Tuesday, July 14, 2015

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


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. 

Friday, July 10, 2015

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


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.




Wednesday, July 8, 2015

China, Debt and Human Rights


Photo:  C. Chappat / Biblioteca de la ONU en Ginebra
Not long ago I received an email about a visit to Beijing being planned for Juan Pablo Bohoslavsky, the United Nation's Human Rights Council's independent expert on debt and human rights. It unfortunately got buried in my inbox as I was finalizing the new book and then heading off to Ethiopia for a conference and some research. Now I see that he has completed his trip to China. His report will be finalized soon.

A story in the Voice of America website, "UN fears Rights Violations in China-Backed Projects" suggested that the UNHRC was concerned because their research suggested some patterns in Chinese finance. 
Investigations by the UNHCHR [sic] show Chinese companies and financing institutions have little concern about human rights violations surrounding projects promoted and financed by them across different countries, including some in Africa.
This concerns the United Nations because Chinese institutions and companies are funding more projects globally than the World Bank, the U.N.’s independent expert on finance and human rights said at a press conference Monday in Beijing.
Whenever I see claims about what China is doing abroad, I'm curious about the evidence. I looked on the website of the UNHCR to see if they had published their investigations and found a stack of interesting studies here. What a great resource. Systematic research on these issues is clearly growing, with environmental issues receiving the bulk of the attention.

Do Chinese institutions and companies fund more projects globally than the World Bank? "Funding" has a lot of meanings. Since the special expert's mandate is to consider debt, we can focus on loan-financed projects. Let's look at Ethiopia, since they are one of the largest clients of both the World Bank and Chinese banks. The table below is drawn from the Debt Management office at the Ethiopian Ministry of Finance and Economic Development. It compares Chinese official debt disbursements with World Bank (IDA) disbursements, over the last five fiscal years. All figures are in millions of USD.

         2009/10     2010/11     2011/12     2012/13     2013/14

IDA         525            394            551            773            851
China      169            299            372             743         1324

Source: Ethiopia Ministry of Finance and Economic Development

Commentary:   Disbursements allow us to see the figures that are actually in play, rather than commitments that might not come to pass. The Chinese figures here probably do not include disbursements of several very large supplier-financed, non-government guaranteed credits to the Ethiopia Telecoms Corporation from Huawei and ZTE for telecoms projects. Commitments made to future projects and funds disbursed after mid-2014 (for example on the Addis-Djibouti Railway) are also not included.

Without accounting for inflation, the World Bank had disbursed $3094 million in loan credits since 2009, while the Chinese government has disbursed $2907 in official lending -- but their growth rate is a lot steeper. So if there are higher levels of official finance from the World Bank side, this is likely to change very soon.

What about numbers of projects financed by each? The World Bank's website says that they have financed 25 projects in Ethiopia between 2009 and 2014 (this does not include "additional financing" for existing projects). According to the Ethiopians, since 2009 there have been 21 separate loan-financed projects from China, including those financed by suppliers' credits. So, more projects financed by World Bank credits than by Chinese loans. I expect this to continue, as the Chinese have very limited manpower to develop projects: hence, fewer but larger projects.

And human rights? It is ironic that the focus on human rights and debt at the UNHRC has its origin in concerns about "the effects of structural adjustment and economic reform policies and foreign debt on the full enjoyment of all human rights, particularly economic, social and cultural rights."  The World Bank, of course, was often criticized for its role on these issues (along with the IMF). It is a sign of how things have changed that the World Bank is now seen as more progressive and helpful, while the new bankers in town -- Chinese bankers -- are seen as the new threat.

Note: This story was updated on July 14 after I received the Independent Expert's statement.

Friday, June 26, 2015

Chinese in Mauritius: Going the Way of the Dodo?

