CHINAS NEW ROLE IN AFRICA

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CHINAS NEW ROLE IN AFRICA

• Ian Taylor
• School of International Relations, University of
  St Andrews

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From Chinas New Role in Africa, published by
Lynne Rienner Publishers this year

• Material and ideas based on fieldwork and
  interviews I conducted in
• Botswana, Cape Verde, Eritrea, Ethiopia
• The Gambia, Mauritius, Namibia
• Nigeria, Senegal, Sierra Leone
• South Africa, Uganda, Zambia, Zimbabwe
• China (Beijing and Hong Kong)
• London and Washington, DC.

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CONTENTS OF BOOK

• 1. CHINAS AFRICA POLICY IN CONTEXT
• 2. OIL DIPLOMACY
• 3. THE IMPACT OF CHEAP CHINESE GOODS
• 4. THE ISSUE OF HUMAN RIGHTS
• 5. ARMS SALES
• 6. PEACEKEEPING IN AFRICA
• 7. WHAT DOES IT ALL MEAN?

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OIL
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• Oil dominates the profile of Africas exports to
  China (around 70)
• Chinas dependence on imported oil rose to 47 of
  annual demand, an
• increase of 4.1 percent since 2005 - expected to
  rise to around 60 by
• 2020

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• FIVE KEY WAYS BEIJING SEEKS TO LESSEN PRESSURE
• Increased energy conservation (this will only
  moderate growth in consumption)
• Fuel switchingreducing the dependence on
  imported fuels by switching to renewable energy
  and coal, of which China has large domestic
  reserves (but the environment)
• Increase in domestic oil production by seeking
  out new resources and exploiting existing ones
  more efficiently (there have been new discoveries
  within China but not enough to satisfy demand).

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• Beijing encourages national oil companies (NOCs)
  to increase purchases in international oil
  markets
• Beijing facilitates acquisition of oil reserves
  abroad through sweetener deals with foreign
  governments
• However, liberalization has resulted in a shift
  of
• power away from Beijing toward NOCs
• The ability by Beijing to tell the NOCs what to
  do is
• limited

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• Question Are particular ventures a result of
• Beijing directing an NOC or the NOC seeking
• diplomatic assistance once it has identified a
• target oilfield?
• China lacks a central ministerial agency
• overseeing the oil industry

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• PROBLEM
• Beijing has as yet been incapable of enforcing
• a geographical division of labour on the main
• NOCs
• Result competition and overlap between
• China National Petroleum Corporation (CNPC)
• China Petroleum Chemical Corporation (Sinopec)
• China National Offshore Oil Company (CNOOC)

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Example

• CNPC and China Petroleum and Chemical Corporation
  (Sinopec) competed against each other for a
  pipeline project in Sudan.

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• The NOCs in fact view one another as rivals,
• competing not only for oil and gas assets, but
  also
• for political advantage.
• The more high-quality assets a company acquires,
• the more likely it is to obtain diplomatic and
• financial support from Beijing for its subsequent
• investments.
• especially true for CNOOC, which does not have as
  much political influence as CNPC and Sinopec

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• This inter-firm competition is normal in the
  capitalist West, obviously, but puts a different
  take on China Inc. and its oil strategy in
  Africa.

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• Problem the NOCs have the reputation to let the
• Chinese government take the dangerous
  consequences
• engendered by their foreign-oil and gas quest
• Thus commercial interests of Chinese NOCs can
  risk
• damaging Chinese governments diplomacy and
• international reputation overseas
• Same as some Western oil companies behave
• But government control over the actions of
  Chinese NOCs
• in Africa not be as easy as many seem to think in
  the West

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IMPACT OF CHINESE IMPORTS
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• One of the more contentious issues in
  Sino-African relations
•  
• Cheap manufactured goods blamed for decline in
  African exportsparticularly of clothing and
  textiles
•  
• African imports from China 712 jump from 895m
  in 1996 to 7.3bn in 2005
•  
• Many African observers see this as the cause of
  decline of Africas manufacturing sector
•  
• Africa is becoming a dumping ground while
  African companies are dying - quote from an
  African newspaper

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• INTERNATIONAL DYNAMICS
• African Growth and Opportunity Act (AGOA) (May
  2000)
• offered incentives for African countries to open
  their
• economies and build free markets
• Modifications made permitting least developed
  African
• countries to employ materials from the cheapest
  contractors
• worldwide
•  
• Effect was that global apparel industry took
  advantage of
• Africas unexploited quota access to EU and US
  via quota
• hopping

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Quota hopping

• various foreign companies, mostly Asian, set
  themselves up in
• Africa as a means to evade the obstacles placed
  on them by the
• Multi-Fibre Agreement
• The MFA allocated export quotas to low-cost
  developing countries
• and limited amount of imports for states whose
  domestic textile
• industries were negatively affected
• ? targeted at imports from Asia and particularly
  China
• Triangular production networks thus developed
  whereby Asian
• firms made products in Africa for export to
  Western markets

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• Result African exports of textiles and clothing
  to US boomed
• In 2000, apparel exports to US 776 m by 2004
  1,782 m - increase of 130
• HOWEVER, this was artificial - vast majority of
  African clothing being exported to US was made
  using foreign fabrics
• Lesotho 98
• Madagascar 92
• Kenya 98
• Mauritius 64
• Swaziland 98
• South Africa 68
• Namibia 96
• Malawi 95
• Botswana 99

