chinas_neomarcantilism.pdf

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Chinas New Mercantilism inCentral Africa JONATHAN H OLSLAG *

A BSTRACTThe objective of this article is twofold. On one hand it elu-cidates the goals and dynamics of Chinas foreign trade pol-icy since the 1990s. On the other hand it assesses the impactof this strategy on the development of the Central AfricanRegion as a case for Chinas in uence on other developing countries. We observe that China is pursuing a pragmaticmercantilist policy that combines a wide array of diplomaticand economic devices. As a result the Peoples Republic gainsground slowly but surely. However, Chinas ascent does notlift the Central African states to a more favourable positionin the global division of labour. We conclude that Chinasrise con rms the current economic position of African coun-tries: that of a commodity supplier and a modest consumersmarket.

Introduction

In 1963 Deng Xiaoping stated that he wanted his country to be among the advanced countries in the world through forty years of hard working.

* Jonathan Holslag, Free University Brussels (VUB), specializes in Chinas foreign pol-icy. His mailing address: Mechelsestraat 45, 3000 Leuven, Belgium, E-mail: jhol-slag@vub ac be Tel: ++32/477 63 82 61


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134 Jonathan Holslag

Four decades passed by, and China indeed has been growing spectacularly.Since the mid-1990s however, Chinas economic transformation hasentered a new stadium. Ever since, the governments orientation shifted

from an obsession with growth rates to the ambition to make growthsustainable. One of the key ambitions was to create direct links to over-seas markets. It took only a short time before international attention wasdrawn to blatant Chinese investments in pariah states such as Sudan andIran. Chinas economic engagement in Asia turned into a hot issue aswell. Though in several regions, commercial activities escaped attentiondespite the Peoples Republic (PRC) and is gaining ground there as well.In this article we assess the impact of Chinas go-out policy on oneparticular region: Central Africa. The seven states mentioned in this sur-

vey constitute a rich sample of what the African continent has or hasnot to o ff er. 2 They comprise resource-abundant states as well as com-modity-poor markets, stable and war-rigged societies, countries that maketheir income from the export of agricultural yields and small oil states,etc. This pattern card also allows us to let a wider array of Chinas eco-nomic interests and aspirations come into play. Consequently, it permitsus also to assess the impact of the Peoples Republics commercial o ff ensivefrom more perspectives. Thus, the objective of this article is twofold. Onone hand we try to explain the goals and dynamics of Chinas actualforeign trade policy. On the other we assess the impact of this strategyon the development of the Central African Region as a case for theinuence on other developing countries.

To start with, Chinas go-out policy is contextualized concisely inthe theoretical perspective of neo-mercantilism. In the second and third sec-tion we focus on the Peoples Republics trade policy toward the CentralAfrican Region: what are its targets and what are the devices at its dis-posal to materialize these aims? In this regard we will stress that Beijing is pursuing a dynamic mercantilism, and that Chinas economic activityin Central Africa arises out of a well-conceived political strategy. Onone hand the government stimulates companies to swarm out via diplo-


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Chinas New Mercantilism in Central Africa 135

matic, nancial and logistical assistance. On the other, it is a directplayer too, given the fact that political o fficials are the helm of several

strategic important state owned enterprises (SOE). Fourth, we try to mea-sure to which extent this policy bears fruit.Is China capable in hammering out a trade regime that is favourable

to its needs? In order to answer this question we analyze as well theoverall trade balance as the position and progress of Chinese compa-nies, in particular key-sectors such as minerals, oil, infrastructure con-struction, telecommunication, etc. The last section considers the in uence

of the Chinese economic involvement on the development of the CentralAfrican Region. Here, we will argue that commercial relations do notturn out to be that bene cial to the local societies as the Chinese polit-ical leaders promise in their well-known win-win discourse. We endwith the conclusion that the economic relations between the PRC andthe Central African countries can be considered as a case that demon-strates the entry of a new era in the global division of labour. Whereasthe West, the respective core of our economic world system, out sourcesa vast part of its industrial activity to China, the latter is obliged to keeph b i d i i i li

Table 1A trade pro le of the region. Source: World Bank (2005);

UNDP (2005); WTO (2005).

Value added as (% of GDP)Agriculture Industry Services Exports Main export goods (goods(% of GDP) and share in total export)

Burundi 49 19 32 7 Co ff ee (65) and tea (16)CAR 61 25 14 24 Minerals (60) and co ff ee (4)DROC 58 19 23 19 Minerals (70) and logs (10)

estimates ROC 6 61 33 78 Oil (67) and cotton (6)Gabon .. .. .. 62 Oil (55) and timber (16)Rwanda 42 22 36 9 Co ff ee (41) and manufactures

(33)Uganda 33 22 45 51 Co ff ee (15) and manufactures

(11)


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mercantilists agree on. For the rest, numerous interpretations exist con-cerning the di ff erent modi in which mercantilism materializes, the stateand non-state actors that in uence policy-making, the question whether

mercantilism is good, bad or both, etc. This plethora of discourses enticedTerence W. Hutchinson to write that: Mercantilism is one of the mostunpleasant and obscure isms in our dictionary. Nonetheless, terms andmodels are attempts to make conceptual continuity a bit more discrete,not reality. The multitude of notions re ects the unabated e ff orts tomatch a strong paradigm to the intricate ows of reality. Among therecent derivates of mercantilism, the so-called Asian developmental statemodel is most prominent. This Asian blend of mercantilism aims atdeveloping strategies for national prosperity in a context of intensifying trans-national competition and a highly uid globalized economy. It com-prises two key features. On one hand it promotes openness and com-pliance to international liberalist standards in order to lure in foreigncapital and to gain access to overseas consumer markets. On the otherhand the state plays a vital role in mooring the accumulated wealth andcreating a well-o ff society through guidance and redistribution. Asianmercantilism suggests a compromise between two extremes of full inte-gration in the globalized capitalist economy and economic autonomy.With regard to the foreign trade policy of these states, economic-diplo-matic activities therefore cannot be conceptualized as pure market-basedtransactions. 4 Instead, they should be viewed as politically mediated inter-actions between di ff erent nation-states that surpass pro t maximization.Which factors explain the emergence of this new wave of mercantilism?Several scholars highlight the cultural fundaments of this policy. Confucianand legalist values are common to many Asian nations. Both emphasizethe inferiority of individual pro ts to the general interest that is repre-sented by a responsible and capable government. 6 Others point at theinternal constellation of economic interests. Jayasuriya Kanishka, forinstance, construes Asian mercantilism as embedded in a trade-o ff betweennationalist-internationalist interest groups. 7 Concluding, Asian develop-


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mentalism provides a potent alternative for the omnipresent monopoly caitalism.8 Whereas monopoly capitalism implies giant corporations coax-ing the state to prop their rush for the creation of surplus, neo-mercantilist

states set up their own big business in order to escape the vagaries of unbound commerce. 9 Capitalism appears to be addressed only as a means,not as an end. The nal goal of the new Asian mercantilism is to thriveon globalization without seizing the capacity to steer and without falling for the dependency trap.

