The Dragon’s Gift” — China’s Growing Influence in Africa

As the world’s largest economy, China has been spreading its influence overseas through commerce, investment, and foreign aid. In December 2015, South Africa hosted the 6th Forum on China-Africa Cooperation (FOCAC), which set the strategic plans for China’s economic cooperation with Africa. Going above and beyond its record of doubling financing commitment to Africa at each FOCAC meeting, China tripled it this time to $60 billion. With an impact of this scale, it is important to understand China’s growing influence in Africa. What is China really doing in Africa? Is this strategic relationship beneficial to Africa? Is China a “rogue donor” as some Western media claimed? Will China’s activity in Africa undermine human rights and environmental sustainability of the continent?

The Dragon’s Gift — The Real Story of China in Africa”, by Deborah Brautigam, helps to demystify China’s involvement in Africa and dispel prejudices held by Western media.

Before delving into the author’s insights from several decades of field observations and research, I’d like to point out that China’s involvement in Africa has absolutely helped the continent. It lies in the fundamental capitalist principle — competition. Let’s admit it, no country’s involvement in Africa is purely out of altruistic and humanitarian concerns. Countries are seeking political leverages and economic gains. And when political/economic gains enter the equation, it is always good for African countries to shop around among bidders. China, in some way, drives other (Western) governments and agencies, like World Bank and USAID, to improve their investment, aid, and political interference approach. The book also sheds lights on several other impacts of China’s involvement, which will be addressed later. On the other hand, there are legitimate concerns as well, around whether China’s involvement has led to bad governance, loose environmental/labor security standards, and land grabbing, as well as whether exports of China’s labor and goods have threatened the growth of African countries’ domestic economy.

Understanding the historical context of China’s aid/investment approach helps understand the motives and guiding principles of China’s current involvement in Africa. Brautigam argues that China’s current role as a donor mirrors the pattern of the Japanese aid to China decades ago, when China was an aid recipient itself. Japan’s “investment for resource swaps” and “compensatory trade” deals with China in the 1970s shaped Chinses perceptions of how relations between two countries at different levels of development might be beneficial to both. As Deng Xiaoping opened China’s economy to the world, China used Japan’s interest in its natural resources to build transport and energy infrastructure, and import equipment and expertise. As an exchange, the loan packages by Japan were paid off by oil, coal, or other “in kind goods” produced by the plants/infrastructures built with the loans. This experience is instrumental in shaping China’s strategy of aid projects in resource-rich countries in Africa.

Another ideological inheritance that defines China’s aid/investment approach is China’s insistence on the policy of “non-interference in the internal affairs of other countries”, which was set in stone by Premier Zhou Enlai half a century ago (in 1954) and is still emphasized by Chinese leaders as the guiding principle of China’s foreign policy and aid strategy. Compared to the Western approach of policy conditionality on loans, African government and state-owned enterprises have more autonomy and are more encouraged to build self-reliance. On the other hand, there are less incentives for the government to reform its governance, for example China’s controversial collaboration with pariah regime of Sudan in 2005, arguably “enabled Sudan to get away with murder in Darfur”. Fortunately, under overwhelming international pressure and rising self-awareness of humanitarian concerns, China is changing. In 2007, then China’s President Hu Jintao held “frank” discussions with Sudan’s President Bashir, which helped UN’s effort to push Sudan to agree to send join UN-African Union peacekeepers to Darfur. Brautigam cited a scholar comment that China’s quiet “good cop” approach complemented the “bad cop” bluntness of the U.S.

What else has China brought to the table that other countries have not? First, recognizing that fundamentally providing foreign aid is a tool of foreign policy, it is not hard to see that China‘s motive of providing aid to Africa is driven by diplomatic benefits rather than economic gains. In fact, China gives aid to every single country in sub-Saharan Africa that follows the One-China Policy (i.e. Taiwan is a part of China). Giving aid can be out of a mix of political, economic, and moral reasons. To incentivize China’s “African brothers” to recognize the One-China Policy, China’s aid package is often more generous, economically speaking, than those from traditional donors. It is not rare to find China giving out multi-billion interest-free loans with zero conditionality to African countries even without abundant natural resource reserves.

Second, as much as international agencies and NGOs would like to emphasize the importance of investing in infrastructure, like transportation, telecommunications facilities, water sanitation plants, healthcare clinics, and education / training facilities, it is ironic to find that aid for manufacturing and infrastructure from Western donors has dropped to historic lows. As traditional donors have downplayed infrastructure spending, China steps in to fill the infrastructure gap. In fact, China is by far the largest investor in African infrastructure. And the $60 billion pledge made by China’s President Xi Jinping in 2015 is aimed specifically to enhance African infrastructure, increase industrialization and reduce Africa’s talent shortage over the next few years.

