Chinafrica (15) Watching for PRC Influence in Africa

Is China Annexing Africa?

Posted By admin On October 15, 2007 @ 2:38 pm In Investing in Asia,
Africa, volatile, Chinese Investments, China, Global Markets, Global
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Trade between China and Africa hit a new high of $55.5 billion last
year, up 40% from the year before. A special report from Tim Bennent and
our U.K. affiliate, MoneyWeek Magazine, explores Beijing's motivations
for upping its trade relations in Africa.

The latest project to hit the headlines is a $5 billion offer from the
Chinese government to fund roads, railways, hospitals and clinics in the
African Congo. Elsewhere, China is already "the biggest investor in the
Sudan," says the Seattle Times. In Freetown, the capital of Sierra
Leone, office blocks, military headquarters and a refurbished stadium
are all the work of planners from Beijing. In Uganda, Chinese money
built the new State House.

While in Zambia, an "economic partnership zone" that will attract $800
million in investment was promised by the Chinese president on a recent
state visit. Even Zimbabwe's international pariah, Robert Mugabe, has
declared: "We have turned East, where the sun rises, and given our backs
to the West" - perhaps grateful for Chinese assistance in cultivating
crops on land seized from white farmers.

Sino-African trade hit a new high of $55.5 billion last year, up 40%
from the year before. In short, as Granta magazine put it, "the Chinese
are everywhere."

What's China's Interest in Africa?

Beijing is interested in Africa because of oil and mineral rights.
China ranks second to the United States in its consumption of oil, and
needs huge quantities of other commodities to sustain its ongoing boom.
So it's no surprise that China president Hu Jintao is anxious to foster
relations all over the resource-strewn African continent.

Oil-rich countries such as Angola - which accounts for around 14% of
Chinese imports - plus Chad, Nigeria and Sudan have seen investment from
Chinese companies for years. About 60% of Sudan's oil goes to China.

Money has poured into a booming copper industry in Zambia and the
Congo, while the Chinese are keen buyers of timber from such states as
Cameroon, Mozambique and Liberia. As J. Stephen Morrison at the Centre
for Strategic and International Studies sees it, "those places that are
energy-rich and mineral-rich are awash in cash."

What Does Africa Get in Return?

The reason why China is "winning friends in Africa" is simple, says
economist Philip Alves. Many African countries that have struggled to
access funds from the International Monetary Fund (IMF) and the World
Bank find the Chinese easier to deal with. For the poorest continent on
the planet, offers from Beijing - such as those made at last November's
China-Africa Cooperation Forum for billions of dollars worth of
preferential loans, buyer's credits and the training of 15,000 African
professionals - are very attractive.

All the more so when Chinese money rarely comes with any of the
political conditions attached to Western funds. As Sudan's energy
minister noted recently: "With the Chinese, we don't feel any
interference in our traditions or politics or beliefs."

Meanwhile, a flood of cheap Chinese goods from motorcycles to T-shirts
to kitchen utensils leads one ambassador to comment, "The Chinese are
doing more than the G8 to make poverty history."

There are Risks

Some argue that closer economic and trade ties will lead to
"neo-colonialism", where African resources are plundered by Beijing and
sent back in the form of Chinese goods. They point out that an influx of
affordable Chinese goods doesn't raise the wealth of most impoverished
Africans and actually makes life harder for local firms. As a Zimbabwean
newspaper owner put it, "If the British were our masters yesterday, the
Chinese have come and taken their place."

Another concern is that China's links to - and implicit support for -
controversial regimes will undermine efforts to introduce democracy and
improve human rights in countries such as Angola, Nigeria and Sudan. For
example, data on arms sales produced by the Council on Foreign Relations
are highly troublesome. Over 10% of Africa's weapons purchases from 1996
to 2003 were from China, with big deals struck with states such as
Sudan, Ethiopia and Zimbabwe.

So is this just Africa being exploited yet again?

Not necessarily. As Lindsay Hilsum says in Granta, poverty remains
Africa's greatest and most urgent problem. Western countries may rail
against Beijing's business practices, but the fact is that Africa needs
trade and - in contrast to Western capital - China's cash arrives
quickly and "with no colonial hangover and no complex relationship of
resentment."

Today, many African economies are enjoying their fastest growth rates
in 30 years, largely on the back of Chinese demand for raw materials.
Chinese investments in African infrastructure have very deep roots,
including some that reach back to large projects in the 1960s and 1970s.


And Granta's Hilsum says that many Africans look at China and see
success rather than threat. World Bank figures suggest that China has
lifted 400 million of its own people out of poverty in the last 20
years. Could Beijing do the same for them, Africans wonder? Unless
Western institutions up their game in the region (one African diplomat
observed, "If a G8 country had wanted to rebuild our stadium, we'd still
be holding meetings"), China could provide opportunities for Africa that
Europe and the United States have often failed to deliver.


Article printed from Money Morning: http://www.moneymorning.com
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