Can China be categorized as a new mercantilist economy? Let us con-cisely match up the two main features to the economic reality of thisparticular country. On one hand the Peoples Republic did break throughits economic isolation. Nowadays we can observe that China is eager toget rid of its import and export restrictions, and that it attempts to com-ply with international norms and standards. Scott Kennedy, for instance,explains that Chinas leaders underwent fundamental learning andmoved from protectionism to fair trade. 10 Alastair Iain Johnston arguesthat the Peoples Republic gradually embraced the global capitalist insti-tutions, their norms, open capital ows, and transparency. 11 Chen Zhiminin turn stresses the ascent of a positive nationalism aiming at coop-eration and integration in world economy. 12 On the other hand the cen-tral government holds tenaciously to its gatekeeper position. It makesitself indispensable by maintaining the monopoly over trade regulation,the monetary policy, the redistribution of capital. In this regard BhallaSurjit, for example, refers to China manipulating its currency to pro-mote exports. 13 Ross Lester and King Susan focus on the protectionistmeasures to ease the external pressures on weak interest groups. 14 Numerous

8 On monopoly capital, see: Baran Paul A. and Sweezy Paul M., Monopoly CapitaMonthly Review Press, New York/London, 1966. For a recent summary, see: SweezyPaul M., Monopoly Capitalism, Monthly Review , October 2004, pp. 78-85.

9 On this argument, see for instance the numerous country-by-country analyses in:

Hewison Kevin and Robison Richard ed., East Asia and the Trials of Neo-Liberalism, a spe-cial issue of the Journal of Development Studies , vol. 41 (2), 2005.


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publications also mention the state pursuing an ardent charm-o ff ensivetoward overseas markets. 15 It is this issue that will form the point of departure of this case study. Let us look at this issue from nearby, and

apply this go-out policy to the Central African Region.

Chinas Trade Policy toward the Central African Region

At rst sight, Chinas stake in Central Africa does not appear to be thatdiff erent from other economic powers: the PRCs commercial relationswith the region only amount to 0.15 percent of its total trade volume.This is comparable to the European Union and the United States. But

here the comparison ends. Beyond the macro- gures China does havesome particular interests in Central Africa. First, China is still juvenilewhen it comes to projection of economic power on overseas markets.Hence, it is seductive to focus more on economies in which strong Western rms are not much interested. Second, nowhere in the worldis the consumption of raw commodities raising as dramatically as in thePeoples Republic: every opportunity to meet this demand is welcome.

While Chinas initial opening-up strategy mainly focused on the attrac-tion of foreign investors, nowadays, it increasingly wants its own com-panies to explore foreign markets. Hitherto, the corner stone of Chinasdevelopment strategy was to spur domestic production output. Thereforeit counted on foreign enterprises not only to invest, but also to managethe retail of the produced goods on overseas markets. Recently however,the Peoples Republic appears to have entered a new stadium of foreign

trade policy in which it attempts to conquer foreign markets by itself.In 2001, the Chinese Vice-Premier Wu Bangguo o fficially announcedhis two-way investment strategy. It was an explicit dictate of the Partythat the invite-in approach had to be complemented by a go-outstrategy. This shift can be explained from two important considerations.

First, the country is eager to diminish its over-dependence on foreignconcerns and to build an autonomous capacity to operate abroad. In

other terms, it wants to promote trade-ownership. In 2001, Chinas coastalprovinces started actively to establish a group of overseas production


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have emerged from the light industry, textile, household appliance andmachinery sectors. These companies are able to go into the global mar-ket to secure broader space for structural adjustment and optimal allo-

cation of resources.16

Understandably, trade ownership can be approachedfrom an outward and an inward perspective.The former implies Chinas eagerness to discover new consumer mar-

kets and lucrative markets for Chinese exporters. It is well known thata substantial share of Chinas Gross Domestic Product (GDP), 34.4 per-cent, consists of export; the largest part of its new jobs are provided byindustries whos main activity is to process consumption goods destinedfor overseas markets. Nowadays, foreign or international corporationsmanage 60 percent of Chinas export volume. In se this does not has tobe a problem. Nevertheless, on the long haul it is all but certain if theseWal-Mart-type companies will also keeptheir production activity in China.The PRC can only remain to be the worlds factory if it succeeds tocement its own production capacity, and if it achieves to create its ownchannels to make way into export markets. At rst sight, Central Africaseems not to t in this aspiration: it concerns an impoverished region,and thus, does not have that much purchasing power. Even though, itremains a pro table market to tap. First, China has a strong standing as a supplier of a ff ordable goods and services. Whereas China does nothave sufficient branding capacity to penetrate the markets of industrial-ized countries itself; cheap Chinese fabricates such as consumption prod-ucts and inexpensive robust machines nd their way easily to Africancountries, without having to resort on foreign retailers. Our textile com-panies do not earn a cent more with a Nike logo, so, if they can selltheir fabricates themselves they are eager to do it, a Chinese diplomatsummarized. 17 Second, the Central African economies form a testing lab-oratory for higher-standard rms. Whereas not yet competitive on Westernmarkets, Chinese companies can gain experience and reputation throughlimited investments and undertakings in developing countries.

The latter, the inward perspective, mainly relates to the supply of strategic important and often scarce goods: raw commodities to be speci cLet us focus concisely on the evolution of Chinas need for raw mate-


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and oil will grow at double-digit annual rates for the next ve years,taking an annual growth of the Chinese economy of 7 to 9 percent forgranted until 2010. Over the past twenty years, Chinas primary energy

consumption increased by 70 percent. Whereas it still possesses an abun-dance of coal reserves, it is running out of oil and natural gas deposits.By result the PRC has to rely more and more on foreign providers. In1993, it became a net-importer of oil. For natural gas too, its surplus isdiminishing. Nowadays, 47 percent of the amount of the oil it consumesoriginates from foreign wells; for 2020 the government estimates to haveto import 60 percent of its oil. 18 Annually 4 million new cars hit theroad; the gasoline consumption is expected to grow 6.3 percent each

year. Another cause for Chinas surging oil appetite concerns the pro-duction of petroleum derivates in the chemical industry: still good foras much as 70 percent of the average oil demand. Petroleum is alsoreplacing coal as an energy source for heating.

16000

12000

8000

4000

0

1996 1997 1998 1999 2000 2001

10

9

8

7

6

5

4

3

Total (mio USD) Share in world trade (%)


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The industrial boom requires masses of other raw materials as well.China is likely to overtake the U.S. as top consumer of aluminium withintwo years. Demand for copper will also surge at annual rates of 10 per-

cent or above, due to Chinas growing power network and constructionboom. Experts assess that by 2010, China will have to import 57 per-cent of its iron ore, 70 percent of its copper, and 80 percent of its alu-minium and a substantial amount of other minerals such as cobalt andniobium (tantalum) to sustain its production. 19 On the whole, Chinasimport of minerals annually grows 21.6 percent; previous decade, itsshare in the worlds total mineral imports surged from 3.6 to 9.8 per-cent (see graph supra ).20 According to the World Wildlife Fund (WWF),Chinas demand for imported industrial wood, timber, paper and pulp,will increase by at least 33 percent within the next ve years, from thecurrent 94 million cubic meters to 125 million cubic meters. China alsohas an interest in promoting agricultural and horticultural cooperation.First, Chinas fertile land is under increasing pressure due to overpopu-lation and pollution. Second, the appetite for exclusive exotic productsis growing, given the fact that a new class of tasteful a ffl uents is devel-oping. Third, many Chinese o fficials and farmers think of investing inAfrica in order to cope with the challenges brought by the WTO entry. 2

On 28 September 2002, Chinas Vice-Minister of Foreign A ff airs LiZhaoxing announced, China will make agricultural co-operation withAfrica a key area of co-operation in the coming years.

