineers.

Kenya railway line almost done

It is the latest in China's massive infrastructure investment in Africa. A $13-billion railroad in Kenya, financed by the Export-Import Bank of China and built by the state-owned China Road and Bridge Corporation, is nearly complete. Other railway lines are planned to stretch into East African countries including South Sudan, Uganda, Rwanda and Burundi.

Between 2000 and 2014, China made $24.2 billion in loans to finance transportation projects on the African continent, according to researchers at the China-Africa Research Initiative, a group at the Johns Hopkins School of Advanced International Studies focusing on China-Africa relations. Eighty percent of those loans were for roads and railways.

China eyes African ports

Experts say Chinese infrastructure investment in Africa is not about altruism. Funding railways benefits China by connecting ports and facilitating the movement of raw commodities that are badly needed to fuel China's development.

“East Africa, particularly the ports in Kenya, ports in Tanzania and especially ports in Djibouti, these are very important for the Chinese just for the exports,” said Jyhjong Hwang, a senior research assistant at Johns Hopkins' China-Africa Research Initiative.

Hwang says that for China, these projects will take a long time to pay dividends.

By contrast she said African economies are likely to see an immediate impact.

“These are big transportation projects that will stimulate local economies, these are good for basic infrastructure,” she said. “This is good for local, loan recipient countries just because these projects have a lot of costs and not a lot of immediate financial return.

“These are the projects that need a lot of financial infusion to begin with and obviously the financier has to be willing to want to take on a lot of risk, but willing to recuperate over a longer horizon,” said Hwang.

Not a 'clear pattern'

In 2016, the China-Africa Research Initiative published its database of all known loans made by China to Africa between 2000 and 2014. The countries that received these loans were not all resource-rich countries, researchers found.

“When we talk about China and Africa and interests, people talk about natural resources, but one of our findings was that actually there isn't a clear pattern in terms of the amounts of loans to countries and how well endowed they are with natural resources,” said Janet Eom, a research manager at the China-Africa Research Initiative.

Oil-rich Angola received the largest amount of funding, Eom says. But resource-poor Ethiopia came in second.

‘One Belt, One Road’ policy in Africa

China views its investment abroad as part of its “One Belt, One Road” policy. Spearheaded by Beijing, this effort is a Chinese public-private partnership, Hwang says, “even though technically no company is truly private in China.”

It aims to develop a modern “silk road” where goods and commodities can be easily transported between China and its surrounding region. Eventually, China says, it would like to shift labor-intensive industrial work to places like Africa.

Local governments are aware a lack of infrastructure is a roadblock to international investment, Hwang says, and are eager to partner with China.

“On the Chinese side, they want to have better investment opportunities in Africa, so if they don't have a railroad, they will help them build it themselves,” she said.

China also has a large number of infrastructure contractors who need work, many of whom have close links to the ruling party or are state owned.

The quality of the work has come under scrutiny, says Hwang. But, she added, “they are capable of doing [the work] very fast and very cheap, and they are able to find the financing for it …”

Most laborers are African

The Johns Hopkins researchers also found Chinese projects benefit African workers, the foremen and technicians tend to be Chinese while the manual laborers are generally African.

There are concerns about the ability of African nations to pay back these loans, researchers found. This is particularly true in countries heavily reliant on oil revenue, which have seen the price per barrel slump in recent years.

There are also concerns China may pull back its investment on the continent as it experiences an economic slowdown.

But the recipient countries of this investment believe it is a win-win.

Salem Solomon

Salem Solomon is a digital journalist at the Voice of America's Africa Division and covers the latest news from across the continent. Salem reports and edits in English, Amharic and Tigrigna. She produced the multimedia and data-driven projects How Long Have Africa's Presidents Been in Office? and Hunger Across Africa. Her work has appeared in The New York Times, Poynter.org, Reuters and The Tampa Bay Times. Salem researches trends in analytics and digital journalism. For tips and inquiries, email: sfekadu@voanews.com.

Source: https://www.voanews.com/a/new-african-railways-ride-chinese-loans/3690287.html

Angola receives US$6.9 billion from the Export-Import Bank of China in 2000-2015 period

Between 2000 and 2015, Angola was the second African country to which the Export-Import Bank of China (Exim) granted the most loans, totalling US$6.9 billion, according to analysts from the China-Africa Research Initiative, of US Johns Hopkins University.

The analysts said Angola still needed Chinese funding and that the money lent to Angola was only surpassed by credit granted by the Chinese state-owned bank to Ethiopia, totalling US$7.2 billion.

Data from a comparative study of China and US trade and finance policies for Africa showed that credit to Angola accounted for 11% of total Chinese Exim Bank financing to Africa, the same as to Ethiopia and higher than Kenya (10%), Sudan (8%), Cameroon (6%) and the Democratic Republic of Congo (5%).

Neither Angola or any Portuguese-speaking country appears on the list of nations that received the most credit from the US Exim Bank, 50% of which went to South Africa.

In 2015, Angola topped the list of African exporters to China with 16% of the total, and was the third largest African exporter to the United States, with 2.9% of the total, and also the seventh largest market for US exports to Africa and the eighth largest market for Chinese exports to the continent.

“As of 2011, however, US oil imports from Angola, as from other suppliers, have dropped consistently and dramatically. Chinese imports from Angola, on the other hand, grew rapidly between 2002 and 2011 and remained stable between 2011 and 2014, before falling in 2015,” the study said.

The study produced by the Johns Hopkins University research centre points out that China’s commitment to Africa “emphasises the needs for infrastructure” of the continent, with construction being one of the main destinations for Chinese loans, along with transport (roads, railways, airports, and ports).

“The fluctuation of commodity prices is important for both the United States and China in Africa. Oil is the main African export to the US and China but, because of the fall in its price, the value of American and Chinese trade with Africa has declined in recent years,” said the authors – Janet Eom, Jyhjong Hwang, Lucas Atkins, Yunnan Chen, and Siqi Zhou.

