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China in Africa: The Real Story

Chinese Investment in Africa: How Not To Mix Apples and ... Elephants

Deborah Brautigam

INFOGRAPHIC: China's total investment in Africa

Today the

South China Morning Post

published an "Infographic" with the title Chinese Investment in Africa (below). A colleague sent me a link, noting that the numbers looked odd, so I took a look. The data is mainly drawn from the American Enterprise Institute's 

China Investment Tracker. 

Two points about this data:

(1)

It is NOT all FDI.

Note the small print which says "Chinese investment

and contracts

in Africa. What these people have done, bless their souls, is to add the CIT's database on Chinese FDI projects with the database on Chinese engineering contracts. This is like adding apples with elephants. In 2014, Chinese companies signed engineering contracts in Africa valued at $70 billion. These are for things that they will build, like bridges or railways or airports. But this has no relationship with the FDI numbers.

(2) The China Investment Tracker collects the

projected

value of FDI projects. This is OK for an acquisition, which is paid upfront, but for other FDI projects, which often begin on a pilot project basis, and may never get bigger,

this can grossly overvalue the figures

.

(3) The China Investment Tracker only collects information on projects valued at $100 million and above. This is going to skew toward natural resource investments which are more expensive, and is unlikely to pick up much if any manufacturing, which is usually less than this. So t

he sectoral breakdown will be distorted.

(4) It's also not the case that there is no Chinese FDI (or engineering contracts) in 8 African countries. There is a lot of Chinese manufacturing investment in Lesotho, for instance, and FDI also shows up in The Gambia and the Central African Republic. BTW: Somaliland may work better than the rest of Somalia, but as far as I know, it is not a country ...

h/t to Heiwai Tang

Highlights of Xi Jinping's Pledges at the Johannesburg China Africa Summit

Deborah Brautigam

Here in Johannesburg, on a stunning summer day, Chinese president Xi Jinping must be enjoying waves of warm feelings (and the relatively clean African air) following his "pledges" speech this morning. 

Here are some of my initial* reactions:

China will continue to support capacity building in Africa. This includes construction of an unspecified number of regional vocational training centers and "capacity-building colleges" that will offer vocational training and education to 200,000 Africans. The time frame for this was not stated but we can expect that this will be rolled out over the next six years: three years to get the construction started, and at least another three years to make them operational and establish programs. Shipping Chinese trainers to Africa has not gone over all that well in the past. Ethiopia had to bring in Germans to replace the Chinese instructors at its Chinese-built vo-tech college. Let's hope that someone in Beijing is thinking strategically about how to build up the African expertise for teaching all these students "how to fish."

China will support the construction of five "Jiao Tong" ("Jiao Tong" means "Communications") universities in Africa. Hmmmm. Will these be like the prestigious Shanghai Jiao Tong University, known for its quality research across a number of disciplines? At first I thought these might be efforts to steer the training of journalists in more China-friendly directions, but it seems that Jiao Tong is better translated as "transportation" -- as a reader pointed out below, in China Jiao Tong universities "are elite schools in training technicians, engineers, and scientists" ... not journalists. This will fit nicely with bringing the "One Belt, One Road" Initiative to Africa, training Africans in the higher technical skills (see my Foreign Policy piece for more on this).

China is continuing to emphasize a more "green" approach to Africa. One of the ten pledges states that "China will support Africa in bolstering its capacity for green, low-carbon and sustainable development and support Africa in launching 100 projects to develop clean energy, protect wildlife, promote environment-friendly agriculture and build smart cities." This follows on from the pledge made at the 2009 FOCAC in Egypt, that proposed "to establish a China-Africa partnership in addressing climate change ... enhance cooperation on satellite weather monitoring, development and utilization of new energy sources, prevention and control of desertification and urban environmental protection. We have decided to build 100 clean energy projects for Africa covering solar power, bio-gas and small hydro-power." As far as I know, no one outside of the Chinese government knows where those clean energy projects are located. I came across one proposal by accident: a Chinese sisal farm I visited in Tanzania was applying to this program to get funding for a biogas project out of its sisal waste. 

To fund these and other programs, China will provide $5 billion in grants and zero-interest loans, and $35 billion in a combination of preferential loans and [non-preferential] export credits and concessional foreign aid loans.  He also pledged to add another $5 billion to the China-Africa Development Fund (so it will now be expected to eventually reach $10 billion) and increase the China Development Bank-funded African Development Special SME (small and medium enterprise) Loans by another $5 billion (this was originally set up at $1 billion). Finally, he seemed to pledge to set up a new China-Africa Industrial Cooperation Fund with $10 billion. This emphasis on manufacturing is very welcome and something I expected, given all the discussion about Chinese offshoring lower cost manufacturing to Africa over the past several years.

China will cancel the overdue portion of interest-free loans provided to low income African countries. I expect a lot of reporters are going to get this wrong. I'm already seeing people calling this a broad debt cancellation for all Chinese loans to low-income countries. No, no, no! This refers only to a special category of "zero-interest" foreign aid loans. Since 2000, the Chinese have regularly cancelled overdue zero-interest loans that countries are unable (or simply unwilling) to pay.
  