With regard to the import of primary goods, trade-ownershipimpliesthat China is eager to take control of the foreign sources of these com-modities by itself. Why is this propensity, and what does it mean? Beijing opts for a control-over-the-well-strategy because it does not have con dencein the liberal approach of the commodity market. First, the up-streamactivity, the excavation of recourses, is seldom liable to the free-marketprinciples, but rather in the grip of monopolies and state control. 22 It isstill the hosting governments that have to grant concessions to foreigncompanies eying at their resources. Often exploitation contracts requiremuch more than a strong market position: political and geostrategic rea-sons as well play a predominant role Second China does not want to


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prices in check. Whereas Beijing is aware of the fact that market-tiedprices of petrol, gas, iron, and other commodities are crucial to curbover-consumption, the limiting of in ation is even more imperative: ris-

ing prices and low wages are a dangerous cocktail for social unrest.Fourth, Chinese companies involved in up-stream activities are oftenquite recently, junior players on the international market. Hitherto, theywere chie y occupied with interior resources; since these domestic sourcesare depleting fast, they have to make up lost ground very swiftly andcarve out their own part of foreign assets. Finally, a foot on the groundin resource producing countries also permits to sketch out a long-termpolicy and to anticipate on trends in the interior demand. Hence, theaspiration to have a certain control of supply will spur China to stim-ulate its companies to hunt for their share of the commodity market:nevertheless, it will simultaneously open up its markets to foreign suppliers.2

International concerns are stimulated to invest downstream activities suchas processing and distribution, as well as to participate in upstream activ-ities. These investments ought to be bene cial in terms of the infusionof capital in expensive infrastructure projects such as the construction of pipelines and re neries. They are also necessary to infuse know-how: forinstance, China has not much experience and skills in o ff shore excava-tion. The UNCOAL a ff aire also made many policymakers in Beijing aware of the fact that too much government control might raise suspi-cion and restrain overseas activity. 24 To come to conclusion, China hasto balance between the long-term strategic objective to foster a certaindegree of trade ownershipon one hand, and on the other hand the neces-sity to involve foreign or international concerns with the purpose of mak-ing swift headway to meet the immediate needs of its booming economy.Cooperation cannot be shunned. Yet, on the long haul, the need is forcompetitive devices with the purpose of pursuing an autonomous andenergetic foreign trade policy.

In this context too, Central Africa has not that much to o ff er. Eventhough countries such as the DROC are dubbed as geological scan-dals or natural treasures, the volumes of natural resources in thisregion just constitute a limited share of the worlds total deposits Take


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and Gabon declined by respectively 18.2 and 29.4 percent. Except forcobalt (24.70 percent) and diamonds (18.00 percent), the regions min-ing output contributes only very modestly to the worlds aggregate total:

copper 6.34 percent, tantalum 3.72 percent, and gold 0.02 percent.2

Most of these commodities can be found much nearer, for instance inAustralia, Canada, Indonesia, Myanmar, and Russia. Nonetheless, theselimited assets remain to be an interesting investment for Chinese com-panies. First, in this area they do not have to face that much competi-tion from more potent international concerns: the big international playersare not prepared to invest as much in the less productive sources herethan in the bonanzas elsewhere, and are concerned having a ff ected theirimage in dealing with war-shattered and corruption mired countries.Second, the impoverished governments of this region are easier to dealwith compared to larger suppliers in which their omnipotent monopo-lies control most upstream activities. Lastly, China, as most other pow-ers, attaches great importance to diversife its lines of supply and to limitdependence on a limited number of countries.

The Devices of Chinas New Mercantilism

Before discussing the speci c tools that China applies in foreign tradeoff ensive, let us rst pore brie y over some institutional aspects of theforeign economic policy. The governing regime of the PRC comprisesthree institutional pillars: the Party, the government, and the military.Even though all three actors have their say, the national foreign trade

policy remains to be nal responsibility of the National State Council,the apex of the national government. The revised Foreign Trade Lawof 1994 iterates: The State Council is in charge of the administrationof the foreign trade of the entire country. 26 Under the aegis of theCouncil, the Ministry of Foreign A ff airs (MOFA) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) are in charge of the execution of the national policy. However, China is not a monolith.

The constitution of 1982 formally divided the state in several sub-statelevels. Each unit is entitled with several authorities that permit it to set


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policy, and to manage non-governmental activities to promote their mar-ket abroad. 28 Still, at the end the central government remains the pri-mary actor. Let us now move to the concrete instruments of Chinas

go-out policy. To start, we focus on the guiding and supportive role of the government; how it takes the vanguard in the promotion of favourablecontacts, and how it conceives an o fficial discourse to convince Africancountries of its benevolent intentions. Subsequently, we concentrate onthe promotion of permanent contacts through the establishment of regionalforums: state owned companies, the nancial backing of Chinese invest-ments abroad, the promotion of business exchanges, development coop-eration, military cooperation, cultural bounds, etc.

Chinese top-politicians and senior o fficials themselves are very vigor-ous to pave the way for the extension of political and commercial rela-tions with Africa. First, there are the numerous state-to-state visits fromwhich the signi cance cannot be underestimated. High-level contactsunderline the importance a state attaches to its relations with another.They promote business relations through the participation of extensivetrade delegations, certainly in state-to-state visits. They also form incen-tives that can bolster mutual trust and good will, and add leverage toattempts to get access to a given market. Despite the fact that PresidentHu Jintao only paid three of its 32 state-to-state visits to African coun-tries, the sequence of other high-level visits to the area is dense. Between1990 and 2003, states of the Central African Region received 34 high-level officials such as ministers, vice-ministers and members of the corenational political bodies. From the other side, every actual state-leaderfrom the region who left for Beijing and paid tribute to China vowedto the One-China Principle and o ff ered or assented more economic coop-eration. In November 2001, Rwandas President Paul Kagame visitedChina. In July 2004, Ugandas President Museveni was hosted. He signedan extensive Agreement of Economic and Technological Cooperationand another one on the Mutual Promotion and Protection of Investment.The consecutive month, CARs President Francois Bozize agreed tostrengthen bi-lateral cooperation in elds such as agriculture, infrastruc-ture and energy During his visit to China in July 2005 President Joseph


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Kabila of the Democratic Republic of the Congo (DROC) signed anagreement on technologic and economic cooperation and acquiesced tofurther relations in the eld of human resources development, agricul-

ture, infrastructure construction, and cooperation between their militaries.Hu Jintao from his side promised to encourage Chinese companies toinvest in the DROC and join the DROCs economic reconstruction. 2

In September 2005, President Denis Sassou-Nguesso from the ROCcalled for Beijing and signed two concrete partnerships: one on the con-struction of a 500 km-long road between the cities of Brazzaville andPointe-Noire, and another on the elaboration of the national electricitytransportation grid. 30 In addition to these particular events, ChinasForeign A ff airs Ministry has established regular consulting mechanismswith 24 African countrys corresponding ministries.

In 2004, delegations of diplomats from inter alia the Republic of Congo,Burundi, Gabon, Rwanda and Central Africa were invited to discussfurther possibilities to advance political and economic cooperation. 31 Apartfrom bilateral contacts, China is increasingly present in multilateral forumssuch as the African Union, the South African Development Community(SADC) and the Southern African Development Cooperation. Signi cantin this regard was the recent remark of SADC chair Paul Berenger: Inparticularly, it is my intention during my tenure as chair to give a newdimension to relations between SADC and India and China. 32 Chinaalso provided itself with a permanent platform, the China-AfricaCooperation Forum (FOCAC), on which I will elaborate later.

