Chinese in the South Pacific: Echos of Africa

PNG dormitory under construction (G. Smith photo credit)

Today a former student sent me links to two interesting papers by an Australian Ph.D. student with Chinese language who is doing research on Chinese engagement in the South Pacific. Graeme Smith's take on the Chinese runs up against hardline Australian opinion, media coverage, and the conventional wisdom that seems to be -- if it can be possible -- even more negative than coverage in Europe and the U.S. regarding Africa. (For an example, see a series of articles by China correspondent Rowan Callick, including "China’s neo-colonial slavery in PNG", The Australian, 12 February 2007, and so on.)

In a short piece called "Are Chinese loans always a bad thing?" (the very title shows what a balanced analyst is up against in Australia!) Smith gives the inside story of a concessional loan arranged via a Chinese construction company to build a dormitory at a South Pacific university, and how university students protected the Chinese workers during the riots, because it was their dormitory being built. Smith's paper also notes the "request-based" aid system for concessional loans that I discuss in The Dragon's Gift, showing in detail how it worked in this case:

Whether it is a grant or a loan affects local control and ownership. With a grant, local partners have little leverage. As a University administrator explained, '(t)he difference is that this is a loan. Even if it is a soft loan, we're still going to pay them back. So it's really the government of PNG paying for it. We're in total control of it.'

My thesis that Chinese infrastructure companies in the Pacific, not aid agencies in Beijing, are driving aid requires more substantiation. Yet for those with even a passing familiarity with China's polity, it is a no-brainer. The Chinese central government lacks full agency and control within its own borders; why would it enjoy it outside of them?

This lack of control can lead to better outcomes for Pacific nations. In the case of the dormitory project, the tail wagged the dog. GDFC [a Chinese construction firm] successfully lobbied Exim Bank in Shanghai. The contractor, rather than the lending agency, penned the initial loan agreement. Remarkably, the university and the lead architect in PNG were able to push back, persuading Exim Bank to accept their terms for the design and supervision of the project, because they were competitive on price, and arrived at the negotiating table with plans and standards to hand.

In a March 2012 article in the Journal of Pacific History (available free for two weeks only) mainly on Chinese reactions to the anti-Asian riots in the South Pacific, Smith argues:

When China does appear in the literature, analysis is rarely nuanced or informed by original sources. This is evidenced by the titles of many articles, where China appears as an anthropomorphised ‘clumsy panda’ or as the ‘dragon in the Pacific’, lurking in the background, secretively disbursing aid, corrupting weak and passive Pacific governments, and engaging in an endless cloak-and-dagger game for diplomatic recognition with its arch nemesis, Taiwan.

One by one, Smith punctures a host of myths and fictions that dominate some of the coverage of Chinese activities in the region. He then analyzes Chinese reactions (via interviews and the blogosphere) to the Port Moresby riots. It's useful and interesting, and China-Africa watchers will benefit from the comparative perspective.

A hat tip to Ekawati Liu.

Links I Liked: Land Grabs, Etc.

(1) A "Land Grabs in Africa" Study that Doesn't Target China.  Opening a recent paper on land grabs published by Earth Security, I expected to find the usual sentences about "China" leading the land grab in Africa. I was pleasantly surprised to find nothing of the sort. Instead, a balanced assessment of the risks and of the sources of risk:

"Key investors are private firms and governments from Europe, Africa, the Gulf States, and South and East Asia, and a growing base of institutional investors, sovereign wealth funds, and private wealth owners, generally in deals made with host governments."

One area missing: as the "database" on over 400 "land grabs" (or media stories) published by the NGO GRAIN on February 23, 2012, pointed out, a large number of American investors are also part of the picture.

China, the US, and Export Credits

I've just learned of a little-remarked result of Xi Jiping's February 2012 meeting with President Obama in Washington DC. As reported by Reuters, the US and China have agreed to open talks on setting rules and guidelines for officially supported export credits.

This small announcement is big news for China-Africa watchers. Right now, these rules and guidelines are mainly set by the OECD's working group on officially supported export credits ("aid for trade"). China, of course, is not a member, and thus is not bound by the OECD norms and rules. Any acceptable conclusion on these guidelines will have to involve more transparency by the Chinese. Transparent reporting is the heart of the Arrangement, the "gentlemen's agreement" that regulates export credit practices among OECD members. Of course the OECD does not require members to publish their individual export credit agreements to the world, just share them confidentially with the working group. But even getting annual figures broken down across regions or countries, would be a huge advance.

A hat tip to Richard Carey.

Inside Trade adds a bit more to this:

The agreement announced last week by the United States and China to pursue a common set of international guidelines on official export financing by 2014 is aimed at creating a new framework that would ultimately replace the export credit arrangement that currently exists between members of the Organization for Economic Cooperation and Development (OECD), according to a Treasury Department official.

A hat tip to Michal Makocki.

Related to the export credit talks is the release a few weeks ago of a General Accounting Office (GAO) comparative study of export financing practices, mainly focused on the G-7 (remember them?): "U.S Export Bank: Actions Needed to Promote Competitiveness and International Cooperation."

As part of this, the GAO revealed that the US Eximbank (Ex-Im):

• "financed 132 transactions totaling $812 million in 20 sub-Saharan African countries. Ex-Im dedicates two full-time employees to promoting exports to sub-Saharan Africa; others work part-time on the issue" (p. 21). 
• Between 2000 and 2010, China Eximbank's total export credit support grew from $4 billion to over $36 billion, while US Ex-Im's "financing increased from about $13 billion to $24.5 billion (p. 39)."  

We can assume that China Eximbank has more than two full time people working on boosting business in Africa!

