Evidence of China's Aid to Africa and the Outlook on Sino-African Development

By Mai, Xinyue; Wilhelm, Paul G. | Competition Forum, July 1, 2012 | Go to article overview

Evidence of China's Aid to Africa and the Outlook on Sino-African Development


Mai, Xinyue, Wilhelm, Paul G., Competition Forum


EXECUTIVE SUMMARY

In recent years, with the rapid development of African economies, the 'new colonialism' tag on China's aid to Africa has been frequently reported in media. It has evoked continuous debates among scholars and critics on this issue. China's substantial aid and investments in Africa is actually for extracting natural resources to enrich China itself. Journalists have warned about the danger of the economic empire China is now building in Africa. The critics see China's aid only as a tool for intentionally further reaping the benefits of resource rich Africa. This paper examines a number of facts about China's moves in Africa and how it actually helps the development of Africa over the years by direct aid, credit lines and reasonable contracts. Because of the help from China, Africa has made immense progress in the area of politics, trade and economy, public health, culture, technology and education. Contrary to some of the media opinion, China shows no sign of serving just its own national interest and instead, it makes efforts to help create a win-win cooperation tie on Sino-African relationship. Problems emerging from the mutual cooperation and recommendations will also be discussed.

Keywords: Chinese business, China politics, African development, Sino-African relatioship

FRIENDLY COOPERATIVE RELATIONS OVER THE 50 YEARS

The History of Cooperation

China and Africa have a long history of trade relations which could date back to the days of Ming Dynasty (1368-1644). The Chinese admiral Zheng He and his fleet visited the east coast of Africa three times. Since 1949, the importance of establishing and developing friendly relations with African countries was emphasized in the Chinese foreign policy. Sharing similar historical experience and facing similar tasks and problems, China and Africa have all along sympathized and supported with each other in the struggle for national liberation and formed a solid foundation in mutual cooperative relations. In 1956, there was establishment of diplomatic relations via a bilateral trade agreement with Algeria, Egypt, Guinea, Morocco and Sudan. This marked the forming of formal ties that China has created with African countries and the beginning of China's aid to Africa.

The Wide-Range Cooperation

In the economic field, China is now actively engaging with 54 African countries on trading, investment, lending money and providing aid, covering the areas of transportation, infrastructure, agriculture, education, health and technical guidance, of which 800 projects have already been completed by 2000. Billions of dollars from China have been poured in as aid and loans for upgrading roads, ports, railways, telephone lines, power stations and other key infrastructure across Africa. This has greatly boosted local economies and infrastructure, created jobs and improved local people's living conditions. Founded in 2007 and as an equity fund dedicated to supporting Chinese investors in Africa -the China-Africa Development Fund (CAD Fund) has granted six investment projects in Africa involving more than $90 million since 2008. At the same time, the Chinese government encourages Chinese enterprises to establish businesses and enlarge investment in Africa and this winwin cooperation mode has also been widely welcomed among African countries. There's a great need to expand field of operations and achieve mutual development for the strong complementary between the two sides-Africa has abundant resources while China has technology and development experience.

In addition, closer political ties have been created between China and Africa. Frequent high-level exchanges of visits and close political dialogue have been conducted in various forms over the past 50 years. For over 20 years, African countries have been the top priority and first destination for Chinese foreign ministers visits at the beginning of every year. Between April 2006 and February 2007, the president and premier from China paid visits to 20 African counties in total and 49 highlevel delegations from African governments were present in the 2007 FOCAC summit in Beijing. Established in 2000 and held every four years, the Forum on China-Africa Cooperation (FOCAC) has deepened political dialogue between both sides and promoted economic cooperation and trade. Influenced by this forum, the Sino-African trade corridor stood at $12.1 million when it opened in the 1950 and only boomed in the 2000s, leapt to a new height of $106.8 billion in 2008.

The Sino-African trade relations made tremendous progress in just a few years. From $7.3 billion in 2000, the trade volume soared to a record high of 127 billion and China has also surpassed U.S., becoming the largest trade partner with Africa in 2010. In 2000 the United States' trade with Africa was three times that of China's, and Africa is now the fourth biggest overseas destination for Chinese investment. Meanwhile Africa's exports to China have doubled over the past 20 years, which have also witnessed the 10 fold-growth of the scale of China's aid to Africa. An estimation made from an American think-tank, the Heritage Foundation, said that 14% of China's overseas investment went to sub-Saharan Africa between 2005 and 2010.