Apart from the contacts themselves, it is also striking how Beijing adheres to a well-conceived o fficial discourse that is carried out consis-tently at every occasion. Jiang Zemin, then President, laid the founda-tion of this discourse in 1996, when he summed up ve cornerstones of Chinas Africa policy: sincere friendship, equality, unity and cooperation,common development, and looking into the future. In 2003, this approachwas modi ed slightly by his successor who formulated six pillars thatcan be summarized as: non-interference, African ownership in dealing with problems, mutual trust and cooperation, the increase of economicassistance without political conditions to appeal the international com-


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international environment for Africas development. 33 This approach canalso be discovered in earlier statements of Hu, such as in his key speechhe delivered in 1999:

China will, as always, adhere to the Five Principles of Peaceful Coexistence,respecting independent choices of political system and development road byAfrican nations according to their realities; supporting the just struggle of African nations to safeguard national independence, sovereignty and terri-torial integrity; supporting these nations e ff orts to maintain domestic sta-bility and unity, invigorate national economy and promote social progress.In international a ff airs, China will actively support African nations partici-

pation in international a ff airs, strengthen bilateral consultations and coop-eration, and make concerted e ff orts to safeguard the just rights of thedeveloping nations, trying to help establish a fair and reasonable interna-tional political and economic order at an early date. China also urges theinternational community, especially the developed countries, to respect andshow concern for Africa, pay attention to Africas peace and development,and adopt e ff ective measures to promote stability in Africa, help Africadevelop its economy, get rid of poverty at an early date, and narrow the

gap in development between Africa and the rest of the world. 34

The main points of this vision have been restated over and over again.What is the signi cance of this o fficial view for Chinas commercial rela-tions? A rst element to consider is the principle of non-interference.Whereas Western governments and international concerns are understrain to pay attention to human rights, the respect of democracy, andenvironmental norms whenever they deal with third world countries,Chinese actors do not have to con ne themselves by these contempla-tions and are permitted to operate freely. This gives them a leap incountries and situations that are not in line with the common standardsof the international, read Western, community; cases in which Chineseenterprises sneak between the meshes are rife. 35 The promise not to inter-fere with internal a ff airs also sets local governments at ease, and makes


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them more accommodating to grant concessions and public contracts.Un-conditionality too contributes to this more unregimented way of doing business. The discourse also implicitly alludes at the hostile char-

acter of the current international community and the actual politicaland economic order; two structures created and dominated by the West.When related to the frequent references Chinese o fficials make to ashared fate as developing countries and the revival of a Bandung spirit,it is obvious that this line of reasoning aims at setting Africa apart fromthe dominating West. 36 This common-destiny principle ties closely towhat is currently named as the Beijing Consensus, an alternative tothe well-known Washington Consensus that promotes a rigid policy of liberalization and privatization as a panacea for development in devel-oping countries. 37 Instead of this strategy, China stands for a gradualprocess of development that departs from the internal conditions andneeds of a country. Complementarity, we already mentioned this before,is another crucial element of Chinas policy toward its partners in Africa:by working together, China and African countries have to endeavour amutual favourable specialization of their economies, or in other words,have to take an active part in international division of labour and coop-eration in order to realize their own development goals [emphasisadded]. 38 Thus, Chinas vision on its economic relations with Africaconsists in the assertion of a common need to pursue a policy that dis-tinguishes from the currently dominating Western approach. Instead of prescribing bitter structural adaptation plans and wry requirements, Beijing only beckons with sweet carrots: instead of forcing African countries toadapt, the PRC adapts its own policy in such a way that it ts smoothlyto the demands of the African regimes. Whether or not this is com-mercial pragmatism, a sincere ideology, or both; it is clear that thisapproach will derive goodwill and permit to do business suavely.

The China-Africa Cooperation Forum (FOCAC) is another means forbolstering commercial and political relations. Established in 2000, theFOCAC forms an interface for o fficials and business leaders throughministerial conferences, senior o fficials meetings, and the China-Africa


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Joint Business Council. Its current goals are stressed out in the AddisAbaba Action Plan and entails issues related to peace and security, mul-tilateral cooperation, economic development, and social development. 3

Let us go more into detail on the economic segment. A rst priority inthis regard is the development of Africas agriculture in order to strengthenthe food security of Africa and to increase its exports to China and othermarkets. 40 China will also continue to support and encourage strong and viable Chinese enterprises, through nancial and policy incentiveschemes, to develop agricultural cooperation projects in Africa. 41 Second,and particularly emphasized, is the infrastructure development: Chinawill encourage its enterprises to take an active part in Africas infra-structure projects and expand cooperation in transportation, telecom-munication, energy, water supply, electricity and other elds.42 Thirdaim is to promote trade through import-tari ff reduction, initially on com-modities; later on, other goods too might be included after bilateral nego-tiations between China and each particular African state. 43 Fourthly, theAction Plan addresses the facilitation of investments, focusing onsimplication of approval procedures for Chinese companies, which areinterested in investing in Africa. 44 African countries are also urged tohold consultations with the China Council for the Promotion of International Trade (CCPIT) with a view to establishing a China-AfricaChamber of Industry and Commerce. Next comes the development of tourism. In this regard China is expected to grant its Approved DestinationStatus (ADS) to more African countries. 45 The sixth vow concerns Chinasintention to take an active part in resources development projects inAfrican countries and increase its investment in this area. 46 In this eldAfrican countries are insisted on to provide all necessary informationand to accord facilities for Chinese enterprises. Other elements of theeconomic section of the Action Plan are debt relief and development aid.

State companies are still the main actors that are sought to imple-ment the aspirations set by the government. However, several structural

39 FOCAC (2003), Addis Ababa Action Plan, Addis Ababa, December 26, 2003. See:


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shortcomings impede them to play a competitive role in overseas mar-kets. None of the Chinas largest rms appears on the short-list of theworlds most competitive corporations. 47 Without going into detail, Chinas

state-companies often lack technological innovation capacity, recogniz-able brands and comparative advantage in niche markets. 48 In addition,Chinas thousands of state-owned enterprises (SOE) often compete witheach other on the same terrain. Hence, parallel to what Japan and Korearealized in the recent past, Beijing pursues an active policy to create anelite corps of national champions: large, vertically integrated businessgroups that encompass entire industries from upstream to down. According to The Economist the government decided that 30 to 50 of its best staterms had to turn into globally competitive multinationals by 2010. 4

At home these concerns would bene t from favourable tax regimes andadministrative support; abroad they will be propped up with export cred-its, loans and backed diplomatically. Thus, instead of letting its still frag-ile companies be preyed by foreign competitors, Beijing prefers to endowthem with everything they need to mature to global champions. Thegrip of the central government on these rms will remain to be assuredin several ways. First, Chinas law prescribes that the State Council rep-resents the State in performing the responsibilities of investor in largestate-owned enterprises, state-owned holding enterprises and enterpriseswith state-owned equity, which have a vital bearing on the lifeline of the national economy and State security, and in large state-owned enter-prises, state-owned holding enterprises and enterprises with state-ownedequity within such sectors as important infrastructure and natural re-sources. 50 In practice it is the state-owned Assets Supervision andAdministration Commission of the State Council (SASAC) who is enti-tled to advance the establishment of modern enterprise system in SOEsand to manage the strategic adjustment of the structure and layout of the state economy. The SASAC can assign so-called supervisory pan-els to large enterprise on behalf of the state, and appoints and removestop-executives of enterprises. 51 Second, the SOEs are only permitted forlimited auctions: often these public o ff ers do not take place on WallStreet or in London but in Hong Kong 52 As a result several important


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SOEs exhibit a dual corporate structure. On one hand they comprisea segment that remains controlled by the state through the SASAC and

via the provision of support. On the other hand they include a division

that is more or less privatized via a joint-venture or auctions. The resultof this structure is that state and semi-state companies demonstrate anappalling solvability. This enables them to realize the imposed long-termgoals even if these are not lucrative in terms of nancial pro ts.

