Wednesday, August 31, 2011

China Development Bank's $3 Billion Line of Credit in Ghana: Better than the World Bank?

Ghana's speaker of the house of parliament in Beijing, 2008
The framework for China Development Bank's offer of a $3 billion line of credit was approved last week by Ghana's parliament. The controversial credit was debated over several sessions of parliament, and the opposition abstained from the final vote. Finance minister Duffuor said the credit is "comparatively cheaper than floating a Eurobond" and from what I can see, the line of credit is roughly equal to, or potentially better than, a non-concessional World Bank IBRD loan, although clearly not better than the World Bank's IDA credits.

What's interesting about all this? Three things: (1) Ghana's democracy and lively parliament show that a better governed country allows more transparency about its engagement with Chinese banks; (2) Because of that transparency, we are learning a lot from Ghana about how Chinese banks engage, and they don't seem to have prohibited Ghana from releasing this information; (3) China's resource-secured line of credit model appears alive and well. The IMF and World Bank are not going to like this challenge to their position as preferred creditors.

The terms of the CDB line of credit differ in its two installments. The first tranche of $1.5 billion will have a 20yr maturity including a 5yr grace period. The interest rate will be 6 month LIBOR (London Inter-Bank Offered Rate) plus a margin of 2.95%, with a commitment fee of 1% and an upfront fee of 0.25%. The terms of the second $1.5bn tranche are 15yr maturity including a 5yr grace period, interest rate of 6 month LIBOR plus a margin of 2.28%, and probably the same fees.

The credit appears to be secured by a petroleum off-take arrangement and escrow account, the same model China has been using for decades in Africa, most famously in Angola. As one report states:
Repayment of the loan facility ... would be effected from petroleum revenue and other government owned resources. Due to the aforementioned terms of repayment, the report stated that a commercial contract for the off-take of oil would be entered into by the Ghana Petroleum Corporation and the Chinese authorities. According to the report, the government would reduce the impact of commercial projects on the public debt, through an on-lending and escrow arrangement for most of the projects under the facility.
With a debt burdened past, Ghanians rightly worry about the increasing levels of debt being incurred by their government. Their parliament needs now to ensure that all the projects financed under these credits have proper feasibility studies, and that the contracts they finance are won through open, international, competitive tenders. There should be plenty of Chinese companies competitive enough to win contracts that these loans will finance, and according to the terms, up to 40% can finance non-Chinese contractors.
Under clause three of the Master Facility Agreement, a minimum of 60 per cent of each tranche was required to be paid to the People's Republic of China (PRC) contractors, a clause which allows about 40 percent of the facility to be applied towards local content sourcing, or sources other than the PR
Ghanians are already trading accusations about corruption and worries about kickbacks. With infrastructure contracts this is a very real worry. But from what I've seen the intial allegations stem from a lack of understanding of the convention of upfront fees. Some believed the fees serve as a commission of some kind to some broker or deal maker, but this kind of fee is common, even in World Bank loans, which also have upfront fees. The World Bank's IDA loans for the poorest countries currently have no commitment fee (this is a change) but do carry a service fee of 0.75%. The World Bank's IBRD loans (for middle income countries, probably Ghana falls here now) vary in fees. The highest are for special development policy loans,  currently at 6 month LIBOR plus a minimum of 2%, with upfront fees of 1% of the total loan amount, while "Development Policy Loans with a Deferred Drawdown Option (DPL DDO) carry a 0.75% front-end fee, plus a 0.50% renewal fee; and Catastrophe Risk or Cat DDOs carry a 0.50% front-end fee, plus a 0.25% renewal fee".

A hat tip to Naa Aku Addo for the story. Below, more details of the loan, repayment, and the projects that are projected to be financed.

Sunday, August 28, 2011

China, Libya, and Oil: Update

China is positioning the country to engage with the new Libyan government, despite comments from at least one Libyan rebel that China might lose out for not being part of the forces backing the rebels. I doubt that will happen, and I predict that Chinese companies, which had signed some $18 billion in infrastructure contracts, will be actively trying to restart those projects and others. They will succeed in a lot of this. Reconstruction after all the NATO bombing will mean lots of new business.

