a, CHINA IN AFRICA --SUMMARY BY MATTHIAS SUMPF
Content
Introduction............................................................................................................................................. 2 Main part ................................................................................................................................................. 2 Background and context ..................................................................................................................... 2 China’s approach on getting closer with Africa ................................................................................... 2 Facts and figures.................................................................................................................................. 3 Other interests .................................................................................................................................... 3 China vs. the West ............................................................................................................................... 3 Chinese emigration and its impact ...................................................................................................... 4 Africa’s relation with China ................................................................................................................. 5 The West’s reaction............................................................................................................................. 7 Conclusion ............................................................................................................................................... 8

Introduction
Over the last 17 years, Chinese relationships with Africa have intensified drastically. While in the beginning those relationships had been established mainly on an elite leadership level, they have now reached down into everyday peoples’ lives. Theories to the intentions of the Chinese in Africa vary from a benign friendly partnership amongst developing countries, over economic competitiveness, and ultimately tapering in colonization with eventual control of African territory. Underpinning the last argument, the Chinese face the risk of being trapped into a lack of resources to nurture their industrial ambitions. On the other hand, African countries benefit from Chinese knowledge as to how to quickly build up infrastructure (roads, railways, ports, schools, hospitals…) in exchange for sharing their resources. On top of that they can take advantage of relatively cheap labor (compared to Western countries) and past experience on shifting a developing country to a more advanced one. In consideration of China establishing itself more and more as a world power, it is important to understand their strategic thinking. Therefore, the following summary shall shed some light on their intentions, investigate the different theories and elaborate on future implications for Western nations.

Main part
Background and context
Imprinted by a communist mark since its foundation in 1949 as a people’s republic, China’s main stance on international affairs traditionally had been one of self-sufficiency, i.e. the country should be able to fully provide for itself without the need of any foreign trade affairs. This, however, quite unsurprisingly resulted in poverty and isolation. When Deng Xiaoping set off as a new leader in 1978, he loosened the socialist boundaries and gradually opened up markets, which resulted in almost double-digit growth rates over three decades and boosted up the per capita income ninefold to $1,700 in 2005, while at the same time reducing the number of people suffering from poverty. However, sustained industrial growth rates along with an ever-increasing population made China vulnerable to a lack of natural resources. Even worse, the ongoing disputes between Western allies and forces in Kuwait, Iraq and Iran along with trade sanctions and occupation proved an absence of stability in these countries as a reliable supplier of energy resources. This raised Chinese awareness and shifted their focus to Africa, which is rich of natural resources.

China’s approach on getting closer with Africa
In contrast to Western countries, which are prone to question the legitimacy of some African countries and their leaders in light of the way they claim and preserve power, the Chinese avoid to address political or ideological topics and instead recognize the power structure currently in place. As both share a common history of having been criticized by the international community for their style of exerting state power on individuals, the Chinese do not bind business in Africa to any political conditions. This leadership criticism – especially uttered by Westerners – unites China and Africa in their denouncement, and the previous Western colonization in Africa obviously makes those countries a less welcome business partner anyway.

But China goes one step beyond and also publicly draws on the common history: During the 17th century, e.g., Chinese slaves fought side-by-side with their African peers against the Dutch oppression in the Southeast. More recently, China has shown some solidarity support in Africa by building the TanZam railway and sending off barefoot doctors and agricultural specialists. As a matter of fact, 44% of all Chinese development aid goes to African countries, though arguably due to a lack of transparency, some of these funds might have served corruption purposes too. Succeeding China’s outstanding economic rise over the past three decades, they now also own huge capital reserves and big multinational companies to outbid the Western competition. China’s ExportImport Bank (Exim) helps financing the business operations with a portfolio US$ 15 billion, thereby often subsidizing loss-making companies for the sake of higher government interests. Thus, China has paved the way emotionally, diplomatically and financially to make themselves the preferred business partner over Westerners. As a rather recent development, these relationships have become even more interwoven since Chinese municipals have been empowered to engage in twin town arrangements despite largely outnumbering their African counterparts, thus bypassing federal authorities and doing business on a more direct level.

