CHINA’S ECONOMIC ENGAGEMENT IN AFRICA: IS IT A WIN-WIN APPROCAH?
ASN505
Submitted to:
Ceren ERGENÇ
Assistant Professor
Graduate School of Social Sciences
Asian Studies
Submitted by:
Harun PUR
2195832
June 06 , 2017
Table of Contents
Introduction 3
A-) General History 3
B-) The West vs. China Engagement 5
C-) China’s Economic Engagement in Africa 8
C.1-) China’s involvement for natural resources; trade statistics and other trade items 9
Import rates 11
Export Rates 12
Import-Export By Sector 12
D-) African Governing Problems 13
E-) Chinese Trade and Investment 13
F-) China Aid To Africa 16
Conclusion 18
Bibliography 20
CHINA’S ECONOMIC ENGAGEMENT IN AFRICA: IS IT A WIN-WIN APPROCAH?
Introduction
The spectacular relation between China and Africa for the last about 20 years has taken enormous attention around the world. China’s economic prosperity brought with itself a requirement of New-Sino-Global-Agenda in its international relations especially in Africa. Thus, China’s fast economic development resulted in an increase in its search for natural resources and new markets for the products it manufactures. This led China to the African continent for its rich mineral especially oil resources and markets. However, China’s way of engagement with Africa is almost completely different from that of Western countries. The West nations have literally abused the black continent without any long-term economic value added in contrast to China. Thus, Comparison between strategy of China and Westerns would be useful to comprehend more clearly how lucrative bilateral gains have taken place in Africa with China’s business involvement. To put it another way, China has created a business climate with Africa based on mutual gains.
According to some nations, economic pursuits lie at the heart of the Sino-African relationship, and China seeks to acquire oil, gas, minerals and natural resources to fuel its economic growth and desires to use developing African markets for its products. (Hanauer, Morris 2014). On the other hand, China claims that since the end of the Cold War, the west’s values and engagements have not been challenged by any major power, thus giving rise to African nations complying unwillingly with westerners’ strict conditional economic support. China destroyed this taboo with an engagement that not any previous governments have done before (Holslag, 2009), and Chinese investment contributed to 5.8% economic growth in 2007, which is the highest record (Ayodele, 2014). In addition, China’s increased presence in Africa since early 1990s has helped bilateral trade to grow at a spectacular ratio of 700 percent (Marafa, 2009).
Africa has faced colonialism for years and still is taken advantage of by the some global powers without any value added to the continent. However, China has changed this equation with its huge investment in infrastructure, education, extractive business such as mining and oil industry, technology transfer etc. in exchange for imports of natural resources without any political strings attached.
In this context, this paper tries to understand and evaluate China’s economic policy in Africa and will analyze whether it is a win-win approach in the context of natural resources, trade and investment, aid policies and West vs. Chinese engagement’s differences and principles. A general history of Sino-Africa relationship will help to understand the historical evaluation of the critical relationship between two important players in the world.
A-) General History
For the first time, China contacted the East African coast in 1415, and traded with African Chinese goods. Modern time international relations began in late 1900s (Wu, 2007). Especially since 1950, China has started to build up relations with African and Arab countries. Bandung Conference in 1955 represents start of Sino-African relations in 20th century, purpose of which was to promote anti-colonial struggle mainly, cultural and some economic exchange agreements. Thus, the relations in the beginning were based predominantly on the ideological contexts, such as revolution, anti-western or colonialism movements and co-operation among third world countries. For example, to counter-balance Soviets and anti-colonial movement, China supported MPLA (Movimento Popular de Angola) with military equipment and training on Maoism (Shelton, Kabemba, 2012).
In 1955, Premier Zhou Enlai declared in Bandung Conference “Five Principles Governing the Development of Relations with Arab and African Countries” which encompassed mutual respect for sovereignty, non-aggression, non-interference in each other’s internal affairs, equality and mutual benefit and peaceful solution of any troubles (Wu, 2007). In 1963, Premier Zhou presented “Eight Principles for Economic Aid and Technical Assistance to Africans” (Hanauer, 2014). With these two strategic agreements, China defined the way it gets into communication with African and Arabic States. These principles strongly emphasize the mutual respect and non-interference of internal affairs of African Countries. China never colonized Africa, and its most known project Tzara railways in 1970s was planned as an indication of solidarity against imperialism; in fact, China was not seen as a colonizing power by African as opposed to Western nations (Shelton, Kabemba, 2012).
