Wednesday, March 30, 2011

Michael Gerson on "China's Aid Invasion"

The Obamas with the Equatorial Guinean dictator.
This morning's Washington Post had a critical op-ed on China's aid (or is it investment? the online version has "investment" in the title, the print version says "aid") to Africa by conservative columnist Michael Gerson. While less hyperbolic than columns on China's "aid" by Freedom House and others over the past few years, Gerson nevertheless falls into some of the same pits: the double standard; and the mixing up of aid and business.

Gerson writes "in Africa today, America consistently promotes economic liberalization and good governance..." Just how consistently we do this is open to debate. For example, the US provided -- each year -- about $1.6 billion in aid (economic and military) to repressive Egypt under Mubarak. 

Referring to China, Gerson says "African governments have a rich friend with low standards." I wonder how he would describe America's friendship with tiny, oil-rich Equatorial Guinea? Check out Harvard group Human Rights in Equatorial Guinea for a portrait of the deep problems with repression and torture in that country, or read Peter Maass's piece in Slate: "Who's Africa's Worst Dictator?". Yet as the BBC has noted,
"[t]he US finds it hard to criticise a country which is seen as an ally in a volatile, oil-rich region. In 2006, Secretary of State Condoleezza Rice hailed President Obiang as a "good friend" despite repeated criticism of his human rights and civil liberties record by her own department. More recently President Barack Obama posed for an official photograph with President Obiang at a New York reception."
There is plenty to criticize in China's human rights record at home, and plenty of room for improvement as Chinese leaders take uncertain and inconsistent steps toward being a "responsible great power". But let's get our own record straight, Mr. Gerson. Your op-eds will be more credible to Africans if you do so.

Wednesday, March 23, 2011

China's Oil Imports From Libya

Hat tip to Leo in Comments section
A Chinese student asked me today what China might learn from the Libya situation about the risks of investing in unstable countries. I mentioned that China's FDI investments in Libya are not large, although China does import oil produced in Libya. But how does China compare with other countries as a buyer of Libyan crude? A quick Google effort found the AP article below, which I have not verified with the source, the International Energy Agency.

Europe gets most of Libya's oil exports

By The Associated Press

Tuesday, February 22, 2011 at 12:55 p.m.

NEW YORK — Europe gets over 85 percent of Libya's crude exports. The rest goes to Asia, Australia and the U.S. Here's a breakdown of how much oil various countries import from Libya (in barrels per day) and the percentage of a country's total crude imports supplied by Libya.

-Italy: 376,000 (22 percent)

-France: 205,000 (16 percent)

-China: 150,000 (3 percent)

-Germany: 144,000 (8 percent)

-Spain: 136,000 (12 percent)

-United Kingdom: 95,000 (9 percent)

-Greece: 63,000 (15 percent)

-United States: 51,000 (0.5 percent)

-Austria: 31,000 (21 percent)

-Netherlands: 31,000 (2 percent)

-Portugal: 27,000 (11 percent)

-Switzerland: 17,000 (19 percent)

-Ireland: 14,000 (23 percent)

-Australia: 11,000. (2 percent)

(Source: International Energy Agency 2010 statistics)

The Associated Press

Tuesday, March 22, 2011

Origins of China's New Anti-Corruption Law

The Chinese National People's Council has passed a landmark amendment to its corruption legislation that makes foreign corrupt practices illegal. Yesterday Ted Moran, blogging at the Center for Global Development attributed this move to efforts by a G-20 coalition. He wrote:
The Toronto Summit in June 2010 established a working group “to make comprehensive recommendations on how the G-20 can take practical steps to combat corruption.” During the Seoul Summit in November, a coalition of emerging market members of the working group (including Brazil, Argentina, South Africa, and Mexico) quietly joined with the United States to urge China to adopt an anti–foreign bribery law. That effort has now borne fruit!
I respect Ted Moran's knowledge of corporations (in fact I've assigned portions of his new book to my students). And it would be nice to think that Chinese legislation moves that quickly, or that the United States and the G-20's quiet urging led to this result.

