Saturday, April 30, 2016

China-Zimbabwe Conflict Heats Up

Photo credit:
Great analysis by SAIS Ph.D. student Yun Sun, non-resident analyst at Brookings: "China’s pains over Zimbabwe’s indigenization plan,"April 26, 2016.

The announcement that Zimbabwe would require 51 percent indigenous ownership for all foreign investments was made some time ago, and since then, the issue has been debated in the courts and policy circles. As I noted in a 2014 story in this blog: "China: Exempt from Zimbabwe's Indigenization Policy?" many believed that Chinese companies were exempt but this was never the case, as I pointed out then, and as we are seeing now.

One Chinese company, Tian Ze, active in the tobacco sector working with local black tobacco farmers, was exempted from the requirement due to its extensive involvement in propping up the local farming effort.

Yun Sun makes another important observation:
Zimbabwe’s indigenization is yet another case of China’s lack of preparedness toward local sovereign risks and a lesson in how to operate in less developed, authoritarian countries with poor investment environment. 
I would add to this that Zimbabwe (like Sudan/South Sudan) remains an important case where we continue to clearly see multiple examples of diplomatic efforts aimed at changing/influencing domestic policies (and politics). As these cases suggest, just what "non-interference in internal affairs" means continues to change, and Africa may be where we can see this most clearly.  

Friday, April 29, 2016

The Economist on our New China-Africa Loan Data

Our new China Africa Research Initiative (CARI) data on Chinese loans in Africa was featured in an article in The Economist today. I'm pleased that they featured our findings that China Eximbank is not (as widely believed) a bigger lender to Africa than the World Bank:

In 2011 Fitch, a rating agency, reported that over the previous decade the China Export-Import Bank had lent more than the World Bank to sub-Saharan Africa*. In fact, say the CARI team, the World Bank has been the bigger lender every year in the past decade bar two, although Chinese lending is catching up.

The graph above shows our data for lending by both banks to all of Africa (north and sub-Saharan). If you only focus on SSA, World Bank figures drop below China Eximbank in 2008 and 2013.

We will be reporting more highlights from our data in subsequent posts.

Tuesday, April 26, 2016

Surprises from our CARI Working Paper on Chinese Manufacturing Investment in Nigeria

photo credit: Irene Sun
The SAIS China Africa Research Initiative (CARI) has published a new working paper on Chinese Manufacturing Investment in Nigeria: "Learning from China? Manufacturing Investment, and Technology Transfer in Nigeria." This paper builds on our Center for Economic Policy Research grant, "The Role of Asian Investment in Manufacturing in Catalyzing Economic Development in Africa," which is intended to study linkages and FDI spillovers from Asian/Chinese investment in four countries: Nigeria, Ghana, Tanzania and Ethiopia.

We gathered data from 20 Chinese and 21 Nigerian manufacturers, looking for linkages between Chinese and Nigerian firms and institutions. Our research in Nigeria found some surprising things:

Private firms. Most of the factory investors we interviewed were private investors or single entrepreneurs without state support; most have relocated directly from the coastal regions of the mainland such as Zhejiang, Shandong and Jiangsu.

Political backing from Nigerians. Instrumental actors such as the former governor of Ogun State, Daniel Gbenga, a staunch advocate of Chinese investment in Nigeria, played a role in attracting Chinese FDI, telling one of the authors: "the Ogun-Guangdong FTZ (Free Trade Zone) is my baby."

Local distributors, not Chinese shops. Nearly all Chinese factories in Nigeria relied on local distributors for their goods. According to Hong Kong businessmen with longtime investments in Nigeria, there is an "unwritten rule that Chinese business stops at the factory door," at which point local distributors take over.

No investment in supplier upgrading. None of the Chinese factories we interviewed had actively invested in upgrading the technology or skills of their local suppliers. Chinese firms still import the majority of their raw materials from China; only low-value and bulky materials such as rock for ceramics, scrap metal, and wood for furniture are purchased locally. Many entrepreneurs complained about the poor quality of local materials.

Learning is happening. The Chinese firms we sampled employ over 80 percent of their workforce locally. In Calabar, the Baoyao steel mill uses ship wreckages as raw material. This requires a higher level of technical ability; as such, its welders have become renowned for their skill and speed. "It's like we opened a school!" said Mr. Zhang.

A growing role of "agent suppliers," Chinese traders and businessmen living in Nigeria whose business it is to serve as middlemen between Nigerian manufacturing firms (generally in the south-east) and Chinese suppliers. They arrange contacts between factories in China that specialize in the required area and often earn commissions.

Training Nigerians in China. The Nigerian manufacturers had robust linkages to Chinese equipment suppliers, their "technical partners," who sent engineers and technicians to install machinery and train Nigerians. Some Nigerian firms have also sent staff for training in China.