Figures recently compiled by Reuters showed that China’s funding to Angola, including the latest loans from the Exim Bank and other financial institutions, totals over US$20 billion, and has become increasingly necessary due to the sharp drop in oil revenues over the last few years.

The latest report from the Economist Intelligence Unit (EIU) on Angola said that “Chinese sources are predominant,” in new loans taken on by the country since November 2015, of at least US$11.5 billion” and adds that the government will continue to seek funding from China. (macauhub).

Source: https://macauhub.com.mo/feature/angola-recebeu-69-mil-milhoes-de-dolares-banco-de-exportacoes-e-importacoes-da-china-ate-2015/

There’s one major pitfall for African countries along China’s new Silk Road

China’s campaign to build a massive network of land and sea links connecting Asia, Europe, the Middle East, and Africa is expected to benefit the African countries along the route. Chinese officials pledged an extra $113 billion in funding for the project at a summit in Beijing over the last two days. In total, China will spend as much as $3 trillion on roads, ports, and other updates to infrastructure in more than 60 countries that make up the “One Belt, One Road.”

China has already financed and built a $4 billion railway between Djibouti to Addis Ababa, the continent’s first transnational electric railway. In Kenya, a Chinese firm has built a new railway connecting Nairobi to the country’s port city of Mombasa. Eventually it will reach Uganda, Rwanda, and the Democratic Republic of Congo.

There’s one drawback to the project observers are calling China’s Marshall Plan. The One Belt One Road (OBOR) initiative, marketed as a modern-day recreation of the ancient Silk Road trading route, is about gaining access to new markets for Chinese goods. (Soft power and finding work for Chinese construction companies are important factors too.)

In this way, OBOR is similar to Britain’s colonial trade routes, used to take natural resources from its outposts as well as ship finished goods back to its colonial subjects, Eric Olander and Cobus van Staden at the China Africa podcast have observed.

African countries are already flooded with Chinese products. Chinese exports to African countries reached $103 billion in 2015, a figure that is likely much higher because of underreporting and smuggled goods. African countries are exporting far less to China than they’re importing. After years of falling commodity prices, now only 10 out of 53 sub-Saharan African countries have a trade surplus with China, according to 2015 data.

Kenya’s president Uhuru Kenyatta, one of only two African leaders invited to China’s One Belt One Road forum in Beijing this week, recently called on China to balance its trade with African countries.

In an interview (paywall) with the Financial Times, Kenyatta said that if Beijing’s “win-win strategy is going to work, it must mean that, just as Africa opens up to China, China must also open up to Africa.”

Sign up for the Quartz Africa Weekly Brief — the most important and interesting news from across the continent, in your inbox.

Source: https://qz.com/983581/chinas-new-silk-road-one-belt-one-road-project-has-one-major-pitfall-for-african-countries/

Chinese firms expand reach in Africa amid fears of ‘new colonialism’

Jane Cai

Already dominant in the continent’s manufacturing and resource sectors, Chinese firms are pushing into new areas and leaving their western counterparts in the dust, a report says

Chinese firms operating in Africa are likely to see rapid growth in the coming decade as they expand their dominance in manufacturing and resources into new areas such as services and logistics, according to a report released in Beijing on Friday.

China’s involvement in the continent already dwarfs that of France, Britain and the US, and Chinese companies could amass combined revenues of US$440 billion in 2025, about twice those of Apple last year and more than double the US$180 billion they generated in 2015, according to the report by McKinsey & Company.

“Neither Western partners such as France, the UK and the US, nor major developing countries such as India and Brazil match China in the depth and breadth of involvement in Africa”, the report said.

“Make no mistake: China is already Africa’s biggest economic partner.”

How a Chinese investment boom is changing the face of Djibouti

The growth can be attributed to Chinese firms’ dominance in Africa’s manufacturing, resources and infrastructure sectors and their expansion into five new sectors: agricultural, banking and insurance, housing, technology and telecommunications, and transport and logistics, the consulting company said in the report, titled Dance of the Lions and Dragons.

China was also among the top four partners for African countries in all five areas surveyed by McKinsey: trade, investment stock, investment growth, infrastructure financing and aid, the report said.

The survey’s findings show how far China has come in its ties to Africa since Beijing adopted a “cement and concrete diplomacy” to engage the continent in the late 1960s. In return for the railways and roads China funded and built under that policy, African nations helped secure a seat for the mainland China on the United Nation’s Security Council in 1971.

Can China score a new win in Africa with Xi Jinping’s ‘Belt and Road’ plan?

China’s trade with Africa has grown exponentially since the establishment of a triennial ministerial-level forum on China-African cooperation in 2000, and got a further boost after a 2006 summit between then-president Hu Jintao and 48 African nations, including 42 heads of state, in Beijing.

At his first summit with African leaders in Johannesburg, South Africa, in December 2015, President Xi Jinping pledged US$60 billion in funding to finance 10 new partnerships with Africa. They ranged from energy, industrial and agricultural projects to security and military cooperation and emergency food and health aid.

Talking to more than 1,000 Chinese companies in eight African countries over the past two years, the researchers found that while major infrastructure projects by Chinese state-owned enterprises might grab the headlines, in fact around 90 per cent of the 10,000 or so Chinese businesses in Africa are privately owned.

And these firms are making healthy profits. Nearly a quarter said they had covered their initial investment in one year or less, and a third reported profit margins of over 20 per cent, as rivals are few in local market.

“There’s a lot of hype about China’s investment in Africa, and also there’s a lot of fear and anxiety about new colonialism,” said Kartik Jayaram, a senior partner at McKinsey.

“In our fact-finding survey, we found there are already over 10,000 Chinese firms operating in Africa – four times the previous official estimates.”