"China Refused to Fund Agricultural Project in Sudan for Lack of Oil Collateral"

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Sudanese farmers (c) Shelter for Life International

I've been writing academic papers about Chinese engagement (or lack thereof) in agriculture in Africa recently. Today I opened a link to a Sudan Tribune article with the (misleading) headline: "China Refused to Fund Agricultural Project in Sudan for Lack of Oil Collateral." The article is actually about a Qatar agricultural project -- on 250,000 acres -- that depends on a separate Chinese project to extend Sudan's electrical grid.

As the Sudanese leader -- who is avoiding arrest by the International Criminal Court in the Hague -- said, the Qatari agricultural project

...stalled due to China not following through on its funding for the project of extending the electric grid because the Chinese loan was in return for oil shipments which stopped after the secession of the South” the Sudanese leader said. “And so China stopped the financing [the project]” he added.

This is interesting because it is another example of how China Eximbank (almost certainly the lender) works in risky countries with poor or nonexistent credit ratings. The loan for the electricity project was secured with oil exports. When oil exports stopped, the loan disbursement stopped.

I'll also make a bet: somewhere, a journalist is going to read this as "China's" 250,000 acre agricultural project, not Qatar's!

h/t to the Centre for Chinese Studies, Stellenbosch

China-Africa Talk at Columbia University Thursday March 8

Thursday, March 8, 2012, 6:00 PM to 7:30 PM

Asia Pacific Affairs Council, Weatherhead East Asian Institute, and Institute of African Studies present:  "China and Africa: Think Again"

A talk by Deborah Bräutigam, Professor of International Development, School of International Service, American University and Senior Research Fellow, International Food Policy Research Institute (IFPRI).

International Affairs Building, Room 918, Columbia University, New York
No registration required.

China and Resource-Based Development in Africa

Photo credit:  Duncan Green @ Oxfamblogs.org

Resource exports are widely expected to be a curse rather than a boon for African countries. Is this always the case? How and when do government interventions make a difference? What do we really know about the impact Asian countries (China and India) have had on the commodity value chains and industrial potential of African raw materials?

PRISM -- Policy Research in International Services and Manufacturing (PRISM) is "a research and policy ‘unit' located in the University of Cape Town's School of Economics and is affiliated to the Centre for Social Science Research (CSSR). PRISM provides a lens to focus research and policy work on issues of globalization and industrialization in Sub Saharan Africa." They are looking precisely at the questions outlined above.

“One Thing Leads to Another” – Commodities, Linkages and Industrial Development," by Mike Morris, Raphael Kaplinsky, and David Kaplan sets out the potential and problems for commodity-based industrialization strategies in Africa.

Their team is doing very interesting fieldwork across Africa, including the oil and gas industry in Angola, gold in Tanzania, timber in Gabon. In an email last November, Mike Morris mentioned to me an AERC study on Sudan "which showed that the 13 Chinese oil producers had dragged 97 supplier firms (services and manufacturing) employing around 4500 people, into Sudan." [Source: Suliman, K. M. and A. A. A. Badawi (2010). An Assessment of The Impact of China's Investments in Sudan. CCS Paper No. 13 Nairobi, African Economic Research Consortium.]

 To read more and see a list of the PRISM Discussion Papers:

China International Fund and Tanzania's Airport

Beibei Yin reports in The Guardian March 2, 2012, about further complications from the failed Dar es Salaam Terminal 3 airport project won by China International Fund (CIF) in Tanzania: Chinese Investment in Tanzania Bears Bitter Fruit. Yin's report digs more deeply into the story, and reveals the problems left behind when the Tanzanian government evacuated all the people living in the spot now vacant and fenced. As noted on this blog, I was there in September 2011, and used the vacant lot as the lead for a story about CIF. Yin reports that the CIF logo has now been painted over...

When China Met Africa

Some time ago I had the pleasure of previewing a stunningly good film: When China Met Africa, directed by Nick Francis and Mark Francis (assisted by China-Africa expert and Paris-based Ph.D. student Solange Chatelard). The filmmakers are now organizing a US tour (to learn more, click here). View the trailer here.

The distributor, Bullfrog Films, describes the movie:

"A historic gathering of over 50 African heads of state in Beijing reverberates in Zambia where the lives of three characters unfold. Mr. Liu is one of thousands of Chinese entrepreneurs who have settled across the continent in search of new opportunities. He has just bought his fourth farm and business is booming.

 In northern Zambia, Mr. Li, a project manager for a multinational Chinese company, is upgrading Zambia's longest road. Pressure to complete the road on time intensifies when funds from the Zambian government start running out.

Meanwhile Zambia's Trade Minister is en route to China to secure millions of dollars of investment.

 Through the intimate portrayal of these characters, the expanding footprint of a rising global power is laid bare - pointing to a radically different future, not just for Africa, but also for the world." 

I endorsed the film for Bullfrog Films:

Remarkable. A compelling, unsentimental and very honest portrait of an encounter between two continents pulled together by profits and politics. The filmmakers had extraordinary access to their three central characters, and the trust they obviously built is never betrayed...Viewers will have no difficulty following these multi-layered dramas--at once ordinary and powerful...The format lends itself exceptionally well to discussions: viewers will find they each saw something different. Intimate, moving and very real.

My former colleague Andy Nathan also endorsed the film: 

"A gritty, vivid picture of the new Chinese presence in Africa, from the pompous officials negotiating deals, to the dedicated engineers trying to build roads, to the hardscrabble immigrant Chinese farmer struggling to tame the land and motivate and pay his local workers. It is a new relationship, full of both hope and suspicion, common interest and cultural friction. Driven by economic need, the two sides struggle to bridge the huge gaps between them."

- Andrew J. Nathan, Professor of Political Science, Columbia University, Author, The Great Wall and the Empty Fortress

For another story about this film by someone who was also blown away by it, see the article by Damien Ma in The Atlantic