Yet in fact, as I pointed out in a chapter written three years ago for Transparency International's Global Corruption Report 2009, "When China goes shopping abroad: new pressure for corporate integrity?" (p. 69), this amendment has been in the works for years
Legal changes now under way may boost efforts to combat bribery by Chinese firms outside the country. China was a sponsor, and has signed and ratified, the UN Convention against Corruption (UNCAC), which stipulates that bribery overseas be made a crime. Chinese officials have repeatedly said that China will modify its laws to comply with all the convention’s obligations.14 In September 2007 China set up the National Corruption Prevention Bureau, tasked to improve international cooperation against corruption and fulfill China’s responsibilities as an UNCAC signatory. The agency was not made autonomous, however. In June 2008 the Communist Party’s Central Committee included the prohibition of commercial bribery overseas in its five-year anti-corruption work plan.15
I think we have the UN Convention Against Corruption (which was ratified and entered into force on December 14, 2005) to thank, and before that, the OECD Convention Against Corruption, not the quiet urging of the US or the G-20.

These Chinese reforms were already well under way before June 2010. It's important to get this analysis right if we want to understand how China's efforts to "go global" are likely to evolve, the factors that will influence them, the way the Chinese government works (still a work plan!) and the time involved in moving through reform.
14 Li Jinzhang, vice minister of foreign affairs, statement at the First Conference of the State Parties to the UN Convention against Corruption, Amman, Jordan, 10 December 2006; Caijing Magazine (China), 25 July 2007.
15 Central Committee of the Chinese Communist Party, ‘Work Proposal of Establishing and Improving the Anti-corruption System 2008–2012’, June 2008.

Tuesday, March 15, 2011

China and Libya: Update on Workers

Bangladeshi workers stranded in Libya. Photo: AFP
Last week I posted on China and Libya, highlighting the challenge of Chinese companies employing Chinese workers and the backlash against this. A reader forwarded me an article from a Bangladeshi newspaper, The Daily Star, that puts China's actions into comparative perspective. Where the Chinese government has moved in ships and planes to evacuate the 30-36,000 Chinese working in Libya (most as laborers), Bangladesh has done little to ease the plight of what appears to be anywhere from 45,000 to 60,000 Bangladeshi workers stranded in Libya. According to the article, "a Chinese company moved 804 Bangladeshi workers to Greece from Libya on Sunday."

An October 2008 article in provided some history on the Libyan government's policy of recruiting labor abroad. Then, the Libyan government had "directed foreign companies from Germany, Japan and South Korea working in Libya as well as [the] Libyan private sector to recruit workers from Bangladesh." I haven't seen any major newspapers asking whether the instability in Libya would make Bangladesh rethink its labor export strategy...

Tuesday, March 8, 2011

The Human Side of China's "Economic Invasion" of Africa

Engineer Liu Hui & Kenyan workers: Sven Torfinn/Panos Pictures
If you overlook the title, "China's Economic Invasion of Africa," you'll enjoy a well-done and interesting story by Xan Rice in The Guardian's Sunday, February 6, 2011 issue. It contains great interviews of individual Chinese entrepreneurs and corporate managers who have come to do business or seek their fortunes in African countries.

Here's one quotation from a Chinese entrepreneur who, Rice writes, "is aware that western attitudes to China's push into Africa remain largely negative – something he struggles to understand."
"Western countries also buy oil, and have mines around the world. People don't talk about 'grabbing', or 'new colonialism' there. So why is it different for Chinese? We are not sending our armies to places and saying: 'Now sell us this!'" Xu says. "If you can't compete with us, you find an excuse. It's like two children fighting, and the losing one crying to his parent about funny tricks."
Some of those funny tricks might involve practices that have been outlawed in the West under laws like the US Foreign Corrupt Practices Act and the OECD Convention on Corruption. These are not always observed by Western companies, but at least they serve as an important signal of a liberal normative consensus. China has no comparative law.

