INSIDE OUT

Unravelling the myth of China’s engagements in Africa

China’s overtures in the continent are not just about exports or imports but something that combines the strong features of its private companies with those of multilateral development banks

PUBLISHED : Sunday, 07 August, 2016, 5:23pm
UPDATED : Sunday, 07 August, 2016, 7:00pm

It was 1982 and I had been seconded by the Financial Times to Beijing to train the greenhorn journalists in China Daily. Back then, the only outside news agency clacketing in the office was Xinhua. And story after story was about visiting leaders from Africa.

I complained and complained – not about the fact that so many African presidents were passing through Beijing, but that the stories were always focused on just one thing – what the leaders ate, dish by dish, with Deng or other senior Chinese officials in either the Great Hall of the People or the Zhongnanhai. The China Daily editors never seemed to catch the irony when I noted that Chinese food was very good, but surely not so good that it justified visits by so many African leaders.

No matter how long the visit, nor how large the delegation, all we learned from the Xinhua reports was the intricate detail of what they ate.

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Today, three and a half decades later, it is obvious that much was discretely being done away from Beijing’s grand banquet halls. China has become Africa’s largest trading partner, with annual two-way trade passing US$200 billion. Chinese investment in the continent has jumped almost four-fold since 2008, to more than US$26 billion a year. Old colonial powers like the UK can still boast a larger long term stock of foreign investment in the dark continent, but that lead is fast being eroded.

Significant and fast-growing as this economic relationship is, many myths confuse understanding of China’s economic relationship. Of course the first myth is that China and Chinese companies are “Johnny-come-latelies” in Africa. As my own China Daily memories confirm, China’s interest in building close economic ties with Africa was being forcefully pursued four decades ago. Not for nothing was a towering Mao Zedong so often depicted in paintings and ceramic tributes as a father to the world’s peoples, with men and women of all races clustered around him holding aloft Mao’s “Little Red Book”.

A second myth is that China’s charge into Africa is being led by state owned enterprises clutching onto Chinese leaders’ coat-tails. This may have been true three decades ago, but it is not so true today. The high-profile projects focused on oil and gas, on minerals, and on big infrastructure projects right back to the TanZam Railway are of course being led by state-owned companies, with strong financial backing from the Beijing government. But China’s investment is much more pervasive and “democratic” than that, with an estimated 1million Chinese working long-term inside Africa, running restaurants, running hotels, and import-export trading.

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A third clear myth is that China has an overinflated obsession with Africa. Trade and investment into the continent may be growing fast, but it remains small in the bigger picture of China’s economic relationships with other parts of the world. Last year, China’s exports to the world amounted to US$2.28 trillion – but Asia accounts for 40 per cent of this, and the US and Europe a further 40 per cent. The markets of north Africa and the Middle East account for 6 per cent, and Latin America a further 5.7 per cent. Exports to sub-Saharan Africa last year amounted to just US$78 billion – or 3.4 per cent of China’s total.

So it seems that China’s reputation for engagement in Africa looms rather larger than the reality. Whatever the pejorative press in the west may say about China’s “new imperialism” or of Africa becoming “China’s second continent”, the reality is a tad more balanced. As David Dollar at Brookings, and a former World Bank head in Beijing, recently noted, China may be popular across Africa – with a 70 per cent “popularity rating” – but it can barely be accused of overwhelming Africa. Its investment stock accounts for just 5 per cent of the continent’s total.

But David Dollar notes distinct characteristics in China’s engagement in Africa too, which makes China’s presence different: “Chinese investment is indifferent to the governance environment,” he notes. This point was endorsed by the Economist early this year: “China has few political ambitions in Africa. It cooperates with democracies as much as with authoritarian regimes. Its aid budget is puny. The few peacekeepers it sends stay out of harm’s way.” In short, its engagement has a clearly mercenary quality – China needs minerals, so it buys minerals. It needs oil and gas, so it invests in oil and gas, whatever the political complexion of the local regime. It is not playing “The Great Game”, as were the aspiring European colonial powers in the 18th and 19th centuries.

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The relative absence of aid as a source of political leverage and economic development is also distinctive, and was emphasised forcefully a few months ago by Jin Liqun, the Chinese president of the new Asia Infrastructure Investment Bank (AIIB): “The Chinese experience illustrates that infrastructure investment paves the way for broad-based economic social development, and poverty alleviation comes as a natural consequence of that,” he says. “We want to create something new that combines the strong features of private companies with those of multilateral development banks.” This sits at the heart of why China is so heavily involved across the length and breadth of Africa in building roads and railways and ports.

But there is another distinctive and seldom-noted characteristic defining China’s engagement in Africa, carefully elaborated to me inside the China Daily nearly four decades ago: Chinese companies have forged a presence in African countries because to do the same in the mature and developed economies of Europe and North America would have been prohibitively expensive. Europe’s markets may have been large and rich, but they were also dominated and ferociously defended by rich and deeply entrenched local companies which had deep pockets and political connections to keep out upstart Mainland companies. Easier then, and cheaper, to build Chinese brand reputations in the poor and relatively uncompetitive markets of the developing world – south America and Asia as much as Africa.

Big western companies might back in 1980 have been dismissive of this timid strategy of winning market share and brand reputation in such tiny and troubled markets. But as Chinese companies build significant presence in these now-not-so-insignificant markets, it may be Chinese companies – and African consumers – that have the last laugh.

David Dodwell is executive director of the Hong Kong-Apec Trade Policy Group

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