Monday, March 12, 2018

China To Set Up a New International Development Cooperation Agency

The National People's Congress will vote Saturday on a proposal to set up a new national International Development Cooperation Agency:
Responsibility for the foreign assistance work of the Ministry of Commerce and the coordination of the Ministry of Foreign Affairs and the coordination of the functions of the members of the Ministry of Foreign Affairs have been consolidated. The National Development and Cooperation Agency has been established as a direct agency of the State Council. The specific implementation of foreign aid is still undertaken by the department in charge of division of labor.
组建国家国际发展合作署。将商务部对外援助工作有关职责,外交部队员住协调等职责整合, 组建国家国际发展合作署,作为国务院直属机构。对外援助的具体执行工作仍由用关部门按分工承担。
This is a move long under discussion. As China's aid has grown, this new agency directly under the State Council will enhance the profile of China's assistance program, and give the agency equal standing with other agencies directly under the State Council. It will resemble Britain's Department for International Development, which has similar standing, more than the US Agency for International Development, which is firmly under the US State Department.

a hat/tip to Sigrid Ekman in Beijing

Sunday, March 4, 2018

Secretary Tillerson Heads to Africa: and China is (a?) (the?) Focus

Secretary Tillerson is heading to Africa on March 6th, to Ethiopia, Djibouti, Kenya, Chad, and Nigeria. Although this visit is being framed by some as the Trump administration's response to the fallout from his much criticized recent comment on African countries, it is also clearly being positioned as a response to China's increased engagement on the continent.

A few clips from the special teleconference briefing held for senior State Department officials and journalists March 2, and published on the State website make it clear that State is still influenced by the same mindset that we saw reflected in Secretary Clinton's remarks during her visits in 2011 and 2012. Yet there has also been progress.

The State Department senior official led by mentioning two issues. The first was a general comment on African development challenges. And the second issue was clearly China--though not by name:
The other issue, too, that we’re looking at is how to really keep African resources and also development beneficial for the people of Africa. Right now we’re looking at the growing indebtedness in Africa. That’s not a good thing. We’re looking at other countries, not helpful countries, other countries too, expropriating a lot of resources
When I read that I thought: here we go again. Has the State Department mindset really not changed since 2012? Yet I had to reassess that a bit later, when reporter Laura Koran from CNN asked a question about Tillerson's view of China's role.

Here, verbatim, is the State Department response to the CNN question about China, in italics. (I've highlighted several of the more pertinent sections and added commentary):
Yeah. Okay. So here’s an interesting point is that we, the United States, especially part in – by region. So in the Africa region, we are going to have a heart-to-heart discussion with the Chinese. We’ve invited the Chinese to come to Washington to talk about their programs in Africa. 
And so on the one hand, the unhelpful role is the providing low-interest but really concessionary loans which really indebts the country. So for all of us who worked on HIPC – in other words, getting African countries post-colonial period off of debt – to see these countries re-indebted again is not only outrageous and terrible, but for us it’s really just – I mean, we spent so much time getting them off of debt, and to see them to go back on debt is just terrible. 
And it goes back to not only corruption in some of these states, but also the ease in which not only China – and you’re talking Russia, Iran, and other countries providing low-interest loans. And this is really kind of another forum of impoverishment and poverty, because it’s – unlike HIPC, we can’t really kind of repay loans back to banks, and so this is going to be a very tough issue to address. 
[I agree that debt levels are rising, and with low commodity prices, some countries are having trouble earning enough to repay their debts. Chinese government policy bank loans contribute to that (the major influence, in the case of Ethiopia and Angola). At CARI we have been beating the drum about this recently based on evidence: our tracking of a rising trend in signed Chinese loans.