While the companies created jobs and brought new products and technology to the continent, breaches of labour regulations are more common among Chinese firms than among other foreign-owned firms, it said.

Human rights groups have criticised working conditions at Chinese firms in Africa.

A study published by the Johns Hopkins China-Africa Research Initiative in February found that less than half of Chinese firms in Kenya had employment contracts for all their employees, compared with 100 per cent for American firms.

In 2011, Human Rights Watch said there were substantial employee safety violations in copper mines in Zambia run by Chinese state firms.

McKinsey meanwhile warned that some African countries could default on Chinese debt, especially Zambia, where debt levels are reaching a critical level. That could force Beijing into additional rounds of debt forgiveness and into rethinking its debt-fuelled infrastructure provision model in Africa, it said.

Nevertheless, it predicted that Chinese investment into Africa would accelerate, as a slowing economy at home pushes Chinese investors seek higher returns abroad. Recent rules making it easier for Chinese to invest abroad via Hong Kong funds will help enable this shift, even with Beijing’s current capital controls, it said.

This article appeared in the South China Morning Post print edition as:

China set to cash in on African dominance

Source: http://www.scmp.com/news/china/diplomacy-defence/article/2100729/chinese-firms-revenues-africa-could-reach-us440-billion

Africa and China’s Construction Sector

China is stepping up infrastructure investment in Africa, and its about more than just natural resources.

By Pierre-Olivier Bussieres

December 18, 2015

It is commonly assumed that Chinese investment in Africa’s infrastructure is being driven by natural resource extraction. Given that many countries in Africa have only very limited railroads and highways – it is estimated that Africa suffers from a $900 billion infrastructure deficit – it makes sense for China to slake its resource thirst by paving the way towards successful extraction.

In the middle of his recent African tour, Chinese President Xi Jinping unveiled a $60 billion investment plan for the continent. It is of course undeniably true that China needs an ever growing pool of raw materials to feed its massive economy, but Chinese credits lines for infrastructure in African, or elsewhere, cannot be entirely explained as facilitating mining operations.

In fact, China is using African infrastructure to keep its construction firms busy. Construction has become a priority in itself. Construction has emerged over the years as one China’s most important exports. Even China is candid about this. In August this year, China Daily was reporting that new financing mechanisms for infrastructure overseas were a key part of government’s plan to boost the construction sector.

Enjoying this article? Click here to subscribe for full access. Just $5 a month.

Construction constitutes roughly one quarter of China’s $10 trillion economy. And it is slowing alarmingly. Until now, much of China’s double-digit growth has come from investment in construction (which encompasses construction material and services).

With Xi Jinping’s promotion of his “New Normal” theory, which proposes a much slower growth to foster a more sustainable economic model, the role of construction is expected to decrease significantly in China. That is likely to be tricky, because construction has been responsible for much of China’s growth. According to Joe Zhou, head of China research at JLL real estate consultancy, China passed the peak of construction activity in 2013, with construction output expected to grow at 3.9 percent annually going forward – less than one third of its rate between 2005 and 2014.

In short, the construction market in China is saturated. Stories about ghost cities in China have led some to believe that Chinese growth during the past two decades was based on building houses for nobody. There are hundreds of new empty cities in China, and dozens more being built, in a scheme often presented as a way to absorb China’s next generation of retirees.

Which brings us back to Africa. While it may very well have been the case about 10 years ago, the Chinese are no longer funding routes and railways because they are the only one to do it; rather, they are doing it because they can no longer do it at home. Infrastructure construction in Africa has now become an end in itself.

Deborah Brautigam has written a comprehensive article questioning conventional wisdom on China’s dedication to natural resources. She uses the example of the Democratic Republic of the Congo and two Chinese construction companies which set up a joint venture to bring an abandoned copper mine back to life. The joint venture then negotiated a 6 billion commercial loan from China’s Export-Import Bank with a repayment guarantee based on profits from the mine. It wasn’t the mine that justified the road, but the other way around.

Examples of such investments shifts are proliferating. In fact, Foreign Policy has reported that in 2014 alone, Chinese companies signed construction contracts in Africa worth $70 billion.

With more than 3,000 active projects in Africa, Chinese companies have achieved unprecedented penetration of the African construction sector. Chinese companies now dominate the African construction sector, with a market share larger than those of France, Italy and U.S. combined. And this is just the beginning. China’s construction sector remains gigantic: It is expected to represent almost a quarter of all construction worldwide.

In fact, China has already showed the world its intention of constructing abroad by entering Central Asia, Russia’s historical imperial zone of influence, with its One Belt, One Road policy. There is no reason to believe the recent plan to invest $60 billion in Africa doesn’t serve the same purpose of keeping Chinese construction firms afloat.

Pierre-Olivier Bussieres is Editor in Chief of Republic of the East. He holds a graduate degree from the Institute of Eastern European, Russian and Eurasian Studies at Carleton University and a practical certificate in foreign intelligence assessment.

Source: http://thediplomat.com/2015/12/africa-and-chinas-construction-market/

Shifting Tides in Sino-African Relations

By Ayush Midha

In early December 2015, Chinese president Xi Jinping promised $60 billion for African development projects, capping off a year that saw trade between China and African countries grow to $220 billion. With steadily increasing trade and aid flows, China remains at the forefront of the global push to increase engagement with the African continent. Given the widespread availability of natural resources and the explosive potential for economic development throughout the continent, China is among a host of global powers that have turned their attention to Africa, investing political and financial resources into expanding foreign aid, trade partnerships, and diplomatic ties with emerging African nations.