In 1978, Rising to power of Xeng Diaoping is a cornerstone of China’s economic and politic policies; China has reorganized its both domestic and international policies fundamentally with more priority given to marketing mechanism. Ideological superiority in China’s national management order was replaced with more pragmatic goal: economical development progress (Fues, Grimm, 2006). The Government’s desire to pull the China out of poverty and improve the life conditions of Chinese people became the first agenda on the table. State owned Enterprises (SOEs) were tools to move on economical development process and “Going out Strategy” of China benefited these Conglomerates and in turn millions of people’s lives changed dramatically with the rising per-capita.
This unremarkable transformation also gave rise to re-assessment of Sino-African relations. The 12th Communist Party Committee National Assembly in 1982 defined two important strategies in African Policy: to focus on domestic economic development and to pursue a foreign policy with the mutual benefits in the center. In 1982, Premier Zhao Ziyang proposed renewed “Four Principles on Sino-African Economic and Technical Cooperation”, which comprises equality, practical result, mutually beneficial policies, and diversity in common development (Wu, 2007). The difference between four principles in 1980s and eight principles in 1960s was China’s mutual support of two developing economies. The ideological-positioned cooperation was removed, and economic agreements were inserted at the heart of the alliance of Sino-Africans. The desire for economic development for China’s rulers did not leave any room to involve in the economical relationship with Africa based on political conditions. China lost its interest in exporting communist ideology; primarily economic and secondly politic agenda occupied China’s mind. However, during these years, there was little that China could do owning to its dependence on foreign loans.
The FOCAC (Forum on China Africa Cooperation) initiation by Ministry of Foreign Affairs of China in 2000 was the beginning of another building block in economic relationship with African countries (Hanauer, 2014). FOCAC was executed through 3 years plans, covering a range of areas such as technical, economic and political ones. China has deployed numerous technical and capital assistance to the African states with FOCAC planning. Its main aim is to enlarge economic cooperation and mutual understanding with equal conditions, China claims. China supports mutual respect with the African nations, and African leaders appreciate very much the China’s economic financing, loans and aid programs.
In May 1999, Nelson Mandela visited China and thanked to Beijing for its consistent support to South Africa, and he emphasized to be an active supporter of development of Sino-African relationship on broad context. That China-Africa bilateral trade has surpassed that of USA-Africa which is 160 $ billion means over the next decades African economics, politic and resulting military affairs will be directly effected by China’s economical venture in the continent and will have long-term consequences on the continent. (Shelton, Kabemba, 2012)
In 2006, Beijing announced a white paper with the title of “China’s African Policy”, claiming four principles of China policy towards Africa:
• Sincerity, friendship and equality
• Mutual benefit, reciprocity and common prosperity
• Mutual support and coordination
• Learning from each other and seeking common development (Hanauer, 2014).
B-) The West vs. China Engagement
Africa was perceived by the west as a colony for years, thus, investment ratio especially from the west remained low. A Nigerian official said to a Deborah Brautigam of John Hopkins University “The west comes to Nigeria, it is oil, oil, nothing but oil. But the Chinese come and they are interested in every sector of our economy; China from economical development point is unparalleled to any country in the world with the opportunity of virgin market of Africa” (Hanauer, Morris 2014). African leaders, taking into account China’s economic miracle for the last thirty years, see China’s loans, experience in infrastructure and in industrial development as an alternative to the West, IMF and World Bank; and a guarantee for future economic prosperity.
First of all, the West’s approach to aid and loan is based on conditionality; aid to where corruption rate is low; the nations that are governed poorly should be denied. The dilemma here is that the countries that are not run by western standards and denied aids or loans are also those that are the most in need. Some of the sanctions by EU on Africa:
In 2002, EU put sanctions on Zimbabwe for government’s refusal to accredit election monitors, expropriation of land from by Zimbabwean leaders against its farmers for some political gains and corruption and mismanagement of the country. These sanctions include (Portela, 2014):
An arms embargo, an embargo on non-lethal military equipment and a prohibition on technical or financial assistance related to military activities;
A travel ban and assets freeze on members of the government and persons and entities associated with it, as well as persons whose activities undermine human rights, democracy and rule of law – originally, the bans applied to 20 individuals, but was later extended to 163 persons and 31 entities;
Suspension of the application of the Cotonou Agreement under Art. 96. This measure freezes budgetary support and support for development projects under the 9th and 10th European Development Fund, except for those social projects in direct support of the population (Darracq, 2010, p. 9).
