Reuters Picture Archive

A Chinese worker looks on as locals cross a construction site in Viana, Angola (REUTERS/Siphiwe Sibeko)

New challenges arise as China-Africa ties deepen

The Oxford Analytica Daily Brief ® - Monday, January 21 2013

An Oxford Analytica In-depth Analysis

After reaching a fairly high pitch in the 2000s, the China-in-Africa debate in strategic diplomacy, policy-making, investment and academic circles has now mellowed. African countries are increasingly shaping the contours of such debates. Attention is shifting from supposed East-West ideological battles to the practical challenges and opportunities the continent faces in engaging at multiple levels with a major 'new' partner. Although state-level ties remain important, of increasing salience are the activities of Chinese and African provincial and local governments, private firms of all sizes, and other non-state actors, including Chinese media.

_

Impact

  • Competition for access to African contracts and consumers will probably intensify.
  • Pressure from African domestic coalitions increasingly will be the driver of foreign policy towards China.
  • Chinese firms routinely undercut Western ones on cost, but cooperation can enhance the comparative advantages of both.
  • Short-term Chinese infrastructure contracts will remain prominent, but Africans are seeking long-term investments.

What next

Two competing trends will typify maturing relations between China and African countries. Official attempts to institutionalise and formalise linkages will continue, but ties will also become more diffuse, with Chinese entities increasingly operating outside Beijing's sphere of influence. China will be a long-term player on the continent, increasing the imperative for governments, firms, and civil society in Africa -- foreign and domestic -- to have a developed China engagement strategy if they are to maximise their own interests in future.

Analysis

China-Africa relations continue to deepen, buttressed by consistent growth in trade flows, which could have topped 200 billion dollars in 2012:

  • Construction. Africa's infrastructure deficit makes it the second-largest market of overseas contracted projects for Chinese enterprises. From January to October 2012, Chinese enterprises' newly-signed Africa contracts amounted to 38 billion dollars -- a third of total turnover of Chinese construction projects abroad (see AFRICA: Returns drive Chinese infrastructure lending - February 7, 2012).
  • Investment. Chinese investment stock in Africa is estimated at approximately 15-18 billion dollars, and grew by about 1.5 billion dollars in the first three quarters of 2012. Mining comprises about one third, followed by manufacturing, and services or logistics.
  • Financing. Beijing's mechanisms for consultation, financing and monitoring of official Africa commitments are relatively well developed. Its two policy banks lend support to aid, trade, and investment projects through a combination of concessional and commercial debt financing, and equity funding (see AFRICA: Chinese banks still show relative caution - January 17, 2012).

Engagement was originally characterised by large bilateral trade, aid and investment deals between central governments. However, this relationship has become more differentiated. It is increasingly marked by diverse actors and new types of partnerships. The diplomatic emphasis is shifting from growing the volume of economic relations to enhancing the quality of formal and informal links with African countries.

Sustaining 'non-interference'

Throughout the 2000s, the cornerstone of Beijing's Africa policy has been bilateral economic relationships with states. In these the Ministry of Commerce -- rather than the Ministry of Foreign Affairs -- played the central role. Beijing consistently expressed reluctance to interfere overtly in African internal political affairs.

As relations have deepened it has become more difficult to sustain this policy. When the approach has been challenged, Beijing has largely moved in concert with the wider international community:

  • Sudans. Unusually, China sent observers to monitor South Sudan's independence referendum, since which it has been building ties with the new state. It broke with its global precedents to contribute infantry contingents to UN operations. One of the few powers with a developed relationship with Khartoum's regime, it now finds itself somewhat in the role of mediating between the two Sudans (see CHINA/AFRICA: Peacekeeping tests non-interference idea - September 4, 2012).
  • Libya. China approved UN sanctions against members of the now-deposed regime, and Beijing's officials had several high-level meetings with the rebels in Benghazi and later the National Transitional Council -- despite China being among the last countries officially to recognise that body.

Beijing's primary political concerns in Africa are pragmatic, not ideological. They revolve around the security of its investments and citizens and the risks to its international reputation. These concerns are now driving the discernible shift in diplomatic priorities from expanding economic ties to improving the depth and tone of existing relations.

Regional integration

Last year's triennial Forum for China Africa Cooperation (FOCAC) brought few surprises: outgoing President Hu Jintao announced a further 20 billion dollars of available concessional finance for infrastructure, agriculture and manufacturing projects and extensions of previous commitments. However, FOCAC 2012 was notable for its new emphasis on African integration and multilateralism:

  • It promoted a sub-regional approach to African infrastructure planning, with special attention to cross-border interconnection of roads, water, electricity, and telecommunications networks.
  • It increased support for multilateral institutions, principally the African Union.
  • It gave priority status for joint project financing ventures.

This marked a departure from FOCAC's traditional role as a site for largely bilateral deal-making. While practical and trade-focused it also reflected a new responsiveness given that barriers to intra-African trade is a principal concern of African leaders themselves.

African steering

China-Africa debates have often characterised African governments as supine, overlooking their adeptness, typically, in using foreign relations to pursue domestic goals. They are increasingly assertive on the terms of relationships with China:

In future, African leaders will not be above 'scapegoating' China and Chinese nationals should they see a domestic political imperative or gain.

