U.S. Assistant Attorney General John Demers discussed the China Initiative and the process for assessing risks posed by Chinese acquisitions or the business operations of Chinese companies in America.
Council on Foreign Relations, "CFR Backgrounders: China in Africa," April 27, 2015
The Council on Foreign Relations published the backgrounder, "China in Africa", to explain Africa's role in China's effort towards rapid industrailization. The piece was written by Christopher Alessi and Beina Xu.
Over the past few decades, China's rapid economic growth and expanding middle class has fueled an unprecedented need for resources. The economic powerhouse has focused on securing the long-term energy supplies needed to sustain its rapid industrialization, locking down sources of oil and other raw materials across the globe. As part of this effort, China has turned to Africa. Through significant investment in a continent known for political and security risks, China has helped many African countries develop their nascent oil sectors in exchange for advantageous trade deals. However, China faces growing international criticism over its controversial business practices, as well as its failure to promote good governance and human rights. At the same time, Beijing's complex relationship with the continent has challenged its noninterference policy in the affairs of African governments.
China's Energy Needs
China's economy, which had averaged an annual growth rate of 10 percent for the last three decades until 2010, requires substantial levels of energy to sustain its momentum. Though China relies on coal for most of its energy needs, its oil consumption is second worldwide, behind the United States. Once the largest oil exporter in Asia, China became a net importer in 1993. The International Energy Agency's World Energy Outlook 2014 (PDF) projects that China will become the world's largest consumer of oil by the early 2030s. According to the U.S. Energy Information Administration (EIA), the country will import over 66 percent of its total oil by 2020 and 72 percent by 2040.
China imports just over half of its crude oil from the Middle East, which holds nearly 62 percent of the world's reserves. According to the EIA, the Middle East supplied 2.9 million barrels per day, or 52 percent of China's imported crude volume in 2013. China's second-largest source of crude imports for that year was Africa, from which it imported 1.3 million barrels per day, or 23 percent. Its largest African suppliers of oil are Angola, Equatorial Guinea, Nigeria, the Republic of Congo, and Sudan. Smaller exporters include Algeria, Chad, Gabon, Kenya, Liberia, and Libya.
In the latter half of 2014, China took advantage of plummeting crude oil prices by filling strategic petroleum reserves to hedge against its heavy reliance on imported energy. But some experts say that China’s slowing economic growth and cutbacks in coal mining may be contributing to the country’s energy slowdown and weakening demand for oil.
While the majority of Africa's exports to China are in oil, it also exports iron ore, metals, and other commodities, as well as a small amount of food and agricultural products. At the same time, China exports a range of machinery and transportation equipment, communications equipment, and electronics to African countries. In 2009, China surpassed the United States as Africa's largest trade partner (WSJ). According to the Chinese Ministry of Commerce, Sino-African trade reached $126.9 billion for 2010, while the trade volume between China and Africa rose 30 percent year-on-year during the first three quarters of 2011, signaling a new record high (ChinaDaily). China's top five African trading partners (CapitalWeek) are Angola, South Africa, Sudan, Nigeria, and Egypt.
China has taken a two-pronged approach in its economic relations with Africa, American University's Deborah Brautigam wrote in Foreign Affairs in January 2010. It has offered resource-backed development loans to oil and mineral-rich nations like Angola, and developed special trade and economic cooperation zones in several states, including Nigeria, Ethiopia, and Zambia. Special economic zones, Brautigam argues, allow African countries to "improve poor infrastructure, inadequate services, and weak institutions by focusing efforts on a limited geographical area."
Access to Oil
In its quest to secure resources, China engages in a form of commercial diplomacy that most other countries can't match, CFR's Michael Levi and Elizabeth C. Economy argue in their 2014 book By All Means Necessary. Beijing pitches vast trade, aid, and investment deals on frequent trips to resource-rich countries, and retains an almost unparalleled ability to provide low-cost financing and cheap labor for infrastructure projects, Economy explains. China has also pursued exploration and production deals in smaller, lower-visibility countries, like Gabon.