Journalist James Wan writes about the venerable Chinese community in Mauritius in his latest article for New African magazine: "Meet Africa's Most Integrated Chinese Community"  (June 15, 2015).
Since 1999, making at least five research visits, I've spent more than 12 months in Mauritius, and wrote about the Chinese there in several early articles. The Chinese connection was critical for the country's industrialization. Many Mauritian companies today are headed by ethnic Chinese, including CMT, one of the largest textile firms. The legendary Hakka town of Meixian in Guangdong is the origin of many Mauritian Chinese. James gives us a glimpse of the possible future of other Chinese settler communities in Africa: thriving economically, marginalized politically.

h/t to Winslow Robertson

Wednesday, June 24, 2015

Will Africa Feed China?

I've not been blogging much as I finished my new book, Will Africa Feed China? Last week I sent off the final edits. The manuscript is in production and OUP will be shipping it out on October 1 (Amazon is predicting a November release). I will post more on the book as the publication date comes closer.

Also looking forward to having a full-time research manager, Janet Eom, who will be starting at SAIS-CARI on July 1. We have been awarded some great research funding by Carnegie and the UK Economic and Social Research Council/DFID and Janet will be busy helping us to program these funds.

I hope to be blogging more now. I have a big backlog of posts on a number of topics, including the Lowy Institute's new Chinese aid data, South African survey research on Chinese enterprises, outrageous China-Africa stories, labor unions and Chinese firms, new data on economic cooperation, and more. Off next week to an Africa investment conference in Addis Ababa co-sponsored by the World Bank, China Development Bank, Govt. of Ethiopia, China-Africa Development Fund and UNIDO. 

Thursday, May 7, 2015

New research on the China International Fund in Africa

J. R. Mailey at the Africa Center for Strategic Studies has just published his new paper on the China International Fund, a.k.a. "The 88 Queensway Group" (click to see his earlier work with the U.S. - China Economic and Security Review Commission.)

J.R. gave us some highlights from the new paper, "The Anatomy of the Resource Curse: Predatory Investment in Africa’s Extractive Industries," at our SAIS-CARI April conference on Chinese overseas finance. He does extensive, careful work. I haven't read this yet, but I anticipate that it will be based on sound research.

A hat tip to Winslow Robertson

Friday, April 17, 2015

Chinese aid for South Africa?

Image Credit: Flickr/ GovernmentZA via The Diplomat
I was struck by an article today in The Diplomat on Chinese foreign minister Wang Yi's visit to South Africa, where Wang met with South African president Jacob Zuma. The article noted "In their meeting, both Wang and Zuma stressed the importance of Chinese aid for South African development."

I immediately wondered about this. South Africa, is, like China, an upper middle income country. China gives South Africa very minimal official development assistance [yes, this is true even if researchers relying on AidData mistakenly list South Africa as one of China's biggest aid recipients ... sigh...]. South Africa has received only scholarships, some Confucius Institutes, and a handful of "gift" projects that are basically symbolic; there is very little official aid. The relationship is all about business -- and politics -- and has its bumpy side. Consider the long standing concern with South Africa's industrial development and competition with Chinese imports, for example, or the ongoing kerfuffle over the inability of the Dali Lama to obtain a South Africa visa.

The article linked to a video of a CCTV clip with the title "Two sides vow to strengthen industrial cooperation". Listening to the clip, I found no mention of Chinese "aid", per se, although they did mention China's "consistent support and help" to South Africa while also emphasizing that Beijing sees the relationship as one of "mutual benefit".

Does anyone else wish that we could get away from the language of "aid" -- this notion that cooperation (or support or help) to an African country should be automatically termed foreign aid -- a one-way transfer of alms from richer to poorer countries?  Here's to more discussion about things like "industrial cooperation" or even "support and help" that poor countries provide to richer countries. After all, the West clearly receives support and help for its goals from the aid it gives, no? 

