CHINA AND AFRICA: THINK AGAIN - carleton.ca

CHINA AND AFRICA:

THINK AGAIN

Professor Deborah Brautigam

School of Advanced International Studies,

Johns Hopkins University

Washington, DC

A BIT ALARMING…

“…ONCE UPON A TIME…”

--- Financial Times

CHINA DOES PRESENT A

CHALLENGE

MAJOR AFRICAN

CONCERNS:

BUT PERHAPS THE BIGGEST

CHALLENGE:

Africa is rich.

We haven’t figured out a way to link

Africa’s riches to its development. The

Chinese are actively trying to do just this.

CHINESE

AMBASSADOR IN

NIGER:

CHINA AND AFRICA:

THE FIRST WAVE

1st Wave

CHINA AND AFRICA:

THE SECOND WAVE

East Wind Blows in Africa: 1950s & 1960s

China vs. USSR vs. USA

CHINA AND AFRICA:

THE THIRD WAVE

CHINESE LEADERS

Visits to Africa, 1995-2009

Premier Li Peng

1995, 1997

President Jiang Zemin

1996, 1999, 2000, 2002

Premier Zhu Rongji

2002

Premier Wen Jiabao

2003, 2006

President Hu Jintao

2004, 2006, 2007, 2009

South Africa

Namibia Zimbabwe

Botswana

Mozambique

Zambia Angola

Tanzania

D R Congo Kenya

Congo

Gabon

Uganda

Somalia

Ethiopia

Sudan

Egypt Libya

Tunisia

Morocco Republic

Chad

Niger

Mali

Mauritania

Western Sahara

Central Af. Republic Cameroon

Nigeria

Burkina Faso

Swaziland

Lesotho

Burundi

Rwanda

Equatorial Guinea Sao Tome and Principe

Malawi

Djibouti

Cote D’Ivoire

Ghana

Togo

Benin

Liberia

Sierra Leone

Guinea

Guinea-Bissau

Gambia

Senegal

Mauritius

Seychelles

Madagascar

Cape Verde

Eritrea

Algeria

WHAT ARE THE DRIVERS OF

CHINESE ENGAGEMENT IN

AFRICA TODAY?

1. STRATEGIC DIPLOMACY

2. BUSINESS

TRADE

Trade: Exports to Africa, China (US Bil $)

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade: Exports to Africa, China vs. US (US Bil $)

Bar: China

Line: USA

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade: Imports from Africa, China (US Bil $)

0

20

40

60

80

100

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade: Imports from Africa, China vs.

US (US Bil $) Bar: China

Line: USA

0

20

40

60

80

100

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

INFRASTRUCTURE

CONTRACTS

Chinese infrastructure contracts, Africa (Turnover: US bil $)

0

5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008 2009 2010

Who is Financing Chinese Contracts?

• World Bank and African Development Bank

• Bilateral Donors

• African Governments

• Private Businesses (Chinese and non-

Chinese)

• Chinese Government (20%)

Construction/Infrastructure

FOREIGN DIRECT

INVESTMENT (FDI)

How Much

to Africa?

Chinese FDI to Africa, % of Global FDI

0

10

20

30

40

50

60

70

80

2003 2004 2005 2006 2007 2008 2009 2010

Challenges

2009 Sinopec buys Addax Petroleum for $7.2 bn.

Addax is “Swiss”, but assets in Nigeria, Gabon, Cameroon,

Iraq

CHINA’S LARGEST

INVESTMENT IN AFRICA?

$5.4 billion for 20% of South Africa’s Standard

Bank (2008)

THREE MYTHS OF

CHINESE ENGAGEMENT

MYTH 1. “CHINESE AID IS HUGE”

Africa: Official Development Assistance (ODA)

2008 (US$ bn)

USA, 7.2

EC, 6

World Bank, 4.1

France, 3.4

Germany, 2.7

UK, 2.6

Japan, 1.6

China, 1.2

Source: OECD-DAC Statistics. *Chinese figure is author’s estimate.

In billion US$

0

5

10

15

20

25

30

35

40

45

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$ billion

China Eximbank

(Annual Disbursements, 2002-2011)

Export Seller's Credits

Export Buyer's Credits

Letters of

Guarantee

What about China’s Huge Commodity-

backed Infrastructure Credits?

• Ghana, Angola, DRC

• Widely misunderstood as “aid”

• Market-rate line of tied export buyer’s credit

• Secured by exports (Japanese model)

• “Not subsidized and not concessional”

Angola: Two Oil-Backed Lines of Credit

(2004)

Amount Interest

rate

Maturity Grace

Period

China

Eximbank

$2.0 bil LIBOR

plus 1.5

12 years Until end

of each

project

Standard

Chartered

Consortium

$2.35 bil LIBOR

plus 2.5

5-7 years none

China Eximbank (2004-2007)

• Ag. Machinery & equipment $22m

• 4 Irrigation systems $93m

• Rebuild Luanda’s electrical grid: $45m

• Water treatment system repair in 3 provincial cities: $21m

• 5 ag. training institutions

• 6 polytechnical colleges

• 5 secondary schools $26m

• Kifangondo-Caxito road: $211m

• 86 ambulances

• 6 provincial health centers

• Rehabilitate 7 regional hospitals

• … etc. etc.

Standard Chartered’s Loan Financed…

? ?

RISKS AND BENEFITS?

MYTH 2. “CHINA IS LEADING THE

GREAT LAND GRAB IN AFRICA”

MYTH 3: “CHINA, INC.”

DRC EXAMPLE

Contrasts

The West Believes: • Countries need aid, good governance to develop

• Our aid is driven by altruism

• Conditionality can improve governance

• Africa needs to be saved.

The Chinese Believe: • Countries need investment, infrastructure to develop

• Aid is about diplomacy, soft power

• Governance improves slowly, as economy develops

• Africa is very interesting for business

Contrasts

What shocks us:

China can build a

presidential

palace in Sudan

and pay for it

from aid budget

What shocks

them: Western

experts live in 5

star hotels & rich

overseas lifestyle,

paid out of the aid

budget

Why is China Different?

Foreign policy framework

Core ideas about development and gov.

Experience as a developing country

East Asian developmental state

Blog: chinaafricarealstory.com