Beijing nourishes its companys overseas activities nancially throughseveral institutions. First, there is the national Export and Import Bank of China (Exim Bank). This institute, the worlds third largest exportcredit agency, is entirely funded by the central government and has tofurnish exporting Chinese companies with export credits, and to providecontracted governments with low-interest concessional loans . For instance,in 2004 the Exim Bank wrote out 490 loans to enable other states toaff ord services provided by Chinese construction companies. 53 Such gov-ernment-to-government loans constitute the bulk of the banks funding,and speci cally target developing countries. For the period from 2005until 2008, Beijing has vowed to provide 10 billion USD in concessionalloans and preferential export buyers credit to developing countries. Asidefrom the Exim Bank, the government-owned China Construction Bank (CCB) too is active and provides services to stimulate investment andtrade between China and Africa nancially. In this perspective its recentbranch in Pretoria is expected to play a leading role. Particular supportis also allocated to the mining industry by means of special capitals andtax reductions designated by the Ministry of Finance. A senior o fficiaof the Ministry of Finance summarized the policy as follows: To pro-mote the implementation of the strategy of going overseas, to encour-age and to guide geological institutions and mining enterprises to exploreand utilize foreign mineral resources, the Ministry has arranged specialcapitals for the work of general survey on foreign mineral resources, fea-sibility studies and initial stage venture surveys. These funds initiatedand implemented a group of projects on oversea venture survey, reduc-ing the initial exploration risks for mining enterprises to go overseas. 5Chinas Ministry of Trade and Economic Cooperation (MOFTEC) as


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Next, there is the promotion of business-to-business contacts throughseveral agencies and events. China established multiple permanent tradeagencies in overseas countries. For instance, aside from the embassies,

the Ministry of Commerce keeps open a permanent trade representa-tion in Rwanda and Uganda, and at the other side supplies Africantrade agencies with accommodation to bolster their presence in China.According to the China Council for the Promotion of International Trade(CCPIT), Chinas largest non-o fficial trade promotion organization, 27Chinese business exhibitions were held in Africa in 2004 and 30 in2003. 56 Government sponsored seminars have also been organized indiff erent provinces of China to brief farmers about conditions in Africaand related government incentive policies for investment. 57 In December2004, the Commercial Ministry and the Ministry of Information orga-nized a 10-day conference for a group of 10 African telecom ministers;the event e.g. comprised a visit to the ZTE Headquarters. 58

Even cultural cooperation is an essential part of Chinas foreign tradepolicy. Cultural relations are a precondition to promote commercialrelations. 59 The former Chinese Premier Zhou Enlai on his turn describeddiplomacy as an airplane with diplomacy as the body, economy and cul-ture as the two wings. 60 In 2004, the Democratic Republic of Congowas invited to participate in an African art festival. To date, China hassigned with 46 African countries a bilateral cultural agreement. Last year,the Chinese government and governments of African countries mutuallysent 200 cultural delegations. In 2004, three artist delegations visited 12African countries with exhibitions as well as the China Art Festivalheld there.

Aid is a political ticket. 61 Development cooperation is a powerful leverto in uence development countries. As from the nascence of the PRC,Beijing paid much attention to maintain an image of China as a benev-olent primus inter pares , a mecenas ready to share the fruits of its devel-opment with other less fortunate peers. Since 2004, China became a

whose process and assembly with brought-in raw materials from overseas are encour-


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net-donor of development aid with a budget of 730 million USD. 62 Thisdevelopment assistance materializes in several forms. First, China employsdozens of medical specialists in overseas hospitals: in Central Africa,

Chinas medical sta ff amounts to 748 specialists. It is also planning todeliver drugs and other medicine to several countries. In the eld ofeducation, the PRC annually o ff ers 1,500 scholarships to African stu-dents. Intercollegiate exchange and cooperation has been establishedbetween 27 African universities and their Chinese counterparts. TheChinese governments African Human Resources Development Fundpays for 10,000 Africans to be trained in Beijing. 63 China provides tech-

nical assistance and delivers equipment to several educational institu-tions. 64 Other terrains of development cooperation concern agriculture,transportation and technological development. China showed itself gen-erous when it decided to cancel the bilateral debts before 2004. ThePRC also exes its muscles as a supporter of regional security. Currentlyit contributes 230 o fficers to peacekeeping missions of the United Nationsin the region. From 1998 until 2003, the Peoples Liberation Army hasbeen training 89 military o fficers from the DROC, and in 2004 it agreedto train another batch of 60. China also provides military equipment tothe DROC, Uganda, and the CAR. 65

The Peoples Republic combines a wide array of instruments to enforceits bounds with the Central African region. Many of these devices arenot that di ff erent from those other powers applied in order to gaininuence in this region. However, what characterizes the Chinese pol-icy particularly is its determinedness and its ability to operate its devisesin a tight and coherent way: the Chinese government still has muchmore steering capacitythan its Western competitors who rather try to facilitate their affiliated companies instead of guiding them to operate whenand where it is the most suitable to the realization of the states interest.

Results

To assess the results of Chinas policy is a delicate exercise. To startwith, facts and gures are limited and inaccessible at large. Whereas one


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data provided by the Chinese agencies themselves are only available forrecent years. Second, there is the question of reliability: without going into detail, we found o fficial gures often contradicting with data result-

ing from expert calculations. Third, it is obvious that the direct trade volumes do not necessarily cover all goods that arrive at the nal des-tination: goods exported from China to South Africa, for instance, canstill nd their way to Uganda, and vice versa.

As mentioned later, many of Central Africas raw commodities, pre-cious minerals in particular, are exported to China after a stopover inSouth Africa, Thailand or Hong Kong. It is a fruitless task, and outsidethe scope of this dossier to try to clear out all these hubs and transi-tions; but even if we take the gures for what they are, they still pro-

vide us useful insights. Hence, how did we specify Chinas politicalaspirations into measurable targets? In general terms the aim is to increaseexports of manufactured goods and the imports of strategically vital com-modities. Here we will present the overall trade gures for the last ve

years aside from facts concerning the composition of these owsConsecutive to this quantitative overview, we will go more into detailwith regard to Chinas realizations in the eld of the di ff erent mineralresources, but also vis--vis the construction of infrastructure and telecom-munication.

A large number of facts in this part are drawn from numerous writ-ten as well as oral sources. Open publications are mentioned in the foot-notes. Oral sources, however, are kept anonymous, given the fact thatmost of informants, kind of sharing their expertise, are a ffiliated withofficial institutions, gos, and companies who are present in the region.

1200

800

10

8

54

Exports Imports Share in exports Share in imports


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Every fact drawn from oral sources is at least double-checked in sepa-rate conversations, interviews, or email queries.