The bottom line here is a pledge of $60 billion in various kinds of support (NOT ALL "AID"): $5 billion that is clearly official development assistance, $35 billion that is a mix of export credits (which may be commercial or subsidized) and concessional (subsidized foreign aid loans), and what seems to be an additional $5 billion in a credit line for SME finance. The CAD-Fund finance will be different: it's for equity investment. And although reports suggest that new China-Africa Cooperation Fund will be focused on manufacturing, it's not clear if it will provide grants, loans, or investment -- or merely be drawn on, by the Chinese, to pay for a variety of activities, like the Human Resources Development Fund for Africa established in 2000, which pays for training programs in China.

We can compare this with the specific 2006 pledges of $5 billion in preferential/ concessional loans, and a further $5 billion for the CAD-Fund: from $10 billion in financial commitments to $60 billion over just nine years.

Frankly, I did not expect to see this level of serious loan funding ($35 billion) -- although I don't think Xi Jinping put a specific timeline on any of these pledges, so it could take a while to roll them out. My sense is that a lot of countries are having trouble absorbing the Chinese loans on offer over the past three years. With lower prices for their exports, these loans will be harder to repay. Perhaps Chinese commodity forecasters see rosier numbers starting five years down the line, when the grace periods for the first loans will start to expire?

*revised slightly after seeing English copies of the speech.


FT story on Chinese aid: bias or ignorance?

Deborah Brautigam

On October 29, Shawn Donnan at the Financial Times wrote a story, "China's aid splurge fails to bridge credibility gap in Africa," that betrayed a significant lack of understanding of how China’s overseas development finance operates.

The FT story summarized "Listening to Leaders," a new report from AidData that purported to measure the usefulness of policy advice offered by development partners in low and middle income countries (ahem: not just Africa).

Few policymakers … trust China’s advice,” Donnan writes. The press release from AidData seemed to seems to back this up:
The Listening to Leaders report also provides evidence that the popular narrative about China’s expanding soft power – in particular, the notion that the “Beijing Consensus” is rapidly eclipsing Western sources of influence in the developing world – is probably overblown. When asked to rate the usefulness of China’s policy advice, developing country leaders ranked China Development Bank, China Ex-IM Bank, and Chinese Embassies 75th, 59th, and 70th, respectively, out of 86 bilateral and multilateral development finance institutions
Whoa, Nelly! What did the AidData researchers really find? Actually reading the report and the appendices provides a different spin on this research.

China’s policy of non-interference makes Chinese officials reluctant to dispense any policy advice at all. Not providing advice is quite different from providing untrustworthy advice.

The survey included 6731 respondents.  Only 326 (less than 5%) were able to comment on the usefulness of any policy advice from the Chinese embassy, while only 102 (1.5%) had an opinion on the usefulness of any policy advice from China Ex-Im Bank, and 56 (less than 1 %) gave a grade to any policy advice from China Development Bank. This suggests that very little advice was being given. Compare this with 1486 who were able to rate advice from the World Bank, 1227 from UNDP, and 984 from USAID.

These are very small numbers on which to say "few policymakers ... trust China's advice." Rather, we should be reading: "few policymakers get advice from China."

Deep in the appendices of the study, we read that the Chinese appear to be giving substantive advice in just one policy domain:  trade -- which is not primarily an internal affair.

Here, the Chinese embassy was rated as #2 among development partners in the usefulness of its policy advice. And this advice helps explain why China-Africa trade rose from $10 billion in 2000 to $220 billion in 2014.

So why didn't we get a headline with this spin: policymakers give high ratings to Chinese advice on trade?


A few other points on how the research was conducted, and how it is being described.
  • China Development Bank, China Eximbank, and Chinese embassies are lumped into a big group and described as "aid agencies." (China does not have an official aid agency, and China Development Bank, in particular, only gives commercial loans). Most Chinese finance provided to other developing countries is not official development aid, but trade finance: export credits. 
  • While the research is described as the opinion of "developing country leaders,"the appendix reports that 1,469 of the people surveyed actually came from the development partner community itself. Not sure yet if these respondents were included in the "usefulness of advice" opinions.
  • At one point, the authors make a somewhat snide comment: "Despite soaring rhetorical commitments, existing evidence suggests that neither China nor Brazil have much influence on government decision-making in Africa’s agricultural sector." But are China and Brazil trying to have influence on "government decision-making"? 
As evidence, the report cites a policy brief we (SAIS-CARI) published on Chinese training courses for African officials, by Henry Tugendhat. Yet the policy brief did not discuss policy influence -- it described 3 week long agricultural technology training courses offered in China. Tugendhat writes: "These courses aim to facilitate the transfer of knowledge and technology, increase trade opportunities, foster stronger political and economic relationships, and present a positive image of China. The courses appear to be achieving these goals..." 


*The survey asked about "23 policy domains, which were then aggregated into four policy areas: economic (macroeconomic management; finance, credit, and banking; trade; business regulatory environment; investment; labor; energy and mining; and infrastructure), governance (land, decentralization, anti-corruption and transparency, democracy, civil service, justice and security, tax, customs, and public expenditure management), social and environmental (health, education, family and gender, social protection and welfare, environmental protection, and agriculture and rural development), and general (foreign policy and general policy)." Aside from trade, there was no indication of any policy domains in which respondents actually received advice from China or Chinese banks.