Besides spurring Sino-Africa trade, China's investments in Africa's infrastructure have increased at an average rate of 46 percent yearly over the past decade, according to a recent African Development Bank report. In China's own experience, aid is just a tool; infrastructure should be put at the center of investment and development instead. The ongoing or already finished projects carried by Chinese governments or private businesses covering Africa's key support infrastructure, including roads, railways, ports, airports, dams and ICT has opened more opportunities and growth for future production activities, along with private sector development in Africa. Lack of investment in infrastructure such as transportation and roads has been a major impediment to economic development in sub-Saharan Africa. With the advent of Chinese construction firms and massive aid from the Chinese government, much has been changed. Built in 1929, the Benguela Railway is one of the pivotal transportation networks of Africa. It has a history over 80 years, and received financial aid from China to help the rehabilitation of the 540km track damaged by Angolan Civil War. According to one BBC news reporter, this Chinese investment in Angola is 'bringing back to life one of the greatest rail routes in Africa'. In the next five years, China Railway construction Corp and other companies will invest $35 billion more into African Railroad projects, which will lead to the result of an increasing supply of African commodities into the global market and raise the product global price-to the benefit of Africa.

OVERTHROWING 'COLONIALISM'-THE FACTS AND EVIDENCE

The accusation of China's "new colonialism" on Africa is based on the ground that the reason China sets up operations in Africa is to grab raw materials and serve for its own benefit. China is not the only country importing raw materials from Africa; large demands also come from the developed countries. This part is to present the facts and evidence revealing that China is actually helping Africa to grow, with sincerity and goodwill.

The Policy on Africa and the Aim of Chinese Aid

Sincerity, friendship and equality have been a part of China's African Policy, along with the Five Principles of Peaceful Coexistence which made a monumental contribution to the maintenance of peace and stability to the world. Also stated in the policy, China made clear that it will "respect African countries' independent choice of the road of development" and provide assistance "with no political strings attached". Expenses incurred by meeting the additional terms carried with international aid can often outweigh the positive effects of the aid. China is a country accused of predatory behavior on resources while it is providing generous aid without any conditions attached, as well as paying respect, to the colony. "The foreign aid programs of China are based on the principles of equality, mutual benefit and mutual development. Many developing countries lack hospitals and roads. China's aid is concentrated on sectors where they need it most", according to the statements of the Vice Minister of Commerce Fu Ziying. Haibing Zhang, deputy director of the Institute for Economic Comparative Studies, stated that before carrying out the aid plans, China would cooperate with African countries on choosing the type of aid projects and the methods of execution.

What China Actually Did to Help Africa

China has provided substantial aid to Africa covering other areas like improving education, local employment, medical treatment, investment environment and peace. In addition, China has given more loans to poor, mainly African countries than the World Bank in 2010 and 2011.For Africa the aid is just a tool and China is sparing no efforts to offer wide-range help and pursue a path of peaceful mutual development. Evidence shows that China does not only strive to demonstrate its deep commitment to the economic well-being of the continent but also shows great concern to improve the local people's lives.

i. Improving the investment environment. In addition to the establishment of the China Africa Development Fund, which aimed to give financial support to Chinese enterprises investing in Africa; there was a signing of agreements with 11 African countries on avoiding double taxation which creates favorable enterprise cooperation. China is now making large investments into industrial parks (also called Special Economic Development Zones) - $250 million in infrastructure in 6 industrial parks across Africa (Zambia, Mauritius, Nigeria, Egypt and Ethiopia. According to Liu Guijin, China's special envoy for African affairs, once completed, these cooperation zones will work as "business incubators" helping to attract global investment and create many jobs. As reported, the first one in Zambia invested by China overseas has already brought over 5,600 job opportunities for locals and are expected to increase as more enterprising will continue to move in.

ii. Promoting education and local technical training. Human resource skills are critical elements in the progress of development. The Chinese government has been working closely with Africa on dispatching numbers of technical experts, youth volunteers and carrying out local training programs. Under the assistance of Chinese governments, over 100 schools have been built in Africa by the end of 2009 and every year around 5000 scholarships are offered to students from African countries. By 2010, 30,000 local Africans have received training programs from China covering over 20 different fields like administration, agriculture, science and technology, medical care and public health. By the end of 2009, over 100 senior agricultural technical experts and youth volunteers have been sent to Africa, providing guidance and services.

iii. Keeping peace and security. Peace and security is the foundation of a country's political steadiness, which guarantees continuous economic development. Specific sections of the FOCAC Action Plans have outlined China's three-year commitments to African peace and security. Peace-keeping operations on the African continent have been conducted by China and for the past 20 years, thousands of its armed forces ad civilian observers have been mobilized to conflict zones in Southern Sudan, Liberia and the Democratic Republic of Congo. A majority of Chinese peacekeepers (1,622) are currently stationed in Africa.