The mystery of Yumei solved: The only intentional experiment of industrial clustering appears to have been the so-called Yuemei Fabric Industrial Zone (YFIZ), which Shen (2013) discusses as a successful case of a private industrial estate. Shen reported that twenty firms had invested in the zone, which was said to have been built by a Zhejiang company, Yuemei. We actually visited the so-called Yuemei cluster in Calabar, which was renting space in the Calabar Free Trade Zone. The Zone operators reported that only two firms ever came to invest in this cluster: Mawa, which specialized in textile dying and printing, and Jinmei, which specialized in embroidery. Both were evicted in early 2014.

Thursday, April 14, 2016

Join me in launching a NEW database of China's Africa loans

In 2009, I published The Dragon’s Gift: The Real Story of China in Africa. And in 2010, I wrote my first post on my blog, China in Africa: The Real Story. Since then, I have continued searching for and telling you the “real story”: what China is really doing in Africa, instead of rumors of what it might do. In 2014, I launched the China-Africa Research Initiative at Johns Hopkins SAIS to continue busting myths and getting the facts right. And at SAIS-CARI, I have made tracking down Chinese loans to Africa our main research project, after years of doing it on my own.

Now, I am proud to be launching SAIS-CARI’s NEW database of Chinese loans to Africa. Next week at SAIS in Washington, Thursday, April 21, 10:30 to 1:30 at Policy Roundtable: How Chinese Money is Transforming Africa: It’s Not What You Think, we will unveil our exclusive insights into Chinese loan finance. SAIS-CARI’s core team of 14 researchers has been collecting, cleaning, and analyzing China’s Africa loans, and now we are providing our work to the public for the first time. In coming months, we will expand ways for the public to engage with our database. But for next week, we will explore some surprising insights: 

  • Who gets the Lion's share of the Dragon's loans?  Angola received 25% of all Chinese loans to Africa between 2000 and 2015, almost all of them backed by Angolan oil.
  • Bloomberg and Fitch, take note: Did China Eximbank really lend more than the World Bank in Africa? SAIS-CARI data shows cumulative 2001 to 2010 China Eximbank loan to Africa amount to only US$27.2 billion, not your figure of US$67.2 billion. The World Bank is still a larger lender than China Eximbank.
  • What do Chinese loans pay for in Africa? Transportation. Between 2000 and 2014, transportation received the largest share: US$23.6 billion worth.
  • What are the biggest Chinese loan-financed infrastructure projects in Africa? No. 1: Kenya's Mombasa-Nairobi Standard Gauge Railway Phase I, funded by US$3.6 billion worth of Chinese loans; No.2: Ethiopia's Addis-Djibouti Railway, funded at US$2.5 billion. Both were signed in 2013.

I hope you will join us next week in understanding how Chinese money is actually impacting the African continent. Please make sure to RSVP in advance.

Tuesday, April 12, 2016

April 18-22: China-Africa Week at SAIS

The China-Africa Research Initiative (CARI) at the Johns Hopkins School of Advanced International Studies (SAIS) is hosting a week of events with diplomats, practitioners, and academics to discuss today's most dynamic China-Africa issues. All events are free and open to the public. Complimentary food/refreshments served at each event.

RSVP today before spots are gone!

Visit "Upcoming Events" on our website or our Facebook events page for more information. You can also click on the RSVP links below.

Policy Roundtable: What is China Really Doing in Rural Africa?

China has made agriculture one of the core pillars in its African engagement, yet this emphasis on agriculture is often misunderstood. This SAIS-CARI policy roundtable features a conversation with five SAIS-CARI visiting scholars fresh from doing fieldwork on Chinese agricultural aid and investment in Tanzania, Mozambique, and Uganda. Panelists will engage in critical reflections on the strategic drivers (if any), challenges, and impact of aid and investment projects in the respective countries. How could USAID’s nascent efforts to cooperate with China’s Ministry of Commerce on agriculture be shaped by a more detailed understanding of Chinese experience in Africa?


Film Screenings: When China Met Africa and China Remix

When China Met AfricaThrough the intimate portrayal of individuals engaged on the ground in the China-Africa relationship, 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.

China Remix
The city of Guangzhou is home to China's largest community of African immigrants. This documentary explores the city’s burgeoning African entertainment industry through the lives of three African hip-hop artists trying to find success in the face of China’s challenging labor and immigration laws.


Policy Roundtable: Chinese Loans to Africa: What’s the Real Deal?

Rumors abound about China’s loan program in Africa. Where, why, and how are Chinese banks financing African development? How do resource-secured loan packages work? What conditions do Chinese banks place on their loans? Are African countries risking a new debt crisis? Join us for answers to these and other questions, as SAIS-CARI launches its new database of Chinese loans to Africa (2000 to 2014).


China-Africa Happy Hour

Join the China Africa Research Initiative at Johns Hopkins SAIS, Cowries and Rice, and Washington DC’s China-Africa enthusiasts for an evening of good drinks and conversation. We will be giving away a signed copy of Will Africa Feed China? by Deborah Brautigam.