Here are a few facts on China & Libya from a recent news article. (I also recommend searching for "Libya" on this blog and reading some of the comments.)
...About 75 Chinese companies operated in Libya before the war, involving about 36,000 staff and 50 projects, according to early Chinese media reports. Many of those firms were engaged in building roads, buildings and infrastructure....
...China's top three state oil firms CNPC, Sinopec Group and CNOOC all had engineering projects in Libya, but no oil production yet, company officials said....
"China was unusually quick to support the [National Transitional Council] ...Relative to China's typical foreign policy response, that was quite important, but relative to what Europe and the United States did, that falls short. So I think they will struggle," said Ben Simpfendorfer, managing director of Silk Road Associates, a Hong Kong-based consultancy that specializes in business between China and the Middle East.
China shipped in roughly 150,000 barrels per day of crude oil from Libya last year through Unipec, the trading arm of Asia's top refiner Sinopec Corp that holds the long-term supply contract. That amounted to about one tenth of Libya's crude exports [and about 3 percent of China's].
A hat tip to Stellenbosch University's Center for Chinese Studies.

Tuesday, August 23, 2011

China in Africa: What Can Western Donors Learn?

photo credit: Deborah Brautigam
A new report of mine: China in Africa: What Can Western Donors Learn? has just been published by Norfund, Oslo, August 2011. Some excerpts:
...Many Western donors think they know what China is doing in Africa. They’ve seen the headlines: the Chinese arrived a few years ago in a desperate search for oil. They set up a huge aid program, propping up governments in resource‐rich, pariah states that the West won’t touch. Their companies bring in all their own workers and refuse to hire Africans. They’re leading the “land grab” in Africa, growing food to ship back to China. It’s an alarming story … but, on closer inspection, none of it is true. (p. 3)
...Chinese companies do have low costs but construction firms in Zambia and Namibia have documented unfair Chinese business practices: collusive bidding, low wages, and a tendency to hire contract workers in order to get around mandated labor benefits (paid holidays, sick leave, etc.) for permanent staff. (p. 12)
...Speaking at the World Bank/IMF Annual Meeting in April 2011, Dr. Situmbeko Musokotwane, the Zambian minister of finance, compared China’s business and aid model with that of the West. China used aid and other tools vigorously to encourage its companies to invest in Africa, he said, but that did not seem to be the case for Europe and America, whose aid programs were more paternalistic, and seemed to be designed as charity: “at least help them not to suffer, we can’t do much more than that. They’re not ready for investment.”
...We need a better understanding of just how countries like China are engaging in Africa. And once we have that understanding, we may be better positioned to accept the recommendations of thoughtful African officials like newly (re)appointed Nigerian finance minister Ngozi Okonjo‐Iweala: “China should be left alone to forge its unique partnership with African countries and the West must simply learn to compete.” Implicit here is a warning: we in the West no longer have a monopoly over development ideas, practice, and finance. China is rising, and with them, India, Brazil and others. If we don’t learn how to have “a new conversation” as African Development Bank president Donald Kaberuka put it, we risk finding that Africans are no longer interested in listening. (p. 16).
Continue reading here >>

Monday, August 22, 2011

Why I Speak to the State and Defense Departments on China and Africa

Angolan offshore oil rigs.    photo credit: Neftegaz.r
At the end of summer, when the Western world pauses, I am catching up on some China-Africa reading. One piece I missed dates from August 2010: an article in China Monitor by Jesse Salah Ovadia, a York University (Canada) Ph.D. student who did fieldwork in Angola. His comments on his interviews with US government officials in Angola were illuminating, and disturbing:
In an interview I conducted with an American diplomat in Angola – carried out as part of a wider research project - he repeatedly denigrated the quality of Chinese infrastructure projects in the country and argued that the Chinese "don‘t have any interests here other than resource extraction. ... It‘s plain and simple. They are just here for the resources. They are not interested in the country‘s well-being, only in extracting what they need economically." ...
...The diplomat went on to insist that the United States espouses a much more holistic set of interests than China: "Yes, Angola is the sixth largest supplier of oil to the U.S., but that is not the sum total of our relationship. We still promote democracy and human rights, and our goal is free, secure, and peaceful relationship with Iraq—I mean Angola."
Iraq? An interesting little slip, that.