Facts and figures
As a result, China has become Africa’s third biggest trading partner after the U.S. and France. 31% of all Chinese oil imports originate from Africa and trade volume between China and Africa has quintupled from 2000, reaching $50 billion in 2006. Chinese investment in energy resources has helped spur African growth of over 5% in 2005 and more than 800 Chinese companies are doing business with 49 African countries out of which more than half are joint ventures. With the exception of a few richly resourced African countries like Angola (22% trade volume) or South Africa (18% trade volume), business is rather one-sided resulting in some African countries running negative trading accounts with China. While energy is the most important trading product, it is by far not the only one. Others include cotton, timber, agricultural products and fishery, transport infrastructure, manufacturing, weapons and telecommunications, though Chinese imports are indeed by and large composed of commodities.

Other interests
Apart from securing natural resources, China also aims at winning over African countries for other interests, e.g. to block UN-resolutions. Specifically, the ongoing dispute between the separatist Taiwanese and China has resulted in a battle of gifts and concessions to whichever state acknowledges Taiwan as an independent country or not. For instance, South Africa changed its position on that issue numerous times under Nelson Mandela. Having committed themselves with such enormous investments, it goes without saying that China now also has a peace interest in Africa. Consequently, having been involved in 7 UN-missions with an overall total of 3,000 troops, China has become the largest UN-contributor to peacekeeping operations on that continent. Ironically, with a market share of 6-7% China is also the third biggest arms supplier in Africa.

China vs. the West
The puzzling question remains how China actually managed to get a foot in Africa in the first place. After all, Western countries had been present there since the days of colonization hundreds of years

ago. Not only have relationships been built and got deeply rooted within society, but also lots of experiences with regards to business, culture and technology have been accrued over centuries. How did China manage to crack up these long-term structures, given their lack of skill and experience to manage and conduct such gigantic exploration projects? For one, big Chinese companies were trained up long before. The fact that they had been shield off competition for a long time under the socialist closed market regime allowed them to gently develop the skills required to sustain in a global market environment. After having satisfied domestic supply according to a fixed allocation scheme, they were allowed to sell on any surplus to the global market, thus gaining international market experience and collecting foreign currency. Essentially, they were already operating under free market conditions abroad. Second, since the privatization in 1997 of all but some very few multinational companies, in order to become a national champion and qualify for government support with respect to political backup and tax concessions, a Chinese company first needs to be successful domestically, then gain access to the global supply chain through trade, next raise international funds on Western money markets and finally build the skills and technologies to survive in the international environment. This ensures that the government only bets on the best of the best that really have the potential to become true national champions. The strategy of developing national champions is one not exclusive to China though. In fact, France has been following a similar approach for years (e.g. Elf-Aquitaine) and so did African countries like South Africa (e.g. Eskom). Even though the market conditions back home in China might be tougher, national champions and free market experience is still not an edge big enough to compete with longestablished, well-experienced Western companies. However, while China might still fall slightly short on the quality aspect compared to Westerners, they can offer a lot cheaper due to much lower labor costs, thus gaining a comparative edge. Also, the fact that China deals with any state regardless of its political setting allows them to do business free of conditions, which to the leaders of the respective countries currently in charge obviously appeals. Lastly, the diplomatic and development assistance (e.g. moderate interest on loans, 1-to-1 relations that flatter leaders of smaller countries, infrastructure commitments etc.) all help when Africans have to decide on which tender to accept. For instance, China managed to strike an oil deal in Angola by granting the government a loan of $2 billion that freed it from conditional IMF-money. Furthermore, China also heavily invested in the local infrastructure and even provided their own labor to carry out the work.

Chinese emigration and its impact
As a result, more and more Chinese have immigrated to Africa, thereby reshaping the environment. Adding to that is the ongoing urbanization back home that threatens traditional rural lifestyles like those of peasants who now struggle to make a living, and the downsizing or closing of state-owned companies, which has left some 25 million people unemployed, some of whom now seize new opportunities abroad. These people often have nothing to lose and offer their work for a single dollar a day plus food and housing. This contrasts with an African pay of 3-4$ a day, thus undercutting the local workers by far. Qualified people like Chinese engineers get paid even only one sixth of their African counterparts.

