China and africa

CHINA AND AFRICA: THINK AGAIN

Professor Deborah BrautigamSchool of Advanced International Studies, Johns Hopkins UniversityWashington, DC

A BIT ALARMING…

1984: Liberia

1984: Liberia

“…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:

THREE WAVES& FOUR MYTHS

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

China’s UN Peacekeepers

2. BUSINESS

TRADE

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

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

10

20

30

40

50

60

70

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

Bar: ChinaLine: USA

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

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20

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60

70

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

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

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40

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120

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

Bar: ChinaLine: USA

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

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40

60

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100

120

INFRASTRUCTURE CONTRACTS

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

2003 2004 2005 2006 2007 2008 2009 20100

5

10

15

20

25

30

35

40

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

Construction/Infrastructure

Fiber-Optic Networks Wind Farms & Telecoms

FOREIGN DIRECT INVESTMENT (FDI)

2003 2004 2005 2006 2007 2008 2009 2010 20110

1020304050607080

Chinese Global FDI Outflows (US $ bn)

How Much to Africa?

Diversity of Investments

CHINA’S LARGEST INVESTMENT IN AFRICA?$5.4 billion for 20% of South Africa’s Standard Bank (2008)

FOUR 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$

Export Credits Compared:Major Export Credit Agencies, 2007

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China Exim US Exim JBIC EGCD

$ B

il

Guarantees

Buyer's Credits

Seller's

Credits

Export Credit

Insurance

Guarantees

Guarantees

Loans

Overseas

Investment

InsuranceSupplier

Credit

InsuranceCredits

MYTH 2. “CHINA USES AID TO GET ACCESS TO NATURAL RESOURCES”

