Africa-China Fact of the Day

This is from the South China Morning Post:

The number of students globally joining Chinese universities surged sixfold in the 15 years to 2018, rising from 77,715 in 2003 to 492,185 last year, according to the Chinese Ministry of Education.

Over the same period, the number of African students in Chinese higher-education institutions increased an astounding fortyfold, jumping from about 1,793 in 2003 to 81,562, last year, according to the Chinese education ministry’s statistics.

With that increase, Africa had the most students in China of any region after Asia, which sent 295,043 students to Chinese universities last year.

A good read on potential US responses to ever-deepening Africa-China relations

This is from Aubrey Hruby, one of the sharpest minds on Africa-US business relations:

For American companies to compete properly in African markets, the administration needs to take a broader look at capital flows into African markets and the diversifying forms of Chinese commercial engagement. This report argues for a broadening of the competitive lens beyond infrastructure and seeks to provide a more comprehensive framework for examining China’s commercial interests in Africa. It presents two models through which policy makers can understand recent developments in the region. The first describes the G2G nature of Chinese infrastructure financing, summarizing the mechanisms by which Chinese state-owned enterprises typically secure contracts, and contrasts it with the government-to-business (G2B) structure of US development finance. Secondly, the brief analyzes US investment in African markets across capital flows, and notes the rising competition from Chinese firms in each category.

Read the whole thing here.

Here is Hruby talking with Eric & Cobus on The China in Africa Podcast.

Trends in trade and influence in Africa

Here are some interesting figures from the Center for Strategic & International Studies. Between 2010 and 2017 trade between African states and China rose from $91.2b to $165.4b. For the U.S. total trade volume contracted from $80.3b to $36.7b (admittedly some of this driven by declining oil prices). All major Western countries saw a decline in their trade volume with the Continent.

trade trendsGermany is the only major Western country that saw its trade volume with African states increase over the same period.

These figures also underscore the recent narrowing of the Red Sea – with Gulf states pushing for ever closer ties with African governments. A lot of focus has been on the geopolitical aspects of this shift (with Qatar and Turkey jostling for influence vs Saudi Arabia and other Gulf states). But as the trade data suggest, trade is also an important feature of the evolving Afro-Arabia relations.

Overall, it is likely that African states’ economic policies and regulations, as well as votes at the UN, will shift to reflect the changes in the strength of the Continent’s trade links.

More on this here.

Japan is trying to stem the decline of its economic influence on Continent with a new joint insurance product with African Trade Insurance Agency and a Saudi bank. The U.S. is about to launch the U.S. International Development Finance Corporation.

 

Is China Doomed to Fail in Africa?

This is from Wilson VornDick, a commander in the U.S. Navy Reserve, writing in the National Interest: 

It is unclear whether China could handle the financial repercussions of a larger, more systemic default or debt-forgiveness program across the African continent. Seeking relief, debtors to China would likely overwhelm existing mechanisms, like international arbitration, or China-backed forums such as the Export-Import Bank of China , China Development Bank , and Asian Infrastructure Investment Bank . More importantly, debt restructuring, recoupment, and, in the more extreme case, seizure may not be viable, reasonable, or sustainable for Chinese interests or presence continent-wide. Just such a dire economic scenario might push China to use its nascent military force to protect or even seize its interests. Looking back at the previous period of Great Power Competition more than a century ago, leveraging military might to force repayment was commonplace. The U.S. military made multiple incursions into Caribbean and South American nations as did the Western powers in Africa and Asia.

It is reasonable to assume that China would have little or no experience in any dire economic contagion across Africa. The one primary example, the take-over of Hambantota Port, was an isolated incident during calmer times, before the financial uncertainty stoked by a slowing global economy or the current U.S.-China trade war. Moreover, the port takeover has now become a watershed moment in Chinese behavior that has attracted significant international scrutiny and ire.

More broadly, VornDick articulates the potential merits (from a U.S. standpoint) of a “Let China Fail in Africa” strategy as part of Washington’s Great Power global competition with Beijing. The whole argument is worth a read.

A glaring omission in VornDick’s analysis, however, is the interests and roles of Africans in this whole game (note that this is a gap in the “China-in-Africa” genre more generally).

chinafricaA key weakness that I see in the “Let China Fail in Africa” strategy is that it vastly underestimates the extent to which Africans will be willing to work hand in hand with China to make the Sino-African relationship work.

China’s forays in Africa is creating complex tapestries of personal and institutional relationships that will become ever harder to undo. For example, in both electoral democracies and autocracies in the region, citizens have come to expect political elites to provide public goods — many of them financed and built by China. Demands for more of the same will likely only get stronger. The desire to secure funding for more public goods will likely push African elites even closer to Beijing. Furthermore, at a time when the U.S. is working hard to signal that Africans are not welcome on its shores, tens of thousands of African students are earning degrees in Chinese universities. Many of these students will probably go back to their respective countries and maintain ties with Chinese business and academic contacts. These kinds of investments in soft power will matter in the long run.

Global diplomacy is not just about crass material interests. It is also about values and shared commitments to respectful mutual cooperation. If African elites become convinced that they are better off bandwagoning with China, they will do so.