Perhaps unsurprisingly, Western commentary on the growing Chinese presence in Africa has been rife with moral judgement. Pundits label Chinese endeavors immoral and dangerous when they involve resource extraction or take place in undemocratic regimes. American analysts also peddle the rhetoric of “zero-sum” competition between China and the United States, decrying the effects of Sino-African ties on American national interests. In a conversation with the HPR, Yun Sun, a fellow at the Brookings Institution’s Africa Growth Initiative, explained that “the extension of China’s influence in Africa here, in the United States, is perceived as at the cost of the United States,” even though China’s primarily economic involvement actually opens the door for cooperation with America’s largely counterterrorism-focused presence.

In order to challenge this well-established narrative, Chinese presence in Africa must be analyzed through an objective lens—one detached from American goals in the continent. China’s relationship with the fledgling country of South Sudan elucidates the political, ideological, economic, and strategic pillars of Sino-African relations. As African nations like South Sudan face growing governance challenges and instability, though, Chinese adherence to this strategy has come into conflict with overriding economic interests.

Ideological Foundations

Chinese leaders often seek to increase influence in international institutions by building a coalition among emerging nations that agree to adopt Chinese international objectives and its model of development. For example, China’s engagement with African regimes began in an effort to bolster ideological support for burgeoning socialist regimes globally. By providing political and economic support for socialist nations, the young Chinese government simultaneously increased international recognition of far-left regimes.

Although China has continued encouraging socialism to demonstrate the efficacy of its economic development model, the CCP also maintains an ideological commitment to a non-interference principle and actively prohibits efforts to influence local governance through conditional aid and investment. This policy has been articulated as an effort to maintain anti-colonial solidarity with emerging nations, but serves also primarily to delegitimize efforts by other global powers to intervene in China’s own domestic politics, according to Sun. China understands that as an authoritarian regime it has a legitimacy problem; but by taking a strong stance against intervention in developing countries, it can object in good faith to other countries’ attempts to meddle in its own business

The case of South Sudan exemplifies China’s emerging dilemma in its adherence to the non-interference principle. The source of South Sudanese instability lies partially in the country’s roots—governed by British and Egyptian colonial overlords for over a century, Sudan was originally divided into two nations. When Sudan gained independence in 1956, though, it was unified by its colonial powers, with the authority to rule placed in the north. In spite of recurring civil wars, China established ties with Sudan early on, and as Sudan became a globally relevant oil producer, China expanded the scope of its involvement. When South Sudan gained international recognition in 2011 as an independent country, China chose to maintain diplomatic and economic ties with both Sudan and South Sudan despite continued tensions between the two nations.

Unfortunately, South Sudan’s secession failed to dampen regional instability, and since the end of 2013, South Sudan has undergone its own civil war. In the midst of this chaos, South Sudanese President Salva Kiir sacked his cabinet and expanded executive authority, inviting vocal criticism from numerous international sources and throwing a wrench into Chinese plans for a stable oil supply. Amid the escalating civil war and the widespread perception that the South Sudanese government represents the worst excesses of authoritarianism, China has been forced to balance its international reputation with its ideological commitment to non-interference. Cutting off ties with Kiir’s nation would send a signal of abandonment to China’s other undemocratic partners on the continent, diminishing the strength of China’s international coalition. On the other hand, supporting a despotic and internationally ostracized leader imposes reputational costs for China, and undermines its own legitimacy in international negotiations with other great powers.

Varied Complications

Unfortunately for Chinese decision-makers, China’s already complex relationship with South Sudan is further complicated by its burgeoning commercial and economic interests in the region. In the 1990’s, China’s focus in Africa shifted away from nebulous ideological commitments to economic development, with a special emphasis on expanding export markets and extracting natural resources. Sun articulated that since 2000, “economic interests have been perhaps the most important pursuit of China’s endeavors or China’s exploration in Africa.” While economic interests shape Chinese foreign policy towards Africa, the continent still represents only 3 percent of its global investment, and trade with Africa comprises only 5 percent of the value of China’s global trade. However, China remains a critical economic partner for many of African countries. China has been the largest trading partner on the African continent since 2009, and Chinese governmental and commercial actors have on multiple occasions offered loans whose value exceeds 10 percent of a nation’s GDP.

Before South Sudan gained independence, for example, China maintained a heavy economic presence in its political forebear, making up 73 percent of total international loans to Sudan in 2007. As Chinese foreign aid to the region spiked, economic development accelerated throughout the African country. Capital and machinery became readily available for manufacturing firms, Chinese investment facilitated training and capacity building efforts, and technology and knowledge transfer programs improved the efficiency and productivity of industries. While the majority of Chinese aid and investment has gone towards expanding resource availability and accelerating the extraction of oil, it has also supported civil works projects and bureaucratic improvements. However, Chinese loans have also bloated both Sudan’s and South Sudan’s external debt obligations, hindering political flexibility for the recipient governments and ensuring dependence on China’s economic and diplomatic decision-making.

Moreover, the significant role of commercial entities in decision-making about Africa has hindered China’s own attempts to achieve other objectives. Relations with South Sudan, for example, were driven initially by the Chinese state-owned oil company, which prioritized its lucrative oil contracts with the developing country despite uncertainty regarding political stability. Sun emphasized that “Chinese oil company interests, [in order] to gain oil access in Sudan, have driven China’s foreign policy towards the country. Had they had the choice, the foreign ministry probably would not have proposed or promoted such a close engagement with the Sudanese government.”

The Challenges of Strategic Ambiguity and Rising Insecurity

None of this is to say that Africa’s role in China’s broader international strategy has grown murky. The Chinese foreign policy establishment maintains a clear division of nations into three strategic categories: the periphery (countries in China’s geographic backyard), great powers (international hegemons like the United States), and the foundation (developing nations with little international influence). African partners like South Sudan fall into the final category, and while the “foundation” remains collectively important, each nation individually has miniscule relevance to China’s economic objectives.

