The Roles of Aid in Politics Putting China in Perspective

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partners in the medium term and will retain a key position as foreign investors, China is gaining ground quickly and is thus increasing the intensity of global competition, including in Africa. Since 1998 foreign trade between the African countries and China has grown tenfold, reaching an all-time high of $55 billion in 2006. Realistic forecasts assume that foreign trade will continue to grow, to about $100 billion by 2010.

Almost three-quarters of all of China’s imports from the region are accounted for by crude oil. In mid-2006, China obtained one third of its oil imports from Africa. China has built very close economic ties with virtually all significant oil-producing countries in Africa. A number of them still have large untapped reserves, even though Chinese companies are rarely granted access to the best oil fields. China’s oil diplomacy has been highly successful in terms of diversifying its supplier countries, but its tolerance of human rights violations and poor governance in these countries has increasingly attracted criticism from Western industrialised countries.

Direct investment by Chinese state-owned energy and commodity corporations as well as private enterprises in the manufacturing industry, the construction sector and the services sector has risen rapidly over recent years. Government support programmes with low-cost loans reduce market development costs for Chinese companies, thus distorting the market. State banks, currently the Export-Import Bank of China (EXIM) but in future also the China Development Bank (CDB), play a key role in the expansion of enterprises and financing development cooperation. There are fears that project financing by Western development banks and private commercial banks could be crowded out.

Chinese development cooperation has increased markedly in terms of both volume and the number of countries supported since the Tiananmen incident. The Chinese state-owned EXIM Bank in particular offers interesting alternatives to International Financial Institutions (IFI) and bilateral Western loans. Because of limited transparency, however, the quantity and quality of cooperation cannot be compared on an international basis and are difficult to determine conclusively. In 2006, the Chinese government announced ambitious targets for expanding DC with a doubling of financial inputs and an increase in low-interest loans through the banks. The priority areas for DC are infrastructure, health care, agriculture and the education sector. China’s advance in Africa follows a characteristic basic pattern (see box).

Four pillars – four characteristics

The four pillars on which the upsurge in Chinese-African relations rests are the intensification of a) trade, b) investment, c) development cooperation, and d) immigration. In combination, these exhibit the following four characteristics:

1. A distinct underlying sectoral pattern with (a) the focus on securing resources (oil, mining, timber, agricultural commodities) plus (b) a large variety of economic interests in almost all African industries and countries.

2. Seamless complementarity of trade, direct investment, DC tied to supplies from China, and immigration or the deployment of migrant workers.

3. Coordinated effort by Chinese state-owned corporations as trailblazers for private enterprises.

4. Huge deployment of state financial promotion instruments with fluid boundaries between preferential and commercial loans.

It is this broad sectoral approach and the systematic economic linkages that give the Chinese economic offensive its strength. The impact on growth and poverty of the various factors of the China boom is ambiguous and difficult to analyse; on the whole it is presumably positive for Africa, but there are major regional and sectoral differences.

Chinese engagement in Africa’s textile and clothing sector has a double-edged effect. Whereas Chinese exports to African countries have greatly increased, despite the dismantling of trade barriers these countries have not been able to consolidate their position in global value creation in this sector on a sustainable footing. The textile sector, leather goods and footwear manufacture and other consumer goods industries in Africa are acutely threatened by both preference erosion in the EU/USA and Chinese imports to Africa. Even Chinese companies in Africa are suffering economically. This presents challenges for the trade and structural policies of African governments and their partners in industrialised countries.

Negative impacts of the Chinese presence are also discernible in the construction sector. Admittedly, Chinese enterprises have contributed to swift improvements in infrastructure and hence to economic growth in Africa, generally acting in the context of projects negotiated at an intergovernmental level. There is a risk, however, of domestic construction companies being crowded out, and there are sizable shortfalls in the transfer of know-how and employment of local workers.

China is criticised internationally for wide-ranging violations of anti-corruption, environmental, labour and social standards in Africa. In particular well-documented illegal logging by Chinese companies in various countries has predictably critical implications for tropical forests in Africa and hence also for global climate change. This overexploitation of African forests is probably by far the most serious harmful effect on the environment arising from the involvement of Chinese companies in Africa. In general, however, Chinese violations of Corporate Social Responsibility (CSR) standards are not comprehensively documented. This makes the promotion of transparency in oil and mining revenues, particularly in the context of the Extractive Industries Transparency Initiative (EITI), all the more significant; China’s limited willingness to enter into cooperation within the framework of the EITI must be utilised. Supporting African governments in their management of the effects of Dutch Disease is equally important.