Yet having worked for the World Bank, done research on debt, and taught about the debt crisis for years, I see debt owed to China as having very different implications for developing countries compared with debt owed to the Paris Club. And in several other countries, we see debt owed more to the traditional lenders: World Bank, supplier's credits, commercial banks, etc.]
The other issues aside too, though, is China builds things. We don’t construct. And so in that regard China can play a helpful role. The other issue, too, is that China has some really good ideas on development in developing areas, such as how to do better healthcare, how to do water production. So those are things that are good. Also China did a good favor for us in Sudan, providing an engineer battalion to provide assistance to the UN operations there. 
So when you look at China, it’s a very complex relationship. We have a lot of areas and issues that we’re in conflict, but the issue comes in is that we’re trying to find the areas where we can build some type of support and cooperation that will be to the betterment of Africa. But one area that’s not to the betterment is these loan rates, which is terrible.
[This is more promising and far more positive than in Secretary Clinton's time. Cooperation over common challenges. Acknowledging Chinese contributions.]
So we’ve looked at countries, and we’re doing data dumping. Some – a lot of countries in Southern Africa and parts of the east and west are having anywhere from 50 percent to in one case 200 percent of GDP debt. And 80 percent and 50 percent are probably Chinese loans, and that’s really not acceptable, and that’s an area that we really need to address and focus on. 
Hmmm. Our China Africa Research Initiative (CARI) team has data on this. Let's see what they have to say next week.
So when you said “countering China,” I think the better word is probably how are we going to resolve tensions, problems. How can we make China much more supportive of the overall development of Africa. Because what we don’t want to see is – let’s say, for instance, Congo, which is very rich in resources – where you see Russia, China, North Korea, Iran taking out resources, yet the Congolese don’t receive very much in benefits. 
How do you resolve that? How do you develop, how do you get these countries to really benefit from the resources that they have, yet at the same time these countries such as China, Russia, Iran is also developing but also they give back a lot to the Africans? And that’s an issue and a question we need to pursue during this trip over.
If I understand what the official was saying here -- and that's a bit of a challenge -- s/he's asking: How do you develop? If we're talking economic development, China has some ideas and some very recent experience. I'm not so sure we have either. But the conversation will be interesting.

Our CARI team is going to try to provide actual numbers on this Chinese debt for the countries where Secretary Tillerson is traveling. We'll be providing a briefing package for media early in the coming week.

Thursday, February 22, 2018

Guest Post - China in Africa: Much Ado about Investment - Part 3

This guest post, the third of three, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS). [1]

There is another approach in attempting to understand China's FDI in Africa: counting the number of Chinese enterprises. Thus, according to a report by McKinsey published in 2017, Dance of the Lions and Dragons, "there are more than 10,000 Chinese-owned firms operating in Africa today." [2] Maybe yes, maybe not. In any case, the report gives no precise definition of what a Chinese enterprise in Africa is, except that it would be "Chinese-owned" implying a business owned by a Chinese natural or legal person. I doubt that statistical services regard an enterprise as "Chinese" on that sole ground.

I already dealt with this issue when Algeria's administration and press had peremptorily applied the data of the National Registry of Commerce and asserted that there were 790 "Chinese enterprises" in Algeria. This was not the case. [3]

Among the enterprises regarded as "Chinese", we must distinguish several categories.

The overwhelming majority of these enterprises are small and micro businesses that are locally incorporated. Legally and statistically speaking, they are all local enterprises even if they are "Chinese-owned". Most often, these businesses are registered by Chinese migrants who invested the savings they earned locally as employees. Not only is the capital built up small, but also it is not, strictly speaking, Chinese FDI, as it does not result from any financial flow from China to some African country.

Let us see how this works with an example. Qin Jianjun is a Chinese national who, starting from scratch, created two companies both incorporated in Algeria, the first in 2006 in the construction industry, the second in 2014 in real estate development. In order to further boost a business that hires about 1,500 local people on its construction sites, Qin Jianjun decided to "sinicize" both enterprises, i.e. to make them look "more Chinese". This is why they are now introduced as subsidiaries of a company incorporated in China... in 2015. In this case, an "Algerian" company became "Chinese". [4]

At the opposite extreme, we find the African subsidiaries of large enterprises incorporated in China. Strictly speaking, these overseas subsidiaries are the only entities that deserve to be designated as "Chinese enterprises" (i.e. overseas business units with legal personality that are controlled by a group incorporated in China).

These two extreme categories are in stark contrast: generally small businesses vs. large companies; local businesses vs. subsidiaries controlled by a Chinese enterprise; no Chinese government support vs. Chinese support (central or provincial government); private vs. (mostly) public... Merging both categories into a single one is like adding apples and oranges.

Between both extremes, we find a wide variety of situations. Among other formal structures, there are representative offices (daibiaochu), executive offices (banshichu), branch offices (fengongsi)…. These various management units are mostly not legal persons and are therefore rarely registered in the local Registry of Commerce. Furthermore, the presence of many of them is often limited to the duration of one contract, or other operation.

Consider Algeria's "Century Project", the construction project of the East-West Motorway. A consortium formed by China's CITIC corporation and China Railway Construction Engineering Group (CRCC) has won the bid for a motorway. Some thirty companies incorporated in China (including the subsidiaries of some foreign firms) have been participating directly or indirectly in the motorway project (see Figure 1).

