China in Africa: How the Lion Should Tame the Dragon

Those who fault China for exploiting Africa's natural resources should point the finger instead at the continent's failing leadership.
Many Western policymakers, politicians, and business leaders have viewed China’s engagement in Africa with vituperation, accusing China of extracting Africa’s natural resources on the cheap and exploiting weak political institutions for economic gain while leaving Africans with the crumbs. However, the only thing China exploits is the improvidence of some of Africa’s political elite. Blaming China for Africa’s ills would be naïve. China’s trade relationship with Africa goes beyond the scope of the natural resource extraction industries. Some non-resource rich African nations are huge beneficiaries of Chinese trade relations, and African states would be prudent to adopt Chinese investment policies within their own borders.China became Africa’s largest individual trading partner in 2011, with trade rising from US$129.6 billion in 2010 to US$160 billion in 2011. However, in many cases African leaders have failed to leverage their natural resources (which include oil, precious metals, copper, coal, uranium, cobalt, and diamonds) to promote Africa’s economic development and growth. While China’s human rights record and business practices in Africa have never been exceptional or transparent, China’s actions in Africa, are, for the most part, within the “rules” of the environment created by Africa’s leadership. Focusing on Chinese trade and investment practices takes attention away from African political elites that have a choice between short-term profit over long-term development for their countries. In many cases, these elites have chosen short-term gain, enabling Chinese firms to extract Africa’s resources with limited accountability to Africa’s political, economic, environmental, and social structures.Sudan, South Sudan, and Angola, three of China’s biggest African trading partners, provide a comprehensive view of how China has used Africa’s weak political institutions and leadership to its advantage. The Chinese government is often blamed for these outcomes, but the political leaders of the three African countries are the ones truly at fault.China has been active in the Sudan since the early 1960s. The China National Petroleum Company (CNPC) has been extracting oil and investing heavily in energy infrastructure to secure a steady supply of energy resources and has close linkages to the Sudanese government in Khartoum. Seventy-nine percent of Sudanese oil exports head to Chinese ports. Yet the leaders of Sudan and South Sudan have been incompetent in taking advantage of this relationship—and the subsequent oil revenue—to foster sustainable and effective economic growth.In Angola, China’s top supplier of crude oil, the Chinese government has structured “oil for aid” deals that have allowed the Angolan government flexibility in determining the use of aid funds. Although these funds are earmarked for developmental projects in the healthcare, educational, and infrastructure sectors, pinpointing the exact location and use of the aid is impossible. This lack of transparency fosters an environment in which the intended developmental impact must be seriously questioned.In fact, resource-rich economies have only received 37 percent of China’s FDI on the continent. The majority of China’s investments have been in non-resource rich economies, such as Tanzania, Ethiopia and Rwanda. These countries have benefited from China’s focus on sectors like telecommunications and manufacturing. This is a growing trend. China’s own manufacturing base is becoming more innovative and wages are increasing, forcing Chinese firms to seek new manufacturing locations and production centers around the world. As China’s investment portfolio on the continent continues to diversify and expand, African leaders should take advantage of new opportunities and revenue sources for their states.In forming these economic relationships, African leaders would do well to take a leaf from China’s book. The Chinese government makes it extremely difficult for foreigners to wholly own businesses in China, ensuring that local firms grow and benefit from exposure to international investors. The simplest way for a foreign enterprise to gain equity exposure to the Chinese market is through a joint venture with a Chinese firm or partner. There are, of course, exceptions to the rule, but the main goal of Chinese policymakers is for Chinese companies to benefit from these relationships. Similarly, African firms need to form international partnerships that are advantageous for Africa, allowing it to develop skilled human capital, provide access to knowledge transfer, and capture technical know-how—all crucial for growth on the continent.China’s hunger for African resources is massive. Without access to these resources, it is unlikely that China can sustain its current economic growth rates. In short, China needs Africa. African leaders, if they are genuine in their desire for Africa’s development, should use China’s reliance on Africa’s resources and leverage their position to negotiate beneficial social and economic agreements with their trading partners. The lion should tame the dragon by mimicking on its own turf how the dragon conducts business with foreign investors.

Image courtesy Jason Pier in DC via Flickr