"Germany blames Chinese land buys for Africa drought": Really?

Photo credit: International Land Coalition

Today here at the International Food Policy Research Institute in Washington, DC, I spoke by phone with a German reporter who wanted to interview someone about the statement this morning by the German government's Africa adviser Guenter Nooke who allegedly blamed Chinese land buys for the drought in the Horn of Africa.

He told the daily Frankfurter Rundschau:  “In the case of Ethiopia there is a suspicion that the large-scale land purchases by foreign companies, or states such as China which want to carry out industrial agriculture there, are very attractive for a small (African) elite.” He added that "the Chinese investments were focused on farming for export which he said can lead to 'major social conflicts in Africa when small farmers have their land und thus their livelihoods taken away'.”

I'm glad the reporter was from a radio station; he couldn't see my jaw drop. Yes, land grabs are bad news for small farmers in Ethiopia. But does China even have agricultural investments in Ethiopia? Not according to the newly released "land grab" studies by the progressive California-based Oakland Institute (whose head, Anuradha Mittal, used to be at Food First). The Oakland Institute actually conducted fieldwork on land grabs instead of looking only at media stories. Their June 2011 report on Ethiopia has this finding (which I do not think has been repeated anywhere by the media):

"While China is active in the mining and infrastructure development sectors, they were surprisingly absent from land investment deals. Recent evidence suggests that a Chinese company is poised* to sign a 25,000 ha concession to produce sugarcane in the Gambella region, and this company claimed to be the first agricultural company from China (emphasis added)."

That's consistent with what I found across Africa (note: not necessarily the case for SE Asia or Latin America). It's also consistent with the findings of a 2009 FAO/IIED study of "land grabs" which said:

"A common external perception is that China is supporting Chinese enterprises to acquire land abroad as part of a national food security strategy. Yet the evidence for this is highly questionable." 

So who has actually invested in Ethiopia? Well, the real story seems to be that it is Western hedge funds, among others. Here's Mittal's YouTube interview.


* Oakland Institute has a copy of a contract between the Ethiopian Ministry of Agriculture and a Chinese company signed December 12, 2010. Nothing appears to have come of this yet, but this could change. If any of you are following this issue in Ethiopia, let us know what happens.

The Atlantic Joins the China-Africa Scare-Mongering

Robert Mugabe and Chinese businesspeople     credit: ZimDaily

I'm disappointed that one of my favorite magazines, The Atlantic, published on June 24, 2011, a short and sloppy article by Max Fisher-- "In Zimbabwe, Chinese Investment with Hints of Colonialism." This is a striking example of some of the superficial, error-ridden, and at times irresponsible China-Africa
analysis that a major magazine can casually publish. Articles like this -- apparently dashed together out of a quick spin through the internet -- are all that America's elite opinion makers are likely to read about China's role in Africa. That's a pity.

Fisher doesn't much care for Mugabe and neither do I. Mugabe is an appalling leader. His policies over the past decade have driven his country into the ground. His refusal to relinquish power in legitimate elections has been devastating for Zimbabweans.

Fisher also highlights concerns by Zimbabwean construction workers, restaurant staff, and labor unions about Chinese employers: these are no doubt a reality: Chinese managers have a well-deserved reputation for poor working conditions. Sadly, there's no news in these claims, which have been voiced often in African and international media (and which form the centerpiece of a good edited volume published in Namibia by the trade union movement).

Fisher ignored something that was interesting and new:  the complaints by Zimbabwe's trade unions were taken seriously by the Chinese who sent a delegation in response. As Veneranda Langa reports from Harare, after the labor problems hit the media, the Chinese government reacted:

A high-level delegation from the Overseas Chinese Affairs Committee (OCC) of the National People’s Congress of China is in Zimbabwe [June 13, 2011] to hold seminars to encourage Chinese nationals to live harmoniously with locals in an effort to boost relations between the two countries.

As for the low salaries, also undoubtedly true -- but the union complaint that that some Chinese companies pay only $4 a day (about $120 a month for a five day week) as wages has to be seen in the context where statutory minimum wage figures in 2009 were $100/month for mining, $150/month for government workers, or $30/month for domestics. (Zimbabwe has no overall minimum wage, only minimum wages for different sectors; these are re-negotiated regularly.)

But let's look at some of Fisher's other claims:

• China has won "near-exclusive dominance of everything from mineral rights to labor standards" ...

• "China recently paid $3 billion for exclusive access to Zimbabwe's extensive platinum rights, a contract estimated to be worth $40 billion."

These claims about exclusive access to mineral rights would come as a surprise to the many international mining firms that have ongoing mineral investments in Zimbabwe, particularly those with extensive investment in the platinum sector, including Canada's Caledonia, and Impala Platinum (the South African firm that is the major shareholder of Zimplats) as well as the mining giant Anglo-American.

It's my guess that discussions of a $3 billion line of credit offer (not a contract or concluded deal) appear to be real -- a line of credit has been under discussion since 2006 but there have been many sticking points. However, if this happens, it would clearly not be a "swap" of $3 billion for "all of Zimbabwe's platinum", but rather a resource-secured line of credit linked to a platinum deposit like the one that was earlier encumbered for another Chinese loan. This bears some similarity to the DRC's copper "deal of the century". 

Fisher bends and twists a few things to make his story more colorful:

• The 87-year-old ruler even relies on Chinese medical treatment.

Well, he does seem to get treatment in Singapore -- he's been six times recently. But isn't this stretching it a bit in an article on "Chinese colonialism"?

Fisher also gives us an alarmist interpretation of a complicated and politically controversial project:

• A massive military compound is under construction in Harare, built by Chinese firms and with a Chinese loan of $98 million. The open-ended loan, which the already indebted Zimbabwean government has no obvious way of paying back, means that this component of the country's military will be effectively Chinese-owned ... the expensive facility will hand a small but important part of Zimbabwean sovereignty over to Chinese lenders.

Neglecting to mention that the "massive military compound" is actually the site of Zimbabwe's new National Defense College, Fisher puts a scary spin on something that is a tad more ordinary. (And why portray the signed loan as "open ended"?)
Here's the history of this project: In 2008, the Zimbabwe government/military decided to upgrade the Staff College run by the University of Zimbabwe, and enable it to have the capacity to offer a BA and MA degrees in Defense and Security Studies. But they didn't have the money to do this. So they negotiated an "obvious way to pay it back": secure a concessional loan from the China Eximbank with the future export of Zimbabwean resources from a joint venture between the Chinese construction company and the Zimbabwe government (again, this resembles the DRC copper/infrastructure model).

