FROM giant state corporations to a host of small businesses, Chinese companies have opened up a new frontier in Africa that is expanding so fast it is already altering commodity markets and manufacturing from Cairo to Cape Town.
Last week, China released figures showing that its trade with Africa is growing by more than 20% a year. Western companies face fierce competition from Chinese firms to buy Africa’s natural resources and sell goods and services back to the continent.
China’s drive into Africa marks a historic shift from its traditional role as a politically motivated aid donor to a hardheaded commercial partner.
This was underlined last February when eight African nations rolled out red carpets for President Hu Jintao on a 12-day tour of the continent, his second in nine months.
It is vital for China to secure sources of oil and raw materials, but the expansion of trade goes far beyond commodities. So crucial is Africa to Chinese energy needs that Beijing is willing to be condemned by world opinion for its deals with dictators and its refusal to tie trade to improvements in governance or human rights.
Although international attention focuses on China’s quest for oil in Sudan and other troublespots, the China Business Daily has reported that more than 500,000 Chinese businessmen and merchants have set up shop in Africa.
A few days ago, officials in Beijing disclosed that trade between China and Africa would probably be worth more than £34 billion this year, compared with £27 billion last year.
China has emerged as Africa’s largest trading partner after America and has cancelled the debts of 33 poor African countries as a gesture of goodwill. Last July, the Chinese also cut import tariffs on 454 items from 32 “least-developed countries”. Since then, more than £200m of duty-free imports have flowed into the Chinese market.
“The favourable tariffs are expected to cover more categories according to market demand,” said China’s vice-min-ister of commerce, Wei Jianguo.
Outbound Chinese investment to Africa was only £487m in the first nine months of this year, but this is expected to grow. “Chinese enterprises . . . envisage enormous business potential on the continent,” said the China Daily newspaper.
China’s big players are already there, generating controversy as well as profits. The Shanghai Business Daily recently published a revealing account of Chinese business interests in Africa, quoting commerce minister Bo Xilai in defence of the state-run China National Offshore Oil Corporation (CNOOC), the biggest foreign investor in Sudan.
“Its investment has made a big contribution to the African people,” said Bo. “It has provided 4,000 local jobs, built hospitals and schools, and constructed an oil refinery with an output of 5m tonnes a year.”
Sudanese oil is mainly light, sweet crude, which is easy to refine, and China takes more than 60% of Sudan’s production.
The link has drawn bitter criticism because China has consistently used its diplomatic influence at the United Nations to protect the Sudanese regime against international pressure over starvation and mass killings in the province of Darfur.
Berkshire Hathaway, the investment vehicle controlled by Warren Buffett, recently sold its stake in Petro China, a CNOOC subsidiary traded in New York, amid an outcry over Darfur from celebrities like Mia Farrow, who dubbed next year’s games in China “the genocide Olympics”.
Buffett testily maintained that he sold the stock because he considered it fully valued and had realised an elevenfold gain on the holding. Nonetheless, the affair exemplified the risks and rewards of playing China’s great game of commerce in Africa.
A background report for the US Council on Foreign Relations noted that: “By 2045 China is projected to depend on imported oil for 45% of its energy needs. China is actively trying to diversify its supply lines away from Middle Eastern crude. Experts say China has adopted an aid-for-oil strategy that has resulted in increasing supplies of oil from African countries.”
CNOOC is to buy a 45% stake in an offshore oilfield in Nigeria, while its oil buyers are competing aggressively for supplies from Angola, Equatorial Guinea, Chad, the Democratic Republic of Congo, Gabon and Algeria.
The Chinese quest for resources goes beyond energy. “China’s manufacturing sector has created enormous demand for aluminium, copper, nickel and iron ore,” said the report for the Council on Foreign Relations. It concluded: “The strategy is working. China has gained access to key resources around the world.”
Few foreign investors have grasped the speed and extent of Chinese exploration and development in Africa.
China is engaged in mining in 13 African countries, singling out deposits of gold, copper, diamonds, titanium and manganese. Prospectors from the government’s geological and mining bureau are active in Namibia, Ghana, Congo and Mali.