As a result of this relative insignificance, though, the highest level of the Chinese diplomatic machine remains largely uninvolved in Africa policy, complicating the hierarchy of decision-making. Historically, both the Ministry of Foreign Affairs (MFA) and the Ministry of Commerce (MOFCOM) have played important roles in defining Africa policy, but according to Sun, “Chinese commercial entities and Chinese political agencies operate China’s relationship with African countries on different tracks.” The growing logjam of domestic actors striving to direct China’s Africa policy without a clearly defined set of goals has led critics to question China’s ability to carry out its strategic objectives. In particular, the disparate directives of the MOFCOM and MFA often produce tension, as China’s emphasis on resource extraction and support for authoritarian leaders has deleterious effects on its international standing.

As partnerships with African countries have become commercially attractive, Chinese state-owned enterprises have served as a conduit for Chinese foreign policy makers. The prominent role of these SOEs in China’s own economy has spilled over to its relationship with the African continent, and large SOEs have developed close ties with important African political actors. Because SOEs retain political clout at home, the Chinese bureaucracy faces challenges monitoring the behavior of these enterprises internationally. Private businesses not associated with the Chinese government have also entered the African economy at growing rates, almost exclusively for the purpose of resource extraction. Their lack of supervision encourages commercial exploitation and risky practices, imposing costs on community stakeholders and increasing hazards for Chinese regional interests. These uncoordinated commercial activities further frustrate the formulation of a consistent grand strategy in Africa.

Making matters worse, growing insecurity in countries that house Chinese economic interests has forced the Chinese government to step up military involvement via arms sales and a reinvigorated naval presence. As a result, the Chinese military has also stepped up its involvement in the decision-making process, as security concerns have expanded domestic support for increased naval operations in the Greater Horn of Africa. In South Sudan’s internal struggle, for example, China has been forced to adopt the role of a mediator to protect its oil supply, a substantial shift from its otherwise hands-off approach to foreign policy. As a clear example of this sudden reversal, China initially blocked a UN resolution for intervention in the region but altered its stance in 2011, when it supported the introduction of peacekeepers in Sudan and South Sudan. As a result of international security involvement, South Sudan has been drawn into the growing rivalry between the United States and China, with both powers trying to facilitate diplomacy, to little avail.

As the case of South Sudan demonstrates, Chinese presence in Africa faces increasingly complex challenges amidst growing economic and political engagement. While the political, ideological, and economic foundations of China’s foreign policy establishment will shape and frame the future of Chinese engagement with Africa, a lack of strategic clarity in the continent continues to frustrate the accomplishment of Chinese objectives. The potential for mutual gains, especially in economic terms, is still immense and will likely drive closer ties, but without a coherent grand strategy and bureaucratic cohesion, the risks for China and its African partners remain substantial.

Image source: Wikimedia/John Hanson/VOA

http://harvardpolitics.com/world/shifting-tides-sino-african-relations-case-south-sudan/

Is China A Neocolonial Power In Africa? – Analysis

By Alvin Cheng-Hin Lim

China-bashing has predictably reemerged as a familiar theme in the current 2016 U.S. presidential campaign, with the frontrunners of both parties attacking China for having committed a myriad of alleged outrages against U.S. interests.1 Hillary Clinton, the Democratic frontrunner, is of special interest, as she had prominently accused China of engaging in neocolonialism in Africa during her 2011 visit to Zambia in her position at the time as U.S. Secretary of State.2 The Chinese have not forgotten this slight, and the state-owned Xinhua news agency recently published an opinion piece critiquing Clinton’s accusation of China’s alleged neocolonialism, concluding that:

“Accusing China of being a neo-colonialist in Africa puts the biased West in an absurd scenario where the robber acts like the cop.”3

As I recounted last year, China has indeed been very active with its various economic projects in Africa. To briefly recap: “Recent examples of such projects include China Railway Group’s Light Railway in Addis Ababa, Ethiopia, the first phase of which was recently completed; China Railway Construction Corporation’s Abuja-Kaduna railway in Nigeria, which was completed in December 2014, and which is the first phase of a larger railway modernization project connecting Lagos with Kano; and the Lobito-Luau railway in Angola, also built by China Railway Construction Corporation, which will eventually be connected to the Angola-Zambia and the Tanzania-Zambia railways. Likewise, Chinese engineering firms … are constructing airports across the continent, including airports in Angola, Comoros, Djibouti, Gabon, Kenya, Nigeria, Sudan, Tanzania, and Togo. Apart from the transportation sector, Chinese companies are also involved in Africa’s energy sector, including hydropower dams in Ethiopia and Uganda; biogas development in Guinea, Sudan and Tunisia; and solar and wind power plants in Ethiopia, Morocco, and South Africa. Other economic sectors Chinese companies are actively involved with in Africa include agriculture, construction, healthcare, mining, and industrial manufacturing. A recent count estimates over 2,000 Chinese companies are engaged across almost every country on the African continent.”4

Does this intense level of economic engagement count as neocolonialism? Gordon observes that the relationship of neocolonialism is one of “political-economic domination” such that “there is no viable cultural, economic, or military opposition to the hegemonic weight of the current ‘world order.’” The world order today is Euro-American, and its hegemony was won through not just the collapse of the Soviet Union and its socialist satellites at the end of the Cold War, but also the “years of successful political, economic, and military destabilization of Third World sites of resistance.”5 Such efforts at destabilization continue in our contemporary era, as can be seen in the 2011 Western intervention against Muammar Gaddafi’s regime in Libya, which in turn led to the strengthening of African jihadi groups such as Al-Qaeda in the Islamic Maghreb and Boko Haram, and which in turn has led the U.S. to establish a network of secret military bases across the African continent to fight its War on Terror.6