Using aid for a project like this is a good example of the downside of China's request-based aid (the package deal seems to have been cooked up between Anjin Corp and the Zimbabwe Defense forces) and Chinese deference to local ownership (i.e. the Unity government -- and Zimbabwe's Parliament, which ratified the deal) in making decisions on how to use aid finance. (I talk about these problems more in The Dragon's Gift).

Surely Zimbabwe has better uses for its diamonds than using them to pay to build the professionalism of its military. (And surely my own country, the US, has better uses for our money than paying for our military's desires... and yet still we do it, and ironically we also finance it by borrowing from the Chinese!). But rather than China now 'owning' part of Zimbabwe's military, China Eximbank will have a lien on part of the Marange diamond fields.

Fisher then moves into shakier territory with a couple more myths:

• In 2006, China paid Mozambique $2 billion for a deal to dam off the Zambezi river and send 3,000 settlers to populate the valley, some of the country's most fertile land.

This Chinese "deal" for the Mpanda Nkua Dam on the Zambezi is another zombie myth that has cycled around the internet for nearly six years. When I went to Mozambique in 2009 to look into it, I found that although Chinese credit for a dam had been discussed, it was never finalized. When the contract was given to a Brazilian firm to build the dam in 2008, there was still no financing. There are no Chinese settlers in the Zambezi Valley, and no one I spoke to knew anything about this hypothesized plan. But why check when the truth might spoil a good story?

In a grand conclusion, Fisher widens his scope to the entire continent:

• China is snatching up agricultural land across the continent, often with leases nearing a century in length.

This claim has an embedded link that brings the reader to an Atlantic article that does describe an African land grab. However, the article has no examples of Chinese "land grabs" and in fact states:  "But neither China nor the U.S. is driving the land scramble: Saudi Arabia and its neighbors are." Did Fisher even read his colleague's piece? It's counter-intuitive, but field researchers continue to report that there have actually been very few big Chinese land deals in Africa.

Fact checkers, where were you when this was published?

Two New Papers on Chinese Aid in Africa

Here are links to two new papers of mine on Chinese aid published this month:

(1) Deborah Brautigam, "Chinese Development Aid in Africa: What, Where, Why and How Much?" China Update 2011, eds. Jane Golley and Ligang Song, Canberra: Australia National University, 2011.

Abstract: China’s development aid to Africa has increased rapidly, yet this might be the only fact on which we have widespread agreement when it comes to Chinese aid. Analysts disagree about the nature of China’s official development aid, the countries that are its main recipients, the reasons for providing aid, the quantity of official aid, and its impact. Why does this matter? Knowing more about Chinese development aid is important for understanding Chinese foreign policy and economic statecraft: how and to what ends does China use its government policy tools? It is also important for more accurate comparisons between Chinese practices and those of other donors and providers of finance. Finally, for those who are interested in the question of whether, as it rises, China will transform, reform or maintain the existing system of norms and rules (Kim 1999), development aid provides a particularly interesting case study. The rules and norms about foreign aid have been forged not by a global institution, but primarily by the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD)—a group of countries of which China is not a part. To answer questions about China’s impact on these rules and norms, we need to have a sound idea of what China is actually doing as a donor.

(2) Deborah Brautigam, "Aid 'With Chinese Characteristics': Chinese Aid and Development Finance Meet the OECD-DAC Regime," in Journal of International Development, v. 23, n. 5, July 2011.

Abstract: China's official aid programme is non-transparent and poorly understood. The paper compares development finance from China and the Organization for Economic Co-operation Development (OECD) generally and through the examination of two cases of Chinese development cooperation in Africa. These cases illustrate a major argument of the paper: that the lion's share of China's officially supported finance is not actually official development assistance (ODA). China does provide finance that meets the definition of ODA, but this is relatively small. Export credits, non-concessional state loans or aid used to foster Chinese investment do not fall into the category of ODA. China's cooperation may be developmental, but it is not primarily based on official development aid. This suggests that the institutions established at the OECD to develop and apply standards for foreign aid (the Development Assistance Committee) may not be the right ones to govern these growing ties.

Australia and China: What Can Africa Learn?

I"ve been in Australia since last Friday, participating in the launch of China Update 2011: Rising China, Challenges and Opportunities at Australia National University and having meetings with AUS government officials. It's fascinating how the Australians view their relationship with China, their major economic partner. As a resource-rich country, Australia has been the target of enthusiastic trade and investment interest by Chinese firms. It's been a politically contentious relationship, but Australia has by and large managed it very well (although one prominent Australian academic here called the govenment's new screening policy toward investment from 'state-owned enterprises' bumble-footed.)

Some Australians have moved up the ladder inside Chinese firms. Australian Andrew Michelmore, a former Rhodes Scholar, now the highest ranking foreigner working for China Minmetals Group, said in a July 4, 2011 interview with Businessweek:

The myth is that the [Chinese] government goes to company X and says, ‘Company X, I want you to go and buy that asset over there and pay whatever you want for it because we want it,’” said Michelmore, who won a gold medal at the 1974 World Rowing Championships. “Not at all,” he said in an interview in Hong Kong. “There is this incredible competition in China, they are businesspeople competing against each other.”:

What can Africans learn from the Australian approach to China? A lot, I imagine.

A hat tip to PKU African Studies Program.

BBC Where Art Thou? Another (Un)Balanced VOA Story on China in Africa

In a June 28, 2011 article with the thoughtful title: "China Supports Global Pariahs, Gets Resources and Criticism in Return," the United States' official broadcasting system Voice of America continued a series on China's overseas engagement. Here are some of the balanced analysts they're quoting: Greg Autry, co-author with Peter Navarro of the book Death by China and economics professor at University of California Irvine, and Peter Navarro, author of the polemic The Coming China Wars. Here's a sample of the analysis.

"Zimbabwe has everything from diamonds to tobacco and farm land," says Peter Navarro, an economics professor at the University of California, Irvine. "China has gone in there and there are a lot of Chinese farmers there now tilling Zimbabwean soil growing crops that are sent back to China while the people of Zimbabwe starve..."

There is a lot to be critical of in China's engagement with Mugabe, but sending a lot of Chinese farmers to till the soil is not one of them. Yes, China imports a lot of Zimbabwean tobacco. Two Chinese companies operate out-grower schemes buying tobacco from Zimbabwean farmers. Another Chinese project contracts with Zimbabwean cotton growers.

Later on the article repeats another of the myths floating around the internet:

China International Water and Electric Company ... has lease holds on over a quarter of a million acres of land in southern Zimbabwe for the raising of maize, which it exports back to China.

This zombie of a story -- another of the "rural legends" floating around the internet (this one was launched in 2003) -- is hard to kill off. But it is bogus. (I explain what really happened in The Dragon's Gift). It's also been embellished. The original version claimed that CIWEC was producing maize for Zimbabweans. Now the VOA, without checking, "reports" that CIWEC is exporting food back to China while Zimbabweans starve.

