As China’s economy grows, so too does its need for energy and resources. In order to fill those needs, the country is quietly signing agreements with many poor African nations – in the process fundamentally altering the patterns of global trade and realigning political allegiances. Charlie Furniss reports.

Jacob Lukaka is optimistic about the future. When he graduates from the University of Nairobi later this year, the 23-year-old Kenyan student will start work for a travel company. Ordinarily, quite a few of his fellow countrymen would have been qualified to do this job; however, in this case, Lukaka is one of only a handful who have the requisite abilities.

The tour operator in question caters for Chinese tourists, and he is one of the few Mandarin-speaking Kenyans. Lukaka knows what a great opportunity he has now. “China is growing very quickly,” he says. “It’s now a driving force in the world, both economically and politically.” And he’s keen to use this to his advantage. “I hope I have the chance to get a masters degree in China, majoring in international relations.”

Lukaka is one of the first 18 graduates of the university’s Confucius Institute for Chinese Studies, which was set up late last year by the governments of China and Kenya to promote cultural exchange between the two countries. With similar departments opening in Zimbabwe and South Africa, the institute is the manifestation of the growing spirit of cooperation between China and Africa.

Indeed, since Beijing hailed a new era of South–South cooperation in 2000, the Chinese have been making their presence felt in Africa. Trade has grown by 400 per cent in four years. In boardrooms all over the continent, Chinese executives are striking billion-pound deals for precious raw materials, while in markets and trade centres, Chinese businessmen are selling everything from clothes, shoes and handbags to mattresses, wardrobes and three-piece suites.

At the same time, construction firms are changing the face of the continent, building everything from roads, bridges and railways to shopping malls, casinos and golf courses. And in schools and hospitals, Chinese professionals are working alongside their African counterparts in an effort to share knowledge and experience. While African leaders have been rolling out the red carpet for their new friends from the East, the media has reported warnings that the flood of cheap Chinese imports is destroying local industries and that Beijing’s courting of rogue regimes is perpetuating corruption and human rights abuses.

However, there is another side to the story, the impact of which looks set to affect us all. The fact is that China’s economic expansion into Africa is triggering fundamental changes in the patterns of global trade, turning on its head accepted wisdom concerning international development and realigning political allegiances. And few people seem to have noticed.

The implications can’t be underestimated – not only upon trade, aid and diplomacy among developing nations, but on the economics,
politics and security of the world as a whole.

Getting resourceful

In January, Beijing announced that 2006 was to be China’s Year of Africa. And so it proved to be. After publishing its official African Policy, the Chinese government visited 19 African countries in the first six months of the year, signing more than 100 bilateral agreements covering politics, economics, trade, infrastructure, culture, education and science and technology.

In August, it resumed diplomatic relations with Chad after a nine-year hiatus sparked when the latter switched its allegiance to Taiwan. And, as Geographical went to press, representatives of 47 African nations were gathering in Beijing for the third ministerial conference of the Forum on China–Africa Cooperation (FOCAC).

These diplomatic moves reflect the rapid growth of economic ties between China and Africa. Since the first FOCAC conference in 2000, the combined value of imports and exports has risen from US$10.4billion (£5.6billion) in 2001 to almost US$40billion in 2005. China is now Africa’s third largest trading partner behind the USA and France, and analysts predict that levels of trade will double to US$80billion in the next two years.

The raw materials needed to fuel China’s rapid industrialisation account for a large proportion of Sino–African trade: copper from Zambia, cobalt from the Democratic Republic of Congo (DRC), manganese from Gabon, iron ore from South Africa and diamonds from Sierra Leone, as well as timber from Equatorial Guinea, Congo–Brazzaville and Cameroon, and cotton from Burkina Faso, Benin and Mali.

China is now the world’s second largest consumer of oil, and in 2004, sourced 30 per cent of its oil imports from sub-Saharan Africa, from Angola, Sudan, Equatorial Guinea, Gabon, Nigeria and Congo-Brazzaville in particular.

Not content with the commodities themselves, state-owned or state-backed Chinese companies have been busy buying up the deposits. In Zambia’s copper belt, for example, they have invested US$170million into the mining sector, and in Zimbabwe, they dominate operations of the world’s second largest platinum reserves, estimated to be worth more than US$500billion. The China National Offshore Oil Company signed Beijing’s biggest oil deal in January this year, paying US$2.3billion for a 45 per cent stake in a Nigerian oilfield in the Niger Delta.