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• Since China is now being held
• responsible for post-MFA collapse
• of Africas clothing industry, we should
• note that a sizeable proportion of the
• fabric in question was actually Chinese

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CLOTHINGS BIG BANG

• MFA expired January 1, 2005, affecting 87 of US
  quotas and 73
• of EUs
• Market share enjoyed by African exporters now
  taken over by
• Chinese manufacturers - also, many Chinese
  companies that had
• relocated to Africa during the MFA moved back to
  China
• African textile and clothing manufacturers
  exports to US fell by 16
• from 2004-05
• US imports from China went up by 44
• EU imports from China went up by 78

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IS AFRICA COMPETITIVE?

• Very difficult to assess whether African textiles
  could compete
• with Chinese imports because the playing field is
  not level
•  
• African manufacturers have to contend with
  chronic energy
• and transport issues
•  
• Example Nigeria has worlds 10th largest reserve
  of gas but
• generates only 3,000 mw of electricity, even
  though domestic
• demand is 6,000 mw
•  
• ? Cost of doing business high and products
  expensive
•  

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• World Bank if Zambian and Kenyan power
• systems were of same quality as the Chinese
• the cost savings for Zambian and Kenyan
• firms would be equivalent to their entire wage
• bills
•  
• South Africa has been losing clothing jobs
• since acceding to the WTO - the industry was
• highly protected during apartheid but is
• basically uncompetitive today

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The popular image
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• THE REALITY
• Africas industries have been in decline for a
  long time
•  
• Between 1975-2000, Ghanas textile output feel by
  50 and employment in the sector by 80
•  
• In Zambia, employment in the clothing and textile
  sector fell from 25,000 in 1980s to below 10,000
  in 2002
•  
• In Kenya, number of large-scale garment
  manufacturers dropped from 110 in 1980s to 55 in
  2000s
•  

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• Africas textile exporting success in mid-2000s
  was an artificial boom for an industry that lost
  its competitive edge long ago
• Only factor supporting the growth of much of
  Africas export-oriented clothing sector
  preferential access to overseas markets
• When these privileges were abolished, Africas
  success in the clothing and textile sectors
  evaporated

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• Poor organizational procedures, low levels of
  skill, and inadequate management
• Ghanaian manufacturers of textiles have to face
  the imposition of an illegal 20 duty by Côte
  dIvoire, a transit tax collected at Benin and
  extortion by Nigerian authorities
• Poor packaging, poor finishing of products
  (quality/conformity to standards), inability of
  some manufacturers to meet export orders on
  schedule also come into play

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• World Bank estimates that the cost of doing
  business in
• Africa is 2040 above that for other developing
  regions
• due to
• Unpredictable property rights
• Ineffective/corrupt judiciary systems
• policy uncertainty
• unfair competition from politically connected
  companies, which results in a few large firms
  holding very dominant market shares

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• Finished goods from China are arriving into
  African markets with few domestic competitors,
  wiped out not only by low prices of Chinese
  imports but by African conditions
• BUT the Chinese are being blamed for African
  governments failings

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• Policymakers in Beijing will have to address
  negative impressions
•  
• Big challenge increasing Sinophobic resentment
  vs. Chinese traders whose products dominate local
  African markets

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KEY POINTS

• Two main points stand out
• 1. Degree of irrational hostility to China in
  Africa. 
• 2. It is up to African leaders to manage their
  relations with China to benefit their own
  economies and citizens

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IRRATIONAL HOSTILITY

• Chinese trade with Africa has become, in many
  ways,
• normalized, which is to say diverse, and
  involving
• multiple actors, rather than state directed and
  controlled
• Yet people still talk of China in Africa, as if
  all actions
• by Chinese actors represents official Chinese
  foreign policy

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• Much of Africas manufacturing industry collapsed
  long
• ago, well before Chinese imports appeared on the
  scene
• Besides, it is not only African producers who
  have had
• to adjust to competition
• between 1995 and 2002, more than 15 million
  factory jobs, representing 15 of the total
  manufacturing workforce, were lost in China

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• It is possible that some Chinese exports may
  block avenues for Africas diversification away
  from its traditional exports
• If Africa is to escape its dependent relationship
  on the global economy and move on from being
  simply an exporter of primary commodities, it
  needs to start manufacturing
• But domestic problems figure more significantly
  in African manufacturers plight

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• Plus, Africans themselves import a huge amount of
  Chinese-made products - go to Yiwu!
• Those that are shoddy or counterfeit should be
  regulated and controlled by African governments
• But these corrupt governments instead prefer to
  blame China.

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• Beijings engagement with Africa is grounded in
  pragmatism à it is up to each African state to
  decide how and where it takes shape
• Chinas abandonment of ideology for economic
  growth gives Africa greater room to
  manoeuvrebut Africas elites must do so wisely,
  with an eye toward mutual benefit
• In some countries, they will
• In others, however, predatory elites at the apex
  of neopatrimonial regimes, unconcerned with
  promoting development, will forfeit the chance to
  make the most of renewed Chinese interest in
  Africa

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THE END