Don't Get Excited: China is not the new aid superpower

Deborah Brautigam

My op-ed at The Guardian Global Development Professionals Network: What does recent news that China is increasing support for developing countries mean for international aid?

Xi Jinping at the United Nations, September 2015
The international development community keeps rediscovering – and misunderstanding – China. The latest episode came in September, when Chinese president Xi Jinping gave a speech at the UN after the launch of the new sustainable development goals (SDGs).

Xi pledged to support the SDGs. Specifically, China would set up a $2bn fund to support south-south cooperation. China would also try to increase its investment in the least developed countries to $12bn by 2030. Finally, his government would cancel some of the developing country debt owed to China.

The flush of media attention around these pledges suggested that they were something new and unprecedented. By giving assistance on this scale and forgiving debt, a BBC reporter wrote, China was (at last) willing to take on “more of the responsibilities that go with its status as an emerging superpower”. Others simply got it wrong. Many newspapers, including the New York Times and the Guardian wrote that China would “seek to increase the fund to $12bn by 2030”, which confused the assistance fund with the investment.

Seeing Xi Jinping’s pledges in historical context helps us to see what is actually new, and what this means for our understanding of China’s rise.

Click here to read more.


RSVP Now: Oct. 29 Book Launch in DC

Deborah Brautigam


My new book, Will Africa Feed China?, is now available on Amazon or at Oxford University Press. You can read excerpts in All China Review and on Quartz.  

On Thursday, October 29th, 2015 I will be speaking about the book in a roundtable discussion at Johns Hopkins SAIS in Washington DC. Professor David Lampton, Director of the SAIS China Studies Program, will be moderating, and Dr. Amadou Sy, Director of the Africa Growth Initiative at the Brookings Institution, and Professor Ling Chen, Assistant Professor of International Political Economy at SAIS, will be discussants. RSVP here: https://www.eventbrite.com/e/will-africa-feed-china-tickets-18985231338
 
A Complete List of Scheduled Book Talks:
  • October 13 -- Princeton University 4:30-6pm
  • October 27 -- Harvard Club of New York 7:00-9pm (members only)
  • October 29 – Johns Hopkins SAIS 4:30-6pm
  • November 3 – Yale University, 4:30-6pm
  • November 13 – SOAS, London, 6-7:30pm
  • November 16 – Institute of Development Studies (IDS), Sussex, UK 1-2:30pm
  • December 9 – Harvard University Asia Center, 12:30pm-1:50pm
  • February 23 – Japan International Cooperation Agency (JICA), Tokyo, TBD


Will Africa Feed China?
Is China building a new empire in rural Africa? It seems a perfect match: the country with the largest population and the continent with the largest remaining reserves of arable land. Few topics are as emotionally charged as the belief that China is aggressively buying up huge tracts of prime African land to grow food to ship home. Will Africa Feed China? probes the myths and surprising realities behind the headlines. 

China in Africa's Fragile States: Exploitative or Developmental

Deborah Brautigam


A new policy brief by China Africa researcher Jing Gu and R. McCluskey at IDS Sussex asks "Is China’s Role in African Fragile States Exploitative or Developmental?" 
The abstract notes:"China’s increasing engagement in Africa has generated heated debates over the extent to which its activities are exploitative or developmental. There is particular concern over China’s impact on governance in fragile states. However, these debates often make generalisations and leave out African agency.This Policy Briefing takes a closer look at Rwanda and the Democratic Republic of Congo, and finds that there is a large gap between China’s policy and practice. It finds that the ways in which African actors promote, respond to and negotiate its engagement is crucial in shaping the extent to which China contributes to development."

Interesting points in the policy brief:
  • The $6 bn (originally $9 bn) Sicomines copper-secured infrastructure loan deal in the DRC has apparently "resulted in the closure of local civil engineering companies." I'd like to learn more about this, given that there has been relatively little infrastructure built yet under the deal.
  • "Rwanda has proactively facilitated investment and trade with China by including Rwandan business people in its official delegations to China and establishing a Rwanda Development Board office in Shenzhen."
  • "Rwanda has particularly targeted information and communication technology (ICT) as a sector where China can help it become a regional leader." 

A h/t to Winslow Robertson, via Twitter @Winslow_R 

Whatever Happened to the $9 Billion China-Congo Deal?

Deborah Brautigam

Sicomines photo credit: http://www.forumdesas.org
Bloomberg has a story today that updates the China-DR Congo Sicomines Tale -- the long-running story of an investment and resource-backed loan deal first mooted around 2004, and still not in production. This is the formerly $9 billion+ 2007 deal that had the World Bank and the IMF in an uproar, concerned about the DRC's taking on additional sovereign debt just when it was asking to have its World Bank/IMF loans cancelled under the HIPC program. Under pressure from the IFIs, the deal was eventually scaled back (in 2009) from two to one $3 billion line of China Eximbank credit, backed by future copper exports, plus a complicated financing deal to bring the abandoned copper mine back on line. (This was estimated to cost at least an additional $3 billion). The sovereign guarantee was also dropped. And what is the status today?

Moise Ekanga, executive secretary of the Office for the Coordination and Monitoring of the Sino-Congolese Programme, announced that the DRC had received "$1.5 billion for Sicomines and infrastructure projects including road construction and hospitals, but funding and implementation have been more difficult than expected ... with projects having faced long delays."