Starting from 1975 the first Lomé Convention (Lomé I) agreement , EU-Africa cooperation was based on more dominant donor–recipient pattern of behavior, and on the contrary to the economic infrastructure priorities by China, EU’s priority was on social infrastructure (Ling, 2010).
“EU considers its aid as a form of one-way benevolence instead of two-way co-operation….. The deficiencies of the EU’s one-way mindset are deeply felt by Africans. According to a study on the ranking of the most pressing problems in the international aid system from an African perspective, donor-driven priorities are among the first rank. The problems are basically donor pressures on partners’ development strategies and aid management systems supporting donor requirements, not national systems….. Afro-pessimism is still too prevalent in Europe, not just in the circles of power, but in public opinion too. Africa continues to be regarded as a problem.” (Ling, 2010)
On the other hand, Chinese aid or loans are not tied to any conditions such as human rights, macro-economic management, environment or political openness. The only condition is that the infrastructure works (roads, schools, hospitals, water and power systems) should be undertaken by Chinese labor, and financing from Chinese banks to Chinese companies operating in Africa (Wang, Ozanne, 2014).
The lack of adequate investment is the most important cause of the underdevelopment of African nations according to a study by Ernst&Young. Inadequate water, electricity, inadequate railway, non-technological and low amount of ports give rise to high cost of doing business in Africa other than natural resources trade. These impediments lead to low manufacturing capacity and eventually prevent a value-added economy. The poor infrastructure increases production costs by almost 200%, lowers productivity by 40% (Hanauer, Morris 2014).
The Chinese way of engagement boosted decades old non-productive continent. China’s investments in different sectors are one of the key contributors to development. In contrary to common belief that China invests just in oil fields or focuses on natural resources extraction, China’s 60 % of the project are in service sectors, almost 20% in manufacturing and 20% in natural resources sectors. Most of the outward direct investment (ODI) of China was mostly in business service (1053 deals) and import&export sector (539 deals) in the end of 2013. (Chen, Tang, 2015).
Credit rate of Africa is very low because of high risk, so they reach (most of time can not reach) to loans in very expensive way. However, Chinese loans are provided via aid budgets, so it helps Africa to get lower interest rates (Sotola, 2014).
The African continent has upgraded its infrastructural and economical background especially since the huge amount of Chinese investment projects started, while the west model is more towards charitable-paternalistic context. China’s adherence to non-interference to internal affairs takes harsh criticism especially from the west. The west claims that China’s approach is detrimental to democracy, human rights, but China’s perspective is economic development, less poverty, national sovereignty over ideological aims (Fues, Grimm, 2007). In addition, China is not the only nation doing business on non-interference context but also India and Korea also follow the same strategy for decades. Africa is in dire needs to improve its domestic manufacturing capacity, which requires yearly 20$ billion investment in infrastructure; thus, Chinese investment is crucial and welcome to the continent; economic priorities rather than human rights, democracy or other western imposed prescriptions are considered “vital”.
The western nations secured natural resources however their value-added activity to continent is fairly low compared with that of China. “In 2014 alone, China succeeded more than $70 billion-worth of construction contracts in Africa that will yield vital infrastructure projects, provide jobs, and boost the skill set of the local workforce (Brautigam, 2014) while European Investment Bank invested 1.1 billion euros in 33 project across 16 countries in the west Africa between 2010 and 2014 (EIB Report).”
China is willing to take risk in any dangerous places in the continent where the western companies are reluctant to do any kind of business. Limited western investors do not provide any kind loans, aid, finance for those areas that stand in need of infrastructure, agriculture, roads, and railways etc. in opposed to Chinese investors. These places should be developed and are crucial to the development of the continent. Besides, such financing of investments don’t have any preconditions. For example in 2005, China made agreement to operate on four oil blocks in Nigeria and made investment accordingly. The west did not consider to make any business in these areas where China operates owning to those areas were located in volatile and dangerous spots. (Sotola, 2014).
