Wednesday, September 27, 2017

Guest Post: Stretching the Data

This guest post is by Jyhjong Hwang, the Senior Research Assistant at the China-Africa Research Initiative at Johns Hopkins SAIS.

This is the story of how five Chinese-financed coal power stations in Africa became 50.

On July 21, 2017, the New York Times published an op-ed titled, "China's Other Big Export: Pollution," written by Paulina Garzon at the Wilson Center and Leila Salazar-López of Amazon Watch.  While the op-ed focused mainly on Latin America and the Caribbean, one paragraph using our CARI data on Chinese official loans to Africa caught our attention:
"China is worsening the climate crisis with its financing elsewhere as well. From 2000 to 2015 China extended $94.4 billion in loans to Africa, fueling extractive industries like oil, minerals and timber; the expansion roads [sic] and ports to get those raw materials to market; and dirty energy like large dams and power plants. Beijing is building and financing some 50 new coal plants across Africa." (Emphasis added).
China-Africa Research Initiative (CARI) has a bone to pick with just about every sentence of this paragraph. While we are glad that our data is being utilized, we would like to set the record straight regarding the nature of these loans – and in particular, the nature of Chinese involvement in African coal stations. We show below how data and information get distorted as they are passed from source to source, rephrased, paraphrased, and taken out of context.

1.    Do Chinese loans go to “fueling extractive industries like oil, minerals, and timber”?

No. That would be stretching the data. Here are the top five sectors for Chinese loans (2000 to 2015):

Rank
Sector
US$ billions, unadjusted
1
Transportation
30.1
2
Power
22.8
3
Mining
9.2
4
Communication
6.8
5
Other social*
4.3
* Chiefly low-cost social housing and stadiums.
Source: China-Africa Research Initiative, 2017.

Mining (oil and minerals combined) constituted only 9.6% of all Chinese loans in Africa. And we could not identify even one loan-financed timber project. The impression that Chinese loans are primarily given to foster extractive industries like oil, minerals, and timber is not borne out by our data.

2.    Do Chinese loans finance “roads and ports to get those raw materials to market”?

Well… the Chinese do finance a lot of transport projects. Roughly 32% of all Chinese loans went to the transportation sector. However, many of these projects have more to do with Africa’s own infrastructure deficits and little to do with natural resource exports. For example, land-locked Ethiopia, with almost no oil, minerals, or timber to export, borrowed billions to build a freight and passenger railroad from its capital, Addis Ababa, to a harbor in the neighboring country of Djibouti. Ethiopia will be using this infrastructure to export manufactured goods and to import fossil fuel from the global markets. At least 17 countries have borrowed to build or renovate airports. Assuming that all Chinese-financed transportation projects are geared toward China’s needs for raw materials is a gross simplification. As the Ethiopia case shows, complex factors related to global and domestic trade, urbanization, population density and distribution, and local politics all shape decisions around road and port construction – not just the presence of resource commodities.

3.    Is “Beijing […] building and financing some 50 new coal plants across Africa"?

No, and not even close – but let’s first clear up some definitions to understand what we mean. As we will further explain below, there are currently only five coal-power complexes in Africa that have received any confirmed Chinese financing. The misunderstanding here lies in a point of confusion over terminology when discussing coal power stations, leading readers to infer that 50 new complexes are rising from the ground thanks to Chinese money. However, this is absolutely false, as one must distinguish between “units” and “stations”: individual coal power stations usually have multiple generating units (i.e. individual turbines and generators). For example, the Morupule B Power Station in Botswana has four units, each generating 150 MW. Therefore, "100 coal-generating units" will always mean fewer than 100 coal power stations.

To further complicate matters, the commonly-used term “plant”, when referring to coal power production, varies in definition: while in layman’s day-to-day discussion, "power plants" and "power stations" are often understood to be the same thing (this is the definition used in the NYT op-ed), other sources (such as the research project CoalSwarm) use "plants" as synonymous with "units", while referring to entire (often multi-unit) complexes as "stations". For clarity’s sake, we will avoid using the word “plant” in this post, and will opt to use the terms “unit” and “station” instead.

So where did the “50” figure originate? We traced the claim to a May 10, 2017 article in the National Geographic article: "As the World Cuts Back on Coal, a Growing Appetite in Africa":

“According to data compiled by CoalSwarm, an industry watchdog, more than 100 coal-generating units with a combined capacity of 42.5 gigawatts are in various stages of planning or development in 11 African countries outside of South Africa—[...] roughly half are being financed by the world’s largest coal emitter: China.” (Emphasis added.)

For their NYT op-ed, Garzon and Salazar-López, appearing to have mistakenly assumed that each coal generating unit is one power station, took the phrases "roughly half" and "100 coal-generating units" and came up with the number 50.
But then what did National Geographic’s source, CoalSwarm, originally mean to say? We tracked down an August 2016 report written by CoalSwarm contributor Dr. Christine Shearer, titled "China’s growing role as funder of Africa’s proposed coal plants", with data from their Global Coal Plant Tracker. The report states that there are:

"42.2 GW of capacity under development on the continent (excluding South Africa) [...] About half of the proposed capacity (21.5 GW) is being supported by Chinese finance [...] totaling 47 units (there are often several units, or plants, within a power station)." (Emphasis added).