A long-mooted hydropower project, Busanga, is now to be financed out of the copper-backed credit line (50%), with the Chinese partners in Sicomines providing the rest. And Sicomines is expected to produce its first copper cathodes by the end of October. Only seven years after the deal was signed.

h/t to China Africa Project

FOCAC is Coming to South Africa: Are You Ready?

Deborah Brautigam

The Forum on China Africa Cooperation (FOCAC) will meet for the sixth time December 4-5, in Johannesburg, South Africa. If you've always wondered: what is FOCAC? now is the time to learn.
One great resource is the 2010 book, The Forum on China-Africa Cooperation (FOCAC) by Professor Ian Taylor (right), available in a Kindle version.
Or, you can visit the new website Reporting FOCAC co-sponsored by those two great groups, the Wits China-Africa Reporting Project at Witwatersrand University in Jo'burg, and the China Africa Project hosted by journalists  Eric Olander and Cobus van Staden.

The new website is a work in progress, so visit frequently to see what updates they're delivering.

Guest Post: Should you worry about China's investments in Africa?

Deborah Brautigam



AP/Alexander F. Yuan
In a recent Washington Post article, Hilary Matfess, a research analyst at the Center for Complex Operations at the National Defense University and member of the Nigeria Social Violence Project at Johns Hopkins SAIS, explores what recent news of China’s $20 million worth of arms sales to South Sudan’s People’s Liberation Army last year might mean for our understanding of Chinese engagement in Africa.  Her review of three recent econometric studies concludes that  “China’s investment in Africa is much like that of the United States and Europe,” except that “China spends more in corrupt countries, and its aid is more easily diverted for political ends.” You can read her article here.

Trailblazers from the China Africa Reporting Project

Deborah Brautigam

The intrepid China Africa Reporting Project overseen by veteran journalist Anton Harber at South Africa's Witwatersrand University has published a volume of 17 articles penned by some of the 50 recipients of their reporting grants. The entire book, Trailblazers 2015 – Best of the China-Africa Reporting Project can be downloaded here, and individual articles are also available here.

I read a number of these when they were originally published, and was impressed by their quality. The project was launched in 2009 to improve and deepen the quality of reporting on China-Africa topics, which was then polarized between sugar-coated positive stories coming from the Chinese side and pessimistic recycled tropes about neo-colonialism and resource hunger coming from the West.

I wonder if this topic, the rise of China and how this plays out in and for Africa, attracts a certain type of reporter? Nearly a third of the new breed of journalists honored in this collection are themselves part of a diaspora:  the European diaspora in South Africa, Hong Kong, and Namibia and the Chinese diaspora in Mauritius.




SAIS-CARI Fellowships: Three Weeks Left to Apply

Deborah Brautigam

The China Africa Research Initiative at the Johns Hopkins University School of Advanced International Studies (SAIS-CARI) announces a call for the second round of applications to the SAIS-CARI Fellows program. SAIS-CARI Fellowships are awarded on a competitive basis or by invitation to researchers, policy-makers, or journalists who wish to spend a concentrated period of time (1 to 2 months) writing or doing field research on an under-explored policy issue related to China’s African engagement.


We particularly encourage teams of two people, one of whom has extensive first-hand experience in Africa and the other of whom is fluent in Chinese, to propose research topics that could be investigated in Africa, drawing on each researcher’s comparative advantage. All projects must be policy-relevant and based on case studies and fieldwork.

In this round we especially welcome proposals that focus on China's energy engagement in Africa (petroleum, natural gas, solar and hydropower, electricity projects). We are also interested in case studies of manufacturing (including mineral processing and oil refining) or agriculture investments, with a focus on technology transfer, training, and local skills development). In addition, we have an interest in proposals that pair analysis of cases of Chinese investment, aid or finance in Africa with that from the United States. 

Applications are due by 11:59 pm EST on October 15, 2015 for a start date between November 15, 2015 and April 30, 2016. Decisions will be announced in early November 2015. The SAIS-CARI Fellows Program is supported by a grant from Carnegie Corporation of New York.

For information on how to apply, please visit the SAIS-CARI website.

Excerpt from Will Africa Feed China?

Deborah Brautigam


Photo: World Bank Photo Collection
All China Review recently published an excerpt from my upcoming book, Will Africa Feed China?, to be published in October 2015. The excerpt is a profile of Yang Haomin, former chairman of Shaanxi province's State Farm Agribusiness Corporation, and his team's efforts to grow rice, maize, soybeans, and cassava in Cameroon. His story is one of many Chinese agricultural investment cases in Africa that I cover in the book. 

You can find the link to the excerpt on the SAIS China Africa Research Initiative (SAIS-CARI) website.


Guest Post: It Takes More Than a Million Migrants to Build a Continental Empire

Deborah Brautigam

Dunia P. Zongwe, lecturer at the University of Namibia, recently wrote a review essay of China’s Second Continent: How a Million Migrants Are Building an Empire in Africa by Howard French. A summary of the review is below; the full version can be found here.