What about our holistic set of interests? In 2009, according to budget documents, the US allocated $56 million in aid to Angola -- mainly global health and child survival. We gave nothing under "feed the future" for agriculture and food security, $2 million for basic education, $4 million for family planning/reproductive health, $14.7 million for HIV/Aids, $30 million for malaria, $2 million for micro-enterprises, $300,000 for trade capacity building, $3 million for water funding, and apparently nothing for general infrastructure (roads, electricity). I didn't see anything specifically for democracy and human rights, either.

That same year, according to the International Energy Agency, the US imported about $10 billion in petroleum from Angola, and $18 billion in 2008.

China's official aid to Angola has also financed malaria initiatives, and health, but has been modest. Where the Chinese make the difference is in using a portion of their oil imports to secure major infrastructure loans that have built massive reconstruction infrastructure in Angola. Between 2004 and today, this has amounted to $10 billion (mainly oil-backed), with another $1.5 billion line of credit to be focused on development in agriculture, from China Development Bank, and $2.5 billion from a commercial bank, ICBC (the latter two are not oil-backed).

None of this Chinese finance should be considered "official development assistance" as it is offered without subsidies, at LIBOR rates. But it does support development. So a lot of China's oil imports from Angola are used to finance Angolan development, but that's not the case for us. (Of course there is the Hong Kong-based syndicate that controls the China International Fund which is doing far less development and reaping far more profit from its cozy relations with Angolan elites. This was covered pretty well by the Economist in a recent article). But that is a separate issue.

What about the impact of this infrastructure finance? Ovadia said:
China‘s new role in Angola has brought the financing needed for the country‘s reconstruction and significant investment has been made in key sectors of the economy. Journeys that once took most of a day can now be completed in a few hours and neighbourhoods are being connected to national power grids for the first time... there is little doubt that the projects are having a major impact on the country.
 In a footnote, Ovadia adds:
The diplomat‘s comments were somewhat contradicted a few weeks later at a public forum in Luanda on the role of China in Angola when an American defence attaché from the embassy commented publically that China was trying to create "a new slave empire in Africa,"* demonstrating that the 'extreme-China threat‘ position is still alive and well.
This is why I speak to the State and Defense Departments whenever they invite me (I regret expressing some hesitation to speak to the CIA when one of their officials approached me informally -- they never followed up with an invitation). Washington: I'm ready to present a different, empirically based, a bit wonky, but, I hope, more balanced perspective, if you're ready to hear it.

*Perhaps he was simply quoting the title of a newspaper article published by Peter Hitchens a few years ago in the UK?

Friday, August 19, 2011

The Economist on China International Fund

credit: Reuters, as used by The Economist
As readers of this blog know, I've been compelled to (as Owen Barder once Tweeted) "fisk" some of The Economist's fact-challenged articles that deal with topics I follow fairly intensely: China in Africa, and Chinese aid. But this week I was, in general, impressed by a lot of Oliver August (and team)'s investigative reporting on China International Fund and the 88 Queensway syndicate.

Here's what is important about this report:

1.  It's the best analysis yet of the evidence that points strongly to a conclusion that China International Fund (or the 88 Queensway group) is not some secret tool of Beijing:
 Although the Queensway syndicate has sometimes been suspected of being an arm of the Chinese government, there is little evidence of that.
As I have also argued, the evidence points instead to CIF's role as a broker -- like Pierre Falcone -- with high level Africa contacts involved in making deals in Africa's often nasty and money rich resource sector. (See my posts on CIF: March 20, 2010 "Was Guinea Bought by Beijing?" June 2, 2010 China International Fund's New Bellzone-Kalia Guinea Deal," July 27, 2010 "China International Fund in Africa: Another Failed Project"). 

But why did The Economist relegate this portion of Oliver's excellent analysis to Baobob's blog rather than the print edition?