Sub-national and non-state links

_

Beijing struggles to manage the proliferation of non-state China-Africa links

Diplomatic relations remain vital and state-owned Chinese firms continue to dominate investment in net value terms, largely due to prominence in the extractive industries. Yet the story is much wider:

  • Individuals. Private Chinese firms of all sizes easily lead its state-owned ones in terms of the number of investments, especially in manufacturing, retail and services. They increasingly drive Chinese commercial expansion in Africa. Large numbers of traders and others have migrated. Surveys show that nearly all such individuals have almost no interaction with the Chinese central government.
  • Local governments. Chinese provinces and municipalities are sending their own companies overseas and implementing independent aid projects. African provincial governors are also courting Chinese investors directly, with African traders commissioning imported goods from south China.

Beijing is trying to manage this proliferation; it has held various recent events to attempt to institutionalise these relationships, including:

  • the July 2012 China-Africa People's Forum for civil society exchanges;
  • August 2012's Forum on Local Government Cooperation to enhance formal linkages between sub-national Chinese governments and African counterparts; and
  • the October 2012 China-Africa Think Tank Forum.

Yet non-state and sub-state linkages will become increasingly diffuse and difficult to monitor. African governments, not Beijing, will bear the primary responsibility for regulating Chinese presence within their borders.

Domestic politics

Host governments will also face a continuing challenge in managing diverse local interest groups and domestic popular responses to the Chinese presence and role:

  • Quality standards. From the compromised structure of the new Luanda hospital to cheaper imported goods, protest can foment around perceived quality shortcomings. A recent example is the late-2012 boycott of taxis constructed under a South African government joint venture with a Chinese state-owned vehicle manufacturer. This scuttled production plans, closing the new factory within weeks of its high-profile opening.
  • Employment. Long-simmering tensions in Zambia's Chinese-owned copper mines have resulted in occasional violence. Past politicisation of the Chinese presence had generated a degree of general hostility, although much of this is only latent (see ZAMBIA: China relations will survive recent violence - August 21, 2012).
  • Competition. While their activities are typically facilitated by locals, Chinese immigrants face actual or potential hostility from African groups, from manufacturers, to street traders, to artisanal gold miners (MEAFDB, August 23, 2012, III).

Indeed beneath the record China-Africa trade figures is the more complex issue of the effect Chinese imports have on African economies. Chinese goods are restructuring patterns of production and informal trade:

  • They fuel a thriving formal and informal retail sector, making inexpensive goods available to populations which might otherwise not afford these.
  • Yet they also raise directly the issues of quality, local competition, and smuggling through corrupted or porous borders.

African governments face a dilemma in wishing to attract Chinese investment in most sectors without exposing less competitive local producers and traders. The informal sector is not normally a target for foreign actors or protective government regulation. However, the growing Chinese presence in petty trading prompted several countries to pass restrictive legislation in 2012:

  • Kenya tightened work permit regulations following widespread protests by local retailers.
  • Malawi banned foreign traders outside of its four largest cities in response to merchants' protests.
  • Violent clashes between Chinese and local traders erupted in Uganda over government failure to enforce an existing ban on foreign retailers.
  • Nigeria arrested 45 Chinese textile traders in a crackdown on illegal trading.

In these cases Chinese embassy officials did not respond beyond supporting the host government's right to enforce its own policies. Meanwhile, Beijing faces its own problems over its growing African migrant population, whom locals regularly accuse of illegal or criminal behaviour.

Security of citizens

The proliferation of private Chinese operators -- many with bigger risk appetites than state-owned firms, and a preference for avoiding Beijing's scrutiny -- raises Beijing's challenge in monitoring activity abroad:

  • Chinese companies lost nearly 10 billion dollars in investments during the Libya conflict and Beijing had to evacuate over 35,000 citizens.
  • Chinese have begun to be targeted in northern Nigeria, as security there deteriorates. Four Chinese nationals were killed in late 2012 alone.
  • Beijing recently evacuated 300 long-term Chinese residents from Central African Republic's civil war.
_

China's role will not necessarily displace Western links and affinities

Broadly speaking, political turmoil and anti-China sentiment trends are both solidifying across Africa, and Beijing has a growing interest in assuring the safety of both investments and citizens.

Hearts, minds and media

These various challenges increase the significance of the Africa public relations campaign that Beijing is finding it must wage. In many respects its African relations are very new, despite Beijing's emphasising long historical connections with Africa. Relations are still marked, on both sides, by a great deal of suspicion and xenophobia.

Yet Chinese and African officials are generally fairly candid about the communication and other challenges presented by linguistic, cultural and ideological differences. Chinese media providers have joined the battle over public perception. Chinese media operations that cater to African audiences have expanded rapidly over the past year:

  • State-owned news agency Xinhua now has 28 African branches, its correspondents providing African media outlets with world news as well as African stories.
  • China's international broadcaster CCTV has launched a high-tech television operation in Kenya.
  • China Daily, a state newspaper in English, began in late 2012 publishing a weekly Africa edition.

Executives from these agencies cite an explicit preference for reporting the positive aspects of China-Africa partnerships and African development generally. They argue that this is a necessary counterweight to negative Western coverage. It is undoubtedly a concerted effort to control more of the China-Africa debate.

Many African governments see China relations in purely economic terms, without the strategic component characteristic of relations with the West. Whatever the history of Western conduct in Africa, Africans have a range of deep political, security, linguistic and cultural ties to the West. These affinities will not fade quickly nor necessarily be displaced (see AFRICA: US groups are well-placed to compete in region - October 17, 2011). Meanwhile Western and Chinese firms are finding scope for cooperation in Africa (see AFRICA: China's role will not eclipse French influence - October 11, 2012).

Follow up

This article is drawn from the Oxford Analytica Daily Brief® which analyses the regional and global implications of key geopolitical, economic, social, business and industrial developments. It provides government, corporate and financial clients with timely, authoritative analysis every business day.

Learn more