Monday, March 30, 2015

Chinese Agricultural Engagement in Africa: Policy Briefs


Our sister website, the SAIS China-Africa Research Initiative at Johns Hopkins University, has now published the latest (and last) in a series of policy briefs focused on Chinese agricultural investment and other engagement in Africa. These policy briefs provide original, fieldwork-based insights and information that is not available anywhere else. The papers on which they are based were presented at our 2014 SAIS-CARI conference on Chinese agricultural investment: 'Land Grabs' or 'Friendship Farms'?

  • Policy Brief 01/2014: The Political Ecology of Chinese Investment in Uganda: the Case of Hanhe Farm, Josh Maiyo.
  • Policy Brief 02/2014: Chinese Agricultural Investment in Mozambique: the Case of Wanbao Rice Farm, Sérgio Chichava.
  • Policy Brief 03/2014: Chinese Training Courses for African Officials: a “Win-Win” Engagement?, Henry Tugendhat.
  • Policy Brief 04/2015: Chinese Agricultural Engagement in Zambia: A Grassroots Analysis, Solange Guo Chatelard and Jessica M. Chu.
  • Policy Brief 05/2015: Chinese Agricultural Entrepreneurship in Africa: Case Studies in Ghana and Nigeria, Yang Jiao.
  • Policy Brief 06/2015: Assessing the Impact of Chinese Investment on Southeast Africa’s Cotton: Moving up the Value Chain?, Tang Xiaoyang.
  • Policy Brief 07/2015: Neither ‘Land Grab’ nor ‘Friendship Farm:’ Chinese Agricultural Engagement in Angola, Zhou Jinyan.
We appreciate support from the Smith Richardson Foundation and from Johns Hopkins University School of Advanced International Studies that made the conference and these policy briefs possible.

Tuesday, March 24, 2015

Mysteries of the China Africa Development Fund


The China Africa Development Fund (CAD-Fund) launched by China Development Bank (CDB) in 2007 remains poorly understood. For example, a 2012 statement by the Africa Finance Corporation outlining a strategic partnership being developed by the AFC and the CAD-Fund describes the CAD-Fund as having "US$50 billion" in funds under management.   Surprise: when fully mature several years from now, CAD-Fund will only be a $5 billion fund. In the past 3 years, no one has corrected that error at the AFC website.

Others have described the small CAD-Fund as a "sovereign wealth fund" -- this is not technically correct, as an adviser for China's sovereign wealth fund, China Investment Corporation (CIC) confirmed to me. Sovereign wealth funds are usually funded directly from central bank reserves arising from trade and budget surpluses (e.g. Korea Investment Corporation; China Investment Corporation) or natural resource exports (Kuwait Investment Authority, etc.). The CAD-Fund is a private equity fund, and was supposed to raise its own funds on the private market, after the initial infusion of $1 billion from CDB.

After two years of trying to raise the second $2 billion, CAD-Fund had to ask CDB for help. CDB arranged to provide CAD-Fund with a loan at LIBOR plus a margin, with an 8 to 10 year term. As noted in the financial newspaper Caixin in April 2012: "Development bank takes out loan after domestic institutions decline to invest" in CAD-Fund.

On another note, it is true that the CAD-Fund is not at all transparent. Its website gives no lists of the projects in which it invests, aside from a few paltry examples. Is this standard practice for other private equity funds, or something uniquely Chinese?

Wednesday, March 11, 2015

African Roads: Why So Many Chinese Contractors?


Thika Road, Nairobi      credit: theeastafrican.co.ke
Sitting in yet another airport, after yet another delayed flight, after yet another conference on China and Africa. Pondering this question: African governments routinely award road construction contracts to Chinese and other foreign companies: South African, Italian, and so on. Why is this the case? A recent discussion in the comments section of this blog addressed that issue. Readers' thoughts welcome.

@Anonymous: Africa needs more infrastructure, no one denies that. I just have one question. Why is it that it is only foreigners who can build this infrastructure? Why can't we Africans rise to the challenge of learning how to construct the infrastructure we need? Is constructing infrastructure too hard for us Africans?