CoalSwarm did mean that half of the proposed capacity is Chinese-financed-- not half of the units (or for that matter half of the stations). As noted above, “units” are not standardized in terms of their electricity production capacity (gigawatts)-- it cannot be assumed that half of one is equal to half of the other, as we could for instance be looking at fewer units, but with a much higher output capacity.

CoalSwarm’s specific terminology choices appear to have been lost in the National Geographic article, which uses "plants" and "stations" interchangeably. As a result, this practice was carried forward in the NYT op-ed, where no mention of "units" was made, and "plants" are used to refer to entire complexes. While CoalSwarm does report 47 units with potential Chinese financing, there is no way for readers to understand this merely from the NYT op-ed.

To firmly establish the exact number of coal power stations involved in this discussion, CARI reached out to Dr. Shearer of CoalSwarm, who kindly provided us with their unpublished granular data. CoalSwarm has actually been able to find 17 projects (totaling 47 coal-fired generating units) with Chinese involvement, with the caveat that these 17 "projects are at various stages - China institutions are either actively financing or discussing financing the plants." Thus, 17 is not even the total number of Chinese-financed coal power stations, but an aggregate of coal power stations that have secured Chinese finance, or are in the process of negotiating for it.

Then, excluding projects with financing still under discussion, how many of these projected 17 coal power stations, with a combined capacity of 7.265 GW, actually secured Chinese financing? Below is the full list of confirmed Chinese-financed coal power stations: from 2000 to 2017, we could only find five such projects.

Chinese-financed coal power stations in Africa, 2000-2017
Country
Project Status
Loan Signing Year
Borrower
Chinese Financier
Loan US$ millions, unadjusted
Project
Total Capacity
Botswana
Completed
2009
Botswana Power Corp[1]
ICBC[2]
825
Morupule B Coal Power Station expansion project
600 MW (4 units)
Kenya
Signed
2015
Amu Power Company[3]
ICBC
900
Lamu Coal Power Station
1050 MW (3 units)
Morocco
Implementation
2014
Moroccan government
Eximbank[4]
305
Jerada Coal Power Station
350 MW (1 unit)
South Africa
Signed
2017
Eskom[5]
CDB
1500
Medupi Coal Power Station expansion
4800 MW (6 units)
Zambia
Completed
2015
Maamba Collieries Ltd.[6]
ICBC & Bank of China (HK)[7]
183
Maamba Coal Power Station Phase I
450 MW (3 units)
Source: China-Africa Research Initiative, 2017.

Throughout this whole “telephone game”, from the CoalSwarm data through the National Geographic article and ending with the NYT op-ed, the original data was misinterpreted and distorted, leading the actual figures – five confirmed Chinese-financed projects – to balloon into 50. Such distortions unfortunately reinforce false perceptions and skew the debate, while the data often does not support these assumptions. Terminology and definitions have their importance when discussing technical issues. Knowing that the public is at times confronted with misleading information, we must strive more than ever to ensure that data on such sensitive issues is correctly compiled, analyzed, and circulated.



[1] Botswanan state power company.
[2] Industrial and Commercial Bank of China.
[3] A consortium of private Kenyan businesses that won the BOOT contract for the power plant.
[4] China Export-Import Bank.
[5] South African state power company.
[6] A joint-venture between the Zambian government and a Singaporean company.
[7] Bank of China, a commercial bank with its headquarters in Hong Kong. Distinct from the People's Bank of China, which is the country’s central bank.

Tuesday, August 29, 2017

Guest Post: The Welcome Party: Cross-Strait Relations and Chinese Loans in Africa

This guest post is by Yunnan Chen, PhD candidate at Johns Hopkins SAIS, and Jyhjong Hwang, the Senior Research Assistant at the China-Africa Research Initiative at Johns Hopkins SAIS.


Do African countries that switch diplomatic relations from Taiwan to Beijing get a boost in Chinese finance?  CARI’s loan database shows that checkbook diplomacy does not always pay off immediately and does not guarantee a continuous flow of financing indefinitely. 
                                                                                                     
On December 20 2016, Portuguese-speaking islands of São Tomé and Principe recognised the People’s Republic of China, switching its allegiance away from the Republic of China, Taiwan, with which it had maintained diplomatic relations since 1997. In this it follows a number of recent converts: Malawi, which switched from Taiwan to China in 2008, and The Gambia, which broke diplomatic ties with Taiwan in 2013. This leaves the small club of African countries maintaining relations with Taiwan even smaller: only Burkina Faso and Swaziland continue to recognise Taiwan over China.