Oh BBC, where art thou? A hat tip to Henry Hall for the story.

The Untold Story of China Development Bank

I've just finished reading Erica Downs' excellent monograph: Inside China, Inc.: China Development Bank' Cross-Border Energy Deals (Brookings Institution: March 2011).

Another extremely well-researched and well-written contribution from Erica, this balanced study busts some myths (inter alia, these deals do not mean China is "locking up" sources of energy) and confirms some concerns (China's ability to coordinate -- sometimes -- in financing and supporting a package of deals mean it is going to be hard for US companies to compete).

Although there is very little on China in Africa, this study is well worth reading to get a better handle on how China Development Bank (CDB) works overseas. Between 2006 and 2010, CDB's loan exposure in Africa increased from $1 billion to $10 billion and this is only going to go up.

Moreoever, it is packed with fascinating detail -- almost all of it openly available in Chinese and other media sources -- on how CDB embarks on the major financing deals that have made it stand out as one of China's deepest pockets. The information on the variety of terms (interest rates, maturities) of these deals alone is a major contribution. It confirms what I've seen in Africa: large deals are nearly always structured using variable LIBOR-plus interest rates, and on terms that are often just slightly better than those available from global commercial banks.

The better terms do not reflect direct subsidies, Erica points out, but rather the government backing for CDB, a policy bank. This backing means that CDB has the ability to take more risks and accept a longer term reward than would a purely commercial bank. Still, CDB cares about its profits and its bottom line. As I've also noted, CDB often uses major international law firms like White & Case to help structure these deals.

The multiple media sources Erica relied on also tell me that reporters in other parts of the world (even in China!) are getting much better detail on these deals than reporters are getting in Africa. It also suggests that that there may be no inherent Chinese prohibition on this information. For example, Brazil's Petrobras, the state-owned oil company, has transparently reported on its deals with China in its annual reports. Yet CDB did not grant Erica an interview, which also shows it has a way to go on openness.

Applause for New Study on Africa and Its Emerging Partners [China]

Released in June 2011: an insightful new African Economic Outlook 2010 highlights a very careful study of Africa's "emerging partners" (mainly, but not exclusively, China).

The annual African Economic Outlook "combines the expertise of the African Development Bank, the OECD Development Centre, the United Nations Economic Commission for Africa, the United Nations Development Programme and a network of African think tanks and research centres".  The study draws on numerous background papers and field reports from member countries.

Chapter 6, "Africa and its Emerging Partners" is one of the most balanced, detailed, evidence-based pieces of group research I have seen on this topic and I highly recommend it. Among the interesting findings: 

• An analysis of Chinese Ministry of Commerce (MOFCOM) data reveals that, by 2009, 76% of Chinese outward FDI in Africa was in countries defined by the IMF (2007) as hydrocarbon- or mineral-rich .... [however] For FDI from OECD member-countries this ratio is even higher, at 85%. By implication, FDI from emerging partners is actually less concentrated in oil-exporting countries than that of traditional partners.

• Outlook experts give a cautiously positive verdict on concerns about the impact of the emerging partners on Africa’s development. Prospects are good for the transfer of technology and access to finance. There is no evidence to suggest that the new players are hindering Africa's industrialisation, debt sustainability or governance, but Africa needs a clear engagement strategy and all sides must show greater transparency. 

• [S]everal countries have begun formulating such strategy [for engaging emerging powers]: Namibia’s engagement strategy is formalised and the assistance provided by emerging partners is integrated into the national development plan; similarly, Cameroon’s engagement strategy with emerging partners is framed within the country’s development vision for 2035. In Morocco, Chinese operators are actively encouraged to invest in the country to counterweigh Chinese imports and ease the commercial deficit; in Cape Verde, the government plays on the full range of partners to modernise productive capacity and infrastructure; in Equatorial Guinea, officials negotiate in Chinese with their Chinese counterparts.

• History makes it clear that investment decisions concerning infrastructure projects currently conducted by emerging partners need to be properly budgeted for and framed consistently with a sustainable, realistic, home-grown development strategy. Projects that are approved need to clear the hurdle of high and wide relevance for the country’s development and chosen to be sustainable not only within the country’s current economic conditions but also in times of economic trouble domestically or worldwide.

Full disclosure: I was a reviewer of an earlier version of the chapter. I think they put in a tremendous amount of effort and the results show this:  they did a great job. While the study is available for purchase, parts of Chapter 6 can be read online or downloaded.

Lisa Sodalo, a student at the Sorbonne in Paris, writes (on the basis of fieldwork!) a comment: "China in Cameroon's Construction Sector: Towards Enforcement of Higher Labour Standards than Local Regulation?" in the May 2011 China Monitor, published by the Centre for Chinese Studies at Stellenbosch University in South Africa. Among her interesting findings:

• Chinese construction companies, like their foreign and local counterparts, hire most frequently through a local sub-contractor called a tacheron. This intermediate employer recruits the necessary number of men to complete a determined work or service, at an agreed and fixed price.
• Safety and hygiene at work are legally part of the subcontractor's duties. Therefore, in the event of an accident, the responsibility lies with the intermediate employer, the tacheron... [yet] the primary employer, Chinese or otherwise, might be in a better position to implement the rules related to safety and hygiene, as well as to compensate the worker in the event of an accident.
• A national study estimates that less than ten percent of [all] workplaces enforce the hygiene and safety laws. Data regarding the enforcement of these codes on Chinese sites is unavailable.
• The minimum wage in Cameroon's construction sector is approximately 63 USD per month, but across the country numerous men are willing to work at a lower rate, including for Chinese companies. Comparatively, migrant workers (min gong,民工) employed at similar positions in mainland China are remunerated approximately 183 USD per month.
• Cameroonian sources in this industry claimed that Chinese companies generally bring their fellow citizens to work on their projects. The situation might be evolving, as every Chinese construction site visited showed Cameroonian labourers working under Chinese management.

To read more, click here.

Bill Gates, Hillary Clinton, China in Africa, and The Dragon's Gift

Saturday last week The UK's Daily Mail posted an interview with Bill Gates in which he mentions that he was reading The Dragon's Gift in preparation for an upcoming visit to China:

His passion for aid is such that he devotes his spare time to reading about it: ‘At the moment I’m reading Getting Better by Charles Kenny, and I’m going to China soon, so I’m reading The Dragon’s Gift, about the history of Chinese aid to Africa.’

After attending a small informal dinner last week in Beijing with Bill Gates, a couple of Chinese experts, and a trio of Gates Foundation staff, I can confirm that he did read The Dragon's Gift. He sprinkled analysis, and references to it throughout the evening's conversation. If it had been a seminar, I would have given him an A. :).