Africa also needs training of its workforce. Thus, China offered trainings to many African young populations; between 2000 and 2006, China gave education and training to 16,000 African citizens. President Hu Jiato declared an aid program comprising 18,000 government scholarships and training of 30,000 persons or Africans in various sectors. China also built plants in Africa to process the raw materials in Africa rather than in China. For example in 2003, a Chinese baggage company established a factory in Nigeria (Satola, 2014).
African people reached to cheap computers that were exclusive to only rich African families beforehand via cheap import of Chinese manufacturers. In addition, China removed tariffs for 440 African exports.
Thus, China’s no interest in internal affairs and its emphasis on mutually profitable projects as opposed to that of Westerners with which Africa experienced colonial rather than economic partnership improved China’s standing drastically in the region and contributed remarkably to African economical infrastructure.
C-) China’s Economic Engagement in Africa
China’s policy change in 1978 did bear fruits in African relation especially in 1990s. China followed economic oriented policies including trade, investment, tech-transfer and training on various scientific disciplines. The Chinese development process is oriented more towards technological assistance and infrastructure development since 1990s. Starting from 1990s, Africa is the central actor of China’s “Going Out” policy boosting both official and private Chinese companies to make investment abroad, especially one those with rich-volume of natural resources and market potentials (Hanauer, Morris 2014). .
According to China, the policy to Africa, on the contrary to the western nations, is based on win-win approach, bringing economic prosperity with no political string attached and no intervention in internal affairs, which facilities China’s strategic interest in trading with Africans. Some western countries see this policy as an opportunism; the most conspicuous example of this is the China’s support of Zimbabwe, a notorious country on human rights abuse. Zimbabwe responded to western economic pressure by declaring “ Look East Policy” in 2003, so China became an alternative to the West. However, the relationship, China claims, is part of mutual respect, non-interference in internal affairs and an engagement to transmit its development and investment resources to Zimbabwe. The crisis of Zimbabwe with west was an advantage for China and Zimbabwe; Chinese goods were full of the markets and investment increased drastically: 98,3 % of the manufacturing sector investment during this period came from China and Korea. Manufacturing sector of Zimbabwe enjoyed an upsurge during this period, 44,2% of total investment. In 2011, China was one of the most important trade alternative partners for Zimbabwe (Shelton, Kabemba, 2012).
By African Nations, the close relationship with China is a guarantee of future prosperity. China’s economic achievement in two or three decades made China “a role and an alternative development model” for Africans. IMF and World Bank provide loans, aid or other funding on the condition of democracy, human right or some other political strings attached. On the contrary, China does not intervene in any internal affairs of African countries. The China’s strategic and most important aim, Beijing claims, is to gain mutual profitable economic benefits mostly; political ones are secondary and less important.
With 54 members in United Nations, Africa represents the largest regional groups in the organization. Thus, Africa’s support for one China policy and votes against any human right abuses’ clauses in favor of China in UN Assembly are priceless for Beijing. Besides, China was colonized by westerners’ in the past just like Africans are now. So, there is a sympathy for Africans by Beijing. China also sets as an example for Africans to pull its citizens out of poverty; China’s poverty rate decreased from 84% to 15.9% between 1981 and 2005 (Ayodele, 2014).
For some nations such as Zimbabwe, China is an alternative to the West while some others such as South Africa, China is a development partner. In 1998, the official meetings between two parts focused on the economic partnership. In 2006, China and South Africa signed 13 agreement on agriculture, minerals, energy, technical-cooperation, nuclear and trade issues. (Shelton, Kabemba, 2012).
The World Bank also accepted that China’s growing bilateral trade with Africa is the main reason of the economic boost in the continent, and the growing bilateral trades and economic involvements are beneficial to both sides. Specifically, China’s investment in hydrocarbons, mining, telecommunication and other infrastructure project are helping to raise the employment rate. The IMF also confirms that average 6% of growth rate is the highest by far and mainly due to China’s huge investment projects in the continent (Shelton, Kabemba, 2012). China’s experience on infrastructure, construction, technical know-how and using them in building railways, roads such as first light railway on the continent in Addis Ababa, Ethiopia, which opened in October 2015; Kalte Dam in Guinea in 2015; a new port in Tanzania at Bagamoyo in 2016 increases China’s influence, soft power and is an indicative of mutual beneficial policies for both nations.