Some experts refer to China's financing strategy as the “Angola model,” by which Beijing provides low-interest loans to countries with low credit ratings, and in turn receives favorable rights to develop oil and mining projects. In 2014, Premier Li unveiled an extra funding package totaling at least $12 billion for Africa, extending credit lines by $10 billion and boosting the China-Africa Development Fund by $2 billion. Experts say that most of China's funding has taken the form of infrastructure financing, which is direly needed on the continent; the Chinese central government, including its state-owned banks, said it will provide $1 trillion in financing to Africa by 2025, much of which will go toward infrastructure, including transnational highways, railways, and airports.
Pushback From Africa
Despite burgeoning trade relations, some African nations are beginning to push back against China's resource development activity. Grievances range from poor compliance with safety and environmental standards to unfair business practices and the flouting of local laws. Chad, which built new roads and public buildings with Chinese financial assistance, took a hard line with China National Petroleum after the company dumped excess crude oil in ditches near the capital of N’Djamena in 2013. Gabon also withdrew an oil field permit from a subsidiary of the Beijing-based oil and gas company Sinopec in 2013 due to environmental concerns.
Local African workers have also begun to fault Chinese companies for maintaining unfair labor practices, says Ian Taylor, a professor of African politics at Scotland’s University of St. Andrews. Beijing has “less and less” ability to control these companies, he explains, thus undermining China's official stance that says Chinese investment in Africa “win-win” situation for both sides. Zambia, in particular, has experienced an uptick in civil strife in response to an influx of Chinese companies; in 2012, the country witnessed protests and even deaths of Chinese mine managers over wages and labor practices.
Other African countries have voiced concern over China's continued use of its own labor and equipment in its projects on the continent. In the past two decades, more than one million Chinese citizens have moved to Africa. The impression that China has exploited resources without building up local African economies and society has triggered fierce criticism from some leaders. In September 2011, Michael Sata won Zambia's presidency largely by tapping into anti-Chinese resentments after Chinese managers shot protesters at a large coal mine in southern Zambia one year prior. In 2013, Lamido Sanusi, governor of the Central Bank of Nigeria, compared China’s presence on the continent to “a new form of imperialism.”
China's Policy of Noninterference
Since former Chinese President Jiang Zemin inaugurated China's reengagement with Africa in 1996, China has tried to maintain a policy of noninterference in the domestic affairs of African countries, explains Donald L. Sparks in an April 2011 paper. Other experts highlight the competition between China and the United States for influence on the continent, as well as their differing approaches. “On the technical level, China views development and foreign aid as practical policy instruments to promote political friendship and economic cooperation, while the U.S. attaches clearly stated goals, stringent conditions, and strict criteria to its development programs,” writes Brookings' Sun.
Moreover, the policy of noninterference has freed up China to sell weapons to rogue states like Sudan and Zimbabwe, Richard Dowden argues in his 2009 book Africa: Altered States, Ordinary Miracles. St. Andrews' Taylor says that China rarely attaches any political strings to its assistance to Africa, opening up space for Beijing to “deal quite profitably” with controversial regimes. “In short, by advancing the theme of non-interference in domestic affairs and promoting a culturally relativist notion of human rights, China has been able to appeal to numerous African leaders,” Taylor writes.
But this policy has been tested in recent years, given shifting geopolitics on the continent, as well as China's evolving foreign policy. Experts say that while the central government continues to talk up the merits of noninterference, it has become increasingly clear that Beijing is gradually abandoning this stance. This shift has been most visible in its policy toward Sudan, which had been a major oil exporter to the country. In 2007, China altered its policy of blocking UN Security Council resolutions that authorized peacekeeping troops for the contested region of Darfur and subsequently placed modest pressure on Khartoum to allow a deployment of UN forces.