Any kind of a graph, such as the one supra , might suggest that Chinese

policymakers should start to worry. While Central Africas imports fromChina nearly rose, the exports from the particular region surged sig-nicantly. Hence, between 2000 and 2003 Chinas trade de cit grewfrom 0 to 84 percent of the total trade volume. A mere two percent of the areas imports originated from the PRC, which indicates that Chinesecompanies do not succeed to gain much terrain on other competitors.On the spot we did not nd any indication either that these Chinesegoods enter in substantial amounts via other states. Hence, Chinas rsaim appears not to be achieved. Still, despite the de cit, these graphsdo not exclude the PRC to accomplish its second objective: the importof resources. Therefore, let us concentrate on the next graph that depictsthe composition of Central Africas export to China. The gures aredrawn from several data les provided by Chinas Customs Agency;product categories were reduced to ve main groups: petroleum (petro-leum and petroleum derivates), minerals (ores and scrap), logs (cork andwood), food (co ff ee, tea, fruits, meat, etc.), and manufactured goods. Itbecomes obvious that except for some percentages of manufactured goods;the entire trade ow from the region consists of raw materials. In 2003,more than 64 percent of the value concerns petroleum, 25 percent logs,and up to 8 percent minerals. Consider for instance the increase of Central Africas exports between 2002 and 2003; 87.7 percent of thisupsurge was due to a new petroleum deal with Gabon and the ROC.

In 2003, China was able to buy 18.4 percent of the total petroleumexport of Gabon and the ROC, by far Central Africas two largest oil-producing countries. Hitherto, Western consortia such as Total, Agip,and Chevron dominated both markets: however, since 2004, Chinesecompanies too are showing their ag. In 2004, Sinopec acquired thepermission to explore for oil in Gabon; besides, it was also put forwardthe possibility to build a second oil re nery. Even though, analysts doubtwhether this investment will turn out to be pro table: since 1997, Gabonsoil output declined unabatedly from 370 000 barrels per day to just


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1200

1000

800

600

400

200

0

2002 2003

Petrol

Minerals

Logs

FoodManufactured

Composition of the regions exports to China (mio USD).Source: China Customs (2005).

300

250

200

150

100

Textile

Electronics

Processed metals

Machinery

Chemicals

Rest

Primary


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Chinas achievements in the eld of mineral extraction are much moreopaque. Apart from the large state-a ffiliated companies, several privateentrepreneurs and individual agents enter the scene. What do we know

about the former category? Hitherto, Chinese state-owned or exclusivelyChinese enterprises do not have many projects on their account. Moreover,the projects they did succeed to set o ff are limited in extension com-pared to those of various European, American and South African enter-prises.67 The most signi cant concessions were obtained in Gabon. InMay 2004, Minmetals, the largest supplier of raw materials for the steel-making industries and industrial minerals, carved out an exploitationlicence for the excavation of iron ore in the Belinga-Mekambo pit inGabon. 68 In the same country Xuzhou Huayuan searches for Niobiumand Manganese in Ndjol. 69

In the DROC, Katanga is the area where most Chinese enterprisesare active: Jiaxing Mining Industry collects copper near to Lubumbashi,and Feza in Likasi where it possesses a comptoir for copper and cobaltores.70 China is also investing in the completion/upgrading of the Bangularailway track between Katanga and the railway grid of Angola. Whetherthere exists a speci c strategic aim behind this investment is not sure,but this connection might facilitate the transportation of materials fromthe resource rich Katanga to the shores of Angola, a country were Chinaalready has a strong foot on the ground. Moreover, an operational trans-portation corridor in Southeastern Congo might also provide pass throughto the output of the mines China recently obtained in Zambia. But still,this is just one possible explanation; we also have to remark that upuntil now there has not been much progress made on the spot.

There are several reasons that can explain the limited advancementof the regular Chinese companies. First, regular rms do not t thatwell in the context of a predatory economy, such as that of the DROC.This marauder economy shows us a mode of excavation, production,and trade that deprives a society of its natural possessions by cultivat-ing violence and disorder. The subsequent lack of stability, administrative


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liability, and infrastructure hampers the establishment of streamlined andefficient production activities. Second, compared to other players, Chinesecompanies are not that long acquainted with the Central African envi-

ronment, its language, and its intricate administration. Third, there isthe experience gap: upstream production demands in the region oftendiff er from these in China, and Chinese rms are not yet able to meetthese exigencies technically. If state-companies do not make the head-way in supplying the mineral recourses to China, who does? For instance,a Chinese mineral analyst testi es that in 2003 at least 30 percent of Chinas cobalt originates from the DROC. 71 These gures are more orless con rmed by a recent survey of the Cobalt Development Institute. 7

A Belgian expert with years of experience goes further and states thateven this calculation is a blatant underestimation. 73 Which players com-pensate for the actual inability of Chinas big investors? To start with,Chinese mineral processing companies purchase from established min-ers; directly or indirectly via brokers and agents. For instance, ChinasNigncxia, a coltan-processing rm, buys its Congolese commodities viatrading posts in Rwanda. According to diplomatic sources, Chineseofficials also paid a visit to another Kigali-based Rwandan companyinvolved in coltan export from its western neighbour. 74 Another impor-tant mineral company, the Hong Kong based Paci c Ores Metals &Chemicals, concluded a cooperation agreement with the South AfricanCAMEC; in turn, the latter holds a stake in Exploitations Artisanalesau Congo (EXACO), a rm active in the DROCs Katanga Province.A recent report of Global Witness goes more into detail on the role of South-Africa as transit country for the DROCs cobalt and copper owto China. 75 Jinchuan, Chinas most important cobalt group, recentlyopened a bureau of the DROC from which it networks with local cop-per and heterogenite excavators.

Besides these lires , there are several one-man private Chinese actorsinvolved in small-scale mining activities. Most of these kinds of busi-nesses concern the collection of precious minerals that can be shippedeasily in small quantities, and thus do not demand extensive facilities.Several interviews identi ed such individual purchasers in the DROCs


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Districts of Nord-Kivu (diamonds), Katanga (gold, diamonds, hetrogen-ite) and Maniema (diamonds, gold, coltan); as well in Kigali-Rwanda(unidenti ed minerals) and Uganda (unidenti ed minerals, but probably

diamonds).76

Concluding, China is not yet successful in achieving its con-trol-over-the-well strategy. Its mining companies still leap far behind sothat the Chinese processing industry has to rely on foreign mineral sup-pliers. The presence of private Chinese actors, often individuals, appar-ently does not emanate from any kind of o fficial policy; it is not clear

yet in which extension they contribute to the realization of their homecountrys appetite for minerals.