It goes without saying that such aggressive labor pricing cuts out many local employees. On top of that, small and medium-sized companies like shops or kiosks have scattered around the industrial areas. Here, too, due to the absence of tariffs, the Chinese can take advantage of their cheap labor costs back home and offer textiles, food or technology items at a bargain, thereby gradually squeezing out the locals while at the same time increasing trade volumes back home. For instance, in Nigeria 80% of all textiles have shut down, leaving 250,000 people unemployed whereas the Chinese stores operate at profitable margins. Obviously, this has led to a public outcry in many African countries as the Chinese population skyrocketed. In South Africa the increase went from 10,000 people in 1980 to 400,000 in 2006. In Angola the government is said to plan on inviting 3 million Chinese. Given a total Angolan population of 12 million, this number is rather ambitious and doesn’t help getting African unemployment rates under control. On the other hand, those Africans who are still in a job benefit from lower prices and suddenly gain access to products they previously could not afford (e.g. cars made in China). While the big Chinese multinational companies are under higher scrutiny due to stock listings or shareholder accountability and therefore need to comply with corporate responsibilities and international standards more and more, small and medium sized companies are far from following best Western practices. Basically they import their health, safety and environmental standards from home, which leaves a lot to be desired. Another topic of concern is that of illegal immigration, which already has created new businesses like immigration broking and, in the case of females, also forced prostitution. These issues need to be addressed on a higher level if China wants its success story in Africa to continue before the situation gets out of control and hostility takes over.

Africa’s relation with China
Since Africa is such a diverse country with over 50 nations, a single African relation with China does not exist. It helps to categorize the countries into three different groups and then evaluate their individual relations with China. The pariah group consists of states like Sudan or Zimbabwe. Here, human rights, international standards and legal frameworks are not being respected. Countries in this group usually have been banned by UN sanctions from doing any kind of business with the West. Instead, they depend on Chinese financing and trade. Therefore, their negotiating power is very weak since they have few other options. The elite of those countries is highly positive towards Chinese engagement as they hugely benefit from additional power and can accrue even more wealth while the everyday citizens are left out. The people in charge, on the other hand, manage to strengthen their position even more through the accumulation of weapons, which in turn allows them to carry on with genocide and the violation of civil human rights. The Chinese do not necessarily deliberately support these actions – they just act out of pure selfinterest, which in this case simply happens to coincide with reinforcing the status quo. However, protecting these countries, e.g. by vetoing sanctions in the UN Security Council, can also backfire as Westerners reacted with financing restrictions for Chinese MNCs on Western money markets. Also, pariah regimes are very erratic as to whether they respect contractual agreements or the law. This has led China to rethink their strategy and act more cautiously in these countries. Still, the interest, especially in Angola prevails and in China’s eyes also justifies the means.

The second group’s main interest is with a diversification of foreign direct investments and aid. Characterized by weak democracies they do not care too much about the impact on their citizens despite the existence of unions and the voicing of societal concerns. These countries tend to be happy to gain unconditional access to Chinese loans and in some cases, like that of Nigeria, also hope for political support in their aspiration for occupying a desired African seat in the permanent UN Security Council, since Nigeria is the most populous African country. Here, too, the benefit of Chinese involvement mainly sticks with the upper class whereas workers and small domestic retail shops are being underbid by their Chinese peers. For China, in turn, the circumstances are very beneficial as the legal framework is reasonably solid for investments while institutional resistance and bureaucratic hurdles are low. The third group, namely that of well-established democracies with diversified economies actually only consists of South Africa. While Namibia, Ghana and Botswana steer in the same direction, they are by no means on a comparable level and simply lack the amount of resources to be equally important to China. Generous Chinese prestige gestures that might work in the first two groups like building a new presidential palace are ineffective in South Africa. Instead, Chinese MNCs find themselves faced with strong unions, an open media arena and a well-settled legal and constitutional framework, which adheres to international standards. Moreover, South Africa has highly skilled labor and academics, plenty of resource exploitation experience and access to international markets so that they do not depend on Chinese expertise at all. However, South Africa, too, has high ambitions on becoming Africa’s representative for a possible permanent UN Security Council seat. Also, South Africa is the only African country noteworthy that has direct investments in China. In fact, they actually exceed China’s investments in South Africa. Considering the latter point in particular, South Africa cannot ignore China’s interests simply due to their large investment exposure in China’s domestic market. A Chinese success story of how to tackle lower class riots has recently occurred in Zambia. Tensions between unions and Chinese MNCs over higher wages and promised pensions were escalated to a political level to the extent that an opposition party (which gained more than a quarter of all votes in the upcoming elections) acknowledged Taiwan as an independent country. China’s response was drastic in that they threatened to immediately withdraw all investment and aid programs. As a result, the leaders in power apologized to the Chinese and everything went back to normal again. This example points out the importance for Africa to speak with one voice and coordinate their actions in order to leverage their full negotiation potential. As long as in most countries a few elite interests prevail over the majority of societal interests, this will be difficult to achieve though. However, an incident of a more coordinated African positioning happened with the Istanbul Declaration, which triggered the continuation of textile quotas by the WTO. Similarly coordinated actions occurred on the request to China to open up their market to African agriculture and on the restrictions on Chinese labor in Africa. In the case of the textile dispute, China accepted voluntary, self-imposed quotas for two years. This shows the potential that can be utilized if Africa manages to stand united and coordinates their interests.