Edited Excerpt from "It Takes More Than a Million Migrants to Build a Continental Empire"

by Dunia P. Zongwe[1]

Rich in facts, poor in logic. This phrase perhaps most tellingly describes China’s Second Continent, a book authored by Howard French on Chinese migrants in Africa. In it, the author argues that Chinese migration to Africa exhibits imperial patterns of the past and that it is likely to repeat those patterns in the future. Written in a limpid and elegant style, graced with interesting interviews, fascinating stories, vivid descriptions and profound insights, China’s Second Continent is quite an informative book, which is in itself a good reason to read it. No doubt the book would have been much better if it had done away with its main thesis and the author’s attempts to prove it. This review essay examines the way that the author built his argument.

Howard French’s thesis is flawed on two levels. On a general level, the evidence presented by the author of China’s Second Continent does not prove his thesis. It has failed to establish that Chinese migrants dominate local populations, or that Africans have lost or are losing the ability to resist. It has also failed to provide clear historical precedents for the author’s prediction that the ‘unquestionably peaceful’ migration of Chinese nationals to Africa will, without militarism, be the cause of imperialism. On the contrary, several counterexamples defy this prediction. The evidence is neither internally consistent nor broadly representative of the multifaceted relationships between Africans and Chinese migrants. In essence, the book’s methodology is ill-suited to its own purposes while the hearsay and the anecdotes on which it heavily relies are not generalizable to a wider, future universe.

On a basic level, the problem with French’s thesis is definitional. His notion of ‘migration’ is undefined and erroneously based on race; his definition of ‘imperialism’ is ambiguous and unscientific. Despite the absence of a common understanding of who is a ‘migrant’, the author does not define this vital notion; instead, his definition is based (contrary to normal practice) on race, not nationality. Furthermore, since – in French’s vision of things – ‘imperialism’ can happen in any way, it will happen, anyway. Since French’s definition of ‘imperialism’ is not grounded, it can be implied that his ‘prediction’ is not scientific. It cannot be empirically tested (or refuted, for that matter) and, consequently, people should not regret that the Chinese migrants in Africa will become ‘imperialists’ in the world imagined by French.



[1] Lecturer, University of Namibia. J.S.D. (Cornell); LL.M. (Cornell); Cert. (Univ. Montréal); LL.B., B.Juris (Univ. Namibia). I am grateful to the participants at the mini US-Africa Summit held on Nov. 6, 2014 at the Maxwell School of Citizenship and Public Affairs, Syracuse University. Their questions, comments and criticisms informed this review essay’s final substantive section ‘It takes billions to build African economies’. In particular, I thank Horace G. Campbell for suggesting that I write a review of China’s Second Continent. I am also indebted to Joëlle Bergeron, Deborah Bräutigam, Horace Campbell and Mamoudou Gazibo for their critical and constructive comments on earlier drafts of the essay. The views expressed in this review essay do not necessarily reflect those of the people who commented on the essay and the participants at the Summit. I am solely responsible for the contents of this review essay and its failings, if any. 

China-Africa Pre-Doctoral Research Fellowship

Deborah Brautigam

The China Africa Research Initiative at Johns Hopkins University School of Advanced International Studies is seeking one or two part-time, pre-doctoral research fellows, who will lead student teams in collecting, cleaning and analyzing Chinese finance and investment data, and writing papers and reports based on the data and on African fieldwork reports. The candidate should hold a Master’s degree and be currently enrolled in a doctoral program, with ABD status, i.e. with course work and exams complete. We seek a creative individual with the skills of a detective or an investigative journalist, an organized and cheerful perfectionist, a quick learner, diligent and tenacious in tracking sources. This will be desk research, but will involve extensive follow up by telephone and other means.
The successful candidates should have knowledge of China and be able to read Chinese. Knowledge of Excel and some knowledge of China are required, while ability to do research in Chinese, knowledge of Stata and some econometrics would be helpful. Experience with China Development Bank or China Export-Import Bank or Africa would be an asset. Major responsibilities include (1) serving as primary leader of student teams working on data collection, cleaning, and analysis; (2) drafting papers analyzing the data; (3) maintenance of databases and data archival system. The role will require up to 20 hours per week for a 9 month commitment starting in September 2015, and may be renewed. Applicants must be eligible to work in the United States.

To apply please send a cover letter and cv to sais-cari@jhu.edu

What does China's Shock Yuan Devaluation mean for Africa?

Deborah Brautigam

This morning, CNN published my op-ed, "What does China's shock yuan devaluation mean for Africa?"

China's development decisions are critically important for Africa. In Lagos, Addis and Johannesburg, China's surprise yuan devaluation has African analysts scratching their heads.

Obviously Chinese goods will be cheaper in Africa, and African exports more expensive in China. So far, this decision is just a tremor, not a quake. Yet why did China devalue, and what is this likely to mean for Africa?

To understand China's devaluation, we need to take a step back. Beijing has been trying to manage China's enormous structural transformation ever since Chinese leaders made their historic decision to move out of poverty by turning to the market in the late 1970s. Their supercharged development model depended on low wages, high levels of foreign and public investment, and rapidly expanding, cheap exports. 

Continued here.

Are Chinese Resource Companies the Worst at Transparency?