Another sector that has to be taken into account concerns logging.According to o fficial gures logs constitute more than 25 percent of theimport from the region with a total value exceeding 200 million USDin 2002 and 2003. Some concrete gures clarify Chinas increasing rolein the Central African logging industry. In 2003, half of the ROCs tim-ber production was reported to have been shipped to China. 77 For Gabonthis gure amounts to 46 percent. According to Global Timber, anNGO, Chinas share in the CARs log exports increased from one per-cent in 2000 to eight percent in 2003; in Gabon seven percent in 1995and 32 percent in 2003. 78 Chinese timber companies are reported to bemore and more active in Gabon and the ROC; recently it opened upHuamao Forest & Timber Company in the DROC. But here too, Chinais supplied as well by several foreign rms. For instance, Shanton PresidentWood Supply Company was bashed in a report of the UN SecurityCouncil for its relations with DARA Forest Company, an illicit loggerin Ituri. 79

The last category of Chinas imports from Central Africa concernsagricultural products, which comprise 0.7 percent of the regions tradeow to the PRC. In this eld, the Africa Agriculture Development Center(AADC) is a vital player that invests in crops, livestock and shery pro-

jects in several states. In the DROC, China Import and Export Companyis active in agricultural production and animal husbandry, as well as


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New Oasis Co ff ee, and a sugar company in the outskirts of Kisangani.In the CAR, the PRC is involved in fruit harvesting. In Ugandas cap-ital, Heritage is investing in a cotton eld, the government went into a

partnership with a Chinese co ff ee company, and a Chinese rm is involvedin sh capture in the Victoria Lake. Nevertheless, these undertakingsfade entirely away compared to the partnerships the PRC recently bro-kered with agricultural giants such as Brazil and Argentina.

Besides the vending of manufactured goods and the import of naturalresources, another particular sector, and probably the one in whichChinese companies were able to make the most signi cant advance, con-cerns the realization of infrastructure projects. Chinese rms are verysuccessful in reaping important public infrastructure contracts from CentralAfrican governments. The state company China Roads and Bridges(CRB), for instance, became a privileged contractor in several countries.Recently it opened permanent commercial representations in Rwandaand Burundi; during the past years CRB was entitled to e ff ectuate allimportant road construction projects in Rwanda. In Burundi it com-pleted a highway section between Bujumbura and the Nile River.

In the DROC it accomplished a road between Bukavu and Kasongo. 8

In the ROC the company paved a road between Brazzaville and Pont-Noire. 81 Another rm, the Companie d Eau et Electicit, completed sev-eral transportation arteries in Bas-Congo, Nord-Kivu, Orientale andBandundu. Apart from roads, other infrastructure as well is built byChinese engineering enterprises. Examples are rife. Stadiums were erectedin Rwanda, the ROC and the DROC. In the latter two countries Chinesealso took care for the reconstruction of the national parliaments. In theROC China national Machinery Import end Export built the ImboulouDam and repaired the Moukoukou dam. 82 Other hydropower stationswere taken care of in Burundi (Mugere), the DROC (Bandindu) andUganda ( Jinja). 83 Interesting is also Chinas involvement in the re-estab-lishment the DROCs port of Matadi, the paving between this harbourand Pont Mpozo and a new commercial center near to the airport of Ndjili.84 Besides construction, the realization of telecommunication networks


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is another terrain of activity. In the ROC Chinas ZTE outbid the IsraeliRCI and the American Vertex to acquire a contract to develop thecountrys telecommunication network; consecutively, Congo Chine Tlcom

became a main operator.85

In the same country China Beijing Constructionerected and equipped a new compound for the state radio and televi-sion.86 In the DROC China Telecommunications Company founded alocal subsidiary with a mobile telephone network that hitherto reachesnot farther than the area around Kinshasa but is expected to expandin the near future. In other states too, Chinese operators are starting tofound new networks: Netcom in Uganda, Huawei-Onatel in Burundi,and an up until now an anonymous applicant in Gabon.

How can one explain the progress of Chinese infrastructure projects?First, whereas rms lack experience in the mining sector, this is not thecase for construction and telecommunication rms. Despite the fact theydo not deliver state-of the-art-products, their results are thought to bequite solid and trustworthy. 87 Second, Chinese contractors succeed toplay out their price competitiveness. By employing cheap Chinese engi-neers and labourers, and by making use of low-cost techniques, the men-tioned rms are able to outbid competitors from inter alia the UnitedArabian Emirates. A last, utmost important advantage concerns the hugeliquidity ow that the Chinese government put at the disposal of its bid-ders. Lending institutions such as the Exim Bank and the ConstructionBank provide investing governments with millions of low-interest loansto enable them to nance the work done by Chinese companies.

Time now to make up a preliminary balance of the progress Chinamade in the realization of its aspirations. Summed up, these achieve-ments have been mixed. Relating to the vending of its own manufac-tured products, it appears that it only takes a limited share of the market.Despite Made in China visible in every household and in every shop,the monetary value that these goods represent is still modest. Chinasgrip on the regions natural resources is still feeble as well. On one hand,it is clear that it succeeds to appropriate an increasing share of theexports of commodities. On the other hand, it does not reach down toacquire trade ownership: the presence of Chinese companies in Central


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take-over of important sources. The other Chinese players, active on theedge between formal and informal trade in commodities, do merely con-tribute to the overall export ows. However, an important question that

still has to be cleared out is the indirect export of precious Congolesematerials via transit countries such as Rwanda, Tanzania and South-Africa. Concluding, the sector in which China turns out the most suc-cessful concerns the contracting of infrastructure projects; obviously themassive nancial support has a stake in this. Lastly, let us come back now on the trade de cit that China runs with the region: it is impor-tant to ask whether this imbalance is a matter of aw or a matter of economic exibility and bu ff er capacity. What does a de cit of one bil-lion USD mean to the PRC if it amasses an overall trade surplus of 32billion? Hence, China seems to have the exibility to recover its tradedecit with regions it depends on for their vital goods from the impres-sive surplus it accumulates in general.

Impact

It is doubtful that the Central African population will pro t much fromChinas increasing presence. First, the quantitative trade surplus is coun-terweighted by a qualitative trade de cit: Chinas infusion of manufac-tured goods, although rarely always state-of-the-art products, and itstechnical expertise represent a larger added value than the regions exportof raw materials. Second, the control-over-the-well policy also impedesCentral African states to foster economic sovereignty. By emphasising

the need to seize ownership of local sources, China implicitly vows todisown African societies of their potential ability to manage these them-selves. Alien possession of sources of raw materials inhibits them also topro t substantially from the rising trend in commodity prices. Third, itis all but certain that the net-incomes originating from the favourabletrade balance come to the bene t of the local populations. China, forinstance, does not pose any demand with regard to the tractability of

the revenues that governments reap out of concessions and taxes. Fourth,the argument that cheap Chinese consumption goods are curbing in ation


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The Monitor , accused its government for allowing the Chinese and Asianbusiness people who come in the pretext of investors to deal in bothwholesale and retail trade. This hinders our operation because how

then shall we operate if someone from outside comes to deal in the samecommodities as we do. 95 The same paper also reports:

Residents and local leaders of Jinja district, especially in the Municipality,are very discontented over the lack of bene ts to the local community fromthe huge $70 million (Shs 70bn) Owen Falls Dam civil work being done bythe Chinese company Sichuan International Engineering and TechnicalCorporation (SIETCO). They mainly complained that the project has not

employed signi cant numbers of people from the area; has not consumedfood, and other goods and services. One resident of Jinja West, IsabiryeIbrahim, said when the project commenced in 1993, he planned to supplypoultry products, fresh vegetables, sh, fruits and other foodstu ff s to the pro-

ject. But I have been terribly disappointed by the Chinese. They go shinginto the Lake or river Nile, and allegedly grow vegetables or go to marketsin Jinja, where they bargain over vegetables, fruits and food stu ff s in mar-kets to the lowest prices, said a visibly disappointed Isabirye. He said many

large-scale commercial farmers in Jinja district, had gone into establishing big farms ostensibly to market their produce to the dam contractors. 96

Seventh, China is replacing old debts it has remitted with new ones,and stimulates Central African governments to buy its own services ontick. As we already mentioned supra, the PRC uses cheap loans to con-

vince administrations to contract its companies for having paved newroads, erected telecommunication networks, etc. The Imboulou Dam inthe ROC, mainly constructed by Chinese personnel, was nanced by aloan of 200 million USD loan, repayable within 15 years with an inter-est of 0.2 percent. 97 The same counts for the Moukoukou Dam, nancedby a Chinese loan of 4.6 million USD. In 2000, the Exim Bank sup-ported a joint venture between ZTE and the Congolese government witha loan of approximately 10 million USD.