Mason reminds us of Hu Jintao’s 2006 pledge to double China’s development aid to Africa, and of the subsequent surge in Chinese investment in infrastructure construction on the continent. Indeed, Chinese aid is more attractive for African governments compared to that offered by the West as it famously comes without the preconditions for political or economic reforms usually imposed by Western donors.7 Memories of the painful experience during the 1980s across Africa of the International Monetary Fund’s (IMF) and the World Bank’s structural adjustment policies looms over the Nigerian government’s recent decision to seek infrastructure loans from the Chinese government rather than the IMF.8 Such memories echo Sartre’s warning that neocolonial efforts to emphasize the economic benefits accruing from colonial reforms are in fact intended to disguise the reality of political domination.9 Indeed, development aid from China has allowed developing countries such as Cambodia to avoid having to adjust their political and economic orders to satisfy the demands of Western donors.10

Mason suggests that the increased Chinese emigration to Africa that has accompanied the increase in Sino-African economic engagement mirrors the “white settlement and rule in Africa” that occurred during the colonial era, and focuses in particular on the economic impact of Chinese merchants in Africa, who “sell goods made in China,” as well as that of their African counterparts who travel to markets in Guangzhou and elsewhere in China to purchase goods for sale back in African markets.11 This influx of cheap goods from China has been known to “drive out traditional suppliers” and “undermine the local economy.”12 Dixon notes that the removal of trade barriers following Nigeria’s entry into the World Trade Organization in 1995 led to a flood of imported goods from China, and this in turn led to mass closures of local factories that were unable to compete with the cheaper Chinese products. The resulting deindustrialization of northern Nigeria laid the economic conditions for the rise of the Boko Haram insurgency which still afflicts the region today.13 However, this by no means represents the inevitable outcome of local industries in Africa confronting global competition. Brautigam cites examples of local African entrepreneurs in countries like Kenya, Lesotho, and Madagascar who were able to successfully compete against Chinese and other foreign imports, in some cases thanks to the human resource development and technology transfer provided by Chinese industrial investment in their countries.14

A related claim that is commonly presented in the media about China’s alleged neocolonial exploitation of Africa is that China and its firms have been engaged in a massive land grab on the continent. In Brautigam’s calculation, if all these media reports were accurate, Chinese companies would own 6 million hectares, or 1% of Africa’s total arable land. However, the actual figure is closer to just 240,000 hectares. As she explains: “Discouraged by poor infrastructure, political instability, and the sober realization that profits were likely to prove more elusive than hoped, Chinese firms came, explored, and then often went elsewhere—most often to countries in China’s border regions: Russia, Central Asia, and Southeast Asia.”15

The small actual size of Chinese-owned farmland in Africa also disconfirms related accusations of China’s alleged neocolonial plot to transform Africa into a farm to feed the hungry masses back home in China. Recent trade data shows that China is currently importing most of its food commodities like maize and soybeans from major non-African agricultural exporters like the U.S. and Brazil. Indeed, the development of Africa’s food producers into major global food exporters will require significant investment in agricultural modernization, which means the countries concerned will have to do more to attract much-needed investment from international agricultural firms like those of China.16

With regard to journalists and researchers repeating false claims about China’s agricultural activities in Africa, similar examples can be found in reports of Chinese loans to African states. A 2011 report from Fitch Ratings calculated that loans issued to Sub-Saharan African states between 2001-10 from the Export-Import Bank of China amounted to 67.2 billion USD, “overtaking World Bank lending of USD54.7bn to Africa for the same period.”17 This claim would subsequently be repeated elsewhere. Mason, for example, repeats the claim that Chinese aid to Africa exceeded that of the World Bank.18 The suggestion that China has been inundating Africa with cheap money has various implications, including the neocolonial image of China purchasing influence from impoverished African governments. However, the Fitch claim is wrong. A recent study of Chinese loans to Africa from Johns Hopkins University’s China Africa Research Initiative (CARI) shows that a more accurate estimate of Chinese loans to Africa during 2001-10 would be 30.5 billion USD, or less than half of Fitch’s estimate. Indeed, China’s growing pledges of development aid, including concessional loans, should be differentiated from the loans that are actually agreed upon and accepted, especially since a “growing number of countries … have suspended or canceled Chinese offers of credit lines.”19 As the authors of the CARI report recount of their analysis:

“Of the 1,223 reports of Chinese loan financing that we analyzed, only 56% actually materialized and are being used. The rest turned out to be mistakes, hopes, rumors, cancelled, or real loans—but not from China.”20

Looking beyond Africa, this trend of misreporting China’s global activities is most glaringly seen in alarmist reports of China’s alleged attempts to subvert the existing Euro-American world order by creating a parallel constellation of international institutions.21 In the case of the new international financial institutions (IFIs) set up by China, including the Asian Infrastructure Investment Bank (AIIB), and the New Development Bank (NDB) set up by China with its BRICS partners, China has always asserted that these are intended to supplement rather than replace the existing constellation of IFIs.22 Indeed, the modest nature of the first projects to be funded by the AIIB and the NDB confirms that this is the case.23 Beyond the shores of Africa, China is also not exhibiting the behavior of an aspirational neocolonial power.

References:

Aderinokun, Kunle, and Amanze-Nwachuku, Chika. “Adeosun: Nigeria Does Not Need IMF Loan.” ThisDay, April 17, 2016. Accessed April 24, 2016. http://www.thisdaylive.com/index.php/2016/04/17/adeosun-nigeria-does-not-need-imf-loan/.

Anderlini, Jamil. “Why Trump is the natural choice for China.” Financial Times, April 20, 2016. Accessed April 24, 2016. http://www.ft.com/cms/s/0/21a225ca-063b-11e6-9b51-0fb5e65703ce.html.

Brautigam, Deborah. The Dragon’s Gift: The Real Story of China in Africa. Oxford: Oxford University Press, 2009.

Brautigam, Deborah. Will Africa Feed China? Oxford: Oxford University Press, 2015.