2.  It contends that "China" is probably paying market prices for Angolan oil, even if the company China Sonangol (a joint venture between the Hong Kong based CIF and Angola's state-owned oil company Sonangol) may pay a lower price. This is consistent with what I have seen elsewhere.
The terms under which China Sonangol buys oil from Angola have never been made public. However, several informed observers say that the syndicate gets the oil from the Angolan state at a low price that was fixed in 2005 and sells it on to China at today’s market prices.
3.  It makes clear that although earlier predictions by The Economist and others that "China" (i.e. CIF) would prop up the military junta in Guinea, were not accurate. Whatever funds the Queensway group transferred had little impact on the junta, which honored the promise to hold elections.

4.  It reports that Angola's state-owned oil company Sonangol now owns shares in China International Fund.
First, the Angolans, including Mr Vicente, seem to have gained a significant hold on the syndicate. Recent company fillings in Singapore show that China Sonangol now owns China International Fund, the original vehicle.
China Sonangol (which does not involve any mainland Chinese companies) is a joint venture between Sonangol (30%) and Dayuan International Development, Ltd. (70%), part of the infamous Hong Kong group known as "88 Queensway". According to the 88 Queensway study, Dayuan owned 99 percent of China International Fund.  If this report is correct, China Sonangol now owns CIF, in other words, Angola's Sonangol itself would now have about 30% of CIF. So when we read about "China International Fund" doing something in Africa, we should be thinking "Angola" as well as "Hong Kong".

5. It is the first place I've seen to break a story that one of the key "88 Queensway" people, Wu Yang, has broken from the group and actually sued them. I would have loved to hear more about this.

OK, so I do have some criticisms of the article.

1. Let's start with the title and subtitle: "The Queensway syndicate and the Africa trade:  China’s oil trade with Africa is dominated by an opaque syndicate. Ordinary Africans appear to do badly out of its hugely lucrative deals."

As I know with The Dragon's Gift: The Real Story of China in Africa, authors don't always get to choose their titles or subtitles: editors often do this for them. Nevertheless, this article is about China's oil trade with Angola, not Africa. And as campaigns like "Publish What You Pay" and research on the "resource curse" have shown us, the subtitle one could easily be rewritten as "The West's oil trade with Africa is dominated by opaque multinationals. Ordinary Africans appear to do badly out of their hugely lucrative deals." 

Sadly, there is nothing unique about that.

2. Some fact-challenges on timing:
In 2002, after decades of commercial isolation, China started encouraging entrepreneurs to venture abroad.
No: not decades of commercial isolation preceding 2002. I devoted an entire chapter of The Dragon's Gift, "Going Global," to showing how this process of "going out" began around 1979 in Africa and evolved gradually.

3. Do Chinese companies' have no ownership of Angola's oil assets?. The Economist writes:
By contrast, China’s state-owned oil companies have no direct interest in Angolan oilfields, one of their two biggest sources of crude. Their names do not show up on the map of concessions.
I don't have time to explore this in depth -- I'm trying to write a scholarly journal article this week! -- but I doubt this is true. Sinopec sent out a press release in March 2010 that they had acquired 55% of the shares of Block 18 in Angola, from Sinopec Sonangol (SSI, the joint venture that also involved China Sonangol), saying "This transaction is Sinopec’s first acquisition of overseas upstream assets. The assets are also the best-ever overseas assets of Sinopec." A March 2011 report in the invaluable investigative newsletter China-Africa Confidential stated:
In February, China Sonangol won three deep-water pre-salt oil (equity) concessions in Blocks 19, 20 and 38, adding to its existing shares in Blocks 3, 31 and 32. Meanwhile Sonangol Sinopec International (SSI), a joint venture between China’s state-owned Sinopec and China Sonangol, has equity stakes in blocks 15, 17 and 18.
4. The article mentions enormous CIF "pledges" and "rights" in Zimbabwe without commenting that these have been as vacant as other enormous "pledges" made by CIF in places like Guinea.
Sino-Zimbabwe Development Limited (a CIF-linked company)... received rights to extract oil and gas, and to mine gold, platinum and chromium. In return, the company publicly promised to build railways, airports and public housing. These pledges were valued at $8 billion by Mr Mugabe’s government.
5. The article insinuates that the CIF oil-backed infrastructure finance deal in Angola (which may amount to some $2.9 billion) is somehow a trade of infrastructure for all of Angola's oil exports.
In return for Angolan oil, the syndicate promised to build infrastructure, including low-cost housing, public water-mains, hydroelectric plants, cross-country roads and railways, according to the government. The country desperately needs such things, to be sure. But their value is unlikely to exceed several billion dollars. That looks like a poor deal for the Angolan people.
I'm sure that all the international oil deals in Angola are not doing much for the Angolan people (nor did they all during the Cold War, when Western firms were the only beneficiaries). But these deals should not be seen as a "swap" of Angolan oil for infrastructure, but rather oil-secured finance. I'm not sure how large the CIF infrastructure deals actually are in Angola, but they are small in comparison with the $20 billion annual value of Angola's oil exports to China.