Eighth, there is the risk of creating new white elephants . For instance,one can have doubts if construction projects are determined to ful ll thekey needs of society or to accede to the eagerness of Chinese compa


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and Kinshasa while the surrounding slums do not have access to cleanwater. 98 In the ROC and in Rwanda, hospitals are reported not to the local demands. 99 Ninth, Chinas demand for recourses is directly and

indirectly nourishing the informal and criminal economy. On the onehand, Chinese state-owned mining companies were already pointed atto be involved in the war economy of the DROC. 100 On the other, asan important customer Chinas lack of willingness and capacity to con-trol the origin of its imported goods is indirectly stimulating illicit activ-ities: via dire lires and via private Chinese undertakers. A survey of Forest Trends for instance states that: China is one of the major des-tinations for timber that is harvested unsustainably or illegally. 101 In thisrespect, Global Timber Watch reports that the illegal timber exportsfrom Gabon to China have been estimated to be as high as 70 percentof total timber exports. 102 A recent BBC report describes how Chinesebusinessmen are involved in the illicit mining industry near to Lubumbashiin the DROC.

The heterogenite is partly treated in furnaces either in DR Congoor in neighboring Zambia and then exported mostly to China via SouthAfrican and Tanzanian ports. Truckloads of copper and cobalt leave thecountry every day. But statistics of DR Congos exports are not accu-rate. [. . .] Joseph Chama Mukinay, vice president representing the trans-porters in Kasumbalesa, describes how between 18 and 25 thirty-tonnetrucks overloaded with copper and cobalt, raw and concentrate, leaveevery day. About 65 percent of the trucks are loaded by Chinese busi-nessmen and are feeding the Chinese market, he says. 103

To assess the profound impact of Chinas stronger presence on thedevelopment of Central Africa we need to go more into detail: that iscertain. Nevertheless, the remarks and indications we sketched out inthis section cast a shadow over Beijings o fficial discourse of win-wincooperation. Sure, in general nancial terms, the intensifying trade rela-tions appear to bene t the region: beyond this macro-economic picturehowever, the Beijing Consensus, aiming at complementarity and non-


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interference, appears to comfort the Central African elites in the rsplace. Chinas unconditional policy as well with regard to developmentaid as relating to the nal destination of trade revenues (taxes, conces-

sions, etc.) comforts local regimes, but make it di fficult to trace were thecash ows end up. The majority of the Central African population doesnot appear to bene t much. Jobs generated by Chinese companies arerare. The torrent of Chinese consumption goods is highly levied, whichmake them more expensive, but still competitive with the scarce manu-factured products African countries process themselves.

Conclusion

No state is pursuing its foreign trade policy more vigorously than China.This diligence is not only a matter of the ambition to turn the countryinto an important world power. It is as well a prerequisite for the sur-

vival of a party apparatus that embodies the direct interests of millionsof members and functionaries. Forty years ago, this regime embarkedon the dramatic transformation from a society anchored in agricultural

communism and personal cult to a new legitimacy based on the accom-plishment of the integration of more than one billion Chinese in theworld economy. Whereas the initial steps to achieve these goals focusedon an inward opening up and liberalization, today, Beijing is more andmore conscious of the need to foster an outward-oriented economic pol-icy as well. In order to make the impressive growth from the rst phasesustainable, the Peoples Republic needs to gain direct access to foreign

markets.To start with, it has to promote exports in a way that allows oper-ating independently from alien distributors and brands. China alreadyhas the factories; now it is time to run the shops as well. Besides, inorder to keep the factory operational, it needs to be certain of a sus-tainable supply of raw materials. Hence, in sum, Chinas current mer-cantilism aims at mitigating its dependence and to foster a certain degree

of trade ownership along the entire production chain. In this regard,mercantilism and liberalism are operated in tandem. Thus, contrary to


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We focused on this in the second section. However, despite this impres-sive toolbox and despite its huge e ff orts, Chinas mercantilism turns outto be rather one of weakness than one of strength. As we argued in the

third section, it experiences di fficulties to penetrate overseas markets.Regions such as Central Africa in se do not have that much to o ff erand not that much to ask either, given their limited purchasing powerand the fact that even their precious resources can be excavated moreeasily elsewhere. The fact that China does not save any e ff ort to enterthis market rather demonstrates its desperateness to achieve progress,even if it means a drop in the ocean. Moreover, even in the CentralAfrican Region it is not that successful. China provides only a limitedshare of the regions imports, and even though it is becoming an impor-tant consumer of the local natural resources, it relies much on inter-mediaries and independent actors. Its own companies often lack thefamiliarity with the terrain, are not competitive enough, or lack thecapacity to run the exploitation of concessions autonomously. Consequently,China squirms to circumvent or to compensate these impediments. First,there is the vast liquidity supply of Beijing via export credits, grants, and

various types of loans. Second, there is the o fficial discourse of non-interference that enables companies to neglect ethical considerations, andthat makes local regimes comfortable. For the rest, we mentioned thediplomatic charm o ff ensive, the development cooperation and the promo-tion of business-to-business contacts. Notwithstanding this rather skepticbalance, it is crucial to stress that Chinas go-out policy is still very juve-nile. The Coming from half a decade of seclusion, the achievements upuntil now, are not negligible.

Albeit Chinas in uence on Central Africa is still limited compared tothe West, it becomes clear that it will exert a profound in uence on thefuture of the region, as well as on the diplomatic course of other pow-ers. First, it o ff ers the countries new entries to the world economy. Itbecomes an important customer on the formal market, but also links upwith the informal branches to which Chinese brokers are easily accessi-ble. Chinas increasing appetite for resources can be considered as a cat-alyst for informal trade and a new impetus for war economies to go on


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region. Hence, the changing patterns in the global division of labor, inwhich China becomes the world factory, does not automatically implythat peripheral regions such as Central Africa will be lifted on a higher

echelon: their main utility will remain to be the supply of commodities.Thus, complementarity in fact turns out to be a synonym for hierarchy,a hierarchy in which China wants to be on top, controlling trade chan-nels, recourses, etc. Second, the Peoples Republic sets new standardsfor practicing economic diplomacy. Its pragmatism and its obvious con-tempt for ethical standards undermine the leverage of other powers, evenif they are traditionally in a more advantageous position. To start with,Central African elites will have more friends to talk with, and if neces-sary to play o ff against each other. Albeit this has not been the case inthis particular region yet; examples such as Sudan, Iran, Kazakhstan,Uzbekistan, and Myanmar demonstrate what the impact of this kind of quandary can be. For the West, it will become more di fficult to demandcountries to comply with its particular demands vis--vis human rights,good governance, and transparency if another important partner is turn-ing a blind eye to these issues. With the entrance of China, but as wellof other would-be powers, balances of power and spheres of in uencewill gradually modify. Central Africa does not escape the global re-conguration of power. However, it is not likely that the in ux of Chineseinuence will coincide with a trickle down of prosperity and development.

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