Friday, April 1, 2016

Guest Post: Chinese engagement in African Ag Not What it Seems

Ian Scoones, University of Sussex

In December 2015, Chinese President Xi Jinping flew into South Africa for the Forum on China-Africa Co-operation with great fanfare. There were lots of announcements about prospective investments across Africa. Agriculture featured prominently. But what is the real story of China in Africa on the ground, beyond the hype?

As Deborah Brautigam’s investigative research has so effectively shown, the assumptions about China’s role in Africa are often not borne out in reality. The level of investment and linked aid flows are much lower than the high numbers sometimes touted; the numbers of imported Chinese workers are much lower than often suggested; the areas of land “grabbed” for investment are small compared to the vast areas identified by some.

And, as Brautigam’s recent book shows, Africa will not be feeding China or China feeding Africa anytime soon.

Reality on the ground

We set about finding out what was happening on the ground. Working with African, Chinese and European colleagues, our team investigated Chinese engagements in agriculture in four countries – Ethiopia, Ghana, Mozambique and Zimbabwe. All have featured prominently as priorities for Chinese investment and aid.

Our just-completed project is reported in a new open access special issue of the journal World Development. So what exactly has been going on?

This proved surprisingly difficult to find out. The data on land acquisition, investment flows and aid projects is limited and confusing. It often doesn’t add up. Ghost projects are listed that never happened, and others are missed out.

Our original idea of doing a simple geomapping exercise based on available data was quickly abandoned. Instead, we had to triangulate between multiple sources to find out what was happening where.

Certainly there is a great deal going on, and the Chinese presence in Africa is important. The Chinese role in agriculture – in terms of business investment, technology transfer, demonstration efforts, training and more – is growing, and shaping perceptions.

We chose cases across the four countries to investigate in more detail. The studies aimed to explore the detail of investments, technology projects, training and development encounters more generally.
The central question we asked was: is China reshaping African agriculture?

No singular ‘Chinese model’

The Chinese Agricultural Technology Development Centres are flagship investments. There are now 23 across Africa, funded in their first phase by the Chinese Ministry of Commerce under their aid program. They are run mostly by companies, and are linked to a commercial model for training and technology demonstration and sale.

As Xiuli Xu and colleagues show, the centres’ performance very much depends on who is running them. Different provincial companies have very different characteristics, demonstrating that there is no singular “Chinese model” of development, or state-business partnership.

We also explored a number of cases of business investments in agriculture, primarily led by Chinese state-owned enterprises. Chinese development efforts mix aid with commerce, linking both provincial and central state involvement with different businesses.

For example, as Jing Gu and colleagues explain, in Xai Xai in Mozambique, the Wanbao agricultural development company from Hubei province took over 20,000 hectares on a state farm to farm rice, and develop a contract farming arrangement with surrounding farms.

It has not been easy. There have been a number of changes in company leads, disputes with local communities, and shifting alliances with local elites, as Kojo Amanor and Sergio Chichava set out.
The training of government officials is an important aspect of the Chinese engagement in Africa. More than 10,000 are trained in numerous courses in China each year, many in agriculture. This far exceeds any training initiative of any western aid programme.

Henry Tugendhat and Dawit Alemu explored the impacts of these courses, participating in training in China, and interviewing officials who had returned home to Ghana and Zimbabwe. While there have not been many immediate impacts, the longer-term building of relationships and the exertion of “soft power” diplomacy is important.

The role of informal Chinese migrants

Chinese migrants supply specialist foods to burgeoning expatriate populations.
Reuters/Noor Khamis
Perhaps the most far-reaching but least understood dimension of Chinese involvement in African agriculture is the growing number of informal migrants getting involved in the agri-food sector, from farming to processing to retail to restaurants.
Seth Cook and colleagues investigated this in Ethiopia and Ghana. They discovered a range of activities: relatively few farmers, but growing investment in supplying specialist Chinese foods to burgeoning expatriate Chinese populations.

Those involved are very often migrants who came as part of Chinese government contracts, and have since established business connections and stayed, encouraging others to join them from China.
Through our work, we were able to gain a snapshot of the early stages of Chinese engagement in African agriculture. Our results show successes as well as failures. But Chinese engagement is certainly not yet at the scale sometimes assumed.

In the longer term, activities may accelerate as more opportunities open up. But China is also changing. As its economy restructures to a “new normal”, there are different demands. Food will certainly remain one, but this is not likely to come from Africa.

As a new global power, China will want to maintain business, aid and diplomatic relations with Africa, and sustaining relationships will be important. China plays the long game, and our studies were observing just the opening stages.

The Conversation
Ian Scoones, Professorial Fellow, Institute of Development Studies, University of Sussex
This article was originally published on The Conversation. Read the original article.