China is willing to become more closely integrated into the NEPAD process. If this is successful, however, it is hardly likely to occur without a shift of emphasis in the NEPAD agenda – upgrading infrastructure problems and downgrading governance issues. China is criticised for undermining improvements of governance through its involvement in Angola, Sudan and Zimbabwe. The criticism is basically justified, but it must not be used to conceal crucial weaknesses in Western policy vis-à-vis Angola, Zimbabwe and other African countries.

China’s unconditional loans and development assistance are mostly welcomed in Africa as they are often regarded as a “second liberation” from Western dictates. The Organisation for Economic Cooperation and Development (OECD) member countries are thus faced with the challenge of both improving the presentation of their Africa policy and further enhancing its content and forms. Growing contradictions in the public perception of China in Africa offer an opportunity for rational, unprejudiced dialogue.

Faced with the choice between a confrontational strategy and a more dialogue-oriented approach, the study argues clearly in favour of a critical, yet constructive integration of China into various processes and structures of a common Africa policy. Among the potential platforms for constructive exchange, possible forums within the trilateral EU-China-Africa dialogue are ranked particularly high. The Federal Republic of Germany can be assigned the role of intermediary in key areas on account of its relative lack of political and economic self-interest in Africa.

Recommendations for Action

In bilateral and multilateral cooperation with China, interfaces emerge in relation to China’s Africa policy, for which a series of recommendations for action are presented at general, multilateral and bilateral levels (see Section 4). The main areas of focus are directed at the fields of trade policy, industrial policy and development cooperation. Their common denominator is:

1. Greater efforts to build the capacities of African partners to master the “Chinese challenge”.

2. Patient endeavours to integrate the Chinese partners into joint coordination and consultation processes.

3. Systematic elimination of political shortcomings that place the West in a difficult position in the trilateral debate with China and Africa, above all in the field of trade and agricultural policy and in dealing with regimes in Africa suffering from poor governance.

4. Improvement of basic information sources.

Asche, Helmut (2008), “Contours of China’s “Africa Mode” and Who May Benefit,” in China Aktuell, Vol. 3, pp. 165-180.

Western/European policy learning with regard to the multipolar challenge posed by China in Africa is, on average, painfully slow. As a rule of thumb, Western attempts to integrate China into pre-established schemes and fora such as OECDDAC, DSF, Joint Country Assistance Strategies etc. will hardly be successful in the foreseeable future. At lower levels, many recent studies contain proposals on triangular modes of cooperation, and some of them are actually gaining ground in technical cooperation projects – not the least by a flexibility of Chinese authorities that caught some by surprise. This is the good news, in a longer story where it is not yet altogether clear if it brings good news.

What else can be said of Chinese development aid in Africa? On average, China’s aid is quick, inexpensive, and highly visible – three attributes not normally associated with established Western development co-operation. However, speed, low price and visibility may come at the expense of other criteria: quality, participation, sustainability, and lasting poverty reduction. In this sense, comprehensive evaluations of the effectiveness of China’s aid to Africa are rare and do not comprise this decade’s events. Therefore, for both reasons – structure and effect – it once again remains unclear “who benefits” in aggregate terms and how much Western donors have to re-adapt their recently built “new aid architecture”, which turned out to be a complex edifice with cumbersome procedures. Also, in terms of tying aid to Chinese deliveries and execution by own contract labourers, China’s aid is rather below OECD standards, and Western co-operation has little to learn from this.

Altogether, a considerable amount of further research is needed to establish more firmly what increased Chinese aid, trade, investment, and migration achieved in Africa, while the overall positive China effect on GDP growth is beyond doubt. Likewise, what is execution of a strategic design and what is left to market forces in China’s “Africa mode”, remains to be investigated further. Our conclusion is therefore a word of caution to Western politicians and some academic critics: As long as the total socio-economic effect of China in African countries is unknown, and the exact degree of control Chinese authorities exert over operations in Africa is not known either, observers and politicians should be warned against coming up with short-sighted accusations of the damage China allegedly does to African economies and should rather explore all avenues of effective triangular cooperation on the ground.

Bräutigam, Deborah A. and Tang, Xiaoyang (2009), “China’s Engagement in African Agriculture: “Down to the Countryside”,” in The China Quarterly, Vol. 199, pp. 686-706.