A construction vehicle drives on a dirt road outside the Kaleta, Guinea hydroelectric dam.
C.1-) China’s involvement for natural resources; trade statistics and other trade items
The Asia Pacific area has not required natural resources especially oil, this leaves one option on the table: turn to the regions with high amount of them. China’s energy hunger should be satisfied to feed its growing industrial development. Especially after 1978, the growing manufacturing sector of China has demanded aluminum, nickel, iron and mostly oil in increasing rates. By statistics, in 21. Century, China is the world’s largest importer of crude oil iron ore, manganese, plastic materials, metal ores, oilseed, textile fibers, papers and second largest user of cooper, 50% of the world’s wood resources and 40% of soybean (Wu, 2007).
Thus, China ventured in Middle East, however; the turmoil and regional wars failed to build in a complete trust in the oil and other resources of the region. This gave rise to China turning its face towards Africa. Besides, Africa is not as chaotic as Middle East and external power struggles are not as heavier. African oil contains low-sulphur, which makes it easier to process in Chinese refineries (Wu, 2007). Africa’s oil reserves is more than 10% that of world, and the continent also holds 7.5% world’s natural gas reserves (Thrall, 2015).
Regions 1995 2000 2003 2006
Middle East 46 53.6 51.3 45
Africa 11 24.0 24.4 32
Asia-Pacific 41 15.0 15.3 8
Others 2 6.7 9.4 15
China’s imported crude oil by region 1995-2006(%), as realized from the graphics, imported crude oil from Africa is rising, while from Middle East is falling. (Source: Ministry of Commerce of the People’s Republic of China)
With the establishment of the FOCAC, the Beijing efforts to enlarge its presence in the African continent have been getting clearer year-by-year. Jiang Zemin emphasized, “China is the biggest developing country and Africa, the continent with the largest number of developing countries”. China Petroleum and Chemical Corporation (Sinopec), China National Petroleum Cooperation (CNPC) and China National Offshore Oil Cooperation (CNOOC) worked on two systems in Africa: either official agreement to explore news natural resources including oil fields or taking the stakes in African-oil companies (Wu, 2007).
The criticism on China’s economic engagement is especially for its support of the regimes with bad human rights, democracy etc. records. However, the mutual economic benefits are remarkable for both sides. In 1995, the trade volume was just almost 3 $ billion, by the end of the 2006, it rose to 55$ billion. About 10% of sub-Saharan exports were with China. Oil and mineral resources dominate the trade; nine out of 10 oil and mineral rich African countries account for 50% of the total imports to China, and Africa is accounted for 10 million out of 84 million barrels of oil production in the world. USA imports 16% of its oil need from Africa; China 30% (Marfa, 2009).
The natural trade has been the beginning of the mutual economic relationships. As developing economies; China needs energy, and Africa needs investment and infrastructure. Ethiopian Prime Minister Meles Zenawi’s speech in 2012 when china was building Africa Union building in Addis Ababa claimed “ China, its amazing re-emergence and its commitments for a win-win partnership with Africa is one of the reasons for the beginning of the African renaissance.” As such, since 2000, the trade between Africa and China increased from 10$ billion to 199$ billion in 2012, an astonishing rate. In 2012, the import from Africa to China was $113 billion, from China to Africa $85 billion. (Hanauer, Morris 2014).