“BRICS bank approves first loans, $811mn investment in renewable energy projects.” RT, April 16, 2016. Accessed April 24, 2016. https://www.rt.com/business/339797-ndb-first-project-loans/.

“Clinton slams China to win labour votes.” AFP, April 8, 2016. Accessed April 24, 2016. http://www.straitstimes.com/world/united-states/clinton-slams-china-to-win-labour-votes.

Dixon, Robyn. “In Nigeria, child beggars are easy recruits for Boko Haram extremists.” Los Angeles Times, August 17, 2014. Accessed April 24, 2016. http://www.latimes.com/world/africa/la-fg-nigeria-economy-boko-haram-20140817-story.html.

Fick, Maggie. “Nigeria agrees $6bn loan and currency swap deal with China.” Financial Times, April 13, 2016. Accessed April 24, 2016. http://www.ft.com/cms/s/0/6e994bb0-0190-11e6-99cb-83242733f755.html.

Fitch Ratings. Fitch: Africa’s Growing Trade and Financial Links with China, December 28, 2011. Accessed April 24, 2016. https://www.fitchratings.com/site/fitch-home/pressrelease?id=737895&cm_mmc=Eloqua-_-Email-_-LM_News%20EM%2FJHB%202012%2FJAN%2F10%20Sub%20saharan%20monthly%20-%20January%20edition-_-0000.

Gordon, Lewis. “Tragic Dimensions of our Neocolonial ‘Postcolonial’ World.” In Postcolonial African Philosophy: A Critical Reader, edited by Emmanuel Chukwudi Eze, 241- 251. Cambridge, MA: Blackwell, 1997.

Halper, Stefan. The Beijing Consensus: How China’s Authoritarian Model Will Dominate the Twenty-First Century. New York: Basic Books, 2010.

Heilmann, Sebastian, Rudolf, Moritz, Huotari, Mikko, and Buckow, Johannes. China’s Shadow Foreign Policy: Parallel Structures Challenge the Established International Order. China Monitor No. 18. Berlin: Mercator Institute for China Studies, 2014. Accessed April 24, 2016. http://www.merics.org/fileadmin/user_upload/downloads/China-Monitor/China_Monitor_No_18_en.pdf.

Hwang, Jyhjong, Brautigam, Deborah, and Eom, Janet. How Chinese Money is Transforming Africa: It’s Not What You Think. Policy Brief No. 11. Washington DC: China Africa Research Initiative, Johns Hopkins University School of Advanced International Studies, 2016. Accessed April 24, 2016. http://www.sais-cari.org/s/China-Africa-Loans-Briefing-Paper_SAIS-CARi.pdf.

Krause-Jackson, Flavia. “Clinton Chastises China on Internet, African ‘New Colonialism.’” Bloomberg, June 12, 2011. Accessed April 24, 2016. http://www.bloomberg.com/news/articles/2011-06-11/clinton-chastises-china-on-internet-african-new-colonialism-.

Kuperman, Alan J. “Obama’s Libya Debacle.” Foreign Affairs, March-April 2015. Accessed April 24, 2016. https://www.foreignaffairs.com/articles/libya/obamas-libya-debacle.

Lim, Alvin Cheng-Hin. “Africa and China’s 21st Century Maritime Silk Road.” The Asia-Pacific Journal 13 (2015). Accessed April 24, 2016. http://apjjf.org/2015/13/10/Alvin-Cheng-Hin-Lim/4296.html.

Lim, Alvin Cheng-Hin. Cambodia and the Politics of Aesthetics. New York: Routledge, 2013.

Lim, Alvin Cheng-Hin. “Hybrid Lives In Postnormal Times.” Eurasia Review, February 15, 2016. Accessed April 24, 2016. http://www.eurasiareview.com/15022016-hybrid-lives-in-postnormal-times-analysis/.

Lim, Alvin Cheng-Hin. “The Pedagogical Subject of Neoliberal Development.” East-West Affairs 2 (2014): 85-96.

Mason, Mike. Global Shift: Asia, Africa, and Latin America, 1945-2007. Montreal: McGill-Queen’s University Press, 2013.

Panda, Ankit. “Revealed: The Asian Infrastructure Investment Bank’s First Projects.” The Diplomat, April 20, 2016. Accessed April 24, 2016. http://thediplomat.com/2016/04/revealed-the-asian-infrastructure-investment-banks-first-projects/.

Sartre, Jean-Paul. Colonialism and Neocolonialism. Translated by Azzedine Haddour, Steve Brewer, and Terry McWilliams. New York: Routledge, 2001.

Talley, Ian. “U.S. Looks to Work With China-Led Infrastructure Fund.” Wall Street Journal, March 22, 2015. Accessed April 24, 2016. http://www.wsj.com/articles/u-s-to-seek-collaboration-with-china-led-asian-infrastructure-investment-bank-1427057486.

Turse, Nick. “America’s Empire of African Bases.” TomDispatch.com, November 17, 2015. Accessed April 24, 2016. http://www.tomdispatch.com/blog/176070/tomgram%3A_nick_turse%2C_america%27s_empire_of_african_bases.

“Who’s Africa’s neo-colonialist?” Xinhua, April 19, 2016. Accessed April 24, 2016. http://news.xinhuanet.com/english/2016-04/19/c_135292464.htm.

Notes:

1 Jamil Anderlini, “Why Trump is the natural choice for China,” Financial Times, April 20, 2016, accessed April 24, 2016, http://www.ft.com/cms/s/0/21a225ca-063b-11e6-9b51-0fb5e65703ce.html. “Clinton slams China to win labour votes,” AFP, April 8, 2016, accessed April 24, 2016, http://www.straitstimes.com/world/united-states/clinton-slams-china-to-win-labour-votes.

2 Flavia Krause-Jackson, “Clinton Chastises China on Internet, African ‘New Colonialism,’” Bloomberg, June 12, 2011, accessed April 24, 2016, http://www.bloomberg.com/news/articles/2011-06-11/clinton-chastises-china-on-internet-african-new-colonialism-.