While the West looks on with a touch of jealously and more than a hint of suspicion, African governments are welcoming the Chinese with open arms. During a meeting on Africa–China cooperation at the last World Economic Forum in Switzerland, Mozambique president Armando Guebuza said China’s interest in Africa was “very welcome” and that cooperation had resulted in “dividends for both parties”.

In anticipation of the third FOCAC summit in Beijing, Ghana’s president, John Kuffuor, said that China–Africa relationship had reached an “all-time-high level of cooperation”, adding that “African leaders are going to China to negotiate for more cooperation”.

In 2004, there were more than 650 Chinese state companies working in Africa. Today, there are more than 800. Many are based around construction, building the Supreme Court in Namibia, the State Building in Uganda, a shopping centre in Nigeria and a presidential palace in DRC, and rehabilitating roads, railways and bridges in countries such as Angola and Mozambique. But there are also investments in telecommunications systems, agriculture and manufacturing. And the China Great Wall Industry Corporation, the state-owned spacehardware manufacturer, has even won a contract to build Nigeria’s first satellite.

The Chinese are rewriting the rules of investment risk in Africa, says Martyn Davies, director of the Beijing-funded Centre for Chinese Studies at Stellenbosch University in South Africa. “They have a confidence in the continent that no-one else has,” he says. “And that has to be a good thing. I wish Western companies would engage with the same vigour.”

China’s African Policy sets out a framework for what it calls “a new type of strategic partnership with Africa”, featuring “political equality and mutual trust, economic win–win cooperation and cultural exchange”. As well as improving bilateral relations, the aim is to promote democracy in international relations, says He Wenping, director of the West Asia and African Studies Section of the Chinese Academy of Social Sciences in Beijing. “Both China and Africa are opposed to unilateralism and the use of force,” she says. “China believes that through developing South–South cooperation, we can improve North–South dialogue and establish multilateralism in the world. We also want to strengthen the UN and other multilateral organisations and encourage them to pay more attention to development and anti-poverty concerns.”

In the spirit of South–South cooperation, Beijing has written off US$10.5billion worth of debt from 31 countries since 2000 and created tax exemptions for 190 imports from 25 countries. Its African Human Resources Development Fund has trained more than 10,000 African professionals, and last year, its universities offered more than 15,000 scholarships to students from 52 African countries. At the same time, it has provided in-country technical assistance by sending more than 600 teachers and 15,000 doctors to work alongside their African counterparts.

Using a trick it learnt from the West, China is using its aid and investment to support its own interests. In Mozambique, for example, it has donated and loaned funds to the government for construction projects, including new parliament buildings and a conference centre. Part of the deal is that Chinese companies should be contracted to carry out the work. Beijing has now gone a step further, using aid and investment to help it win contracts for the commodities it so badly needs.

In 2004, for example, China’s national export bank, Eximbank, loaned Angola US$2billion to rebuild its infrastructure. The agreement dictated that not only should Chinese companies be contracted to do 70 per cent of the reconstruction work, but that Angola should supply China with 10,000 barrels of oil a day. So fruitful was this deal that China has since loaned Angola a further US$4billion for reconstruction work, invested US$3billion to build an oil refinery and is now licensed to export 456,000 barrels of oil a day.

In some cases, Chinese companies are even taking on loss-making projects just to secure the deals. With such a strategy, the Chinese are beating their rivals hands down. “The private Western companies just can’t compete with Chinese state-owned enterprises. They don’t have the resources to build a road or power station,” says Davies.

Unsurprisingly, African governments seem to be enjoying dealing with China. Last year, PetroChina signed an oil deal with Nigeria worth 30,000 barrels a day for five years in return for China funding two new power stations. Speaking to Fortune, Nigeria’s oil business development manager said his government had more influence in their negotiations with Chinese companies than they did with their Western counterparts. “They are desperate for our resources,” he said. However, not everyone has been so impressed by China’s modus operandi.

A welcome boost

When China’s NFC Mining Africa paid US$20million for an 85 per cent stake in a Zambian copper mine in 1998, residents of the nearby towns were overjoyed. It had been 11 years since the closure of Chambishi mine had caused widespread unemployment. Renewed
production would provide a welcome boost to the local economy. NFC promised to build a US$7million explosives factory on the premises and donate US$600,000 to equip and refurbish a local hospital. Eight years on, however, Chinese–Zambian relations at the mine have soured. April last year, a huge blast in the explosives factory killed 46 workers. And in July this year, Chinese management shot six miners during violent protests over pay and conditions.