• Import rates
China for the especially last 10 years became growing trade partner of Africa; in 1995 trade rate was %5, in 2012 %13 of the total trade share; European union in 1995 %48, in 2012 %33; so, there is a clear decreasing trade volume with the western countries:
It is not surprising that overwhelmingly 87%, Chinese imports from African counties originate from oil-natural resources-rich nations; South Africa, Angola, Libya, Congo based on the fact that China became the second largest petroleum products consumer (Eisenman, Kurlantzik, 2006); which is also the indication of still poor African domestic production capacity. Thus, China strives to boost imports from Africa, the poor countries are endowed with tariff-free access to Chinese market (Shelton, Kabemba, 2012):
• Export Rates
As the table below shows while west is still Africa’s most important export destination, it is predicted to remain same or decline. On the other hand, China, with its export rate of 1% in 1995 to 12 % in 2012, will increase its share in the bilateral trade:
• Import-Export By Sector
China’s trade with Africa consists mainly of oil and mineral trade, mine ores and oil covers 86% of the imports while exports suits to the African demand of economic development tolls such as machinery, manufactured goods etc. Machinery and related products show infrastructure investment and other economical production tools for the developing industry of Africa; besides, the prices of the machines are relatively cheaper than their western counterparts:
As seen from the graphics, main exports to Africa is machinery, transportation equipment, high-tech goods and manufactured or finished goods while import is largely petroleum, iron, copper or other low-tech manufactured goods, which leads to a trade imbalance in favor of China. However, China’s win-win solution to this economic imbalance claimed by some African authorities has been to agreement to limit textile exports to Africa, to provide skills upgrading and training to advance African competitiveness in the global markets (Shelton, Kabemba, 2012).
D-) African Governing Problems
The economic growth and resource hunger in both developed and developing nations will lead to more rivalry in Africa. As for Africa, they are supposed to set a sustainable economic growth environment from its natural resources export. However, it is not fair to say they have used effectively revenues from natural resources. Africa has 50 % of the world’s reserves of key minerals (Jonah, 2005). On the other hand, Africa does not get enough capital inflows to Africa; its total share of global investment in resource extraction is just 15% (Shelton, 2014). The major reason for this is its problems with governance, property rights and high cost of doing business in Africa. The governments in Africa are sometimes acting more as landowner rather than an engineer of the economic development process, using limited resources but fails to plan a sustainable economic development plans, just taxing revenue and rent-seeking from the oil companies. Thus, although economical push by China on Africans, those governing problems can limit the win-win strategy even if not stop completely.
The bright side is that with the Chinese infrastructural investment and Chinese companies operations in the region, this equitation has started to change and Africans, as expressed above, see China as a role model and they are willing to trade its natural resources in exchange for infrastructural projects by Chinese companies.
E-) Chinese Trade and Investment
Even though it is quite clear that China’s primary concern in Africa is its abundant resources, it would be inadequate to think of a China in Africa focusing just on resources of the black continent. Long-term trade concerns and increasing interests in Africa of China led to unavoidable investment on infrastructure, science and technology. On a visit to Africa, President Hu Jintao declared trade agreement comprising of automotive investment in Namibia, fruit trade in South Africa, tourism in Seychelles and duty-free goods in Mozambique; bilateral trade grew from 10$ billion in 2000 to 733.11 billion in 2007 (Wu, 2007).
Chinese investment in Africa is a natural result of Africa-China trade. China FDI stock in Africa increased from 1.5 billion in 2005 to 21.23 billion in 2012 (Hanauer, 2014). Even though investment in Africa is 2.9 percent of Chinese foreign investment, it contained 81% of all Africa (Wu, 2007). China Development Bank and China Exim Bank are responsible for the investment in Africa operations, the credit is directed to Chinese companies in Africa rather than African Governments or companies. China engages in economical development of Africa via tech-transfers, infrastructure projects and student exchange programs, too.
China heavily invested in power and transportation sector with its vast experience on construction industries, and the extraction industries require transportation, communication and manufacturing centers for natural resources; all of which depend largely on a good infrastructure capacity of the Africa. Chinese Industry got 30$ billion worth of infrastructure projects (Fues, Grimm, 2006). Through these investments projects, both China and Africa have become the winners of the lucrative trade. As seen in the graphic below, year-by-year, Chinese infrastructure financing has grown:
Zambia and Tanzania benefited from Chinese investment on development of TAZARA, Tanzania-Zambia Railway, linking Zambia’s rich copper belt to the coast of Dar Es Salaam. This project was 405 $ million interest free loan project.
In 2001, Beijing made an agreement on debt remittance with Zambia government. The purpose was to support Zambian development process and enhanced China’s soft power in the continent. In 2007, China cancelled 200$ million debt of Zambia. (Shelton, Kabemba, 2012).
In 2006, China built up Road and Bridge Regional headquarter in Kenya and fixed the roads in Angola destroyed during civil war (Wu, 2007).