Several points the article didn't make, but could have:

6. CIF's officials may have deliberately tried to camouflage their company by adopting a name similar to conventional corporations in China: CIF is similar to CIC, China Investment Corporation and CICC China International Capital Corp. Both of these are large, legitimate companies, and CIC in particular is involved in long-term overseas investments. 

7. The Bright Connection.  Along these lines, the name of a key CIF-affiliated company, New Bright International, is similar to the Chinese Everbright* group (one of the 88 Queensway gang, Wang Xiangfei, was formerly an executive director and CEO of an Everbright subsidiary) and Sinopec's 100% owned subsidiary Century Bright Capital Investment Ltd. Is this also done for camouflage, or does it mean that these "Bright" companies are affiliated?

I've been contacted by several groups doing research on CIF, including Global Witness and some student researchers at Columbia University. I hope they were able to sort more of this out and I look forward to their findings.

*Is the financial services corporation China Everbright a front for Chinese military intelligence, as the famous 88 Queensway Group report alleged (while noting in a footnote on its source: "information from this source has not been corroborated")? Could be, but if so, that hasn't stopped companies like Citicorp from partnering with Everbright: see, for example, Citicorp's Hong Kong-based investment fund Citicorp Everbright China Fund 

Thursday, August 18, 2011

Why Are We So Critical of China in Africa?

The German newspaper Die Zeit has published an op-ed "Why are we so critical of China in Africa?" that I co-wrote. The English version can be found online at the German Development Institute). We make three points challenging the conventional wisdom about the size of China's aid flows, the alleged links between Chinese aid and natural resource investments, and the impact of Chinese aid on governance and human rights.
The final edits for the column deleted a portion that I wrote:

Sensational stories may sell more newspapers, but their exaggerated (and often erroneous) claims do no service to a realistic and balanced understanding of a growing power. As just one example: on July 28 the Frankfurter Rundschau carried a story saying “China’s practice of buying up land” had contributed to the famine in Ethiopia, based on a statement by Günter Nooke, the German Chancellor's G8 Personal Representative for Africa in the Federal Ministry for Economic Cooperation and Development. Research we and others have done in Ethiopia show that Chinese private companies are active in infrastructure and mining but are not buying up land. As a field study of Ethiopian land grabs by the Oakland Institute in California published in June this year said: Chinese companies “were surprisingly absent from land investment deals.” The German media missed that story.
Just wanted to be sure that this point gets made somewhere -- even if not in Die Zeit :)

Tuesday, August 16, 2011

More Mistakes by The Economist: "Charity Begins Abroad"

Image credit: Michael Kirkham for The Economist
The Economist has a new feature on aid from developing countries (August 13th, 2011): "Charity Begins Abroad: Big Developing Countries are Shaking Up the World of Aid."

A lot of the article appears to be accurate. But with regard to China's aid, not surprisingly, it gets a few big things wrong or partly wrong. Here are three:

(1)  Dredging up the (awful) Wagner School "data" on China's "aid":
But second on the list, if reports monitored by New York University’s Wagner School are to be believed, would be China, which gave away $25 billion in 2007. (Statistics on aid from new donors are dodgy and the line between aid and trade is blurred; by another count China’s officially reported aid was only $1.9 billion in 2009.)
Sigh. As I have posted a number of times, this so-called monitoring by "the Wagner School" was actually a project done for the Congressional Research Service by students who collected rather indiscriminately all the media stories they could find on any aspect of Chinese state engagement in developing countries, defining this as "Chinese aid". By mentioning this thoroughly discredited statistic, even if with a hint of doubt, The Economist continues to give it credence.