Clinton and Banda in Zambia. Photo Credit AP: Susan Walsh

So now Donald Trump and Bill Gates have read The Dragon's Gift, and The Guardian recommended it to Britain's new Conservative-Liberal government. Yet it's clear from media coverage of Secretary Clinton's visit to Zambia that Mrs. Clinton is probably not among those who have read it.

Below are a few clips from her press conference in Lusaka (emphasis added):

"Acknowledging that China, the world’s biggest energy user, has extended its influence across Africa, the top U.S. diplomat said she recognized that while its size accounted for its presence in the continent, she had reservations about its reach: 'We don’t want to see a new colonialism in Africa.' ...  The U.S. is 'concerned that China’s foreign assistance and investment practices in Africa have not always been consistent with generally accepted international norms of transparency and good governance,' Clinton said yesterday at a news conference in Lusaka after meeting Zambian President Rupiah Banda. Clinton pointed to U.S. efforts to improve political and economic governance in countries like Zambia as an example of a different approach. 'The United States is investing in the people of Zambia, not just the elites, and we are investing for the long run.'*

The implication that China is not investing for the long run, or is only interested in narrowly investing in Zambian elites would be hard to argue for anyone who has read my book. Chinese leaders' multiple visits to Zambia over the past five decades, numerous aid projects including the iconic Tan Zam railway (which is still being supported by Beijing as it limps along), and business investment in multiple sectors, suggest a much longer, deeper, and broader set of interests than Secretary Clinton appears to be aware of.

And while the Secretary's concern about Africa's political and economic governance is commendable, I wish she had shown the same concern about US foreign assistance and investment practices in Africa. Our foreign aid is transparent -- and China's is not -- but this same transparency makes clear that even after the end of the Cold War, several countries with poor records on democracy and governance -- Mubarak's Egypt and Ethiopia -- have been the largest US aid recipients in Africa. This support is clearly not "consistent with generally accepted international norms" of good governance. As I have noted before in this blog, it is a sad fact that energy security concerns trump good governance in relations between the Obama administration and the notoriously corrupt human rights abusers heading the Obiang government in Equatorial Guinea.

China has a long way to go in improving its multi-faceted engagement on the continent, but the US is not there yet either. The difference is not as complete as Secretary Clinton would have us think. Pointing to the principles that do generally guide our aid, ignoring US companies happily investing with a pat on the back from the Obama administration in places like Equatorial Guinea, and then comparing our aid to Chinese aid and investment is a common debate tactic among op-ed critics (Michael Gerson did this recently in the Washington Post). I would have hoped that Secretary Clinton would do better than this. But perhaps as her major advisor on Africa (and, probably, on China's role there) is Ambassador Johnnie Carson, the person who, in the Wikileaks cables, famously dismissed China in Africa as "a pernicious economic competitor ...[with] no morals", it's not a surprise.

As many of the comments on the Zambian Watchdog reposting of this story make clear, Africans are under no illusions about Chinese -- or US -- goals in their neighborhood.

A hat tip to Calestous Juma for the Zambia story and to Joe for the story of the Times interview with Bill Gates.



*The quotation comes from a different news story on the visit: http://www.dawn.com/2011/06/11/clinton-warns-against-new-colonialism-in-africa.html

Donald Trump and The Dragon's Gift

Take this with a grain of salt: Donald Trump lists The Dragon's Gift among his top 20 China books. "I've read hundreds of books about China over the decades," Trump told a reporter. Here's Tony Pierce's take on the Donald's reading habits (from the LA Times): (a hat tip to Elsie Cheng for this story.)

Donald Trump has read a lot of books on China: 'I understand the Chinese mind'

May 3, 2011 |  4:05 pm

Donald Trump  recently reeled off an impressive list of Chinese books that he has read over the years that has helped him understand the nation and people that he does business with.
"I've read hundreds of books about China over the decades," Trump told Xinhua, the official news agency of the People's Republic of China.
"I know the Chinese. I've made a lot of money with the Chinese. I understand the Chinese mind," said the billionaire, who has continually stated that if he were president he would levy a 25% tax on Chinese imports.
Asked to name any of his favorite tomes on China, Trump reportedly listed the following 20 books right off the top of his head.
1. "The Party" by Richard McGregor
2. "On China" by Henry Kissinger
3. "Mao: The Untold Story" by Jung Chang
4. "Tide Players" by Jianying Zha
5. "One Billion Customers" by James McGregor
6. "The Coming China Wars" by Peter W. Navarro
7. "The Beijing Consensus" by Stefan Halper
8. "China CEO" by Juan Antonio Fernandez and Laurie Underwood
9. "Poorly Made in China" by Paul Midler
10. "CHINA: Portrait of a People" by Tom Carter
11. "The Man Who Loved China" by Simon Winchester
12. "China Shakes the World" by James Kynge
13. "Mr. China" by Tim Clissold
14. "Country Driving" by Peter Hessler
15. "The Dragon's Gift" by Deborah Brautigam
16. "Factory Girls" by Leslie T. Chang
17. "The Heavenly Man" by Brother Yun
18. "1421" by Gavin Menzies
19. "Seven Years in Tibet" by Heinrich Harrer
20. "Battle Hymn of the Tiger Mother" by Amy Chua
That's quite a difference from when Katie Couric asked Sarah Palin in 2008 what magazines and newspapers she reads:

Couric: And when it comes to establishing your world view, I was curious, what newspapers and magazines did you regularly read before you were tapped for this to stay informed and to understand the world?

Palin: I’ve read most of them, again with a great appreciation for the press, for the media.

Couric: What, specifically?

Palin: Um, all of them, any of them that have been in front of me all these years.

Couric: Can you name a few?

Palin: I have a vast variety of sources where we get our news, too. Alaska isn’t a foreign country, where it’s kind of suggested, “Wow, how could you keep in touch with what the rest of Washington, D.C., may be thinking when you live up there in Alaska?” Believe me, Alaska is like a microcosm of America.

File this away if Trump and Palin ever square off in a debate.

-- Tony Pierce
twitter.com/busblog

The Chinese in Africa: The Economist Gets Some Things Right, Some Wrong

The Economist's April 20, 2011, report on China and Africa (with the catchy subtitle "Africans are asking whether China is making their lunch or eating it") gets a lot of things right, but some big things wrong. As I noted in an earlier post, it is also prone to exaggeration.

What the reporter, Oliver August (he emailed me while he was working on the article but I was in Ethiopia and we never managed to talk), got right was a generalized sense that lower standards, lack of "corporate social responsibility" (social and environmental) in business practices, poor labor relations, competition with import substitution industries (especially textiles), and not enough hiring of local labor are the downside of China's increasingly prominent presence in Africa. These are serious issues and rightly tarnish the general reputation of China in Africa. I've written about them all in The Dragon's Gift.

