China in Africa: Realism conquers myth

For three decades now Deborah Brautigam has been covering China’s African engagement, long before it was a fashionable ‘scare issue’ in the West. In this latest offering, she brings her knowledge and experience to bear, in an account at once scholarly and accessible, combining the puncturing of prevalent myths with a realist approach that does not rely on rosy assumptions. China’s involvement is shown to be motivated neither by evil conspiracy nor by altruistic benevolence, but by rational and experience-based self-interest.

China’s strategy, she demonstrates, is based on the country’s own experience of development as a receiver of foreign investment. The model – much criticised by the West when applied by China in Angola and the DRC (Democratic Republic of Congo) – of finance used for development and repaid with resources or the proceeds of their sale, is based on Japan’s investment in China in the 1970s, and on the experience of other East Asian ‘developmental states’.

True, China’s African strategy was devised, by trial and error, to meet three key policy challenges she faced. First, was indeed the need to secure supplies of raw materials, as China’s growth was outstripping its own resources. Second, was the need to reassure world opinion, and especially that of developing countries, that China’s rise was ‘responsible’. Another important diplomatic goal was, of course, to counter the diplomatic challenge of Taiwan. And third, was the need to expand into new markets, upgrade its ‘mature’ domestic industries and build up its fledgling multinationals.

Understanding this strategic approach, Brautigam argues, is key to assessing the vexed question of the impact of Chinese exports on African jobs. Yes, there have been job losses, especially in textiles. But firstly, their extent varies with the ability of firms and industries to restructure in the face of challenges that stem, not from China alone, but from the global market context: And China is willing to help with this.

The example of the Ethiopian shoe industry is one of successful adaptation, with Chinese help after initial devastation by Chinese imports, with the government now aiming to make Ethiopia ‘the leather centre of Africa’. South African textiles by contrast failed to benefit from a voluntary Chinese moratorium on exports, with the slack in the South African market being taken up by other exporters, while the funding that China provided for reskilling was frittered away elsewhere.

In other words, China can be the scapegoat for the failings of local entrepreneurship and effective governance. And secondly, China’s overall strategy actively encourages the ‘international product development cycle’ by which ‘mature’ industries relocate overseas, as home producers move upmarket. This was China’s own experience, and she aims to repeat it in relation to Africa – unlike the USA, where ‘outsourcing’ or ‘going offshore’ arouses fierce domestic protectionist opposition.

In contrast, as Brautigam points out, ‘The Chinese government wants exports of Chinese machinery and equipment to overtake cheap consumer goods in the export mix, moving up the value chain... it wants mature industries to move offshore. Setting up factories that process African raw materials in Africa is part of this strategy.’

Thus contrary to the impression that China is ‘only there for the oil’ [or other raw materials">, Chinese investment in the African manufacturing industry has outstripped investment in mining for each of the past five years.

The author also challenges Western suspicion of the Chinese ‘package deal’ model as applied in the DRC and Angola. With regard to the DRC the IMF’s (International Monetary Fund) objections amount to a rehash of the standard objections to hypothecated taxation: It must be wrong, the argument goes, for a portion of a country’s foreign currency earnings to be earmarked in advance for one particular creditor, necessarily, to the disadvantage of the others and of sound financial practice.

But this apparently prudent argument can hardly apply when the earnings in question flow from investments, which would not have been made without the loan package. There is no ‘diversion’ as the resources are additional.

Typically, Brautigam makes this point not by arguing abstruse economic theory, but with a telling anecdote. On hearing of a BBC report which suggested the deal was ‘unfair’ to the Congolese, ‘Paul Fortin, the Canadian-born director of Gècamines, a lawyer and the man who spent months negotiating the deal with the Chinese, pointed to the ruins of the Belgian mine and replied: “Rubbish. Without the Chinese, all this would just be scenery”.’

But in addition, the other aspect of the deal will also enhance the recipient’s long-term economic viability. The £4 billion Congo loan, for example, will not be paid in cash, but in the form of power plants, a repaired water supply, 32 hospitals, 145 health centres, two hydroelectric dams, two large universities, two vocational training centres, thousands of cheap houses and thousands of kilometres of railway. It will be paid back in copper and cobalt or in the proceeds of their sale, in the future. The DRC’s overall economic capacity will be enhanced: A factor which, as Brautigam points out, is also factored into the calculations of Eximbank and other Chinese institutions.

Experience shows that the Chinese firms involved will also benefit in the longer term as they gain local knowledge and contacts that will stand them in good stead for taking advantage of the renewed economic opportunities, which the deal will have opened up.

As for the widespread complaint that the Chinese employ their own instead of local labour, Brautigam shows that the extent to which this is true varies greatly and that the longer Chinese firms have been operating in Africa, the greater the proportion of local labour they employ.

Similar considerations apply to the Angolan package where, as the author shows, despite Western protestations, there has been no shortage of Western firms eager to deal with Luanda despite supposed conditionality on governance issues. In any case, since Chinese loans are mostly used to fund specific projects on the ground, there is greater certainty that they will not vanish into Swiss bank accounts.

Brautigam also rehearses familiar ground – not, however, as familiar as it should be – on Sudan, where she points out that Japan has actually been a bigger customer for Sudanese oil than China and that India and Malaysia are co-partners with China in Sudanese oil investments. She also documents the significant shifts in China’s stance towards Khartoum. She points out that Western companies, such as Barclays and Anglo-American, have continued to operate in Zimbabwe and that Zimbabwe’s claims about the extent of Chinese support have been reported as fact in Western media when research shows them to be exaggerated.

Her point in these cases is not at all to defend China from criticism where it is merited, but to point to the one-sided way in which China is attacked for sins of which she may be guilty, but no more, or often less, than the countries which criticise her.

On issues such as labour practices and some aspects of agricultural policy, Brautigam is critical of China’s performance or policy, but she also points to China’s ability to modify policy in an intelligently, self-interested response to criticism Brautigam also documents a number of ‘urban myths’, which her own painstaking research has managed to explode.

In one example, she investigated a press report that China would invest US $800 million in modernising Mozambican agriculture. Even with an assistant to plough through four years of local newspapers, she no evidence for the story was found. What she did find was a pledge to locate one of 14 agro-technical stations in Mozambique, at a cost of US $8 million.

In another case, a report that a Chinese company had been awarded the right to farm 100,000 hectares of maize in Zimbabwe turned out to be merely a contract to clear the land and install an irrigation system. Even this project was suspended when the Zimbabwean side proved unable to make the promised payments. Other advertised agricultural deals involving Chinese firms in Zimbabwe turn out to have been turned down by the Chinese side, on grounds of security and business risk.

These well-chosen, illustrative details are typical of the author’s method, which manages to combine a readability – it is accessible to any lay reader – with a wealth of detailed and original scholarship on such issues as the unravelling and aggregation of key statistical information on the exact extent and breakdown of China’s African aid and investment.

The lay reader and the specialist will both gain from this comprehensive and thorough account.

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* Stephen Marks is a freelance writer and researcher, specialising in issues on emerging powers, development and human rights.
* ‘The Dragon's Gift: The Real Story of China in Africa’ by Deborah Brautigam is published by Oxford University Press, 2009.
* Please send comments to [email protected] or comment online at Pambazuka News.