South Sudan's secession in July 2011 further complicated matters. China had long supported—mainly through arms sales—the Khartoum government's efforts to crush a longtime rebel uprising in the south. However, with most of the area's oil located in what is now South Sudan, China recalibrated its policy toward the southern Sudanese rebels. As the conflict continued, China’s envoy to Africa, Zhong Jianhua, made numerous visits to the region in a bid to help craft a diplomatic solution for the countries' internal strife. Then in late 2014, China committed seven hundred combat troops to South Sudan, marking the first Chinese infantry battalion to take part in a UN peacekeeping mission. Wang Yi, China's foreign minister, was also sent in early 2015 to help mediate talks between South Sudan's warring factions.
This extension of military aid came just a year after China dispatched combat troops to Mali to ease tensions in the country’s restive north. It had also provided $1 million in assistance to the African Union in support of its mediation efforts in there. China was careful, however, to walk a fine line during the 2011 uprising in Libya that overthrew Muammar al-Qaddafi. “In effect, the PRC is slowly but surely giving up its controversial policy of non-interference,” writes Harry Verhoeven at the University of Oxford. “This is not so much the product of a carefully considered foreign policy shift as it is a logical response to both acute security crises on the continent in recent years and China's re-emergence as a global power with ever greater interests, ever further afield.”
Assessing the Benefits of Sino-African Ties
Chinese investment in Africa has helped spur consistently high economic growth. The International Monetary Fund's October 2011 Regional Economic Outlook for Sub-Saharan Africa (PDF) estimates growth of 5.3 percent and 5.8 percent for 2011 and 2012, respectively.
Some analysts say China's efforts in Africa—from building infrastructure to forgiving billions in debt to providing medical support—are for building goodwill for later investment opportunities or stockpiling international support for contentious political issues. Dowden writes in his book, "China is playing a long game for oil and other raw materials in Africa and securing allies who will vote for it in the United Nations." Meanwhile, St. Andrews' Taylor says, "The fundamental problem facing Africa is governance--it doesn't matter how many roads or ports."
In addition to international observers, many Africans themselves have expressed frustration over China's role on the continent, having accused Chinese companies of underbidding local firms and not hiring Africans. At the same time, Chinese companies that do hire African workers have been criticized for failing to maintain fair labor relations. In Zambia, managers of Chinese mining companies have banned union activity, and in at least two instances, have been charged with attempted murder after opening fire on African employees protesting poor working conditions (Atlantic). In September 2011, Michael Sata won Zambia's presidency largely by tapping into anti-Chinese resentment. He has called on foreign investors to "abide by Zambia's labor laws" (CSM).
International observers say China's willingness to pay bribes—as documented by Transparency International's 2011 Bribe Payers Index report—and to attach few prerequisites for aid undermines both local and international efforts to implement good governance and macroeconomic reforms.
China's engagement in Africa has also raised concerns in Washington, as some recent diplomatic cables leaked in December 2010 by the whistle-blowing website WikiLeaks show. A U.S. diplomatic cable, as reported by the Guardian, noted that if oil or gas is found in Kenya, China's engagement with that country would likely grow. "Kenya's leadership may be tempted to move ever closer to China in an effort to shield itself from Western, and principally U.S., pressure to reform," the memo said. A separate U.S. cable from Nigeria (Guardian) described China as "a very aggressive and pernicious economic competitor with no morals."
Accusations over China's exploitative behavior in Africa have prompted questions about the future of the relationship. French raises one such question in the Atlantic: "Can Chinese money and ambition succeed where Western engagement has manifestly failed?" Or, he asks, "will China become the latest in a series of colonial and neocolonial powers in Africa, destined like others to leave its own legacy of bitterness and disappointment?"
As the dance over control of TikTok gets more complicated, last week it came out that the U.S. government has asked American-based video gaming companies where China’s Tencent is an owner or investor to detail how they handle the data of American players.
Please join the USC U.S.-China Institute for a book talk with author David Lampton. His new book examines China’s effort to create an intercountry railway system connecting China and its seven Southeast Asian neighbors.