However, as African intellectuals have pointed out, Africa needs to be cautious not replicate the same pattern of the days of colonization when they were being used merely as a source of natural resources exploitation without much compensation and no consideration of the consequences. For instance, Chinese trawlers have already severely overfished African seas, thereby threatening the survival of local fishermen. Chinese loggers have chopped off wood even in national parks. Big Chinese projects like the building of dams have severe ecological impacts and require the displacing of local inhabitants. On top of that, African workers feel deceived and threatened by the Chinese staying in their country even after their contracts have expired and fear their strong work ethic coupled with their willingness to put up with low salaries. Not only has this caused cultural clashes, but it also fueled racist attacks on both sides. Unsurprisingly, these issues have been addressed by the media and thus been raised to public attention. As a result, China’s initial strategy of not interfering with local politics or ideologies has been overthrown. Their sheer presence and activities have made them a part of daily African life so they cannot help but get involved in politics too. Consequently, China’s focus has shifted from initially gaining access to natural resources in Africa to now sustaining their positions and investments. Obviously, this requires Chinese MNCs to adjust to legal requirements and cooperate with unions and societal activists.

The West’s reaction
Unequivocally, China not only clashes with the West’s economic interests in Africa, but also with the vision the West has been trying to force upon the continent since the beginning of the new millennium. In 2000, Germany and Britain announced a debt release for African countries with other G8 countries to join soon thereafter, totaling an overall amount of $40 billion to be written off. Furthermore, development aid programs were initiated that tight money with progress to follow best Western practices on good governance, transparency and free markets. Embarrassingly, initially only 16 countries signed up (26 as of 2006) and even recognized democracies like Botswana stayed out signaling the unwillingness to oblige with the conditions put on receiving the funds. However, on a more positive note, in contrast to past times where Western colonies were competing and fighting each other in Africa, these conflicts have been minimized (though not entirely dissolved) and the West now formulates a more united standpoint. Contributing to that development is the further integration of the EU and its close bounds with the U.S. and Japan. While there may still be competing economic interests amongst Westerners, they at least all agree on common best practices. In that sense, Western MNCs find themselves now faced with new competitors that must not worry about who they deal with and under which conditions but instead can simply focus on getting the deal done. Additionally, Chinese corporates receive strong diplomatic and financial support in contrast to some of their Western peers, and cheap Chinese labor crowds out Western products except for high end and luxury goods. Naturally, this puts Africa in a much stronger negotiation position as they now have access to a second source of foreign direct investments and must not care about conditions set upon receiving these funds. It goes without saying that this heavily undermines the West’s attempt to restructure the economic and political life in Africa according to their vision. Moreover, due to the availability of cheap Chinese money, Africa’s debt burden has been reanimated and this obviously strongly discourages Western donors to release any further debt.