@Margaret Lee: I agree with you. Africans have the capacity to build infrastructure. The problem is that the Chinese are sending many of their people out of China to get jobs because there are too many people in China. All over the continent you have well qualified African engineers who can design new infrastructure and people to actual do the construction. In addition, most African countries have the monetary resources to pay for the needed equipment and supplies. The real issue rest with African leaders who are not serious about African development and would rather allow foreigners, like the Chinese, to do the work. This has been the problem with Africa since independence. Noted brilliant African scholar, now deceased, Claude Ake in his book on Democracy in Africa says,"..the assumption so readily made that there has been a failure of development is misleading. The problem is not so much that development has failed as that it was never really on the agenda in the first place. By all indications, political conditions in Africa are the greatest impediment to development.."

Friday, January 30, 2015

China and Mozambique: Soft Power and Media

What I'm reading: a new paper by Sérgio Chichava, Lara Côrtes and Aslak Orre on the coverage of China in the Mozambican media, and what this says about the Chinese soft power strategy. From the conclusion: 
Where representatives of Western donor nations, so predominant in the Mozambican political landscape, actively attempt to mould the Frelimo-based elite into its own image, China’s politicians emphasise that it cooperates – and does business – with that elite no matter what it may privately may think about its virtues and conduct. This may well be a successful diplomatic strategy in the short run. The above findings go in the direction of suggesting that in the long run, the close association – diplomatically, in business and in people’s minds – of China with Mozambique’s elite, could become an obstacle, in particular [when it] concerns the question of Chinese soft power. At least if Mozambique’s newspaper reports on China are anything to go by, China’s soft power builders need to give some thought on how to make more of its positive image (“the bankroller”) and that which could potentially be positive but has not yet made a considerable mark on the Mozambican media, Chinese culture and language. Similarly, how can it play down what seems to affects it negatively the most: Illicit resource extraction and corruption in Mozambique, and authoritarian governance in China.

Thanks to Sérgio for sending me a copy of the paper and to Henry Tugendhat at IDS Sussex for circulating a link to the online version in the Future Agricultures blog.

















Tuesday, January 27, 2015

China and Industrial Policy in the South

The Huajian factory outside Addis Ababa [The Economist]
What I'm reading:  A new paper by Daniel Poon at UNCTAD: China's Development Trajectory: a Strategic Opening for Industrial Policy in the South, UNCTAD, December 2014.

Poon points out that China is at a crucial crossroad, serving at the same time as the world's low-end workshop and its most prominent proponent of industrial policy. China wants to move up the value chain, and Poon says: "The gap between China’s industrial ambitions and its current capabilities provides a strategic opening for other developing countries to bargain for enhanced opportunities for domestic investment, learning, technical change and structural transformation."

This paper helps frame the work on Chinese industrial investment in Ethiopia that we are doing at SAIS-CARI. I am just back from Addis-Ababa where we interviewed a number of firms in the leather sector with some kind of skill-building or technology-transfer linkage with China. Fascinating.

Thursday, January 15, 2015

China Africa Research Manager Position available at SAIS-CARI

Our new center, the China Africa Research Initiative (CARI) at Johns Hopkins University School of Advanced International Studies (SAIS), has been awarded a Carnegie Corporation grant to build CARI's capacity to bridge scholarship and policy. We are seeking a full-time research manager, who will take a leading role in organizing the center's work and programs. We are looking for someone with a master's degree (or equivalent experience), excellent organizational skills, and familiarity with communications, including social media and website management. Field research experience and Chinese language skills would be a plus. Deadline for applications is January 31, 2015 with a mid-February start date (negotiable). This is a 2 year, fixed-term position, although there is some possibility of renewal, depending on funding.

For detailed information on the post and how to apply please see the Johns Hopkins University HR website, requisition number 64680: http://jobs.jhu.edu/

Monday, January 12, 2015