In the case of Malawi, after recognising Beijing in 2008, our data shows that the country received a significant number of subsidized loans in the following years. This included a $90 million concessional loan for the Bingu International Conference Centre in 2009, a $79 million concessional loan for the Malawi Science and Technology University in Thyolo in 2011, and another $70 million concessional loan for the Bingu National Stadium in 2012. However, no new loans have been confirmed since 2012.

Presumably, São Tomé and The Gambia hoped to reap similar benefits by re-establishing ties with mainland China, at least in the first few years. However, their change of heart had no immediate payoff. The Gambia switched diplomatic recognition from Taiwan to the P.R. China in 2013, but this gesture was not reciprocated by China for three years. Beijing was in no rush to build diplomatic relations with The Gambia, giving more importance to preserving the “diplomatic truce” it held at the time with Taiwan under former KMT President Ma Ying-Jeou.[1] Only in March of 2016 did China finally establish formal diplomatic relations with the West African state, and not coincidentally a few months after Tsai Ing-wen, of the pro-independence DPP was elected as president of Taiwan.

The re-establishment of ties in 2016 can be read as a rebuke across the strait, but it also coincides with the ascent of the new Gambian President Adama Barrow—the first peaceful handover of power since independence, bringing the prospect of greater political stability. On April 25th, 2017, Gambia’s National Water and Electricity Company (NAWEC) signed a project agreement on a prospective power project with Sinohydro worth US$165 million. While details surrounding the project’s financing are as yet unreleased (and the agreement may only be an MOU), it indicates a possible new wave of interest and investment from China.[2]

For São Tomé, there have also been some teasing prospects of new investments in recent years: the IMF notes that in 2015, the President of the Council of Ministers and Parliamentary Affairs signed an MOU with the China Harbour Engineering Company (CHEC) for the construction of a new deep-water port costing US$800 million, which would be financed through a Public-Private Partnership model.[3] However, this project still remains unconfirmed, and while a memorandum of understanding (MOU) has been signed, this does not constitute commitment of financing, or any guarantee of the project’s implementation. Other “Chinese” investments on the island, such as a project for 100 housing units and an administrative centre have been constructed by Chinese contractors, though these projects have not received official finance.[4]

More recently, São Tomé’s Prime Minister Patrice Trovoada undertook a six-day visit to China on April 12th, 2017. Chinese official news outlet China Daily reported that President Xi Jinping was “willing to help São Tomé and Principe improve its development plans, boost cooperation in tourism, fishery and agriculture, and support the country's infrastructure construction, use of human resources and security capacity building.”[5] The Taiwan-owned World Journal reported that, as of early 2017, China has sent expert teams in agriculture, electricity, medical, and anti-malaria to São Tomé.[6] Aside from these initial gestures, Beijing has made no concrete, official financial commitments as yet in response to either São Tomé or the Gambia’s diplomatic reversal. Given the small size of the two countries’ economies, it is highly unlikely their respective government budgets would be able to finance a US$800m deep-water port of US$165m power plant without external financing.[7] As such, our CARI loans database team continues to monitor these developments.







[1] "China’s Gambia gambit and what it means for Taiwan". Richard C. Bush, Brookings Institute, March 22, 2017. https://www.brookings.edu/blog/order-from-chaos/2016/03/22/chinas-gambia-gambit-and-what-it-means-for-taiwan/

[2] " NAWEC signs $165M electricity project with China". The Point, April 25 2017. http://thepoint.gm/africa/gambia/article/nawec-signs-165m-electricity-project-with-china

[3] Staff report for the 2016 article IV consultation, first review under the extended credit facility, and request for waiver for nonobservance of performance criterion and modification of performance criteria—press release; staff report; and statement by the executive director for the democratic Republic of São Tomé and Príncipe. International Monetary Fund, IMF Country Report No. 16/174, June 2016. https://www.imf.org/external/pubs/ft/scr/2016/cr16174.pdf

[4] The housing project is expected to be financed by the contracted Chinese company Guangxi Hydroelectric Construction Bureau through a build-own-operate-transfer (BOOT) arrangement, and the administrative centre is rumoured to have received financing from the private investment company China Investment Fund, though the deal is very opaque and still being investigated by CARI.

[5] "President Xi meets leader of Sao Tome and Principe". April 14, 2017. China Daily. http://www.chinadaily.com.cn/china/2017-04/14/content_28935907.htm

[6] "After breakup with Taiwan, Sao Tome president receives big gifts during visit [甩台灣後聖多美總理訪京收大禮]. World Journal, April 14, 2017. http://www.worldjournal.com/4924459/article-%E7%94%A9%E5%8F%B0%E7%81%A3%E5%BE%8C%E8%81%96%E5%A4%9A%E7%BE%8E%E7%B8%BD%E7%90%86%E8%A8%AA%E4%BA%AC%E6%94%B6%E5%A4%A7%E7%A6%AE/

[7] According to data from the IMF and World Bank, the GDP of São Tomé and the Gambia were respectively under US$500m and US$ 800m