Chinese images of their involvement in rural Africa contrast sharply with images increasingly prevalent in the media outside China, both in Africa and around the world. On the Chinese side, engagement in rural Africa has been presented primarily as the acts of a socialist brother or a capitalist friend (depending on the era). The outside world sees much more threat, as symbolized by a growing number of news articles and blogs focused on the “land grab” theme. At the same time, very little research has been done on this issue, and there are as many myths as realities in stories about China’s current engagement in rural Africa. As with oil, Chinese interest in African land “pushes buttons” for many people, particularly in a region where the alienation of land to outsiders has long been controversial. The Chinese government’s efforts to make diplomacy-based aid more sustainable by incorporating incentives for Chinese businesses may have political ramifications, as some Chinese analysts have already warned.

The differences between rural China and rural Africa are vast, and this creates areas for misunderstanding. Used to intensive agriculture, some Chinese misinterpret the situation in rural areas of some African countries, where shifting cultivation depends on fallow systems that make it appear as though vast expanses of land are empty and available. “Land is plenty in this country,” a Chinese technician in Sierra Leone told one of the authors: “No one uses it!” In reality, land scarcities were already putting pressure on local fallow systems in Sierra Leone long before the civil war. As the Magbass experience shows, land has many kinds of use and ownership claims, and a straight purchase or lease under a formal legal system is liable to violate many other traditional uses for the land, and traditional rights. Governments may assure Chinese investors that they can allocate land to them freely, but experience shows that without proper safeguards, this kind of eminent domain land takeover is risky for local people, who may easily be left worse off.

There are three other areas of sensitivity: competition between Chinese and African growers in African markets, cash crops as competition with subsistence crops, and the likelihood that large-scale production could push people off their own land, using them as seasonal workers. Competition is already a feature of local African markets. The growing presence of Chinese investors with imported skills and technology should yield the benefits of competition: an expansion of local supplies while providing examples of imported skills and cheaper technologies that can be copied by profit-oriented African farmers. An expansion of cash crops can increase the risks of disruption in the traditional gender division of labour where, in many areas, women are responsible for food while men grow crops for the market. While these disturbances may be part of the evolution of farming systems in Africa from subsistence to market-orientation, there is little evidence that Chinese experts are even aware of these cultural production issues, or that they take any steps to ameliorate their impact.68

The time is not far off when China will run out of farmland to maintain a 95 per cent self-sufficiency in food supply. As Japan, Korea and other land-scarce Asian countries are already doing, the Chinese will produce greater quantities of food abroad. The unhappy experience with land alienation in much of Africa (and Asia and Latin America can be added to this) suggests that any efforts by foreigners, including the Chinese, to produce on a large scale are likely to continue to be controversial. Systems of outgrowing, where farmers maintain control over their own land but have incentives to produce under contract to a central company, could be a middle ground. A Chinese company with an unhappy experience trying to produce on a large scale in Laos has planned to introduce hybrid rice into Tanzania using just such a system of outgrowers.69 China’s Tianze tobacco company, a subsidiary of state-owned China National Tobacco Import and Export Group, uses 150 Zimbabwean farmers to produce tobacco for shipment to China. Tianze provides tractors, fertilizer, agro-chemicals and generators to the farmers, and guarantees purchase of their crop.70 Outgrowers bear more risk than farm labourers, but also have the potential for more reward.

Today the Chinese government uses training opportunities in China to promote understanding of China’s model. In agriculture, there is a vast gulf between Chinese and African systems. These one-way trainings will do little to close that gulf for Chinese experts or investors. Ultimately, the Chinese government could do more to help its companies and individual investors move up the learning curve by sponsoring deeper understanding of Africa’s challenging rural realities – culture, society and history – and not simply extolling its potential for profit.

Bräutigam, D. (2009), The Dragon’s Gift: The Real Story of China in Africa, Oxford: Oxford University Press.

Conclusion: Engaging China (pp. 307-312)

Is China a “rogue donor,” as pundit Moisés Naím argued in the pages of the New York Times? I do not believe so. China’s rise in Africa is a cause for some concern, but it need not evoke the level of fear and alarm raised by some who have condemned China’s aid and engagement as destabilizing, bad for governance, and unlikely to help Africa to end poverty. Many of the fears about Chinese aid and engagement are misinformed, the alarm out of proportion. First of all, China’s aid is not huge; the traditional donors give far more aid to Africa. China’s export credits are much larger than its aid, but not as large as commonly believed. Their novel approach in Angola, the Congo, and elsewhere applies the system China learned from Japan: using very large credits, at competitive market rates, tied to Chinese machinery, equipment, and construction services, with repayment in oil or other resources. This is the essence of the “win-win” approach.