Here's my take on what they got wrong and/or exaggerated: 

1. The Economist: "For investment in African farming, China has earmarked $5 billion. A lot of Africans view this anxiously." 

Wrong: Sigh. This myth is a hard dragon to slay (so to speak). I wrote about the legend of the (non-existent) $5 billion fund for agriculture here in April 2010 after reading Howard French's Atlantic article that made this surprising and erroneous claim. Yes, China Africa Development Fund plans to raise $5 billion for Chinese equity investment in Africa (they've raised only $1 billion so far), but this is going into all sectors: infrastructure, manufacturing, energy, mining, and agriculture. The mistake that this fund is devoted to agriculture has become one of the urban legends circulating around the internet, a "rural legend" we could call it.

2. The Economist:  Chinese construction work can be slapdash and buildings erected by mainland firms have on occasion fallen apart. A hospital in Luanda, the capital of Angola, was opened with great fanfare but cracks appeared in the walls within a few months and it soon closed. The Chinese-built road from Lusaka, Zambia’s capital, to Chirundu, 130km (81 miles) to the south-east, was quickly swept away by rains.

Exaggerated: I've analyzed stories about the Luanda hospital and the Lusaka-Chirundu road before in this blog. True, both had problems (the hospital was opened in February 2006 but rather than "falling apart" in a few months, it developed significant cracks over the first four years, and closed for repairs in June 2010). The Economist implies that the entire Lusaka-Chirundu road was "quickly swept away by rains". This did not happen but the road did develop a cave-in along what appears to be a 20 foot section. For more on this from several Chinese, Africans, and others see the comments on my post.

3. The Economist: At Chinese-run mines in Zambia’s copper belt they must work for two years before they get safety helmets. Ventilation below ground is poor and deadly accidents occur almost daily. To avoid censure, Chinese managers bribe union bosses and take them on “study tours” to massage parlours in China. Obstructionist shop stewards are sacked and workers who assemble in groups are violently dispersed. When cases end up in court, witnesses are intimidated.

Exaggerated.  Let's look first at the claim of deadly accidents occurring "almost daily" in Chinese-run copper mines. It took about five minutes of searching on the internet to find what appear to be fairly good statistics on all fatalities in the copper belt, not just the Chinese. For example, here is a table from a critical 2008 South Africa Institute for Security Studies study of Zambian copper mines by Neo Simutanyi:

All Mining Fatalities in the Copperbelt

Year         Fatalities
2000             9
2001           23
2002           17
2003           21
2004           19
2005           80*
2006           18
Source: Mines Safety Department [in Simutanyi, "Copper Mining in Zambia," July 2008].
*Includes the 50+ workers who were killed in the notorious BGRIMM dymanite factory explosion at the Chinese-run Chambishi mine.

Although the data stops in 2006, it covers the worst years with regard to Chinese safety practices (see below). A 2009 Norwegian academic study of an unnamed international copper mining firm in Zambia (not the Chinese company) reported that it had experienced 20 fatalities between January 2005 and May 2007. Any fatality is one fatality too many, but it does no favor to our efforts to understand the reality of Chinese engagement to exaggerate their record.

I didn't look into the massage parlour claim (sounds plausible) but on the other safety aspects I asked Dan Haglund, a British scholar who has done extensive fieldwork on the Chinese copper mines. He was unaware of any practice that miners "must work for two years before they get safety helmets." He told me "the first Zambians working at NFCA after it started operating in 2003 may well have had very limited safety equipment during the first couple of years. However employees as well as regulators agree that standards have improved significantly since then - albeit from a low base." From another researcher, I learned that the Chinese in the copper belt do issue required safety equipment on a regular basis, but are reluctant to replace boots or helmets that are damaged before the scheduled replacement period.

About court cases, Dan Haglund reported that in his experience, the Chinese in the copper belt tended to ignore many labor regulations, for example, they would dismiss personnel without giving notice. However, he said, "my impression is actually that the court usually rules in favour of the workers. The Company Secretary said that this was one of the company's concerns regarding operating in Zambia - saying that in Zambia, if there is a dispute, the courts will always rule in favour of workers."

Perhaps due to an editing error, The Economist combined discussion of the improving Chinese state-owned companies in the copper belt with the poor record of the private firm running the Collum coal mine in southern Zambia (which is where the notorious mine shootings took place in 2010). (For deeper discussion and links to stories on the shooting at Collum coal mine, see my earlier blog post.)

4. The Economist quotes (without comment) Sanou Mbaye, formerly a senior official at the African Development Bank, who said "more Chinese have come to Africa in the past ten years than Europeans in the past 400." 

Exaggerated/Wrong. A nice quote but without being unkind, I venture to say it is complete balderdash. No one has figures on how many Chinese have come to Africa. We often hear estimates of 750,000 or a million, or even more. But any estimate pales in comparison to the numbers of Europeans who came to Africa during colonialism and who live and work there even today. Nigeria and South Africa are favorite destinations for Chinese traders and immigrants. And there may be more Chinese than Europeans in Nigeria. But could anyone who lives in South Africa or visits frequently, as I do, claim that there are more Chinese than Europeans in the airports, or even on the streets of South African cities and towns?

Estimates of Europeans in Africa during the colonial period vary, but a long and pretty well documented Wikipedia overview of "White Africans of European Ancestry" might surprise Mr. Mbaye. The article estimates that the population of Europeans in Africa rose to perhaps 10 million during the colonial period, and remains (at most) at 6.5 million. While I will leave it to others to examine the sources, the article cites research claiming that in South Africa in 1995, there were some 5.2 million "Europeans" while Algeria had over 1.6 million Europeans in 1960, the Portuguese colonies in Africa had some 650,000 Portuguese before independence, Libya had over 150,000 Italians; Tunusia and Morocco had 750,000 Europeans, at the peak there were some 296,000 Europeans in Zimbabwe. 

5. The Economist: Suspect above all is the type of transfer that China offers to African countries. Most loans and payments are “tied”—ie, the recipient must spend the money with Chinese companies. (Japan, Spain and others followed a similar model until fairly recently.) But tied aid leads to shoddy work. With no competition, favoured firms get away with delivering bad roads and overpriced hospitals. Creditors and donors often set the wrong priorities.

Exaggerated/Wrong. Yes, Chinese aid and export credits largely appear to be tied. Yes, donors from the OECD agreed to progressively reduce their own requirement that official aid to the poorest countries be tied. But as a 2011 analyses by the OECD pointed out, while aid is increasingly untied in theory, it doesn't seem to be untied in practice: most contracts still go to donor countries' own firms. This was also the conclusion of an independent study funded by Denmark: "Untying Aid: Is it Working?. (For a fascinating blog post by Laura Freschi  at Aid Watch on the "unsung hero" of the struggle to get the US to even report how much of its aid is tied.)

