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China and Africa: A New Scramble?
Mauro De Lorenzo, The Jamestown Foundation, China Brief
5/7/2007

What distinguishes China’s involvement in Africa from that of other nations is that it is accompanied by a clear government policy in support of African commercial ventures, abundant financing and tax benefits for Chinese firms operating abroad and robust diplomacy toward the region [1]. State-owned Chinese companies can depend on the Ministry of Commerce, which manages most Chinese aid programs, to add sweeteners to bids for African government contracts or assets. A $5 billion oil-backed concessional loan was a prominent feature of the massive energy deals struck in Angola in 2005-2006, for example. With the announcement of a $5 billion investment fund for Africa at the Beijing Summit of the Forum on China-Africa Cooperation in November 2006, we can expect more deals that combine aid and investment.

Meanwhile, thanks to the pageantry associated with the Beijing Summit in November 2006 and the numerous extended visits paid to Africa by President Hu Jintao, Premier Wen Jiabao and Foreign Minister Li Zhaoxing, the high visibility of China’s new profile in Africa has served as a target for Western concerns about the consequences of China’s economic and military rise, and of its true intentions in regions where it previously had few interests and little influence. And while China proclaims benign intentions—“mutual benefit” and “win-win cooperation” are the catchphrases—it may not fully appreciate the possible consequences of its methods of delivering aid upon African politics.

Trade, Investment, and Aid

There are three main components to China’s economic engagement in Africa that are not always distinguished: trade, investment and aid. First, Chinese trade with Africa increased from $11 billion to $40 billion between 2000 and 2005, becoming Africa’s third largest trading partner [2]. Most of the increase comes from oil imports from Sudan, where China’s companies have been active since 1995, and Angola, where they made major energy investments in 2003-4. It is, however, important to consider these figures together with Africa’s increased trade with Europe and North America. It has also grown, though less slowly, and continues to constitute the destination for the majority of Africa’s exports. An important difference, however, is that the increase in Chinese trade with Africa is driven by “complementarities” between the two economies, whereas increased trade with North America and Europe has resulted from preferential trade arrangements, such as the African Growth and Opportunity Act (AGOA).

Second, Chinese investment in Africa is increasing, but still represents a small fraction of China’s total Foreign Direct Investment (FDI) stock. The stock of Chinese FDI in Africa in 2005 was $1.6 billion, which represented only 3 percent of China’s total FDI. Most Chinese investment was directed to Asia (53 percent) and Latin America (37 percent). The period 2003-2005 saw massive increases of Chinese FDI outflows to all parts of the world, not just to Africa [3].

Third, Chinese aid is now set to increase dramatically as well, and it is here that we can expect to see the most profound challenges to Africa’s relationships with the rest of the world. China has had aid programs in Africa since the 1960s, but with the exception of the rail line between Tanzania and Zambia and a number of stadiums around the continent, the impact left by Chinese aid was not great. World Bank chief Paul Wolfowitz has called China to account for lending to countries that have recently benefited from the Heavily Indebted Poor Countries (HIPC) loan forgiveness program. The value of Chinese aid in Africa is set to overtake World Bank assistance in 2007 with $8.1 billion on offer compared with only $2.3 billion from the Bank (Bloomberg.com, November 3, 2006).

The Chinese “aid” now on offer is intimately tied to its commercial expansion and often comes in the form of credits from the Chinese Export-Import Bank. The Beijing Summit also announced a token expansion of more purely humanitarian aid programs, such as the dispatching of 300 “young volunteers” to Africa and the pledge of establishing 100 rural schools in the continent before 2009. Beijing sees aid-giving as a way of generating positive sentiment toward China, and seems unaware of the consequences it can have on governance and economic performance, particularly when channeled through weak and undemocratic national governments. To the extent that Western donors have begun to learn some of the lessons from the poor performance of their previous aid programs, increased Chinese aid-giving could be a setback for sound economic policy-making and democratic accountability in Africa.

