Friday, January 28, 2011

Being a Constructive Critic: "China's Growing Role in African Peace and Security"

photocredit: japanfocus.org
On being a "constructive critic":  Saferworld, a UK-based non-governmental organization, has just released their report on China's Growing Role in African Peace and Security. They sent me a copy last week.

I read the Executive Summary, which seems overall to be a balanced and helpful treatment. I'm not (at all) an expert in the security area: I always recommend Ian Taylor's excellent work. However, the report frames Chinese security engagement within Chinese engagement more broadly, and here there are a few mistakes. Below, my comments to the authors:
It looks good! There were a few areas where I saw some room for improvement:
p. 1  "China ... has started to deliver development assistance..."
As you know, I'm sure, China "started" to deliver aid to sub-Saharan Africa around 1960. Recently aid has increased, but it's still fairly modest and not new. This is important because it helps dispel the myth that China just arrived as part of a desperate search for resources. This engagement is much more complex.
p. ii. "China has developed close relationships with African regimes that the international community, or more specifically, Western countries, only engage
with in a manner that is conditional on improvements in governance."
Perhaps you mean Western governments only provide aid "in a manner that is conditional on improvements in governance"? (even this is debatable: see Egypt for example...). Western companies have lots of engagement except when specifically banned, which is extremely rare (Sudan). And Western governments "engage" with all sorts of poorly-governed and/or non-democratic countries: Angola, Nigeria; Egypt; Chad; DRC; Guinea; Equatorial Guinea ... and even Sudan and Zimbabwe.

One statement is quite inaccurate:
p. ix  "As part of China’s wider participation in Africa’s infrastructure development, Chinese finance and companies had been involved in the construction of 25 dams in Africa by 2008."
I've seen the report you cite. The authors did a good job of compiling media reports. However, the figure of 25 is far from the real story.

Here's how these 25 projects break down:  4 refer to projects, usually quite small, completed between 1982 and 1996; 3 refer to repairs or expansions of hydropower plants (i.e. new turbines, etc.), not dams; 3 have construction contracts signed recently & seem to have financing lined up, but haven't started construction & so could still fall apart (Ethiopia-Neshi; Togo-Adjarala; Gabon-Grand Poubara); 10 appear at the present moment to have been MOUs or expressions of interest that went nowhere; as of 2011 only 5 of the listed projects are dams currently under construction or completed recently (Ethiopia-Tekeze; Ghana-Bui; Congo-Imboulou; Sudan-Merowe; Botswana-Dikgatlhong).

Some of these points are small, but as you know, as a constructive critic, it's important to present things as accurately as possible -- it shows you know what you're talking about, and this matters for Chinese readers as well as us in the West.

Monday, January 17, 2011

Understanding China

As Washington prepares for Hu Jintao's state visit, two excellent and short articles that help set the stage for understanding "how China thinks":
  • James Fallows in The Atlantic January 16, 2011 on "Imagining America as China": a thought experiment that does an excellent job of showing the sheer scale of China. A hat-tip to Chris Blattman.
  • Henry Kissinger (yes, I'm surprising to find myself agreeing completely with this craggy old realist). In the Washington Post, January 14, 2011: "Avoiding a US-China Cold War." A thoughtful, large-picture view of our quite different paths to the present.

Sunday, January 16, 2011

Wikileaks: What Do the China-Africa Cables Really Tell Us?

Chinese President Hu Jintao and President Kibaki of Kenya
Hu Jintao is heading to Washington. We're not sure what will be on the agenda, but we do know that China's engagement in Africa is a source of some concern for the US government. We've all see that Ambassador Johnnie Carson believes that China has "no morals" in Africa. But a closer look at the Wikileaks cables reveals some surprises about China, the US, and at least some parts of Africa. Ryan Briggs and I discuss this at the Royal African Society's African Arguments.

Friday, January 14, 2011

Has China's Export Financing Met Its Match?

photo: a train in Pakistan: but is it GE or Chinese? 