Very few had a more formal structure than a command post, and even fewer have registered in the Algerian National Registry of Commerce. Even the Consortium, which was incorporated in the British Virgin Islands, has not completed the registration initiated some years earlier when negotiations were underway.

Whatever the way the number of "Chinese-owned firms" is computed, it can at best testify to the Chinese economic presence but in no way serves to label their precise nature: investors, contractors, small business people...

As my two previous posts also demonstrate, words such as "Chinese investment" have a very specific meaning especially when they are technical, legal, economic or statistical terms. Indulging in unsuitable semantics when analyzing can only lead to approximations that are detrimental to the understanding of the phenomena studied; consequently, such bias can only be prejudicial to the implementation of any strategy, co-operation or opposition.

Figure 1. -  CITIC-CRCC Consortium. Source: Author. For the genesis of this diagram, click here   
Acronym key:
CECC or CCECC: China Civil Engineering Construction Corporation.
CITIC: China International Trust Investment Corporation.
CRCC: China Railway Construction Corporation Limited.
SASAC: State-owned Assets Supervision and Administration Commission.
Xinjiang Prod. And Const. Corps: Xinjiang Production and Construction Corps.

[1] Dr. Thierry Pairault is research director at France's Centre National de la Recherche Scientifique (CNRS - National Center for Scientific Research) and at the Center of Studies on Modern and Contemporary China at the École des Hautes Études en Sciences Sociales (EHESS - School of Advanced Studies in Social Sciences). Please see for more information about his work.
[2] Dance of the lions and dragons. How are Africa and China engaging, and how will the partnership evolve?, June 2017.
[3] Thierry Pairault, "Algérie, quelle présence chinoise ?" published in A. Adel, Th. Pairault et F. Talahite (éd.), Algérie-Chine : approche socio-économiques, Paris, Eska, 2017, p. 34-45.
[4] The whole story is told in a post on my website: "L'entreprise chinoise est en fait algérienne...",

Wednesday, February 21, 2018

Guest Post - China in Africa: Much Ado about Investment - Part 2

This guest post, the second of three, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS).[1]

Real Trends in China's African Investment

Chinese official overseas FDI data has its problems, as this blog has pointed out. For example, the two largest investment destinations in Latin America are the Cayman Islands and the British Virgin Islands, two offshore financial centers. Yet it's likely to be more accurate than the data put out by The Financial Times. Here we look at trends and comparisons, which are less likely to be affected by the Chinese affection for offshore financial centers. The trends in the MOFCOM data suggest that Chinese investment in Africa is not only modest, it is falling. According to official data, the amount of Chinese FDI in Africa for 2016 was $ 2.4 billion, a decrease of 19% compared to 2015 ($ 2.9 billion), itself falling by 7 % compared to 2014 ($ 3.2 billion), itself in 5% fell compared to 2013 which was the second-highest year from 2003 to today.
Fig. 1: China's OFDI compared (2003-2016) Sources: MOFCOM, UNCTAD

China's FDI in all of Africa is equal to:
  • 14.1% of what China invests in the US
  • 83.6% of what China invests in Canada
  • the same as what China invests in Germany
While the share of China's total outward FDI has increased steadily since 2003 to 13.5% of the World's total FDI, the share of China's FDI in Africa has declined consistently since 2011 and is now only 1.2% of China's total outward FDI and 0.2% of World's total FDI (see Figure 1).

According to Figure 2, Chinese FDI in Africa seems to have peaked, while that in the EU and the US has been steadily rising.

Fig. 2: China's OFDI destinations compared (2003-2016) Sources: MOFCOM, UNCTAD
Investing, Financing, or Providing Services?

Then, the question: how to reconcile the feeling that China is investing heavily in Africa with factual data showing the precise opposite?
Once again, we are confronted with a classic confusion between investing, financing and providing services. International bodies (IMF, OECD ...) gave a clear definition of what should be considered as an investment; it is a definition to which China adheres and which is recalled in the MofCOM's last Statistical Bulletin:[2]
FDI is an activity in which an investor resident in one country obtains a lasting interest in, and a significant influence on the management of an entity resident in another country. This may involve either creating an entirely new enterprise (so-called "greenfield" investment) or, more typically, changing the ownership of existing enterprises (via mergers and acquisitions). Other types of financial transactions between related enterprises, like reinvesting the earnings of the FDI enterprise or other capital transfers, are also defined as foreign direct investment.[3]
China does not invest in infrastructure in Africa but builds and finances African investments in infrastructure.