The second statistic is the dollar translation of China's budget figure for external assistance in 2009. This is an accurate (and official) figure, but it does not include the face value of the concessional loans, only the direct subsidy required to make them concessional. As the loans are expected to be repaid, and thus are not a donation, this is a more accurate figure for the real budgetary outlays made by the Chinese government for (net, not gross; disbursed, not committed) official assistance.

(2) A few mistakes: mixing apples and lychees. 
At the same time, China has become a far bigger donor. Wen Jiabao, the prime minister, has promised that in 2010-13 China will provide $10 billion in low-interest loans to African countries, bolster the China-Africa Development Fund by $1 billion (bringing it to $5 billion) and cancel debt owed by highly indebted countries with which China has diplomatic relations. 
Yes, Wen Jiabao said that China would provide $10 billion in low-interest loans to African countries between 2010 and 2012 (not 2013). This pledge was made at the November 2009 FOCAC; these pledges go on three year cycles. Some of these loans will be "concessional" (you hui dai kuan) and some will be preferential export credits (you hui mai fan xin dai). Technically, only the former would qualify as official development assistance by the OECD's guidelines. Even if they all were to be counted as "aid", this would amount, on average, to $3.3 billion per year, divided among the 49 or so countries with which China has diplomatic ties, or an average of about $67 million per country, per year.

On the other hand, the China Africa Development Fund, which has been capitalized with $1 billion, and which is now scheduled to raise its second billion (it will only reach $5 billion at full maturity, at some distant point), is not aid, but investment: equity finance in support of FDI (foreign direct investment) by Chinese firms.

Finally, the debt to be canceled is not all debt, but, as stated by the Chinese, overdue debt from zero-interest loans, a modest portion of China's aid. It's important to get that right, as borrowers reading The Economist may believe that China is going to cancel all their debts, including concessional loans and commercial debts. No way. 

(3) Spinning Without Evidence: The article suggests, without any evidence, that some of the infrastructure projects financed by Chinese aid were done in support of China's resource extraction goals. And it states, falsely, that China has "modernized the port" of Dar es Salaam:
Many of its aid projects help build infrastructure that benefits Chinese investment. It has helped rebuild the Tanzam railway, for example, linking Zambia’s copper belt, where China has large projects, and Dar-es-Salaam, where it has modernised the port. The white paper seeks to counter Western views that much of its aid goes to feed its appetite for oil and minerals. It says only 8.9% of concessional loans have been used to support the extraction of such resources. But it gives no details. Much of the 61% of loans for transport, communications and power may also help mining efforts.
By not being transparent about their aid, the Chinese government leaves themselves open to this kind of accusation. However, my own database supports the claim that China's aid is not distributed in support of Chinese resource extraction projects (these are mainly financed directly by the companies, with a few exceptions as in the Congo Sicomines project, which is financed by non-concessional loans from China Eximbank).

So what about the two examples mentioned by The Economist?

The idea that the iconic Tanzam railway -- built as a Maoist project in the 1960s-1970s to allow Zambia's exports to bypass apartheid controlled South Africa -- was rebuilt to serve China's resource interests is probably not the case. The expensive railway has been continuously supported by Chinese aid (the World Bank has also financed some Tazara modernization) for the past 35 years during which it transported the region's resources to Europe. Now they are going to China. But using aid to support the Tanzam railway all these years has been far more about politics and China's soft power than it has been about resource extraction.

Furthermore, the statement that China has "modernized" Tanzania's port with its aid dollars in order to extract resources seems to be false. The bottom line is that China has not (yet) financed any construction at the port. The Tanzania Port Authority reported in June 2011 that it was still in discussions with the Chinese government in the hope that it would finance the $523 million cost of constructing two new container berths (#13 and #14), probably on a Build Operate Transfer (BOT) basis using a public private partnership (PPP) arrangement, as recommended by the World Bank.