In 2004, China provided an infrastructure loan to Angola, and since then, high-ranking official visits take place and signed political, diplomatic, economic and socio-cultural agreements. China contributed to Angola’s infrastructure program; loans are reimbursed back with oil (Shelton, Kabemba, 2012).
IN 1997, China provided 20 $ billion fund was provided to Chinese Companies to do business in Mozambique. In 2007, Hu jiato gave a futher 170$ million of loan and made agreements on agriculture, technology, education, economy and exploitation of natural resources. (Shelton, Kabemba, 2012).
The relationship between individual countries and China are not seen as an exploitative by Africans; and on the contrary, like Mozambique President said “it is partnership benefiting both sides”. (Shelton, Kabemba, 2012).
In 2010, new parliament building in Malawi (Burgess, Grimm, 2011).
In 2007, new parliament building in Lesotho (Burgess, Grimm, 2011).
China’s arm deal with Africa is another important trade item for both sides. A lot of regimes in Africa that have been put sanctions on by the west turn their face to China to meet their ever-growing need. Between 1996-2003, China weaponry trade to Africa was second to Russia. In 2004, Zimbabwe purchased 6 military aircrafts and a radar system. In 2005, Zimbabwe bought 100 military vehicles and 12 military planes more. Sudan is also China’s arm equipment client, buying tanks, planes, grenades etc. In 1998, China violated UN Embargo and sol 1$ billion worth arms to Ethiopia and Eritrea (Eiseman, Kurlantzick, 2006).
The repayment of the loan of infrastructure is tied to the future extraction of minerals or oils from the recipient country in case the re-financing guarantee is low, and the risk of collecting back the loan is high. China especially makes infrastructure investment in the resource-rich countries such as Nigeria, Angola, and Sudan etc. As understood, China follows a strategy by using incentives, investments, and its soft power to get access to the continent’s vast resources. By the way, the western criticism that China pursues its self-interest, damaging efforts to promote human rights, regional peace, rule of law and free market economy falls on deaf ears as long as China and African states get what they want. Besides, China and Africa are similar in the way that they fight against poverty; in this context, China is a proven role model for Africans to follow the example of rising out of poverty without western imposition of human rights, democracy, rule of law etc. China’s desire to stimulate African economies both with trade and investment to increase Chinese products’ demand in the market via win-win policy and no political strings attached is welcomed by the continents’ governments. So, China, in opposed to the West, does not impose any unrealistic conditions on loans, investment or aids and there is no political impediments on any economic engagement for African to cooperate with China. China’s only political demand is to be recognized as one China, not Taiwan. Except this, there is no any kind of political imposition, and China advocates equal relationship and stay out of any admonishments or patronizing behavior. African nations also realize the hypocrisy when the west criticize and push them to contain China on the continent and at the same time support their companies to get market share in China.
As a result of increasing bilateral trade and economic development of the continent, Africa treats Chinese officials and traders like a super power, a show of respect, which was enjoyed by just western companies beforehand (Eiseman, Kurlantzick, 2006).
Year
Total trade volume
Trade with Africa
Weight
2007 21738.3 733.11 3.4%
2006 17606.9 554.64 3.2%
2005 14221.2 397.4 2.8%
2000 4743 10 0.2%
China’s trade volume with the world and with the Africa (billion USD), (Source: Ministry of Commerce of the People’s Republic of China)
F-) China Aid To Africa
China’s aid and loans are appealing for African nations for several reasons:
1. There were no conditions on governance, fiscal discipline, human rights or other political measures insisted by West.
2. China does not use a country’s debt to control its economy, it just cancelled it several times; in 2000, the debt cancellation amounted to reached to 1.3$ billion to 31 African nations.
3. China gave export credits to Africa, which diversified its source of finance (Ayodele, 2014).
China’s more that 50% of aid goes to Africa as part of development program (Shelton, Kabemba, 2012). Through investment, loans, and aids, China wins African Nations to its side; World Bank attaches aid to good governing and democracy related governance while China has almost no political conditions required for aid policy. According to Centre for Global Development, a Washington-based institution, Chinese aid to Africa amounts to 75$ billion in 50 countries in Africa between 2000-2011, financing for infrastructure increased from 1$ billion in 2003 to 7$ billion in 2006 (Sotolo, 2014). However, there are some complications about the aid policy of China: China establishes aid to build up infrastructural or constructional policies, such as sports stadium in Gambia and Sierra Leone which in turn benefits Chinese companies operating in Africa. Even if these projects are conducted by Chinese companies, the African people’s lives also get easier via these deals.