A fascinating new development in the dry area of export financing: we learn that for the first time, the US Eximbank has matched China Eximbank's terms for export financing. John Pomfret reports for the Washington Post on the case of GE's effort to win a tender for train exports to Pakistan. GE was about to give up:


After all, China was a powerful competitor that routinely offered low-cost financing - below-market interest rates, easy repayment terms - that cut tens of millions of dollars off the bottom line of its international deals.
But in a case that underscores a significant shift in how the United States and the rest of the developed world are dealing with the challenge of China's economic might, the U.S. Ex-Im Bank decided to fight back. In February of last year, U.S. Ex-Im informed Pakistan's Ministry of Railways that it would take the unprecedented step of matching China's below-market-rate financing terms.
GE won the contract. 
"There's a new willingness to take on China, to compete toe-to-toe with China on financial terms," said Fred Hochberg, the chairman of the Ex-Im Bank. "This is a policy change that we will compete with anyone who's not compliant."
In an interview with the Wall Street Journal, Hochberg confirmed this view: "They're winning deals in part because they're not playing by the rules." Although the US administration positioned this action as a move against China, which was not "playing by the rules" it's important to point out that the rules China was not playing by are a voluntary "Arrangement on Officially Supported Export Credits" set by the elite membership of the OECD, an organization of wealthy states that does not include China.

The rules apply only to other OECD members. Why should China abide by these rules?

This is a positive development. The US has long pressed other wealthy exporting powers to adhere to common rules in order to try and create a level playing field. Yet the rise of the BRICs now makes the choice of the OECD as the arena for rule-making seem quaintly obsolete. If we want to get China and the other BRICs to play by the wealthy countries' rules, we do need to create incentives. Now, in a tiny way, Chinese companies can feel the pain of being outside. But more importantly (and urgently), we need to have an arena in which these negotiations can take place.

Pomfret gets one thing wrong, I think. He suggests that the Chinese are using "foreign aid" in these deals, and that the US must use its foreign aid "to serve diplomatic or strategic goals" but that China's Ministry of Commerce dispenses foreign aid, with the purpose of "making money for China." First, it isn't foreign aid funds, but export credits that we're talking about, and they are not being disbursed by the Ministry of Commerce but by the China Export-Import Bank. We have the same kind of agency, the US Eximbank, and that's the relevant comparison: both were set up to "make money" for their owners' companies. I doubt if the US Eximbank got a tranche of finance from USAID for the train deal. 

What were the actual terms for the contract? We learn from Pomfret that "Instead of fees of up to 21 percent of the contract, the United States said it would charge Pakistan 8 percent. Repayment was stretched from 10 years to 12." Charging fees of 21 percent, no wonder we're losing out to China! From the Wall Street Journal, we learn that the interest rate charged by the US Eximbank will be based on Treasury bond yields (now about 3 %), but we don't learn what the margin over T-bonds will be. I will try to find this out, but I doubt if the US Eximbank will be any more transparent on this than China's Eximbank.



Thursday, January 13, 2011

Murder of Chinese Manager at Zambian Mine

Henry Hall, at China Africa News, posted this thoughtful comment on his blog after reading about the sentencing of a Zambian worker from the Chinese-owned Collum coal mine, which has been in the news recently. Apparently, a year ago, a Chinese manager at the Collum mine was murdered by one of the workers, This worker has now received the death penalty. Henry Hall caught the story and begins his comment with a reference to the Collum coal mine:
... where Chinese managers injured a number of workers late in 2010. What I did not see reported at the time however, was that a Chinese manager had been killed by a Zambian worker as recently as February of last year. Although this in no way excuses the actions of the Chinese managers, it certainly seems relevant to the discussion. It again highlights Beijing's failure to properly manage the media impact of their African misadventures.
I also thought this report was sad and revealing. Sad because clearly the Collum coal mine is a place with deeply troubled labor relations, problems that apparently drove one man to murder. And revealing because I could not find anything else online about the killing of a Chinese manager by a Zambian worker. Did it really happen? Wasn't it considered news?

For a collection of stories on the shooting of Zambians by two Chinese managers in October 2010, including a link to a Chinese investigative reporter's story, see China Digital Times.

Monday, January 10, 2011

How Many Chinese Workers?

Senegalese & Chinese. AFP for the BBC

Since the late 1970s, the Chinese government has promoted labor exports to earn foreign exchange and provide employment opportunities. Yes, there are thousands of Chinese working overseas today, over 700,000 by official count -- mainly not in Africa, but in Hong Kong, Asia and the Middle East. Yet the popular idea that Chinese companies bring in all their own workers and refuse to hire Africans is not true. The photo to the right could be duplicated in dozens of African countries.