It was particularly interesting to me that the story begins with Zhang Hao, the son of a man who worked on one of China's foreign aid-financed development projects -- a fishing project on Lake Victoria that I wrote about in The Dragon's Gift. After spending time there himself as an aid worker, Hao's father encouraged him to explore business opportunities in Uganda.

A hat tip to Li Anshan's Centre for African Studies at Peking University.

Friday, March 4, 2011

China and Libya: What's the Real Story?

Chinese evacuees in Malta. Dmitry Solovyov / NBC News
In recent days, the unrest in Libya and attacks on the many Chinese projects there, have raised questions about the impact this will have on China's quest for natural resources in unstable states. I think this focus is surprisingly off-track. What should we be learning about Chinese strategy from the Libyan engagement?

(1) China joins in United Nations sanctions. First, there has been relatively little comment about a rather extraordinary step: on February 26, the Chinese joined with other Security Council members at the UN in approving Security Council Resolution 1970 which imposed immediate sanctions on the government of Muammer Gaddafi. This move put into place an international arms embargo and targeted "smart sanctions" on key individuals, and refers the matter to the International Criminal Court for possible prosecution. Given Chinese reluctance to support intervention into "internal affairs" of other states, this move marks yet another step toward China's coming of age as a global power. It's something we can applaud.

(2) China's investment in Libyan oil is actually quite modest, while Western companies are major players. As William J. Hudson, acting deputy assistant secretary in the Bureau for Near Eastern Affairs, told Congress in 2009:  "I'm happy to report that US oil companies are the most active there, and Libyans are eager to use their technology. The Chinese are participating, but our countries [sic] are taking the lead" (Snow 2009).

ENI (Italy), Occidental (USA), and Petro-Canada and BP, Hess, Marathon, Conoco-Phillips, ChevronTexaco, and others have been key players in Libya. Italy, Germany, Spain, and France have been Libya's major markets for its oil. Although the US imposed sanctions on Libya after the Lockerbie airline bombing tragedy, not all European countries followed suit; US sanctions ended in 2004. Check out the Wikileaks website for the Libya cables and extensive discussion of all of this. (A good place to start is here.)

China's efforts to invest further in Libyan oil and gas were rebuffed in September 2009 when Libya vetoed CNPC's $US462 million bid for Verenex Energy, whose assets were Libya-dominated. Chinese oil and gas operations employed only around 400 Chinese nationals, another sign of their small size.

(3) For China, the problems posed by the popular uprising in Libya are far more about Chinese construction projects and their use of Chinese labor, than Chinese companies' oil investments. Over the past four years, China State Construction Engineering Corporation (CSCEC) has itself signed at least $2.67 billion of construction contracts in Libya.  In 2008 alone, Chinese companies signed US$10.05 billion in contracts for 180 construction, engineering and labor service projects in Libya (they also reported turnover of US$750 million, which suggests most of these projects started fairly recently). This was far larger than any other location in Africa.

Construction firms doing projects in telecoms, railways, and other infrastructure, seem to have employed some 36,000 Chinese workers. This was bound to raise resentment from Libya's unemployed youth. Despite high levels of unemployment, wages are also high in Libya, and few local workers speak foreign languages. Comments on a Tripoli Post story on this issue suggest that use of foreign workers is a widespread response by foreign companies in Libya. Despite this, many Libyans do find employment in this sector. The Economist Intelligence Unit's 2008 report on Libya cited the Monitor Group, a US consulting firm, which estimated in 2005 that some 600,000 to 800,000 people were employed in Libya's construction industry. It is likely that the vast majority of these people were Libyan. But the attacks on Chinese work camps in Libya bring home the risks of a business plan that relies on imported labor in repressive states with high unemployment.


Nick Snow, "Local approaches may help US in oil-rich areas overseas," Oil & Gas Journal, July 27, 2009.