Deborah Brautigam

HomeWe often assume that Chinese oil, gas and mining companies are "the worst of a bad bunch" (quoting from a Global Witness email blast). Several years ago I attended a conference in the Netherlands on transparency and natural resources, where I was intrigued to hear a representative from the Extractive Industries Transparency Initiative (EITI) state that Chinese companies were no different from others. But this was only anecdotal. Now, a new study confirms this. As Global Witness noted in the same blast, "financial disclosure by Chinese oil, gas and mining companies around the world [is] becoming their new normal." Or, as Global Witness put it: 财务披露成为中国海外石油、天然气及矿业公司的 “新常态”



Here's more from Global Witness:
"When it comes to foreign companies denying locals basic information about what they’re up to Chinese firms are frequently fingered as the worst of a bad bunch.  However a new study challenges that assumption.

The briefing by the international transparency scheme for the oil, gas & mining industries, EITI, sets out how much information Chinese companies have published about their operations in EITI member countries around the world.

The results are encouraging and indicate an ability and willingness for Chinese firms to act transparently where disclosure is the law or the commercial norm and, at times, to go beyond the minimum requirements.

Key findings from the EITI briefing include:
At least 90 Chinese companies are involved in EITI reporting globally, including some of the world’s biggest oil and mining names such as China National Petroleum Corporation, China National Offshore Oil Corporation and China Nonferrous Metal Mining.
Chinese firms disclose information about the payments they make to host governments as much as non-Chinese firms. In the limited cases where Chinese companies were reluctant to report, they were in the good (or not so good) company of businesses from countries such as Australia, Canada and the US that were also dragging their feet.
Information disclosure by Chinese firms doesn’t stop at financial payments. Indeed, Chinese companies in DRC, Mongolia and Nigeria made declarations about their ownership and control, known as beneficial ownership, while firms working in Afghanistan published their oil production contracts. 
Chinese firms are involved in EITI ‘Multi-Stakeholder Groups’ – the national committees that oversee implementation – in at least six countries, which in itself goes beyond the minimal requirements. 
The findings of the report mirror those of an earlier study by Global Witness and Beijing-based consultancy SynTao which examined the extent to which Chinese companies were publishing details of their payments to foreign governments either through EITI or in line with stock exchange reporting rules.
Both studies reflect China’s increased awareness of risks faced in overseas operations and point to the role disclosure rules can play in building a more stable investment environment for companies. Research by Global Witness and other groups has shown how questions over hidden payments can damage the reputation of Chinese companies, at a time when many are seeking greater recognition on the international stage as a basis for forging joint ventures, getting listed or gaining access to new resources. Meanwhile there is growing awareness that transparency of payments made by companies to governments can help prevent corruption and associated conflict.

Given the new evidence of widespread disclosure of financial, beneficial ownership and contractual information under EITI by Chinese companies, the time seems right for leading firms to engage with and support the scheme at a more institutional level. An immediate step would be for industry leaders in China to make a public commitment to the scheme and the principles it enshrines – something that would also go some way towards reassuring doubters that Chinese companies are committed to operating as responsible players on the global stage." 

Guest Post: When the U.S. visits Africa, so does China

Deborah Brautigam

Photo: Ben Curtis, AP via The Detroit News
This guest post is by Janet Eom, the Research Manager at the SAIS China Africa Research Initiative at Johns Hopkins University.

After his historic Africa tour, President Barack Obama is back in Washington. It was the first time a sitting U.S. president visited Kenya and Ethiopia, and Obama’s roots in Kenya lent a personal touch. But even in a story of the U.S. in Africa, China was present.

The U.S.-China-Africa plot went something like this: Africa, young and quickly growing, is the place of the future. However, U.S. trade with the continent is declining, China’s is growing. But not to worry: where China is extracting minerals, the U.S. is planting good intentions. At the AU Headquarters (constructed by Beijing) in Addis Ababa, Obama declared, “Economic relationships can’t simply be about building countries’ infrastructure with foreign labor or extracting Africa’s natural resources. Real economic partnerships have to be a good deal for Africa. They have to create jobs and capacity for Africans. That is the kind of partnership America offers.”

But as this is a story of diplomacy, how much exactly have the two governments’ leaders visited Africa? There is rhetoric, but there is also the decision to visit in the first place.

Into Africa: A Timeline

In 2009, the year Obama became president, China became Africa’s largest trading partner, surpassing the U.S. Although we can’t conclude a cause-effect relationship between presidential visits and changes in trade, it is interesting to look at patterns. This approximate timeline of visits that involved meeting with African governments in the several years before and after 2009 is strung together via the U.S. Department of State, Office of the Historian and China Vitae.

George W. Bush, 2001-2009
7 days in 2003
June 2-3: Egypt

July 8: Senegal
July 8-10: South Africa
July 10: Botswana
July 11: Uganda
July 11-12: Nigeria

9 days in 2008
January 16: Egypt

February 16: Benin
February 16-19: Tanzania
February 19: Rwanda
February 19-21: Ghana
February 21: Liberia

May 17-18: Egypt

Hu Jintao, 2003-2013
7 days in 2004
January 29-February 1: Egypt
February 1- 3: Gabon
February 3-4: Algeria

6 days in 2006
April 24-26: Morocco
April 26-27: Nigeria
April 27-29: Kenya

11 days in 2007
January 31-February 1: Cameroon
February 1-2: Liberia
February 2-3: Sudan
February 3-5: Zambia
February 5-6: Namibia
February 6-8: South Africa
February 8-9: Mozambique
February 9-10: Seychelles