However, this discussion of "tied aid" is beside the point: what the Chinese are primarily providing to African governments is not aid, but commercial-rate export credits. And no OECD country provides untied export credits. That would defeat the purpose of this government tool for increasing exports. Members of the Development Assistance Committee at the OECD reported in 2009 that they had committed $24.8 billion in "other official flows"* to developing countries (this is in addition to official aid). We don't have a "tying" report for these transactions, which are the appropriate comparison for the Chinese non-concessional official flows.

6. The Economist: The Democratic Republic of Congo was persuaded at the last minute by international advisers to scale back a Chinese lending facility from $9 billion to $6 billion.

Exaggerated/Wrong. This sounds as though international advisers came in "at the last minute" as the DRC was about to make a huge mistake. What really happened was a stand-off lasting nearly two years between the DRC and its creditors, which were refusing to consider debt reduction for the DRC unless it reduced the size of (and official guarantees for) a Chinese credit package linked to a joint venture mining investment. What this meant for the DRC (in addition to a lower debt) was that the benefits it will get from the Chinese consortium in exchange for the mining rights were reduced by $3 billion. (The mining venture was going to finance $6 billion in reconstruction infrastructure projects, unlinked to the mine, in addition to $3 billion for the mine). For more on this complicated story, see this note by researchers Johanna Jansson and Wenran Jiang for Pambazuka.

I'm leaving for a CSIS/CIIS meeting in Beijing tomorrow and then on to conferences/speaking engagements in Brussels, Copenhagen, and Dresden. Thanks to the Great Fire Wall, likely won't be blogging again for awhile, but I'll be interested in readers' comments on my take on The Economist.

------------
*other official flows: "Other official flows are official sector transactions which do not meet the ODA criteria, e.g.: i.) Grants to developing countries for representational or essentially commercial purposes; ii.) Official bilateral transactions intended to promote development but having a grant element of less than 25 per cent; iii.) Official bilateral transactions, whatever their grant element, that are primarily export-facilitating in purpose. This category includes by definition export credits extended directly to an aid recipient by an official agency or institution ("official direct export credits"); iv.) The net acquisition by governments and central monetary institutions of securities issued by multilateral development banks at market terms; v.) Subsidies (grants) to the private sector to soften its credits to developing countries [see Annex 3, paragraph A3.5.iv)b)]; vi.) Funds in support of private investment." Source: OECD/DAC Statistics.

Interview on The Dragon's Gift: Podcast on Development Drums

Development expert Owen Barder interviewed me about The Dragon's Gift in Addis Ababa for his podcast Development Drums. He was a terrific interviewer (how great to speak to someone who has actually read The Dragon's Gift, quite thoroughly; how nice to know that he will be based part time in Washington DC now).

I'm sitting in a hotel in Oslo, Norway, grading final papers in between speaking at Norfund and the Ministry of Foreign Affairs, and the University of Oslo, and moving on to Bergen for ten days in my new position as Professor II at the University of Bergen (a part-time "visiting" position).

At some point soon I hope to get back to more serious blogging on China and Africa.

Lusaka-Chirundu Road and Summer Research

Road after rainstorm

Road when originally completed.

Here are a couple of 2009 photos of the Lusaka-Chirundu road, another problematic Chinese construction project, this one a key link between Zambia and its southern neighbors. China Henan was the company in this case. A hat tip to Wei for this story.

This project -- along with the crumbling Angola hospital -- was part of this week's Economist story on China and Africa. The Economist reported that the "The Chinese-built road from Lusaka, Zambia’s capital, to Chirundu, 130km (81 miles) to the south-east, was quickly swept away by rains." Well, I don't think the entire road was quickly swept away by rains, but clearly a chunk of it was.

For another Zambia story on the heavy pressure some of these roads are under, see this Lusaka Times story. Researchers: Zambia provides a wealth of examples of comparative road construction. In this story from 2005, we can see the mention of a Chinese company, a local firm (Sable) and a South African company: Steffanutti and Bressan, all with similar contracts. What an interesting summer research project: comparative analysis of the state of these Zambian roads today, based on contracts awarded in 2005.

New Transparency? Beijing Reports on Chinese Aid

Food donations: photo credit japanfocus.org/-B-McCartan/3153

China's State Council has released its first official report on China's foreign aid program, providing the most authoritative figures on Chinese aid to date. As I told the Associate Press's Gillian Wong, this is a very big step, and should be welcomed. I will look carefully at this report and compare it with my own analysis in The Dragon's Gift (updated for the 2011 paperback, just released in the UK) once I have a minute in the middle of end of semester demands and deadlines ... (how does Chris Blattman manage?!)

Chinese Aid and Luanda General Hospital in Angola: Still Falling Down?

Angolan Cartoon: Crumbling Hospital

Last year we learned that Luanda General Hospital, built by Chinese company COVEC under China's aid program (not under China's multi-billion dollar line of oil-backed credit) had developed severe cracks and was closed, with patients living in tents on the grounds. A critical op-ed on Chinese engagement in Angola published recently in al-Jazeera by Angolan human rights activist and journalist Rafael Marques de Morais, led with this story, arguing that many Chinese projects in Angola had problems with quality.

It is not surprising that some of the hundreds of projects constructed between 2004 and the present under what has now become a $10 billion infrastructure program have problems. As Marques de Morais notes, Angola has weak monitoring and enforcement capacities and a lot of corruption: "After all, Brazilian and Portuguese construction companies have expertly exploited this environment for decades, leading Angolans to create a specific lexicon for the resulting public works: disposable roads, Styrofoam bridges, facade works, etc." China also has a lot of corruption in infrastructure at home, and infrastructure is known worldwide as a sector rife with corruption.

As we know, a Hong Kong based company, China International Fund, is also involved in infrastructure in Angola, although the Chinese government has officially distanced itself from CIF, telling Marques de Morais: “CIF is a company that has no construction record or credentials.” I wouldn't be surprised to find problems with infrastructure built under CIF.

But I was surprised about the hospital. As I noted in The Dragon's Gift, the Chinese have a long-term sense of responsibility for projects financed under their aid program (but not export credits) because aid is an important tool of diplomacy. Because of this, the quality of projects financed under the official aid program is usually very good, and these projects often seem to have life-time guarantees. I looked into what happened in the case of Angola's Luanda General Hospital. Here's what I found.

The decision to build the 100-bed $8 million Luanda General Hospital was made in 2002, and after tenders in China, COVEC won the bid and constructed the building between July 2004 and February 2006, " using 90 percent local labor."  On his visit to Angola in 2006, Chinese Premier Wen Jiabao visited the hospital to officially open it. In June 2010 serious cracks developed in the walls. The patients were evacuated, the hospital was closed, and the Chinese government dispatched a team to investigate.