In order to make the confusion more obvious and give investment its exact role, I shall compare the amount of FDI to the value of services provided. I shall take the turnover of overseas construction contracts completed in one year as a proxy for services.[4]

Figure 3 shows that the turnover achieved by Chinese construction companies in 2016 was more than 25 times higher than the amount invested by China in Africa.

Fig. 3: China in Africa: FDI vs Completed contracts. Sources: MofCOM, National Bureau of Statistics.
This was not an exception but the rule. It must be perfectly clear that China's FDI in Africa is an expense for China but not an income for the hosting African country. On the other hand, payment for services is an expense (and at the same time an investment) for the client African country AND a revenue for China.

Keeping in mind this difference, these two activities each illustrate, in their own way, China's presence in Africa; they show clearly that China is a services provider rather than an investor, that Africa is rather a customer than a partner. This conclusion would be even more evident if the services were to be added to the Chinese goods bought by African countries or, more accurately, to the growing African merchandise trade deficit with China.

In my final post, using examples from Algeria, I will explain how the many kinds of "Chinese" enterprises in Africa further complicate efforts to understand Chinese FDI.

[1] Dr. Thierry Pairault is research director at France's Centre National de la Recherche Scientifique (CNRS) and at the Center of Studies on Modern and Contemporary China at the École des Hautes Études en Sciences Sociales (EHESS - School of Advanced Studies in Social Sciences). Please see for more information about his work.
[2] Notes 1 and 2, page 3 (see
[3] Moreover, to be considered as a direct investment, an investment must represent at least 10% of the shares; otherwise it is a portfolio investment (speculative therefore most often). OECD Economic Outlook, Volume 2003, Issue 1, p. 158 (Box VI-I).
[4] Chinese statisticians use the terms "Contracted projects", chengbao gongcheng, and "Value of Turnover fulfilled", wancheng yingye'e. We are taught, "Overseas Contracted Projects refer to activities of contracting overseas construction projects by Chinese enterprises".

Tuesday, February 20, 2018

Guest Post - China in Africa: Much Ado about Investment - Part 1

This guest post, the first of three, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS). [1]

Once upon a time... Africa met the good fairy China who became a very significant investor. It's a beautiful story, but how accurate is this fairy tale?

The latest The Africa Investment Report published by the Financial Times is an excellent example of why the fairy tale needs reappraisal. Indeed, it states: "China was the number one source country in Africa by capital expenditure, investing $36.1bn into Africa and accounting for 39% of total investment" (The Africa Investment Report, p. 6.)

This reading aroused profound doubts in my mind as to the methodology used for a document read by many people and widely cited in the press. I shall provide here two flagrant examples of bald misstatements, conveyed by this report.

Fig. 1: The Africa Investment Report Source: Financial Times

A "Chinese-owned" El Hamdania Port?

The first example is taken from page 5 (see Figure 1). We are told that the China State Construction Engineering Corporation (CSCEC) has invested $ 3.3 billion in Algeria in 2016. The information is false. This very large sum refers to the expected construction cost for the deep water El Hamdania port in Algeria.

A Chinese consortium of banks may finance a portion of this project, although no loans have been signed. But this loan if it happens will be taken out by the Algerian government. Neither the CSCEC nor the other Chinese engineering firm involved in the project -- China Harbour Engineering Company, CHEC -- are investors, but service providers on behalf of the Algerian government, which is the sole investor.

Therefore, this $ 3.3 billion project cannot be considered as a Chinese investment in Algeria in 2016, or even as a future Chinese investment project.

Monday, February 19, 2018

Fruit baskets, Blackface, and Racism in China

This past weekend, China's central television station CCTV broadcast a Chinese New Year celebration that featured a Chinese actress in blackface, with an artificial, large bottom, playing an African woman for comedic effect. Many people have been offended and outraged by this portrayal. The skit has been covered by the New York Times and a host of other media outlets. If the goal was to portray China-Africa relations in a positive light, it backfired big time.

A lot of people have contacted me about this video. After watching it, I was not outraged (but I live in Washington DC, where our standard for outrage is a moving target...).  I agree it was tasteless. It also reflected a "pat ourselves on the back" condescending attitude from the Chinese in the skit toward the "Africans". The Dragon's gifts? Cringeworthy indeed.

Yet in the media coverage so far,** I haven't seen much comparative or historical context for this kerfuffle.