6 days in 2009
February 12-13: Mali
February 13-15: Senegal
February 15-17: Tanzania
February 17: Mauritius

Bonus: Hu Jintao spoke at FOCAC in Beijing in 2006 and 2012
Barack Obama, 2009- 
3 days in 2009
June 4: Egypt

July 10-11: Ghana

7 days in 2013 (traveled with the First Lady)
June 26-28: Senegal
June 28-July 1: South Africa
July 1-2: Tanzania
July 2: Senegal (stopped during return to Washington)

5 days in 2015
July 25-27: Kenya
July 27-29: Ethiopia

Bonus: August 4-6, 2014: U.S.-Africa summit of 50 out of 54 African heads of state in Washington D.C.
Xi Jinping, 2013-
7 days in 2013
March 24-26: Tanzania
March 26-29: South Africa (Durban for BRICS Summit)
March 29-30: The Congo


Quick Observations:
  • Five months into his presidency, Obama made his first visit to Africa. Xi made his two weeks after assuming office, his first foreign tour. As many people suggest, are Obama’s second-term, “end-heavy” Africa tours an after-the-fact catch-up effort? Indeed, Hu intensely traversed Africa every one to two years, before halting once the trade balance shifted in 2009. However, at the same time, Bush did conduct pre-2009 tours in both his terms. With more information, it would be interesting to track whether the trade changed first, then the tours, or vice versa.
  • While both Obama and Bush made short stops, neither Hu nor Xi had one or two day stopovers – all their visits were tours, with Hu visiting a whopping 8 countries in 11 days at one point. Perhaps this is because Chinese media does not publicize short visits, focusing on significant, committed trips instead. But maybe the Chinese trips are purposefully long to convey stateliness and intention. Chinese diplomats have been associated with formality and red carpet treatment to convey importance. Meanwhile, Obama emphasized his personal identity as the first Kenyan-American president of the U.S. What is the role of culture in diplomacy in Africa?
  • Overlap of countries between U.S. and China visits: Egypt, Nigeria, Kenya, Liberia, South Africa, Senegal, and Tanzania. What may be some common priorities for potential U.S.-China-Africa collaboration in these countries?

Of course, counting visits only goes so far and there’s a lot to explore beyond this post’s scope; we need to track concrete commitments. But leader-to-leader diplomacy is symbolic, conveying priorities and intention. For now, it seems that any future U.S. or Chinese state visit to Africa will not occur without drawing comparisons to the other. It will be something for the next U.S. president to ponder.

Additional Sources:

"Chinese, Kenyan Presidents Agree to Enhance Co-op." Gov.cn, 28 Apr. 2006. Web. 4 Aug. 2015. <http://www.gov.cn/english/2006-04/28/content_269154.htm>.
"Chinese President Concludes Five-nation Trip." Forum on China-Africa Cooperation. Ministry of Foreign Affairs, the People's Republic of China, 18 Feb. 2009. Web. 04 Aug. 2015. <http://www.focac.org/eng/zt/Topichjt2009/t607439.htm>.
"Chinese President Hu Jintao Wraps up Successful African Tour." China View. Xinhua News Agency, 11 Feb. 2007. Web. 04 Aug. 2015. <http://news.xinhuanet.com/english/2007-02/11/content_5724926.htm>.
"President Hu's Arab-African Visit Fruitful: FM." China View. Xinhua News Agency, 30 Apr. 2006. Web. 4 Aug. 2015. <http://news.xinhuanet.com/english/2006-04/30/content_4492702.htm>.
Stone, Amanda. "President Obama Travels to Kenya and Ethiopia." The White House Blog. The White House, 26 July 2015. Web. 04 Aug. 2015. <https://www.whitehouse.gov/blog/2015/07/26/president-obama-travels-kenya-and-ethiopia>.


China, Debt, Development Finance and Human Rights (2)

Deborah Brautigam


Third International Conference on Financing for DevelopmentThis week, tens of thousands of people are gathering for the development finance summit in Addis Ababa, Ethiopia, in the largest conference Addis has ever hosted. As one of the newest "big overseas lenders," will Chinese banks be represented? My initial scan of the program suggests not. Not a single Chinese entity or individual is listed in the provisional Roundtable program. China's Minister of Finance, Lou Jiwei, will be involved in the third Plenary session, yet there is not a single Chinese representative at any of the official side events. This suggests that there is some way to go before Chinese financiers see themselves as part of the framework of development finance as it has evolved. Is that a good or a bad thing? It depends on how you view that framework and is effect on development, so far.


My post last week on China, Debt, and Human Rights -- inspired by a Voice of America story -- generated some interesting discussion (through emails) suggesting that the Voice of America reporter had not done justice to the material released by Juan Pablo Bohoslavsky, the International Expert on Debt and Human Rights, at his press conference in Beijing. I was urged to read the expert's end of mission statement (preliminary report) itself, released on July 6. It makes interesting reading, for several reasons, including the degree of cooperation from the Chinese government.