The telecommunications flagship Zhongxing Communications, which began investing in Africa in 1995, has ploughed in more than £3 billion and now employs 1,100 people across the continent. In Egypt, Brother Shoes, a company based in east China’s Zhejiang province, claims to have captured 70% of the local market since it set up in 2001 and now sells 12m pairs of shoes a year.
In agriculture, the Chinese have carved out deals from Zimbabwe to Zambia and Kenya. The China Agricultural Cultivation group claims to have transformed grain production in Zambia and saved the country a fortune in transport costs by reducing the need to import grain from South Africa.
When a Chinese businessman gets off the plane in Africa – the number of flights is multiplying every year – he can count on full diplomatic support and state-directed financing.
One example cited by the Council on Foreign Relations paper is Angola, where China takes 25% of Angolan oil exports, and Beijing has a stake in future oil production, thanks to a £1 billion commitment of loans and direct aid. The package will fund Chinese companies to build railways, schools, roads, hospitals, bridges and offices, while technicians are installing a fibre-optic network and training local staff.
The boldest stroke so far came last month, when the Industrial and Commercial Bank of China (ICBC) agreed to pay £2.7 billion for a 20% stake in Africa’s largest bank, Standard Bank, which is based in Johannesburg.
The investment gives ICBC an interest in a continent-wide banking network with more than 200 branches in 18 African nations.
Investment analysts noted that unlike a western investor, ICBC did not appear to be linking its money to management changes or a shift in financial strategy.
The pursuit of disinterested commercial gain is nothing new. China calls it “noninterference” in countries’ internal affairs, and makes a virtue of its refusal to link trade with human rights or democracy.
China’s state-controlled arms merchants have followed the lucrative trail of African conflict to weapons-hungry regimes denied overt supplies by more easily embarrassed munitions makers in the West.
The US Congressional Research Service estimates that China got only 10% of the conventional arms market in Africa between 1996 and 2003. But its customer base is distinctive. Sudan’s Islamic regime bought £50m worth of Shenyang combat aircraft, including 12 F-7 jets, plus helicopter gunships that were used in the Darfur conflict.
Zimbabwe, which has hailed China’s noninterference policy as a defeat for colonialism, reached a deal in 2004 to buy 12 fighter jets and 100 armoured vehicles. Chinese technicians have set up sophisticated jamming devices at a base near Harare to block critical news broadcasts from abroad.
But China’s foray into economic empire-building has not been cost-free. There is resentment among small traders in Africa over the inflow of cheap Chinese goods. Campaigners against corruption claim some Chinese firms have no hesitation in paying bribes, underbid local firms and fail to employ enough Africans.
A reading of China’s own media shows that in the corporate cultural-sensitivity department, Chinese managers may have a way to go.
In an interview with Jiefang Ribao, the Shanghai communist party daily, one pharmaceuticals manager said: “African people’s rhythm of life is very slow and they also treasure their lives very much and enjoy entertainment, so they do not want to work overtime. So we don’t ask them to work at night or do overtime.”
Huang Zequan, the vice-chair-man of the Sino-African People’s Friendship Association, had this advice for Chinese businessmen in an interview with the China Business Daily: “Although African countries lag behind in manufacturing – some of them can’t even make needles and rely on imports – you should never believe Africa lacks consumers. There are a lot of rich men. And since African people, generally speaking, have little idea of finance, they like to spend all the money they have and therefore there’s a very good market for Chinese products there.”
The vice-chairman went on to give the example of a Chinese washing machine, sold for £86 at home, which he saw on sale in an Angolan market for £533.
The West is right to make aid and economic ties conditional on human rights and economic reforms since we have less dependency on rapid development than China and we feel that the promotion of certain principles are needed to improve living conditions for all people. We can and should pressure our leaders to uphold certain standards.
China's provision of investment, infrastructure and such without conditions is also beneficial since the need for them and the economic benefits are so great in Africa.
If nations follow healthy economic policies and move towards democracy and liberty then they have opportunities for dealing with the West and East and accessing all markets without fear of boycott. Otherwise they should be forced to deal with the PRC at whatever terms and conditions they can get. This good cop/bad cop approach gives more nations a chance to get some development done while still providing pressure and benefits to nations that head in the right direction.