China has turned the loans into grants, writing off 1.2$ billion debt in 2000, 750$ million worth of grant was provided in 2003. Ethiopian President Meles Zenawi expressed his gratitude, which is in the best interest of China in its increasing soft power in the region. China’s prominence via debt relief, grants and aid is a useful tool for both sides to lay the foundation of more lucrative business environment in the future. China also provides scholarship to African students, 1,793 students were granted in 2003 alone, representing one-third of total foreign students in China. Chinese medical schools and physicians give training to African doctors and give medicines and medical equipment free to almost all African countries (Eiseman, Kurlantzick, 2006). The aid is allocated not just via monetary basis; China government defined 16 African nations as tourism destinations such as Kenya, Ethiopia and Zimbabwe; in 2004 Chinese tourist to Africa increased from 11,000 to 110,000 in 2005 (Eiseman, Kurlantzick, 2006). Thus, tourism revenue of Africa surged dramatically accordingly (Eiseman, Kurlantzick, 2006).
Rwanda’s finance minister expressed his pleasure with China’s aid without any precondition like improving human rights etc. Sudanese bureaucrats thanked to China and described Beijing as an alternative global power.
Country Date of first aid agreement Amount (US$ million)
Algeria 1958 100
Egypt 1958 193
Ghana 1961 81
Mali 1961 148
Somali 1963 220
Tanzania 1964 534
Kenya 1964 91
Burundi 1964 125
CAR 1964 56
Congo 1964 205
Uganda 1965 77
Mauritania 1967 239
Zambia 1967 372
Table shows only 13 African countries receiving Chinese aid in the 1960s(Source: Ministry of Commerce of the People’s Republic of China)
Country Date of first aid agreement Amount (US$ million)
Sudan 1970 230
Equat.Guinea 1971 18.7
Ethiopia 1971 155
Guinea 1971 161
Sierra Leone 1971 94
Togo 1972 77
Tunisia 1972 97
Benin 1972 72
Mauritius 1972 48
Nigeria 1972 3
Rwanda 1972 56
Burkina Faso 1973 92
Cameroon 1973 124
Chad 1973 77
Senegal 1973 108
Niger 1974 64.7
Gabon 1975 26
The Gambia 1975 36
Guinea-Bissau 1975 18
Mozambique 1975 116
Sao Tme-Prcp 1975 12
Botswana 1976 19.4
Comoros 1976 10.3
Morocco 1976 32
Cape Verde 1977 17.6
Liberia 1977 37.4
Seychelles 1978 8.1
Djibouti 1979 12.9
This table shows 30 countries receiving Chinese aid in the 1970s(Source: Ministry of Commerce of the People’s Republic of China)
Conclusion
China’s economical development after 1978 has had impressive implications both on China and the world. With it’s the most crowded population and strategy of mobilizing these human resources into the industry, China has created the second largest economy in the world. This phenomenal success brought with itself a huge natural resource demand, and Africa with resource-rich nature has provided an important opportunity to meet China’s need. In the past, the relationships, till 1970s, were shaped by ideological considerations. After serious re-structuring itself, beginning with Xeng Dioping era, China has used all of its energy on economic-centered development process for both its domestic and foreign relations. From this perspective, the complementary relationship between China with its sufficient capital, manufacturing export base, constructional and infrastructural experience and Africa with its rich-resources, poor manufacturing and insufficient capital for infrastructure presents an impressive win-win policy for each party involved. China’s growing demand for raw materials increases prices, which also benefits African nations. The low-interest loans provided by China can be concern for damaging conditional economic imposition based on human rights, democracy, rule of law or marketing economy etc. leveraged by the west on Africa. However, the undeniable fact is that Africa has both learned and increased its prosperity considerably compared to past with the help of China’s emerging global power. Through the massive infrastructural investment program in the continent, Africa achieved to have infrastructure upon which its manufacturing capacity can be built. The unconditional loans and aids, if managed effectively, have potentials to turn the virgin industrial bases of Africa into a developing giant and to lift the millions of poor families out of poverty.