Chinese Aid Agreements 1960-2007

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Sudan* 1958 ◘ ◘ ● ◘ ● ● ◘ ● ◘ ● ◘ ◘ ◘ ● ● ◘ ● ◘ ● ● ● ◘ ● ●Guinea 1959 ◘ ● ◘ ● ● ◘ ● ◘ ◘ ◘ ● ● ● ● ● ● ● ● ● ● ● ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ●Ghana 1960 ◘ ● ● ● ◘ ● ● ● ● ● ● ● ● ● ◘ ◘ ◘ ● ◘ ◘ ◘ ●Mali 1960 ◘ ● ◘ ● ◘ ◘ ◘ ● ◘ ● ● ● ● ● ● ● ● ● ● ● ◘ ◘ ● ● ● ◘ ◘ ● ● ◘ ●Somalia 1960 ◘ ● ◘ ● ● ◘ ◘ ◘ ● ● ◘ ● ●Tanzania 1961 ◘ ◘ ◘ ◘ ◘ ● ● ● ● ● ◘ ◘ ● ● ◘ ◘ ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ● ◘ ●Uganda 1962 ◘ ● ◘ ● ◘ ◘ ◘ ● ◘ ◘ ● ◘ ● ● ◘ ◘ ●Kenya 1963 ◘ ◘ ◘ ● ● ◘ ● ◘ ● ● ◘ ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ●Benin 1964 ◘ ● ● ● ● ● ● ● ● ● ◘ ◘ ● ◘ ◘ ◘ ◘ ●Burundi 1964 ● ◘ ● ● ● ● ● ● ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ●C.Afr. Rep. 1964 ● ◘ ● ● ◘ ● ● ● ◘ ◘ ◘ ◘ ◘ ● ◘ ◘ ●Congo-B 1964 ◘ ◘ ◘ ● ◘ ◘ ● ◘ ● ● ◘ ● ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ●Zambia 1964 ◘ ◘ ● ◘ ● ● ● ● ● ● ◘ ● ◘ ● ● ◘ ● ◘ ● ◘ ● ◘ ◘ ◘ ● ● ◘Mauritania 1965 ◘ ● ◘ ● ◘ ◘ ● ◘ ● ● ● ● ● ● ◘ ◘ ◘ ● ● ◘ ●E. Guinea 1970 ◘ ◘ ● ◘ ● ● ● ● ● ◘ ● ● ● ◘ ● ◘ ●Ethiopia 1970 ◘ ◘ ● ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ● ● ◘ ◘ ◘ ◘ ● ◘ ● ●Cameroon 1971 ◘ ◘ ◘ ● ● ◘ ● ● ● ◘ ● ● ● ● ◘ ◘ ◘ ● ◘ ◘ ◘Nigeria 1971 ◘ ◘ ◘ ◘ ◘ ◘ ◘ ●Rwanda 1971 ◘ ◘ ◘ ● ● ● ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘Senegal 1971 ◘ ● ● ● ◘ ◘ ● ● ● ● ● ● ● ◘ ●Sierra Leone 1971 ◘ ● ● ◘ ◘ ◘ ● ● ◘ ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ● ◘ ●Chad 1972 ◘ ◘ ● ● ● ● ◘ ◘D. R Congo 1972 ◘ ● ● ● ● ● ● ◘ ◘ ◘ ● ◘ ◘ ◘ ◘ ● ●Madagascar 1972 ● ● ◘ ◘ ● ● ● ◘ ● ● ● ◘ ◘ ◘ ● ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ● ●Mauritius 1972 ◘ ● ◘ ● ◘ ● ◘ ● ● ● ◘ ● ● ◘ ◘ ◘ ◘Togo 1972 ◘ ◘ ● ● ● ● ● ● ● ● ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ●B. Faso 1973 ◘ ● ◘ ◘ ● ◘ ● ◘ ● ◘ ◘G.Bissau 1974 ◘ ◘ ● ● ● ◘ ◘ ◘ ◘ ● ● ◘ ●Gabon 1974 ◘ ◘ ◘ ● ● ● ◘ ● ● ◘ ● ● ◘ ● ● ◘ ● ◘Gambia 1974 ◘ ● ● ● ● ●Niger 1974 ● ◘ ● ◘ ● ● ◘ ● ◘ ● ◘ ◘ ◘ ◘ ● ◘ ● ◘ ◘Botswana 1975 ◘ ● ● ● ● ◘ ◘ ◘ ◘ ● ● ● ◘ ● ● ● ● ◘ ●Comoros 1975 ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘ ● ●Mozambique 1975 ◘ ◘ ● ◘ ● ● ◘ ◘ ◘ ● ◘ ◘ ◘ ◘ ◘ ◘ ● ●S.Tome/Pricp. 1975 ◘ ● ● ● ◘ ● ●Cape Verde 1976 ◘ ● ● ● ● ● ◘ ● ◘ ◘ ◘ ● ◘ ◘ ◘ ●Seychelles 1976 ● ◘ ◘ ● ◘ ◘ ● ◘ ● ● ◘ ◘ ◘ ● ● ●Liberia 1977 ◘ ◘ ● ◘ ● ● ◘ ● ◘ ◘ ●Djibouti 1979 ◘ ● ◘ ◘ ◘ ● ● ◘ ◘ ◘ ◘ ● ◘ ◘ ◘ ●Zimbabwe 1980 ◘ ◘ ◘ ◘ ◘ ● ◘ ◘ ● ● ◘ ◘ ● ◘ ◘ ◘ ●Angola 1983 ◘ ● ◘ ● ● ● ● ◘ ◘ ◘ ◘ ◘ ◘ ◘Cote d'Ivoire 1983 ● ● ● ● ● ◘ ◘ ● ◘ ◘ ● ● ●Lesotho 1983 ◘ ● ◘ ● ● ◘ ◘ ◘ ◘ ◘ ◘ ◘ ◘Namibia 1990 ◘ ◘ ◘ ● ◘ ● ● ◘ ● ●Eritrea 1993 ● ● ◘ ◘ ◘ ◘ ◘ ● ●S.Africa 1998 ● ◘ ◘Malawi 2008Swaziland

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 CharteredConsortium

$2.35 bil LIBOR plus 2.5

5-7 years none

Standard Chartered’s Loan Financed…

? ?

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.

RISKS AND BENEFITS?

MYTH 3. “CHINA IS LEADING THE GREAT LAND GRAB IN AFRICA”

Outward FDI Flows by Industry ($ bn)

2005 2006 2007 2008 2009 20100

2

4

6

8

10

12

14

16

Agriculture

Mining

Manufacturing

MYTH 4: “CHINA, INC.”

Contrasts

The West Believes: • Countries need aid, good governance to develop• Our aid is driven by altruism• Conditionality is good for governance• Africa needs to be saved. Not for business

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

Typical foreign engineers & experts housing in Africa

Chinese Western

Why is China Different?

• Foreign policy framework• Core ideas about development and govt.• Experience as a developing country• East Asian developmental state

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