Their conclusion was that the problem was (the Chinese official claimed) partly Chinese and partly Angolan. According to the contract, apparently, the Angolans were supposed to provide geological survey data for the location, but this data was not accurate, and therefore the design by the Chinese architects was flawed. (Seems to me that given weak state capacity in Angola, this basic task should not have been left up to the Angolans.)

A Chinese official told me: "After several rounds of discussion both sides have reached consensus on how to address the problems. The Chinese side will build some temporary wards and sewage systems for patients to ensure the operation of the hospital. Then the maintenance work and expansion of the hospital will begin." The Chinese government will finance the new construction.

Will COVEC be given the job, or will another Chinese company do the work? That's not clear, but what is clear is that one messed-up hospital project has cast a particularly large shadow over hundreds of other less visible Chinese construction projects in Angola that do not seem -- so far -- to have had such dramatic flaws. Yet what is also clear is that the environment for construction in Angola, as Brazilian and Portuguese companies have found, tends to produce infrastructure with lives that are "nasty, brutish, and short". Perhaps it's time for a new international NGO to focus on monitoring transparency and accountability in public infrastructure projects. "Engineers (and Architects) without Borders"?

New York City Meets Warm Heart of Africa

This has very little to do with China and Africa -- call it New York City and Africa -- but swamped as I am with grading papers, article deadlines, traveling to give talks, thinking what I will say during my seven minutes on a World Bank/IMF Annual Meeting panel this week, I want to share 3:42 minutes of escapism: a video of The Very Best's hit song Warm Heart of Africa with guest artist Ezra Koenig of Vampire Weekend joining Esau Mwamwaya of The Very Best. This sweet and jolly song combines pieces of my life (Columbia University and Malawi where my South African husband lived for five years). Enjoy.

Michael Gerson on "China's Aid Invasion"

The Obamas with the Equatorial Guinean dictator.

This morning's Washington Post had a critical op-ed on China's aid (or is it investment? the online version has "investment" in the title, the print version says "aid") to Africa by conservative columnist Michael Gerson. While less hyperbolic than columns on China's "aid" by Freedom House and others over the past few years, Gerson nevertheless falls into some of the same pits: the double standard; and the mixing up of aid and business.

Gerson writes "in Africa today, America consistently promotes economic liberalization and good governance..." Just how consistently we do this is open to debate. For example, the US provided -- each year -- about $1.6 billion in aid (economic and military) to repressive Egypt under Mubarak. 

Referring to China, Gerson says "African governments have a rich friend with low standards." I wonder how he would describe America's friendship with tiny, oil-rich Equatorial Guinea? Check out Harvard group Human Rights in Equatorial Guinea for a portrait of the deep problems with repression and torture in that country, or read Peter Maass's piece in Slate: "Who's Africa's Worst Dictator?". Yet as the BBC has noted,

"[t]he US finds it hard to criticise a country which is seen as an ally in a volatile, oil-rich region. In 2006, Secretary of State Condoleezza Rice hailed President Obiang as a "good friend" despite repeated criticism of his human rights and civil liberties record by her own department. More recently President Barack Obama posed for an official photograph with President Obiang at a New York reception."

There is plenty to criticize in China's human rights record at home, and plenty of room for improvement as Chinese leaders take uncertain and inconsistent steps toward being a "responsible great power". But let's get our own record straight, Mr. Gerson. Your op-eds will be more credible to Africans if you do so.

China's Oil Imports From Libya

Source: http://www.economist.com/blogs/dailychart/2011/02/libyan_oil  
Hat tip to Leo in Comments section

A Chinese student asked me today what China might learn from the Libya situation about the risks of investing in unstable countries. I mentioned that China's FDI investments in Libya are not large, although China does import oil produced in Libya. But how does China compare with other countries as a buyer of Libyan crude? A quick Google effort found the AP article below, which I have not verified with the source, the International Energy Agency.

Europe gets most of Libya's oil exports


By The Associated Press

Tuesday, February 22, 2011 at 12:55 p.m.

NEW YORK — Europe gets over 85 percent of Libya's crude exports. The rest goes to Asia, Australia and the U.S. Here's a breakdown of how much oil various countries import from Libya (in barrels per day) and the percentage of a country's total crude imports supplied by Libya.

-Italy: 376,000 (22 percent)

-France: 205,000 (16 percent)

-China: 150,000 (3 percent)

-Germany: 144,000 (8 percent)

-Spain: 136,000 (12 percent)

-United Kingdom: 95,000 (9 percent)

-Greece: 63,000 (15 percent)

-United States: 51,000 (0.5 percent)

-Austria: 31,000 (21 percent)

-Netherlands: 31,000 (2 percent)

-Portugal: 27,000 (11 percent)

-Switzerland: 17,000 (19 percent)

-Ireland: 14,000 (23 percent)

-Australia: 11,000. (2 percent)

(Source: International Energy Agency 2010 statistics)

The Associated Press

Origins of China's New Anti-Corruption Law

The Chinese National People's Council has passed a landmark amendment to its corruption legislation that makes foreign corrupt practices illegal. Yesterday Ted Moran, blogging at the Center for Global Development attributed this move to efforts by a G-20 coalition. He wrote:

The Toronto Summit in June 2010 established a working group “to make comprehensive recommendations on how the G-20 can take practical steps to combat corruption.” During the Seoul Summit in November, a coalition of emerging market members of the working group (including Brazil, Argentina, South Africa, and Mexico) quietly joined with the United States to urge China to adopt an anti–foreign bribery law. That effort has now borne fruit!

I respect Ted Moran's knowledge of corporations (in fact I've assigned portions of his new book to my students). And it would be nice to think that Chinese legislation moves that quickly, or that the United States and the G-20's quiet urging led to this result.

Yet in fact, as I pointed out in a chapter written three years ago for Transparency International's Global Corruption Report 2009, "When China goes shopping abroad: new pressure for corporate integrity?" (p. 69), this amendment has been in the works for years: 

Legal changes now under way may boost efforts to combat bribery by Chinese firms outside the country. China was a sponsor, and has signed and ratified, the UN Convention against Corruption (UNCAC), which stipulates that bribery overseas be made a crime. Chinese officials have repeatedly said that China will modify its laws to comply with all the convention’s obligations.14 In September 2007 China set up the National Corruption Prevention Bureau, tasked to improve international cooperation against corruption and fulfill China’s responsibilities as an UNCAC signatory. The agency was not made autonomous, however. In June 2008 the Communist Party’s Central Committee included the prohibition of commercial bribery overseas in its five-year anti-corruption work plan.15

I think we have the UN Convention Against Corruption (which was ratified and entered into force on December 14, 2005) to thank, and before that, the OECD Convention Against Corruption, not the quiet urging of the US or the G-20.