If China does finance this construction, is it likely to use a concessional loan to do so? Possibly. In January 2010 the Chinese offered Tanzania a line of concessional credit for $180 million to be used in a number of projects over three years, with discussion ongoing on finance for other projects (including the port). Chinese companies are interested in getting the contract to build this project, but if it is to be financed by a Chinese bank -- no sure thing -- I predict it will be on commercial lines, BOT, and with a commercial profit in mind -- and not aid. 

The Economist suggests that the Chinese are blurring the boundaries between aid and investment. I don't see that, but what I do see is that they have a lot more instruments for promoting development than our governments do. We need to move away from the narrow pattern of thinking that our "help" for African development can only come in the form of aid.

Thursday, August 4, 2011

When China and Africa Dance, the Elephants Get Trampled
A beautifully written and moving investigative article by Alex Shoumatoff in the August 2011 Vanity Fair, "Agony and the Ivory", fingers the Chinese demand for ivory and the rising presence of Chinese businesses in elephant-rich areas of rural Africa as an insidious pull-push factor in the rise in elephant poaching. I'm sure they are right about this.

The whole article is well worth reading, particularly for those who have been swept up in the honor and wonder of seeing these magnificent, intelligent animals in the wild.

Here are a few excerpts that shed light on the Chinese role:
“Another problem,” Crystal explains, “is that the Chinese word for ivory is elephant’s teeth—xiang ya. We did a survey. Seventy percent thought tusks can fall out and be collected by traders and grow back, that getting ivory did not mean the elephant is killed, and more than 80 percent would reject ivory products and not buy any more if they knew elephants were being killed, so it’s ignorance.”
Of course this ignorance doesn't extend to those on the ground in Africa:
...Hundreds of thousands of Chinese workers and other temporary laborers are employed on road, logging, mining, and oil-drilling crews in all of the elephants’ range states. Some manage to make it home with a few pounds of ivory hidden in their suitcases, thus doubling their meager earnings, or they are recruited as carriers for higher-ups. But they are not the real problem. The real problem is the managers, who have the resources to directly commission some local to kill an elephant and bring them the tusks, and diplomats, whose bags are not checked, and the Chinese businessmen, who are taking over the economy of Africa.
Well, it's not necessary to ring that gratuitous alarm "the Chinese are taking over!" when the reality of Chinese engagement in the ivory business -- as consumers, and as middlemen -- has been well-documented. Other Asians are also involved, although from what I can see, the West appears pretty clean in this sector.

Remember the old African saying, "When elephants dance, the grass gets trampled." It seems while China and Africa danced, the elephants are getting trampled. Public education and a strong zero-tolerance stance by the Chinese government on ivory trading by its diplomats and businessmen could do a lot to improve this.

Read more here. A hat tip to Matthew Robertson.

Wednesday, August 3, 2011

Guest Post: Let's Argue About the China-Congo Contract

By Tony Busselen

The debate about the cooperation agreement between Congo and China at the Brussels symposium on the 27th of May, 2011 was very instructive.

This agreement is not about charity or aid; it is a form of economic cooperation on a capitalist basis, in that investors make a country pay for the risks they take. Congo will pay with minerals, the market defines the price of the minerals and the Chinese companies involved come to Congo to make profits.

As a leftist, it is not my spontaneous idea of economic cooperation. But I try to understand this situation. I've lived in Kinshasa for a year and I have been studying the country since the 90’s. Colonialism and neo-colonialism have imposed enormous challenges on the Congolese people and confront the Congolese leaders with hard dilemmas: which choices should they make to go forward?

Tuesday, August 2, 2011

DRC Debates: Is China's Sicomines Project Good or Bad for the Congo?

Chinese managers supervise a Congolese worker in the DRC.
On May 27, 2011 I attended a very interesting day-long "debate" in Brussels focused solely on the famous China-Congo "deal of the century" . This package deal was originally a $9 billion package combining a copper mining investment ($3+ billion) and two $3 billion commodity-backed infrastructure credits. (The second credit was deleted under pressure from the IMF).

A Financial Times editor wrote about this deal: "Beijing has thrown down its most direct challenge yet to the West's architecture for aiding African development." For quick background and fascinating insights, see the trio of excellent articles by Peter Lee at Asia Times: June 12, 2009; March 11, 2010; and June 11, 2011.