But what is the ratio of Africans to Chinese workers on Chinese projects in Africa? What cases, if any, do we find of Africans being hired in management positions on a Chinese investment or project? Are Chinese-speaking Africans breaking into this area?

I will be maintaining a page on this blog, Chinese Workers in Africa, in which I will collect anecdotes on the ratio of Chinese to African workers on projects and investments. If you work on, or visit a Chinese project in Africa, post here with a line with the ratio, verified, if possible, with local officials, particularly trade unions. I'll update the page regularly. While I wouldn't want to do multiple regressions using these anecdotes, they may help to shed some light on this not well understood issue. Many thanks.

Monday, January 3, 2011

US Far Outstrips China in Arms Sales to Dictators

Kristin Jones reports for the South China Morning Post on the surprising result of a new Norwegian study that examined US versus Chinese arms exports. She also quotes some of my reservations on the study's methodology:

 

US far outstrips China in arms sales to dictators



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When it comes to arming autocrats in Africa, upstart China is no match for the United States, a study of arms exports finds.

China's sales of weapons to dictatorial regimes such as Sudan and Zimbabwe have sparked outrage from human rights advocates, academics and officials in the West. Some say that Beijing is undermining the development of democracy and rights in Africa.

In a State Department cable recently released by WikiLeaks, the top US diplomat for Africa, Johnnie Carson, summed up the basic sentiment for an audience of oil executives in Lagos, Nigeria, in February last year when he noted: "China is a very aggressive and pernicious economic competitor with no morals."

But compared with the US, China actually shows a preference for relatively democratic clients such as Zambia and Namibia, according to a review of arms transfers from the end of the cold war until 2006.

And morals or not, the US tends to favour autocrats and human rights abusers - most notably its ally Egypt.

"The US is promoting its strategic interests even if it means promoting authoritarian regimes, while China is more interested in economic relationships," said Paul Midford, who co-authored the study with Indra de Soysa using data compiled by the Stockholm International Peace Research Institute.

The findings turned common wisdom on its head, said Barry Sautman, a political scientist at Hong Kong University of Science and Technology.

"People naturally assume that because China is an authoritarian state, it will want to sell arms to other authoritarian states, and that the US will do the opposite," Sautman said.
The actual record is more complicated. In Sudan, a state with an egregious record of atrocities against its people, China has indeed supplied weaponry. But it is not the most important supplier of arms, the authors note. From 2001 to 2008, as international attention to China's involvement in Sudan grew, Russia sold five times more arms to Khartoum, according to the Stockholm data.

More of China's arms went to Egypt - its biggest market in Africa. But there, Beijing's sales were dwarfed by the US. From 1989 to 2006, the US provided Egypt with billions of dollars worth of fighter jets, tanks, missiles and other arms.

Hosni Mubarak, Egypt's president, has ruled since 1981 under "emergency" law that allows the government to detain people without charge. Torture by police and security forces is routine.

"This is not to excuse Chinese arms sales to undemocratic or human rights-violating regimes," says Ian Taylor, a professor of international relations at the University of St Andrews who has written about China's role in Africa. "But we need to remember that firstly, China is not the worst culprit in this - the United States is, by far."

The Stockholm data includes sales of things like tanks, military helicopters, and fighter aircraft. But it doesn't include small arms and dual-use equipment, which are often sold through brokers rather than by direct government-to-government arrangements.

This omission was significant, said Deborah Brautigam, an expert in China-Africa relations at American University in Washington DC. Small arms, including AK-47s and ammunition, comprised the bulk of Chinese weaponry sold in places like Zimbabwe. And the trend, she added, may be towards more Chinese arms sales across Africa - not fewer.

The authors might have come up with different results, she suggested, by looking at a shorter and more recent time span.

"China's export of arms, like all its other exports, are likely on a sharp rise year by year," Brautigam said.

But Chinese arms sales did not signify an effort to challenge values like rights and democracy, Brautigam and other specialists said.

To those who had painted a picture of an emergent superpower that sought to create a "Beijing consensus" of authoritarian states, the data from Stockholm illustrated that "there may not be anything to that", Sautman said.

Midford and de Soysa are both political science professors at the Norwegian University of Science and Technology. Their research was initially presented at an international studies conference in New Orleans in February, and is under review for publication in an academic journal.