In Lusaka, where the Chinese population has swollen to 30,000 in the past decade, the situation isn’t much better. Businessmen selling cheap imports from their homeland have been accused of destroying local industries. “Wherever you go – the market, the town centre – the Chinese are there and they are putting Zambians out of business,” Joe Mamba, a 27-year-old cobbler told the Telegraph earlier this year. “I make shoes with genuine leather. The Chinese make bad shoes very much cheaper, so people go to them and I have no business.”

Anti-Chinese resentment boiled over in October following the results of Zambia’s presidential elections. Riots broke out and Chinese shops were looted after it became clear that an opposition candidate who had accused Beijing of “exploitation” had lost. Chinese imports have also replaced domestically produced clothing and furniture in Ghana and South Africa and have been blamed for the loss of 350,000 jobs in Nigeria. And in Ethiopia, research has shown that 28 per cent of shoemakers studied have been forced into bankruptcy and 32 per cent to downsize and make redundancies.

To make matters worse, competition from Chinese manufacturers in third-country markets has also hit African industries. Following the
liberalisation of the international textiles trade in 2005, the value of the clothing and textiles from five African countries fell by 17 per cent, causing widespread job losses – 3,000 in Kenya, 12,000 in South Africa and 15,000 in Lesotho. In Swaziland, redundancies in the sector ran to 56 per cent.

One of the main principles of China’s foreign policy is that it won’t interfere in the internal affairs of another country. So when Eximbank
lends a government money, or a Chinese company signs a contract to buy oil or build roads, there are no conditions about good governance or environmental damage.

To their African partners, this comes as a breath of fresh air. But human rights and anticorruption activists are worried. “The Chinese
are supporting some African governments that have very poor records on transparency, good governance and human rights,” says Sarah Wykes, senior campaigner with Global Witness, a British NGO working to expose the links between natural-resource extraction and human-rights violations.

Nowhere is this more clearly illustrated than in Angola – China’s largest supplier of oil. Donors had refused to lend the Angolan
government the funds it needed for reconstruction without commitments to move forward on issues of human rights, good governance and fiscal transparency, explains Wykes. “Then, in 2004, there’s suddenly this US$2billion export credit deal with the Chinese. And the Angolan government no longer needs any concessional loans from the IMF or the World Bank.”

Similarly, many believe that China’s investment in Zimbabwe has allowed Robert Mugabe to continue to bring the country to its
knees. And that its dealings with Sudan caused it to block a UN Security Council resolution in 2004 calling for sanctions in response to the atrocities in Darfur, Sudan. China’s record of arms sales is further proof that its government has little concern other than its own economic gain, say campaigners. Not only has it recently conducted deals with Sudan, Zimbabwe, Burundi and Equatorial Guinea, it sold an estimated US$1billion worth of arms to both Eritrea and Ethiopia before and during the 1998–2000 war between the two countries.

Most coverage of China’s influence in Africa has trodden this line – that Africa is poverty stricken, corrupt and incapable of managing its own affairs properly, and China is greedy and untrustworthy, so the result can only be disaster. And when institutions as ideologically divided as Amnesty International and the Bush administration share this conclusion, it’s difficult to disagree. There is an opinion, however, that our Western/Northern perspective is preventing us from grasping the exact nature of the situation.

There are, however, more wide-ranging implications than the direct impact of China’s trade, aid and investment in Africa that, ultimately, will affect us all.

Rewriting the rulebook

The countries that benefit most from China’s attentions are the commodities exporters. They’re not simply enjoying the growth in
sales to Beijing and all that is associated with it, but have also seen the value of trade increase because China’s huge demand for raw materials has forced up commodities prices on the international market.

This is the same, albeit opposite, effect experienced by the textiles industries in Lesotho, Swaziland and Kenya. Indeed, economists now
believe that the rapid growth of China’s economy and its impact upon third-country markets is reversing one of the fundamental laws of
economics. And, in doing so, it is forcing many countries to reassess their development strategies. “One of the conventional wisdoms of
development strategy has been that because commodity prices have fallen in comparison to the prices of manufactured goods, countries should target their industrial sectors for expansion.

However, China’s accession to global market threatens this logic,” says Raphael Kaplinsky, professor of international development at the Open University and coauthor of a UK Department for International Development report on China’s impact on Africa. China’s competitiveness has caused the price of manufactured goods to fall, Kaplinsky explains, and its demand for certain commodities has caused their value to increase. “Now, economists believe that African countries should focus more on commodities and move out of manufactured goods.”

It’s difficult to overestimate the significance of this trend, he continues. “In terms of development policy and development studies,
this is a major issue. In the space of five years, China has turned on its head one of the unwritten economic rules that have governed
development for decades.”