A View from the Great Lakes of Africa

With no energy resources, Rwanda and Burundi are not high priorities for China, but they are strategically situated next to the resource-rich Democratic Republic of Congo, where China has growing interests. Discussions are underway to start a Confucius Institute at the Kigali Institute of Science and Technology in 2007, and Rwanda would like to entice Chinese companies doing business in the sub-region to locate their headquarters in Kigali [4]. However, though China’s engagement in both countries is on the increase, it has hardly reached the tsunami-like proportions that breathless media reports about China re-colonizing Africa would suggest.

In Rwanda, there has actually been little new Chinese investment since 2004. The Rwanda Investment and Export Promotion Agency (RIEPA) has issued no incentive-qualification certificates to Chinese companies over the past year. Most of the Chinese companies active in Rwanda are in the construction sector and have been working there since the 1970s or 1980s, such as the China National Road and Bridge Company, which has won significant contracts from the Rwandan government. New entrants include telecommunications companies Zhongxing and Huawei, with which the U.S.-Rwandan telephone company, Terracom, recently signed a deal to upgrade its network technology. The number of Chinese restaurants has expanded by 50 percent, from two to three.

Many of the Chinese actors on the ground are small-scale, private entrepreneurs or traders [5]. The owner of the new Chinese restaurant in Kigali first came to the country in 1996—to open a medical clinic; Chinese medicine has been extremely popular in East Africa since at least the 1980s. This tallies with UNCTAD’s finding that most Chinese investments in Africa are small and medium-sized enterprises (SMEs)—and thus only indirectly motivated by the high-level Chinese “go abroad” policy and its attendant incentives. Chinese firms are present in the Rwandan market, but they are not particularly central and hardly dominant. There are also none of the complaints about Chinese traders that are commonly heard in Zambia or South Africa. Chinese diplomats lament how “conservative” and “short-sighted” their compatriots are: very few end up investing despite promises of embassy support in bidding for contracts.

Rwanda was the first African country to open a permanent trade office in China. It is based in Shenzhen, and staffed by two Rwandans, one of whom has lived in China for 12 years and speaks Mandarin fluently. It assists Rwandan importers who visit Hong Kong and the factories of Guangdong in search of electronics and textiles that sell well in Rwanda and the sub-region. The office has had less success in enticing Chinese entrepreneurs to invest in Rwanda, though a mobile-phone assembly facility for the local market is being planned in Rwanda by a Chinese-Rwandan joint venture. The office found that its most urgent task in China was much more basic: reassuring Chinese businesspeople that Rwandans did not live in trees, that Chinese visitors would not be hacked to death in a flare-up of the genocide, and that there is food to eat. A poster showing a bare-chested Rwandan traditional dancer was removed from the office because it was giving visitors the wrong impression about how most Rwandans dress.

The views of senior Rwandan officials toward China are positive and welcoming, but do not rise to adulation. They had a good experience at the Beijing Summit, but are waiting to see how China’s promises of increased cooperation will be translated into action. While they are concerned that Rwandans might be taken advantage of by Chinese firms and prefer Chinese investment over aid, Rwanda is allowing China to build the new headquarters for its foreign ministry. The rest of China’s aid program in Rwanda—some small health and agriculture programs and the management of a government-owned cement plant—is not significant enough that it would give the government significant “leverage” with the World Bank or bilateral donors. Even with the increased commitments announced in Beijing, there is little chance that China will soon rival the hundreds of millions of dollars a year that Rwanda receives from U.S. and European sources. A Chinese diplomat stated privately that there were no plans to respond to one of the Rwandan government’s top infrastructure priorities—a railway to Tanzania and the coast—because it would be “uneconomical.” China is financing the equally uneconomical Benguela railway rehabilitation in Angola, a major oil supplier.

In neighboring Burundi, where a gleaming new Chinese embassy was recently completed by a company brought in from China, an embassy official expressed his disappointment that the company had decided to return to China rather than establish a permanent presence in the region; the company saw high risks and few returns. Tianshi Health Products, however, proudly flies the Chinese flag over their new office in Bujumbura. In line with paragraph 4.4 of China’s January 2006 Africa Policy which declared that “it is necessary to increase intelligence exchange,” some members of the Burundian intelligence service have undergone training in China, according to a foreign human rights researcher who saw photographs of the training in the offices of the Burundian security service. At the official opening of parliament in February 2007, Burundi’s only admiral proudly wore a pin he had received during an exchange visit to China. Whether such military and intelligence cooperation is as practical as it is ceremonial is difficult to ascertain.