A major difficulty the West encounters is that there is very little pressure they can possibly exert on the Chinese government or Chinese MNCs to reconsider their attitude to Africa. One such instrument is the denial of access to Western money markets by way of jurisdiction for violating best practices but Chinese MNCs have quickly found a work around through the foundation of subsidiaries. Another threat the West could pose is the enforcement of trade sanctions or, more drastically, excluding China from the WTO. As the U.S. is Africa’s biggest trade partner this approach has been suggested by some hardliners, but since China has also become a very important trade partner for the U.S. enforcing trade sanctions against China could backfire strongly and hurt the U.S. economy. Therefore a more reasonable diplomatic road has been initiated appealing to China’s sanity and their interests in Africa. For instance, as war puts investments and a constant commodity flow at risk, China, too, has an interest in making Africa a peaceful place. In fact, China has stacked up its peacekeeping troops heavily within a few years. Moreover, China has also experienced the downside of unreliable conditions, e.g. when allocated money all out of a sudden “magically disappears” due to corruption. More recently, the economic advancement China has accomplished over the last decades has resulted in a middle and upper class that has gone beyond focusing on their basic needs like food and shelter and now also voices their concerns with respect to ecological issues and corporate responsibility. Conclusively, there is hope that through an inner movement as well as external diplomacy the way China deals with Africa might get overhauled, but at the same time the West also needs to realize that the loss of its dominance is irreversible and has to accept China as a strongly growing force that now seeks its advantages in yet a less aggressive manner than Western colonies of the past.

Conclusion
Western diplomacy as well as concerns on the part of some African countries has already resulted in China gradually urging dictators to abide by international standards, though the no-conditionalitypolicy has not been abandoned yet. After all, dealing with pariah regimes also weighs on the relationship with Western trade partners and hurts China’s reputation not only in the West but also in Africa. The resistance China faces in particular from within Africa for bringing their own labor and crowding out domestic small and medium-sized businesses through undercutting costs has become more intense. Beyond that, China finds itself accused of exploiting African commodities in exchange for manufactured goods without contributing to developing the African economy; much like it has been the West’s approach for centuries. Then again, China has addressed these concerns more readily and tailored to African needs, e.g. by lifting agricultural tariffs which the West has never brought itself to do. Coming back to the starting question of whether China is a partner, competitor or colonizer, characteristics of all three can be identified, at least on the surface: China has indeed been a partner in the sense that a few years ago it started off on a similar level as Africa (though now outpacing it) and that it conformed to African interests and needs more than any other country before. It might not be evident that China is a competitor to Africa because it exchanges manufactured goods in return for commodities thus complementing one another. However, in the long run it certainly could be since for Africa to really grow out of poverty it needs to go beyond being just a commodity supplier and instead advance to a diversified economy that manufactures its own goods and services, which then would compete with Chinese products as is already the case in the textile industry. Lastly, though it might appear that China is a colonizer for its proximity to pariah regimes and overpopulation in some

African countries, it definitely lacks critical colonizing aspects such as the ideology of a civilizing mission, territorial claims and exclusive trading rights. China’s real influence in Africa, however, will be much more determined by experiences than visionary political statements and the way people cope with each other in everyday life. From Africa’s perspective, China is the new face of globalization as it sees the West’s presence diminish while the East’s rises. For China, this presents an opportunity not to make the same mistake as the West, namely exploiting African commodities, only serving their own good and then leaving Africa back behind in poverty. Instead, China can make a difference through real commitment not only in foreign direct investments and development aid but also in technology transfer, which ultimately would support Africa in the advancement of their own economic ambitions. Africans need to understand, however, that just copying the Chinese success story might not do the same trick for them as each strategy needs to be tailored to the peculiarities of the country it is meant to be applied to. From the West’s perspective, China portrays a mirror of its own super-capitalism. Ecological concerns and labor conditions have only very recently emerged as a concern to some parts of the West but the major economic rise to the present wealth has been achieved tolerating these issues over decades. Nowadays, companies have exported pollution and humiliating work environment conditions abroad where goods are produced cheaply and with less regulatory and costly obstacles. Therefore the West benefits from these dire conditions nonetheless, e.g. through the assembly of low-priced technology or cheap clothing. In that respect any Western criticism on China feels hypocritical as the West not only builds upon a less glorious past but even now still partly operates under the same conditions to foster its wealth. America’s latest war on terror, where the adherence to human rights remains doubtful if not outright nullified, does not help when criticizing China for doing business with African pariah regimes. Still, just because the West has not led by good example, this does not justify the violation of human rights or humiliating labor conditions. In that respect, diplomacy without finger pointing is the only way to go for the West on its mission to convince China to reconsider its attitude to Africa.