Another key distinguishing feature is China’s pure pragmatic approach, best summarized by Deng Xiaoping’s famous comment, “Who cares what color the cat is as long as the cat catches the mouse.” Free of ideological constraints, China seeks sustainable, profitable economic cooperation with African countries. China’s practical infrastructure investment model, coupled with its non-paternalistic approach, has no doubt helped many African countries build up self-reliance in industrial sectors. China’s typical turn-key approach is to: first import technology and skilled labor to kick off the project, then manage it for short-term to turn the project into a sustainably and profitable business, finally hand over the ownership to local governments. It is also important to realize that Chinese construction, industrial and telecoms giants, fueled by loans from government-controlled banks like China Eximbank and China Development Bank, are more risk-tolerant than Western rivals and therefore often surprise the world by the sheer scale of development project, its execution speed, and high risk. China’s bold investment paves the way for local and Western companies to seek economic opportunities. As Paul Collier argued in his book, “The Bottom Billion”,

“…In order to break into global markets for manufacturers it is necessary to get over a threshold of cost-competitiveness. If only a country can get over the threshold, it enjoys virtually infinite possibilities of expansion; if the first firm is profitable, so are its imitators.”

Indeed, through spearheading manufacturing and infrastructure investment, Chinese companies have brought the production costs down, thus attracting more investment and competition. This effect is dubbed as “Economies of agglomeration”.

Finally, it is interesting to note China was the first developing country to offer an aid program. And like many other African countries, China was colonized before. Having similar economic status and historic struggles, and maintaining respect through the non-interference principle, China has forged trust and empathy with many African countries. And China has credibility too, thanks to its ability to have decades of double digit growth, its ability to feed 1/5 world population on 1/20 arable land, and its track record of always delivering on aid promises, even during economic crises. For many Africans, China feels more like a brother fighting together against poverty than a big brother watching over and bossing around.

Of course there are legitimate concerns about China’s involvement in Africa; however, these concerns unfortunately are often exaggerated and twisted by the mainstream Western media, which would like to paint China as a “rogue donor” seeking to import labor and grab resources from Africa.

To begin with, Chinese aid is not all about oil/mineral/resources. As mentioned earlier, China’s aid policy is primarily a diplomacy tool to maintain the “One-China Policy”, and China gives aid to every single African country who stands on this side. In addition, China does not give more official development aid to countries with more resources. “Grants and zero-interest loans from the Ministry of Commerce are distributed fairly evenly across countries for the kind of project that won political kudos,” argued by Brautigam.

China, just like traditional donors, has built infrastructures that enables oil export/resource extraction, but it has also built school, hospitals, and thousands of miles of roads that do not lead to any resource reserves. And natural resources oftentimes serves as collaterals to back the loans. Anyone still believing in the land-grabbing theory seems to forget that China is one of the biggest exporters of manufacturing and telecoms technologies. It is in China’s best interest to build for Africa to import its manufacturing technology, rather than extracting the resources.

This land grabbing/colonization theory, to some extent, comes from the stereotype that all China’s investment in Africa are masterminded by big wigs in Beijing, which is totally wrong. Big players like Huawei and ZTE are profit-seeking enterprises. And numerous Chinese companies that build factories, establish farms, and conduct commercial trades in Africa are actually small businesses. With government incentives like subsidized loans, these Chinese entrepreneurs (or speculators) are seeking wealth and fame overseas. Africa is their Wild West.

With more Chinese faces in Africa, it’s tempting to believe in the wide-spread rumor that Chinese companies are exporting Chinese labor to Africa instead of hiring local labor. Again, critics totally ignore that Chinese companies in Africa are selling technological solutions and bidding for construction projects to make a profit. With rapidly increasing labor costs in China, it is in their best interest to train and hire local Africans. For example, Huawei established training centers across countries like Angola, South Africa, Nigeria, and Kenya to train Africans in skills needed to operate and maintain telecoms systems. Brautigam points out that Chinese labor is usually brought at the beginning of project to ensure quality, and is hired on permanent status. This is little reason to hire a Chinese labor, at a budget of hiring 5 to10 local labor, if the latter have comparable capability/productivity. As an anecdote, Brautigam gives an account of one African manager telling her that in his factory, an average Chinese woman can simultaneously operate 30 mills easily while a local woman who can only operate 8 machines would win a medal. Economic development agencies should focus on making African labor more skilled and productive, instead of criticizing foreign businesses for making entirely rational and cost-effective decisions.

Concerns over Chinese companies’ loose compliance with labor laws and environmental standards are very real. Increasing international pressures and local complaints are necessary to push Chinese companies to seek more transparent transactions, comply with labor safety laws and environmental protection laws, and take on more corporate responsibility to truly empower local communities. Worries about Chinese exports crushing African manufacturing are very legitimate too, but unless African governments / corporations and international development agencies continue to make sure electricity gest cheaper, infrastructure gets built, and workers get more educated, African goods will still be uncompetitive. After all, in an effort to transform and upgrade its economy, China wants to transfer its mature, resource-intensive, and labor intensive industries overseas (to Africa and South East Asia). Building better infrastructure and education programs to increase African industries’ cost-effectiveness and productivity, instead of establishing trade barriers, is the Holy Grail.

In many African countries, there is still a long way to go to achieve modernization and prosperity. But it is good to know that China, in an effort to improve its international image and creating good wills, is turning from its unsustainable ways and instead, pursuing a more humanitarian and environmentally sustainable way to invest and trade overseas. To achieve better governance, sustainability, and social responsibility, traditional donors and Western companies should lead the way, while in terms of investing in infrastructure, building self-reliance for local governments/businesses, and committing to aid/investment promises, China provides many valuable lessons that traditional players can learn from.

References:

Brautigam, Deborah. The dragon’s gift: the real story of China in Africa. OUP Oxford, 2009.

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