Sean, Fredericton, Canada
Survival of the fittest has always been the name of life's game. No 'meek inheriting the earth' here - just the sound of bulldozers ploughing the vulnerable under - and gleeful dictators syphoning off even more of their country's profits to private (foreign) bank accounts. As long as improvement is not motivated and controlled from within by the African people themselves, what China is offering is just another, more subtle form of colonization.
Jean Booth, Hague, Netherlands
Sounds uncannily like the Raj. The East India company grew to huge proportions and made the fortunes of Brits and Indians alike - it was even given jurisdiction over Indian territory. It build infrastructure, as the Chinese are doing, and relied on cheap labour (and child labour) in the UK, another parallel with China. Then, when rebel tribes attacked The East India company, because of its importance to the UK economy, the British army was sent in and we took control of the whole country.
How long before African rebels start attacking China plc. and how, I wonder, will the Chinese react?
Betty, Brighton, England
Criticising China for dealing with dictators? The west has been dealing with these dictators for decades - no change there then!
E J Murray, Kerry, Ireland
Just for the record, Petrochina is not a subsidiary of CNOOC. These are two separate companies.
O.Roche, salisbury, MD/ USA
The Africans are the most naive people in the World, and I am African.
fvb, Liverpool, UK
I am 100% for China in Africa. The West has had their turn with Africa, the exploited the people and exploited the land/natural resources. At least with China they want to TRADE. Fine we might get short changed a little along the way but at least it is a 100% better than what we got when we dealt with the West (Europeans).
Funke, London, United Kingdom
China is alreadya force in the World Market. Half of what we buy nowadays is made in China. What China is doing now is investing money into countries which need it. Like America did. Except America didnt go as far as cancelling the debt to 33 of Africas nations.
Loki Baird, Glasgow,
Is China's support of Mugabe's regime and Sudanese genocide benefiting Africa as well? How about arms sales to conflict regions? Do you think China will support human rights and fair working conditions in other countries when they don't even do this in their own country? Think again!
laowai, Shanghai,
The difference between China and the West is that the West sees Africa as 900 million aid recipients, while China sees Africa as 900 million potential clients. We know that China will try to rip us off occasionaly, but we are less stupid than we were in 1860 or 1960 - that is the big difference.
We need to understand that China does not have "Africa to itself". It is competing (and will compete in future) with India, Brazil, South Africa (and increasingly) Nigeria.
The competition is good for Africa.
Trade not aid, will save Africa. We have a real opportunity to play India against China in order to obtain the best deal. I hope we use it well.
Kanyo, Leeds,
i don't see anything wrong. rather i think its just a game that time is playing with us.
if we can do same with gulf countries and that to with weapons, atleast with chinese somebody will be getting benifits.
isn't it true.
Ady, buxton,
When China is building roads, railway, hospitals, institutions, etc., they make it easier for Africans to travel, communicate, do business, and manage their finances. How can this be bad?
The West way only benefits the riches. The China way benefits the common people.
janetmorgan, San Francisco, USA
Let's remember the dismal record that the West has of helping Africa to grow. Perhaps this is economic colonialism by the Chinese, but it won't have any more of an adverse economic effect than Western interventions have had.
On the other hand, the Chinese government has absolutely no regard for ethical foreign policies. Dictators in Africa will be supported as long as China can get economic benefits. That is a big worry, if we assume that economic sanctions can affect a country for the better.
But that is a big if.
Economic growth of any sort will be good for Africa. That the Chinese are doing this shows that their economy is maturing - perhaps as their consumer base grows, we can sell to them. As China grows, Africa could well become the new 'China' - and heavy involvement by Chinese companies could help that progression.
Chris Lowe, Birmingham,
This is obsene , it is almost like a modern day colonialism whereby the Afican countries in question are wrapped with money from head to toe, making them blind in the eye and immobile with the feet.
Since, you can't bite the hand that feeds you. Some countries put up little resistance.
The Chinese financial tentahooks are growing fast and strong, hence stifling any hopes of REAL African Development.
They will end up holding Africa ransom to the West. This is an evil yet cunning plan to become a force in World Market, but in an unjust way.
JA, London,