Though not representative of the continent as a whole, China’s engagement in Rwanda and Burundi has not dramatically increased over the past three years. Yet, neither is the engagement of China in oil-producing states like Angola and Sudan representative of the rest of the continent. The China-Africa question is not spontaneously discussed, and is not often in the media. With the exception of some importers, the countries’ political and economic elites continue to be oriented primarily to the United States, Europe and South Africa [6]

A View from Beijing

Foreign delegations visiting Beijing to discuss China-Africa relations tend to interact primarily with a community of Africanists and aid specialists based at the Chinese Academy of Social Sciences, the China Institutes of Contemporary International Relations and other government-affiliated think tanks [6]. They tend to portray China as a selfless friend of African countries and make frequent reference to China’s Cold War aid programs and support for African liberation movements. These scholars tend to believe that aid really can buy friendship and goodwill abroad, and also that China needs to systematize its aid apparatus if it is to be able to deliver upon the large commitments made at the Beijing Summit. There is little awareness that aid can have negative economic and political effects in the countries that receive it. There do not seem to be any mechanisms in place to monitor the effectiveness of Chinese aid, even at the most basic level of ensuring that the money is not stolen.

In discussions with U.S. delegations, the focus is often a competition to show which side is more genuinely concerned with Africa’s well-being. To the frustration of African interlocutors, the discussion is rarely focused on what Africa should do to take advantage of the new opportunities that China’s expanded commitment to Africa offers. To China’s experts, criticism of the country’s intentions and investments in Africa seems like part of a strategy by Western countries to “thwart China’s development,” as one scholar put it. One rumor in circulation in PLA circles suggests that U.S. intelligence agencies are planning to foment local unrest toward Chinese ventures in Africa and elsewhere in the developing world.

In off-the-record discussions, two senior Chinese scholars conceded that China should indeed “do something” when faced with genocide in Africa—though they seemed to be referring to private exchanges with African leaders rather than public denunciation or military action. China’s intransigent position on Sudan seems to derive not only from China’s traditional adherence to a doctrine of “non-interference in internal affairs of sovereign states,” but also from a desire to thwart U.S. foreign policy, and less from any specific concern about the security of Chinese energy investments in Sudan: Sudan needs China more than China needs it. One of China’s undisclosed requirements for agreeing to pressure the Sudanese government to accept the deployment of a robust UN peacekeeping force may be that Hu Jintao, rather than George W. Bush, takes the credit. As one Chinese blogger exulted during President Hu’s trip to Africa in February 2007: “Our brother Hu thawed the Darfur crisis with his cordial smile! The United Nations peacekeeping force is going to station in Darfur with his cordial smile! Bush failed, brother Hu succeeded with a smile! Sino-Africa friendship is true friendship!”[7].

Notes

1. See the “Forum on China-Africa Cooperation Beijing Action Plan (2007-2009)”, the key document emanating from the Beijing Summit in November 2006. It recapitulates and expands the Chinese government white paper on policy towards Africa issued in January 2006.
2. UNCTAD/UNDP, Asian Foreign Direct Investment in Africa: Towards a New Era of Cooperation among Developing Nations, New York, March 2007, p. 56.
3.UNCTAD/UNDP, Asian Foreign Direct Investment in Africa: Towards a New Era of Cooperation among Developing Countries, New York, March 2007.
4. See http://www.hanban.edu.cn/en_hanban/content.php?id=2439.
5. Based upon this author’s observations during his several visits to the Great Lakes region.
6. For a good indication of Rwanda’s priorities, see this article about President Kagame’s address to the Starbucks board of directors in March 2007 and his expanding relations with American CEOs: http://money.cnn.com/2007/03/28/news/companies/pluggedin_Gunther_Rwanda.fortune/?postversion=2007032910.
7. Referenced at the blog of China-Africa watcher Jennifer Brea: http://jenbrea.typepad.com/africabeat/2007/02/who_is_visiting.html

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