These Chinese reforms were already well under way before June 2010. It's important to get this analysis right if we want to understand how China's efforts to "go global" are likely to evolve, the factors that will influence them, the way the Chinese government works (still a work plan!) and the time involved in moving through reform.

Notes:
14 Li Jinzhang, vice minister of foreign affairs, statement at the First Conference of the State Parties to the UN Convention against Corruption, Amman, Jordan, 10 December 2006; Caijing Magazine (China), 25 July 2007.
15 Central Committee of the Chinese Communist Party, ‘Work Proposal of Establishing and Improving the Anti-corruption System 2008–2012’, June 2008. 

China and Libya: Update on Workers

Bangladeshi workers stranded in Libya. Photo: AFP

Last week I posted on China and Libya, highlighting the challenge of Chinese companies employing Chinese workers and the backlash against this. A reader forwarded me an article from a Bangladeshi newspaper, The Daily Star, that puts China's actions into comparative perspective. Where the Chinese government has moved in ships and planes to evacuate the 30-36,000 Chinese working in Libya (most as laborers), Bangladesh has done little to ease the plight of what appears to be anywhere from 45,000 to 60,000 Bangladeshi workers stranded in Libya. According to the article, "a Chinese company moved 804 Bangladeshi workers to Greece from Libya on Sunday."

An October 2008 article in Libyaonline.com provided some history on the Libyan government's policy of recruiting labor abroad. Then, the Libyan government had "directed foreign companies from Germany, Japan and South Korea working in Libya as well as [the] Libyan private sector to recruit workers from Bangladesh." I haven't seen any major newspapers asking whether the instability in Libya would make Bangladesh rethink its labor export strategy...

The Human Side of China's "Economic Invasion" of Africa

Engineer Liu Hui & Kenyan workers: Sven Torfinn/Panos Pictures

If you overlook the title, "China's Economic Invasion of Africa," you'll enjoy a well-done and interesting story by Xan Rice in The Guardian's Sunday, February 6, 2011 issue. It contains great interviews of individual Chinese entrepreneurs and corporate managers who have come to do business or seek their fortunes in African countries.

Here's one quotation from a Chinese entrepreneur who, Rice writes, "is aware that western attitudes to China's push into Africa remain largely negative – something he struggles to understand."

"Western countries also buy oil, and have mines around the world. People don't talk about 'grabbing', or 'new colonialism' there. So why is it different for Chinese? We are not sending our armies to places and saying: 'Now sell us this!'" Xu says. "If you can't compete with us, you find an excuse. It's like two children fighting, and the losing one crying to his parent about funny tricks."

Some of those funny tricks might involve practices that have been outlawed in the West under laws like the US Foreign Corrupt Practices Act and the OECD Convention on Corruption. These are not always observed by Western companies, but at least they serve as an important signal of a liberal normative consensus. China has no comparative law.

It was particularly interesting to me that the story begins with Zhang Hao, the son of a man who worked on one of China's foreign aid-financed development projects -- a fishing project on Lake Victoria that I wrote about in The Dragon's Gift. After spending time there himself as an aid worker, Hao's father encouraged him to explore business opportunities in Uganda.

A hat tip to Li Anshan's Centre for African Studies at Peking University.

China and Libya: What's the Real Story?

Chinese evacuees in Malta. Dmitry Solovyov / NBC News

In recent days, the unrest in Libya and attacks on the many Chinese projects there, have raised questions about the impact this will have on China's quest for natural resources in unstable states. I think this focus is surprisingly off-track. What should we be learning about Chinese strategy from the Libyan engagement?

(1) China joins in United Nations sanctions. First, there has been relatively little comment about a rather extraordinary step: on February 26, the Chinese joined with other Security Council members at the UN in approving Security Council Resolution 1970 which imposed immediate sanctions on the government of Muammer Gaddafi. This move put into place an international arms embargo and targeted "smart sanctions" on key individuals, and refers the matter to the International Criminal Court for possible prosecution. Given Chinese reluctance to support intervention into "internal affairs" of other states, this move marks yet another step toward China's coming of age as a global power. It's something we can applaud.

(2) China's investment in Libyan oil is actually quite modest, while Western companies are major players. As William J. Hudson, acting deputy assistant secretary in the Bureau for Near Eastern Affairs, told Congress in 2009:  "I'm happy to report that US oil companies are the most active there, and Libyans are eager to use their technology. The Chinese are participating, but our countries [sic] are taking the lead" (Snow 2009).

ENI (Italy), Occidental (USA), and Petro-Canada and BP, Hess, Marathon, Conoco-Phillips, ChevronTexaco, and others have been key players in Libya. Italy, Germany, Spain, and France have been Libya's major markets for its oil. Although the US imposed sanctions on Libya after the Lockerbie airline bombing tragedy, not all European countries followed suit; US sanctions ended in 2004. Check out the Wikileaks website for the Libya cables and extensive discussion of all of this. (A good place to start is here.)

China's efforts to invest further in Libyan oil and gas were rebuffed in September 2009 when Libya vetoed CNPC's $US462 million bid for Verenex Energy, whose assets were Libya-dominated. Chinese oil and gas operations employed only around 400 Chinese nationals, another sign of their small size.

(3) For China, the problems posed by the popular uprising in Libya are far more about Chinese construction projects and their use of Chinese labor, than Chinese companies' oil investments. Over the past four years, China State Construction Engineering Corporation (CSCEC) has itself signed at least $2.67 billion of construction contracts in Libya.  In 2008 alone, Chinese companies signed US$10.05 billion in contracts for 180 construction, engineering and labor service projects in Libya (they also reported turnover of US$750 million, which suggests most of these projects started fairly recently). This was far larger than any other location in Africa.

Construction firms doing projects in telecoms, railways, and other infrastructure, seem to have employed some 36,000 Chinese workers. This was bound to raise resentment from Libya's unemployed youth. Despite high levels of unemployment, wages are also high in Libya, and few local workers speak foreign languages. Comments on a Tripoli Post story on this issue suggest that use of foreign workers is a widespread response by foreign companies in Libya. Despite this, many Libyans do find employment in this sector. The Economist Intelligence Unit's 2008 report on Libya cited the Monitor Group, a US consulting firm, which estimated in 2005 that some 600,000 to 800,000 people were employed in Libya's construction industry. It is likely that the vast majority of these people were Libyan. But the attacks on Chinese work camps in Libya bring home the risks of a business plan that relies on imported labor in repressive states with high unemployment.

References:

Nick Snow, "Local approaches may help US in oil-rich areas overseas," Oil & Gas Journal, July 27, 2009.