3 “Who’s Africa’s neo-colonialist?” Xinhua, April 19, 2016, accessed April 24, 2016, http://news.xinhuanet.com/english/2016-04/19/c_135292464.htm.

4 Alvin Cheng-Hin Lim, “Africa and China’s 21st Century Maritime Silk Road,” The Asia-Pacific Journal 13 (2015), accessed April 24, 2016, http://apjjf.org/2015/13/10/Alvin-Cheng-Hin-Lim/4296.html.

5 Lewis Gordon, “Tragic Dimensions of our Neocolonial ‘Postcolonial’ World,” in Postcolonial African Philosophy: A Critical Reader, ed. Emmanuel Chukwudi Eze (Cambridge, MA: Blackwell, 1997), 242.

6 Alan J. Kuperman, “Obama’s Libya Debacle,” Foreign Affairs, March-April 2015, accessed April 24, 2016, https://www.foreignaffairs.com/articles/libya/obamas-libya-debacle. Alvin Cheng-Hin Lim, “Hybrid Lives In Postnormal Times,” Eurasia Review, February 15, 2016, accessed April 24, 2016, http://www.eurasiareview.com/15022016-hybrid-lives-in-postnormal-times-analysis/. Nick Turse, “America’s Empire of African Bases,” TomDispatch.com, November 17, 2015, accessed April 24, 2016, http://www.tomdispatch.com/blog/176070/tomgram%3A_nick_turse%2C_america%27s_empire_of_african_bases.

7 Mike Mason, Global Shift: Asia, Africa, and Latin America, 1945-2007 (Montreal: McGill-Queen’s University Press, 2013), 250.

8 Alvin Cheng-Hin Lim, “The Pedagogical Subject of Neoliberal Development,” East-West Affairs 2 (2014): 86-89. Kunle Aderinokun and Chika Amanze-Nwachuku, “Adeosun: Nigeria Does Not Need IMF Loan,” ThisDay, April 17, 2016, accessed April 24, 2016, http://www.thisdaylive.com/index.php/2016/04/17/adeosun-nigeria-does-not-need-imf-loan/. Maggie Fick, “Nigeria agrees $6bn loan and currency swap deal with China,” Financial Times, April 13, 2016, accessed April 24, 2016, http://www.ft.com/cms/s/0/6e994bb0-0190-11e6-99cb-83242733f755.html.

9 Jean-Paul Sartre, Colonialism and Neocolonialism, trans. Azzedine Haddour, Steve Brewer, and Terry McWilliams (New York: Routledge, 2001), 9.

10 Alvin Cheng-Hin Lim, Cambodia and the Politics of Aesthetics (New York: Routledge, 2013), 39.

11 Mason, Global Shift, 250.

12 Stefan Halper, The Beijing Consensus: How China’s Authoritarian Model Will Dominate the Twenty-First Century (New York: Basic Books, 2010), 98.

13 Robyn Dixon, “In Nigeria, child beggars are easy recruits for Boko Haram extremists,” Los Angeles Times, August 17, 2014, accessed April 24, 2016, http://www.latimes.com/world/africa/la-fg-nigeria-economy-boko-haram-20140817-story.html.

14 Deborah Brautigam, The Dragon’s Gift: The Real Story of China in Africa (Oxford: Oxford University Press, 2009), 219-223.

15 Deborah Brautigam, Will Africa Feed China? (Oxford: Oxford University Press, 2015), 153.

16 Brautigam, Will Africa Feed, 157.

17 Fitch Ratings, Fitch: Africa’s Growing Trade and Financial Links with China, December 28, 2011, accessed April 24, 2016, https://www.fitchratings.com/site/fitch-home/pressrelease?id=737895&cm_mmc=Eloqua-_-Email-_-LM_News%20EM%2FJHB%202012%2FJAN%2F10%20Sub%20saharan%20monthly%20-%20January%20edition-_-0000.

18 Mason, Global Shift, 250.

19 Jyhjong Hwang, Deborah Brautigam, and Janet Eom, How Chinese Money is Transforming Africa: It’s Not What You Think, Policy Brief No. 11 (Washington DC: China Africa Research Initiative, Johns Hopkins University School of Advanced International Studies, 2016), 3, accessed April 24, 2016, http://www.sais-cari.org/s/China-Africa-Loans-Briefing-Paper_SAIS-CARi.pdf.

20 Hwang, Brautigam and Eom, How Chinese Money, 1.

21 Sebastian Heilmann, Moritz Rudolf, Mikko Huotari and Johannes Buckow, China’s Shadow Foreign Policy: Parallel Structures Challenge the Established International Order, China Monitor No. 18 (Berlin: Mercator Institute for China Studies, 2014), accessed April 24, 2016, http://www.merics.org/fileadmin/user_upload/downloads/China-Monitor/China_Monitor_No_18_en.pdf.

22 Ian Talley, “U.S. Looks to Work With China-Led Infrastructure Fund,” Wall Street Journal, March 22, 2015, accessed April 24, 2016, http://www.wsj.com/articles/u-s-to-seek-collaboration-with-china-led-asian-infrastructure-investment-bank-1427057486.

23 Ankit Panda, “Revealed: The Asian Infrastructure Investment Bank’s First Projects,” The Diplomat, April 20, 2016, accessed April 24, 2016, http://thediplomat.com/2016/04/revealed-the-asian-infrastructure-investment-banks-first-projects/. “BRICS bank approves first loans, $811mn investment in renewable energy projects,” RT, April 16, 2016, accessed April 24, 2016, https://www.rt.com/business/339797-ndb-first-project-loans/.

Source: http://www.eurasiareview.com/26042016-is-china-a-neocolonial-power-in-africa-analysis/