Bohoslavsky notes that he received an official invitation for his mission, and that during his week's visit he met with officials in the ministries of Foreign Affairs, Education, Finance, Public Security, Human Resources and Social Security, Housing and Urban-Rural Development, Commerce, the State Council Information Office, the National Health and Family Planning Commission, the People’s Bank of China and the China Banking Regulatory Commission and representatives of the China Development Bank, EXIM Bank China, and the Chinese Enterprises Confederation, including the China Chamber of Metals, Minerals and Chemical Importers and Exporters.

Bohoslavsky also stated that he phrased the dilemma of human rights protection like this:
I posed this question in almost every meeting during this visit: how to reconcile the principle of non-intervention in domestic affairs with the idea of protecting and promoting human rights abroad [emphasis added]? There is in China a sense that this is a delicate, complex but much needed task to be carried out. In my view the solution should be to stress local ownership and the own development priorities of partner countries to achieve social inclusive and sustainable development in line with international human rights standards.
Bohoslavsky got the first part of this exactly right. Yet his solution is problematic. Ironically, Chinese banks -- like other export credit agencies and multinational commercial banks -- already stress local ownership and development priorities of partner countries (read: governments). They take a "hands off" approach, providing the finance and expecting the borrower/owner to manage resettlement, compensation, and other thorny issues. Thus, it is very often weaknesses and shortfalls in the borrowers' own systems--under local ownership--that results in aggrieved citizens, who have lost homes and livelihoods without an adequate response from their governments.

The mission was able to pose some tough questions to people in responsible positions. Bohoslavsky noted that on paper, Chinese companies and lenders are supposed to apply standards, for example, on green credit. But he was "informed that so far no sanction has been applied by the Chinese authorities to Chinese lenders and corporations for overseas investments that may have contradicted the Green Credit Guidelines."

It is tough to do interviews on these issues in China. Chinese banks are unlikely to provide examples of their responses to environmental/social issues because they would consider these highly sensitive matters not for discussion with “outsiders” and seen as the internal affairs of the borrowing country. If these issues arose and were dealt with, they would (as Bohoslavsky noted) have been viewed as the borrowing country’s “internal affairs” and this is not something that can be discussed in public. Yet there are some examples in Africa where it appears that Chinese lenders have halted loans, or Chinese companies, adjusted their approaches to mitigate environmental concerns.

According to a fascinating case study published in 2007 by the World Wildlife Fund, engagement among local and international NGOs, Gabon ministries, and a Chinese oil company that was prospecting for oil in a Gabonese national park led to a collaborative effort to mitigate impact.

Peter Bosshard at International Rivers, an activist NGO, wrote an optimistic post in 2010:
… we have witnessed progress on the ground in Gabon. With support from China Exim Bank, Chinese investors plan to develop a huge iron ore deposit in this West African country, complete with a hydropower dam, railway line and port. Brainforest, Gabon’s inspiring environmental NGO, sent a letter to the Exim Bank pointing out that the dam was proposed to be built in a national park, and would violate its environmental guidelines. In due course, Brainforest learned from the Gabonese government that China Exim Bank had suspended the project over environmental concerns. In a separate development, Sinohydro agreed to work together with the Global Environmental Institute, a Chinese NGO, in an effort to address the social and environmental impacts of the Nam Ngum 5 Dam in Laos. 
Environmental and social impact of Chinese lending overseas is an important area, but not my own research focus -- so I welcome other case studies, if anyone has them. 

Will China Provide $1 trillion in finance to Africa by 2025? NO WAY

Deborah Brautigam


Will China provide $1 trillion in finance to Africa by 2025? No way. 

I really wanted to avoid analyzing this silly story, even when I was bombarded by colleagues sending me the link to the November 2013 South China Morning Post story quoting China Eximbank' chief country risk analyst as saying that China will provide $1 trillion in finance (investment, soft credits, commercial loans) to Africa by 2025, i.e. over the next 12 years. I wrote about it in another post on Zimbabwe, but never tackled it head on.

Let's unpack that a bit. For 2011, the SAIS China Africa Research Initiative has confirmed around $9 billion in Chinese loans (and loan commitments) in Africa. These are still mostly from China Eximbank, although China Development Bank is increasingly active. Chinese FDI in 2011 was $3.17 billion by official figures. According to Derek Scissor's China Investment Tracker, FDI was over $10 billion in 2011 (this only includes deals valued at $100 million and above).  So if we figure that Chinese finance in 2011 was about $20 billion, is it likely that we will see an additional $1000 billion ($1 trillion) by 2025?

No. As the article points out, this would mean $83 billion per year, on average. The China Eximbank official said that China Eximbank will provide "70 to 80 percent" of this amount. The entire continent's infrastructure deficit is estimated to be about $93 billion annually, but absorptive capacity and bankable projects are far below that figure.

Perhaps this another example of bad translating. How many times have I seen a translator struggling to convert Chinese numbers (based on 10,000 or "wan" where one million is 百万(or "a hundred ten thousands") into the system we use of thousands, hundred thousands, and millions? Although many stories have now spun this as a "pledge" or "commitment" of finance to Africa, I haven't seen a retraction, but I also haven't seen the figure repeated again by any Chinese official.

Update, July 28, 2015. A reader, Xiao'ou Zhou, commented that in fact China Eximbank did issue a denial of this story (in Chinese) on December 5, 2013.  They also noted that there is no such position as "chief country risk analyst" at the Eximbank. Thanks for the good research, Xiao'ou.