And most importantly, having made that choice, they will make specific investments (whether deliberately or not) to make their nations ever more closely allied with China. They will adopt specific technologies. Establish specific market relationships. Acquire specific weapons systems. And yes, more of their students will learn Chinese and go on to earn degrees in China. The closer the military, economic and “soft” ties, the more African elites will be willing to make costly investments in order to ensure that their respective states’ relationships with China work.

A good lesson in this regard is francafrique. The relationship between France and its former colonies in Africa is not winning any awards soon. But for almost six decades African elites have remained committed to the relationship and worked to give the French military free rein in the region and French firms access to vast natural resources. The French state, in turn, has worked to prop up the same elites despite massive economic and political failings.

The point is: China’s failure in Africa (if it comes to pass) is not what will determine the future of Sino-African relations. What happens before any such failure will likely matter more.

The wonder that is Chinese growth

Below is an amazing illustration of shifts in the sizes of leading global economies:

For more on China see here, here, here, and here. This reminded me of this graphic from Carlos Lopes, former head of the UNECA:Dr3w9PhW4AAnCGU

All that happened in just 36 years. Time is on Africa’s side. If (and that’s a big IFF) African elites can get their act together. As shown in the graph below, the lost long decade (1980-1995) was particularly brutal for African economies — but it was a temporal dip and not a permanent feature of African economies.income

It is also worth noting that in 1980 African states and China were not at the same level of institutional development. By that time China had already accumulated centuries of coherent stateness — which made it possible for elites to optimally allocate human and capital resources in ways that produced the growth miracle.

Here is a good nuanced take on trends in economic growth and development on the Continent.

What exactly is China up to in Africa?

Leading Afro-Chinese relations scholar Deborah Brautigam has a great piece over at the Washington Post:

On Chinese imported labor in Africa:

Surveys of employment on Chinese projects in Africa repeatedly find that three-quarters or more of the workers are, in fact, local. This makes business sense. In China, textile workers now earn about $500 a month — far more than workers in most African countries. Chinese investors flocking to set up factories in low-cost countries like Ethiopia are not thinking about importing Chinese workers. Like U.S. and European factory owners who moved their factories to China in past decades, Chinese firms are now outsourcing their own manufacturing to cheaper countries.

On Chinese loans to African states:

… In Africa, we found that China had lent at least $95.5 billion between 2000 and 2015. That’s a lot of debt. Yet by and large, the Chinese loans in our database were performing a useful service: financing Africa’s serious infrastructure gap. On a continent where over 600 million Africans have no access to electricity, 40 percent of the Chinese loans paid for power generation and transmission. Another 30 percent went to modernizing Africa’s crumbling transport infrastructure.

On alleged Chinese land grabs:

… the total amount of land actually acquired by Chinese firms was only about 240,000 hectares: 4 percent of the reported amount.

I like to remind my students of the qualitative difference of the “Chinese model” of resource exploitation in Africa.

Previously, Exxon, Elf and other Western resource sector firms would pay African leaders in cash, most of which wound up in Swiss banks, property in southern France, and various tax havens outside the Continent. This was, if you will, the “Western model” of resource exploitation in Africa.

afrobarometerEnter the Chinese. Their model is to pay for resources both in cash and in kind. African leaders still get cash that they can stash abroad. But they also get roads, railways, stadia, hospitals, water works, among other infrastructure investments. And more recently Chinese firms have begun to invest in actual factories — most notably in Ethiopia. It is no wonder that a majority of Africans have a favorable view of China (see image).

Some of these projects produced sub-standard structures (in the recent past the quality has gone up). And the level of indebtedness of African states as a result should concern every sane person. But this arrangement is orders of magnitude better than useless capacity building workshops and janus-faced democracy promotion on the back of rapacious pillaging with little public investments to show for it.

Finally, the inability of African states to negotiate reasonable deals with Beijing is on African political and economic elites. The Chinese have every right to rationally push for the best deals they can get. And if they are smart, they will also work to avoid future defaults by not overstepping their bounds.

To paraphrase a Mozambican diplomat at a recent event here on campus, Africans are too smart to allow themselves to be recolonized by the Chinese.

What roughly $470m of borrowed money gets you in Nigeria vs Ethiopia

Ethiopia and Nigeria both borrowed roughly the same amounts of money from China’s EXIM Bank for massive infrastructure investments. The former sought to transform its capital’s transit system with a light rail ($475m); the latter tried to boost security in its capital by installing security (CCTV) cameras ($470m).

The outcomes of the two projects are an indication of what will be the impact of China’s ongoing infrastructure projects in much of SSA. Some countries because of the specificities in their domestic political economy are using borrowed money to deliver on actual tangibles — dams, power lines, stadia, housing projects, railway lines, roads, et cetera (corruption plays a role, but projects get completed). Yet others are accruing loans (albeit on concessionary terms) simply to treat the cash injections in the same manner that political elites have treated windfalls from mineral resources in decades past.

Ethiopia just opened its new light rail system in Addis. Nigeria’s CCTV project was a major flop. Of course this fact was not lost on a section of Nigerians on twitter:

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