These credits are by no means risk-free. Debt sustainability is an issue, a concern that deepened as the global financial crisis washed over Africa. The credits are tied to Chinese goods and services, reducing choice. Although in Angola at least three Chinese firms bid on each project, it is not clear how transparent bidding will be elsewhere. Still, this approach provides a new opening for the construction of badly needed infrastructure. Chinese banks can act as “agencies of restraint” for African leaders beset by patronage demands. This is a practical way to address the “natural resource curse” that plagues so many African countries.

The Chinese say: “to end poverty, build a road.” The “Four Modernizations” China launched in the 1970s emphasized infrastructure. They built roads, ports, and rural power plants, modernized agriculture, invited in factories. They experimented with different approaches: special economic zones, for example. China’s “Beijing Consensus” may simply be about embracing experimentation (what works?) and avoiding easy certainties. The deals they offer Africa are based on similar deals Japan and the West offered China decades ago, and which the post-Mao Chinese accepted in the belief that they could also win from an approach that was not about aid, but business. Where the West regularly changes its development advice, programs, and approach in Africa (integrated rural development in the 1970s, policy reform in the 1980s, governance in the 1990s, and so on) China does not claim to know what Africa must do to develop. China has argued that it was wrong to impose political and economic conditionality in exchange for aid, and that countries should be free to find their own pathway out of poverty. Mainstream economists in the West today are also questioning the value of many of the conditions imposed on aid over the past few decades. Exchanging view, rather than lecture, on lessons learned and approaches to aid and cooperation could lead to more useful engagement between China and the West.

Concerns about Chinese exports crushing African manufacturing are very real. Although Africa still represents only 4 percent of China’s overall trade, this is 4 percent of an economic juggernaut. African wax print fabric industries in Nigeria, many based on an import substitution model with outmoded equipment and hampered by poor roads and “epileptic” electricity supplies, are rapidly going out of business. Yet some industries in some countries – leather, shoes and plastics, consumer appliances, for example – seem to be competing with Chinese imports. Indeed, these are the industries now attracting investment from China, even in Nigeria. The overseas economic zones Chinese firms are building in Nigeria and elsewhere in Africa are intended to foster Chinese investment in African manufacturing, enabling China’s mature industries to move offshore in groups. Contrary to popular belief, they are creating employment for Africans. There has been almost no attention in the West to the role African countries might play in attracting investment from these Chinese firms.

China’s early aid to African industry and agriculture was not sustainable. Getting Chinese companies involved to consolidate the projects helped sustain the benefits in some instances, but not in others. The new “win-win” initiatives are only just starting, but we can see that Chinese companies have already served as industrial catalysts for some African firms, just as Japanese and Korean firms have done so for decades in South and Southeast Asia. The flying geese model has a long way to go, but it has proven its potential, in the “miracle” environment of Mauritius, and even in the tough conditions of Nigeria.

On agriculture, I am less sanguine. African lands may seem empty, but signing over large tracts of land to foreign concessionaries without the informed consent of local communities is a strategy unlikely to end poverty in Africa, even if it does boost domestic food production. Patented hybrid seeds as the entry point for Chinese seed companies may help more modern farmers, but present risks to the subsistence farmers eking out a precarious existence in rural Africa. Using smallholders as voluntary outgrowers, as Chongqing Seed Company is doing in Tanzania, may be a socially and economically sustainable compromise. At the same time, however, outgrower systems shift many of the risks of farming directly onto the contract farmers. China’s own rural development strategy focused first on land reform, then incomes for rural farmers, only much, much later opening up to foreign investment in agribusiness. Were more African countries to shift toward the land inequalities of South Africa, Zimbabwe, or even Brazil, it would be a tragedy.

As I was researching and writing this book, China was already changing rapidly, with Chinese leaders moving from old alliances (Mugabe in Zimbabwe) and stepping into an unaccustomed new role as a mediator in Sudan. Chinese naval patrols were rescuing European ships in the pirate-infested waters of the coast of Somalia. New domestic pressures for corporate social responsibility and environmental and social protections were growing inside China. New laws were put in place for labor rights in China, new guidelines published outlining the environmental and social responsibilities of banks and forestry companies overseas. This is a practical move, even if these norms are not yet taken to heart. As China’s state-owned companies move to develop global reputations, they are learning that corporate social responsibility will help them avoid expensive reputational risks.