The CCTV "African mama"
China is still at the stage of cultural awareness and sensitivity that the US was in decades ago.  Back then, in Latin America, our government was trying to win hearts and minds through aid programs like the Alliance for Progress. Chiquita, the multinational company of "banana republic" fame, was portraying Latinas as voluptuous dancers with bananas on their heads.

Carmen Miranda for Chiquita Banana 

Our media's concern over expressions of racism in China, even as relatively benign as this one, show how far we have come in the West in overcoming deeply entrenched racism.* But they also remind me how far we have to go. Yes, we have had blackface, yellow-face and red-face, with European actors playing those of African, Asian, and native American heritage. In West Side Story, the Latina heroine was played by Natalie Wood. The Lone Ranger’s Indian side-kick Tonto was played by a white man. And we still have dubious casting decisions that reflect "white-washing" -- see the uproar over a decision to use a 100% European actress (Emma Stone) to portray a woman who was half-European, half Asian/native Hawaiian).

At Halloween, we're still blithely dressing our kids in Carmen Miranda "Chiquita Banana" costumes, although as NPR and others have pointed out, many Latin Americans view this as offensive and racist.

Yes, we have progressed. Europeans no longer exhibit people from Africa in zoos. And recall Sarah Baartman and other 19th century "South African Khoikhoi women who, due to their large buttocks, were exhibited as freak show attractions" across Europe.

Today our racism is institutionalized. In the US, we no longer make it illegal for people of different races to ride together on a bus, eat together at a lunch counter, or marry the person they love. Yet as research and the Black Lives Matter movement shows, our racism takes these insidious forms: disproportionate incarceration rates; police brutality, and discrimination in employment, credit, and housing. These are much harder to overcome. (At home, China's equivalent racism is directed toward its Muslim and Tibetan populations.)

What's likely to happen in China? In recent years, China's economy has developed faster than any in the modern era. To those of us who first visited China in the 1970s, the social changes from 1978 onward are mind-boggling. Without much of a legacy of slavery, China's racism toward Africans has not been nearly as deep as ours in the US.

Research tells us that racism and cluelessness prejudices such as we saw in the CCTV broadcast are learned, they are not "hard-wired" in the human brain.*

Given this, I was encouraged to see, in the online comments, the internal Chinese debates over racism sparked by the media coverage. Change is happening.

If a thoughtful, respectful and friendly relationship with Africans is really desired in Beijing, they will allow these debates to continue among Chinese netizens. Conversations like this are part of how Chinese people will get "woke" to their racism.

*For an interesting discussion of the research on "the origins of racism," see this link:
**After posting this, I read an interesting take on this published in Kenya. Hat tip to Magnus Fiskesjö. And here's a link to a fascinating and relevant 2016 blog post by Derek Sheridan on the infamous Qiaobi ad.

Saturday, February 3, 2018

Will Trump's Comments Push African Countries Toward China?

Source: The Economist, January 18, 2018 (hat tip to Jeff)
Now the world knows what the US president allegedly thinks about African countries.

At the Council on Foreign Relations blog, analyst John Campbell warns that "this racist and anti-African rhetoric is likely to strengthen the hand of those in Africa that would see their countries turn away from the West and towards more authoritarian governments, like those of Russia and China."

Perhaps. Yet this assumes a kind of "new Cold War" set of choices, where countries need to chose "the West" or "the East." Today's African countries can admire China's astounding economic development success, and take advantage of Chinese offers of finance, without rejecting the West or its own generous financial flows. They can have their cake and eat it too.

On the other hand, Washington should know that for decades, the Chinese government has made Africa a diplomatic priority. The Economist (see illustration) might not be aware that this far predates any special concern with Africa's natural resources. Since January 1991, China's foreign minister has started each year by traveling to Africa for high-level meetings with a group of selected countries. This year Foreign Minister Wang Yi visited Rwanda, Angola, Gabon, and São Tomé and Príncipe.

As I noted in The Dragon's Gift, a decade ago, I gave a talk to a group of African ambassadors in Washington, and in the discussion afterwards, one ambassador mentioned these Chinese visits, saying "China gives Africans more respect than they get from the West." I was struck by how many other ambassadors nodded vigorously in agreement.

Trump's comments mark a new low, but in other ways, his sentiments are not new. What is new is having these sentiments expressed at such a high level by our top leader. China has its own problems with racism and anti-African rhetoric among its citizens, but the government has always prioritized a respectful engagement with African governments, not just in words but in deeds, like the annual January visits. Our state department could help to neutralize these comments with its own push for respectful engagement, but a year after coming to office, the Trump administration has still not nominated anyone to be the Assistant Secretary of State for African Affairs.