iv. (iv) Improving local people's lives. China shows great concern for the livelihood of African people and dedicates considerable efforts to improving healthcare and helping build public welfare facilities in Africa. By the end of 2010, China had sent a total of 17,000 medical workers to 48 African countries and the number of treated patients reached 200 million, according to a report from China's Ministry of Health. In addition, China provided assistance in building hospitals and medical centers, training of local health workers and helping to prevent and treat AIDS by contributing to the Global Fund. Local people also enjoy better dwelling conditions for low-cost housing projects led by China and implemented in countries like Mozambique, Angola and Ethiopia. Drinking water problem have been largely solved due to well-digging projects in Nigeria, Senegal and Equatorial Guinea, the water supply systems in Tanzania and Niger.

EXISTING PROBLEMS AND RECOMMENDATIONS

Despite how much progress has been achieved in the development of Africa over the recent years, problems still exist in a variety of issues during the bilateral cooperation.

More and more Chinese enterprises are paying more attention to local workers' wellbeing and have shouldered a wide range of social responsibilities in Africa, such as organizing charity activities (set up Hope Project in Africa) and increasing the awareness of protecting the environment. Nevertheless, they have also brought some bad habits. When conducting businesses in Africa, they were reported to care less about local rules and regulations and pay little attention to working conditions of their employees. China's overlooking of local business practices have led to a variety of problems and thus made it the target of much criticism. According to one report from the Economist magazine, some of the constructional projects led by Chinese businesses were found liable for unguaranteed quality. Cracks were found in a newly-built hospital in Luanda and part of the Chinese-built road in Zambia been reportedly being swept away by rains were examples as such. Local workers employed in Chinese firms were found to be receiving pay lower than the local standards. Chinese managers running mines there would bribe local union bosses to avoid censure. Worse still, the report also indicated the lack of transparency about the loans provided by Chinese government. No detailed records or figures could be found from the main lenders China Exim Bank and China Development Bank.

In the case of Africa, long-existing issues on this continent including underdeveloped legislation and legal systems, unsteady political environment, severe corruption and bribing, a lack of skilled labor force and widespread diseases would bring further threats and risks to local Chinese enterprises.

RECOMMENDATIONS

Improve the Cultural Understanding and Exchange between Africa and China

China is clearly adopting a new unconditional aid mechanism to Africa and making big investments on its land in recent years. For Africa, best way to better embrace China's different strategy is to gain deeper understanding of China and its culture by language learning and cultural exchanges. China should make continuous efforts deepening communication with African governments and local people and through which would further strengthen the mutual friendly relationship.

Greater Development Should Be Encouraged in Africa

For Africa, being a recipient country and benefiting from China's large aids can never outweigh the importance of internal developments. Issues as poverty, poor medical treatment environment and lack of infrastructure can be greatly improved by economic developments and lead to less social unrest in Africa-a steadier social environment which would ultimately benefit Africa's economy.

Tight regulations should be imposed over monitoring aid and Chinese businesses. The importance of observing local culture and customs and greater corporate responsibility will be enhanced among Chinese enterprises by means of training and strict punishment mechanism. Supervision is further encouraged to prevent bribes or corruptions. High level of corruption in Africa degrades the investment environment and greatly impedes the development of Africa's economy. More transparent aid paperwork and report will show the accountability of aid and a strict supervision from Chinese government, as well as acting as a powerful tool against the 'new colonization' criticism. Government Agencies should aid in monitoring local labor unions to protect workers' rights.

CONCLUSIONS

We can't neglect the fact that African countries are still in their initial stages of development. In spite of all the underlying issues and problems during the exchange of cooperation, there is no denying that China's substantial aid and invaluable contribution to the development of Africa has brought about peace and security, as well as redefining the global image of Africa as a continent of hope and opportunity.

China's new colonialism does not fit the negative reporting. Instead, China shows great willingness to share its experience of development and rarely imposes its own development way on Africa. By committing to uphold the principles of accountability, transparency and respect for local workers, China can play a highly constructive role during the cooperation and more importantly, shows its image as an emerging power that aims for taking more responsibilities on the global stage. The expanding common interests and complementarities enjoyed by both sides presents a brighter future of economic and trade cooperation between China and Africa, which further contributes to building a long-distance friendship and harmonious society.

[Reference]

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[Author Affiliation]

Xinyue Mai, Kentucky State University

Paul G. Wilhelm, Kentucky State University

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