The Chinese are many things in Africa: touring presidents delivering grand promises for partnerships, provincial companies with very long names, huge global corporations, resource-hungry and profit-motivated. They are factory managers demanding long hours of work, tough businesswomen, scrap metal buyers, traders. They offer frank deals that they expect to work well for China, but also for Africa: roads, broadband, land lines, high-tech seeds. They bring aid workers: vocational teachers, agricultural specialists, water engineers, youth volunteers, and others who have come, as so many from the West have done, out of curiosity, a sense of adventure, or a desire to help the por. And they have not just arrived on the scene. Some Chinese families came to Africa in the 1820. Sino-Africans – Eugenia Chang, Jean Ping, Jean Ah-Chuen, Manual Chang, Fay King Chung, and others – have served African governments as parliamentarians, finance ministers, and ministers of foreign affairs.

Their long history in post-independence Africa gives China legitimacy and credibility among many Africans. Arriving after independence, they never really left. The West simply did not notice the Chinese teams laboring upcountry building small hydropower stations and bridges, repairing irrigation systems, managing state-owned factories, all usually without the kind of billboards other donors favored to advertise their presence. Today, Africa fits into the strategy of “going global,” not simply for its natural resources, but for opportunities in trade, construction, industry: business. The Chinese are linking business and aid in innovative ways. Aid subsidizes Chinese companies to set up agro-technical demonstration stations, or economic cooperation and development centers. The Chinese are experimenting, hoping that the profit motive will make these efforts sustainable, releasing the Chinese government from having to return again and again to resuscitate its aid projects. They will continue to change, and grow, and learn from these experiments, and we would do well to follow this progress and learn from it too.

By Western standards, China is secretive about its aid and export credits. This lack of transparency understandably raises suspicion and concern. Beijing could easily address this by using reporting standards adopted long ago by the OECD. But, on the other hand, private banks and corporations in the West have long maintained secrecy about their deals with African leaders. Transparency is good, by the West should lead the way. It would be unrealistic to expect Chinese corporations to be the first to publish their own business contracts.

The United States, Europe and Japan should continue to engage China as a “responsible stakeholder” in Africa, while recognizing that the traditional donor countries have their own credibility gaps as development partners. Aid pledges made by Western leaders go unfunded by Western parliaments. Promises to untie aid are hedged by simply not counting some areas – technical assistance, for example. As the Center for Global Development points out in its annual Commitment to Development index, several OECD countries (France, the UK, the US, Belgium) continue to profit from arms sales to undemocratic, militaristic governments. A shared commitment to improve in all these areas would do much to make similar demands of China more credible.

China is now a powerful force in Africa, and the Chinese are not going away. Their embrace of the continent is strategic, planned, long-term, and still unfolding. The global economic recession created a pause in this engagement, but the Chinese government still lived up to the pledges they made in Beijing in November 2006: to double aid, to set up agro-technical stations and special economic zones. Ambitious Chinese companies used that pause to buy assets at bargain prices, as they first began to do in the 1990s.

Ultimately, it is up to African governments to shape this encounter in ways that will benefit their people. Many will not grasp this opportunity, but some will. The West can help by gaining a more realistic picture of China’s engagement, avoiding sensationalism and paranoia, admitting our own shortcomings, and perhaps exploring the notion that China’s model of consistent non-intervention may be preferable to a China that regularly intervenes in other countries’ domestic affairs, or uses military force to foster political change.

At the end of the day, we should remember this: China’s own experiments have raised hundreds of millions of Chinese out of poverty, largely without foreign aid. They believe in investment, trade, and technology as levers for development, and they are applying these same tools in their African engagement, not out of altruism but because of what they learned at home. They learned that their own natural resources could be assets for modernization and prosperity. They learned that a central government commitment to capitalist business development could rapidly reduce poverty. They learned that special zones could attract clusters of mature industries from the West and Japan, providing jobs and technologies. These lessons emphasize not aid, but experiments; not paternalism, but the “creative destruction” of competition and the green shoots of new opportunities. This may be the dragon’s ultimate, ambiguous gift.

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