However, China’s influence in Africa now extends far beyond simple economics. All over the continent – indeed, all over the developing world – governments are looking east for policy advice as well as new trade and investment opportunities. During the 1990s, international development was based around a theory that became known as the Washington Consensus.

Originally devised by the World Bank and the IMF as a means of tackling Latin America’s debt crisis, it was adopted as a model for all development programmes and subsequently applied globally. The results ranged between poor and disastrous. Critics cite the Argentinean economic crisis of 1999–2002 as proof that its policies were flawed. According to Joshua Cooper Ramo, a former foreign editor of Time magazine who now lectures at Tsinghua University in Beijing, it was “a banker’s list of dream conditions for development”
and “had little to do with directly improving peoples’ lives”. His criticism echoes the widely held belief that the Washington Consensus was designed primarily to open up the markets of underdeveloped countries to the multinational companies of North America and Europe.

Ramo believes that China’s success in economic growth and poverty reduction acts as an example to the rest of the world of an alternative path to development. Beijing’s model, he says, “offers a vision for how technological globalisation changes things [in a way] that is far more nuanced and frankly useful than much of what is sent out from Washington or Geneva”.

Based upon more than 100 interviews with key decision makers in China, Ramo has defined a new Beijing Consensus, a model driven by a desire for equitable, peaceful, high-quality growth that favours stability, self determination and, above all, flexibility. Founded upon innovation-led growth, explains Ramo, the Beijing Consensus has turned established development doctrine on its head by favouring ‘bleeding-edge’, rather than ‘trailingedge’, technology. “It suggests that creating highgrowth economic hubs is more important than building sequentially from fundamentals,” he writes in a paper published by the UK-based Foreign Policy Institute. “It is better, in this
world view, to wire some of the country with fibre-optics instead of patiently waiting to wire everything with copper first.

Ramo goes on to explain that Beijing is now trying to make sustainability and equality primary considerations, rather than luxuries. The dynamism of China’s market in the past 25 years has caused the country all manner of problems – pollution, social instability, corruption, mistrust of the government and unemployment, he writes. “Without a change to a more sustainable growth model, China’s economy is likely to splutter out, choked off by a shortage of resources and hampered by corruption and pollution.”

According to Davies, African leaders are now interested in learning from China’s experience. “There is a growing frustration with the Western approach to development,” he says. “Fifty years of aid hasn’t worked, and the G8 is failing to deliver. China, on the other hand, has experienced nine per cent growth a year for more than two decades and raised 400 million people out of poverty – that’s about half the population of Africa. It’s easy to see what the attraction is.”

Power shifts

Such is the support for Beijing in some parts of Africa today, that it not only enjoys an advantage over its Western competitors, in some cases it’s replacing them. After Beijing handed President Jose Eduardo dos Santos’ Angolan government a US$2billion loan in 2004, he refused to allow French oil company Total to renew its licence on a large block, offering it instead to the Chinese Petroleum and Chemical Cooperation.

This shift of power in Africa shouldn’t be underestimated, says Kaplinsky. The implications extend beyond trade and economics. “With the growth in resistance to Western globalisation,” he says, “we now have a series of failed states in East Africa where there is the possibility of al-Qaeda training camps and so on. Now that China has become Sudan’s biggest ally, the USA and European governments will be able to exert little influence upon the government without their support. We’ve seen this already happening with UN sanctions and Darfur.”

The interesting question now is how the West will respond to China’s growing influence in Africa. The hope is that it will be forced to pay more attention to development issues. However, there is evidence to suggest that the USA is so desperate to retain the upper hand in the region that it’s lowering its foreign policy standards in an attempt to beat China at its own game. According to a report published by financial analyst Global Insight, between 2002 and 2004, the US administration increased its annual oil imports from Equatorial Guinea – a country whose human rights record is ranked alongside North Korea and Myanmar – by 120 per cent in order to keep up with the Chinese.

According to historian Niall Ferguson, the growth of ties between China and Africa is indicative of a global shift of power from West to East. “There’s no question that that’s what we’re seeing,” he says. “It’s a long process that you can trace right back to the early 1900s, when Japan became the first Asian power to discover the joys of modernity. But bearing in mind that China was the world’s largest economy in 1700, we are really seeing a global rebalancing.” Where African nations will position themselves in this great global shake-up remainsto be seen. “There’s no doubt that China is offering African nations a great opportunity to take control of their own destinies,” says Davies. “The onus is now on these governments to invest the revenues into their economies to stimulate the growth they so badly need.”