Studie Chinas Engagement in Afrika

Chinas Engagement in Africa
Opportunities and Risks for Development

Africa Department, Economic Affairs
About the authors:
Dr. Helmut Asche is Professor of African Politics, Economics and Society at the Institute for African Studies of the
University of Leipzig
Dr. Margot Schller works at the GIGA Institute of Asian Studies, Hamburg
Preface
Te authors would like to thank BMZ Division 320, Divisions 202, 301, 305, 315 and 322 and numerous colleagues
at GTZ and Kf W for their constructive criticism and information. Te strong backing for the study provided by
GTZ organisational unit 1002 (Gerald Schmitt, Georg Schfer) was key to the breadth and depth of treatment of
the topic.
Bernt Berger, Claudia Mller and Stefanie Rudolf (GIGA Institute of Asian Studies, Hamburg) and Henriette
Dose, Susanne Schmutzer, Katrin Schulze (Institute for African Studies, Leipzig) and Anett Shabani (GTZ) were
all involved in preparatory work and research.
Value judgements and conclusions are the sole responsibility of the authors. Tey do not necessarily reect the
position of GTZ.
A long version (in German) supplemented by further topics is available online at:
www.gtz.de/de/dokumente/gtz2008-de-china-afrika-lang.pdf
www.uni-leipzig/afrikanistik
www.giga-hamburg.de
CHINA S ENGAGEMENT IN AFRICA: OPPORTUNITIES AND RISKS FOR DEVELOPMENT
China's rapidly expanding engagement in Africa in the elds of development cooperation, trade, investment and
migration has attracted great attention and given rise to mixed reactions at international level. As there are still
hardly any reliable data and only few empirical investigations on hand, one of the central questions is whether Chi-
na is eectively contributing to sustainable development in Africa; or, rather, is China's primary concern to gain
access to Africas raw materials and to open up new markets?
Tis study, conducted by GTZ on behalf of the German Ministry for Economic Cooperation and Development
(BMZ), investigates this question and uses the latest data and information as the basis for analysing the economic,
social and environmental impacts resulting from current Chinese engagement in Africa. Surprisingly for many,
the authors conclude that Chinese interventions as a whole are having a positive eect on Africas development
prospects. Tey say that China is making important contributions to the expansion of infrastructure, to tapping
hitherto unexploited resources and to integrating African economies more eectively into global value chains. Te
most critical issue, however, concerns compliance with international environmental and social standards by Chine-
se companies operating in Africa. Tere is evidence to suggest that Chinese rms are involved in the illegal export
of tropical timber from Africa and are thus playing a part in the disappearance of this resource. Similar criticism
applies to compliance with labour and social standards in Chinese production facilities in Africa, as illustrated by
the examples of Chinese copper mines in Zambia and Chinese textile factories in Mauritius. Tey go on to point
out, however, that since China wants to be an internationally recognised global player, there is scope for inuence
and change based on empirically well-founded criticism. Te authors therefore recommend constant monitoring
and analysis of Chinese companies business practices in Africa.
Te Chinese government holds that its partnership with Africa is a partnership of equals with benets for both
sides. China does not intervene in the internal aairs of its partners and does not apply conditionalities. Chinese
development cooperation in Africa mostly receives high praise from the African side for its eectiveness and speed
of implementation; from a Western perspective it is often reminiscent of approaches and concepts from the 1970s.
Today, China is expressing interest in the strategic and technical know-how of Western donors and implementing
agencies. Tis might serve as the basis for joint learning on how to provide more eective and better coordinated
support for sustainable development in Africa.
To date, African states, whether collectively or individually, have not developed strategies of their own that under-
pin their cooperation with China and other emerging-country donors. Chinas interest in Africa, however, oers
a variety of opportunities that could be better utilised by the African side. German and European development
cooperation can play a part in making the most of this potential. For certain thematic areas, and under well dened
conditions, this can also include tripartite cooperation with China in Africa.
I hope you nd this study both interesting and rewarding.
Andreas Proksch
Director General, Africa Department, Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH
FOREWORD
4
CONTENTS
0 Executive summary and recommendations for action 10
0.1 Description of the situation 10
0.2 Recommendations for action 13
1 Introduction: Chinas objectives, motives and strategic interests in Africa 14
2 Analysis of Sino-African cooperation 16
2.1 Political relations 16
2.2 Economic cooperation 18
2.2.1 Chinas foreign trade policy 18
2.2.2 Economic signicance of Sino-African trade 18
2.2.3 Te structure of merchandise trade 21
2.2.4 Chinas oil imports and oil diplomacy 22
2.2.5 Development of Chinas exports to Africa 25
2.2.6 Chinese investment in Africa 26
2.2.7 Chinese immigration in Africa 30
2.3 Chinas development cooperation with Africa 32
2.3.1 Organisation of Chinese development cooperation 32
2.3.2 Instruments and procedures of Chinese development cooperation 35
2.3.2.1 Te Angola Mode: a new, old form of cooperation 36
2.3.3 Scope and relative importance of Chinese development cooperation in Africa 37
2.3.4 Priority areas of Chinese development cooperation in Africa 43
2.4 Other areas of cooperation 44
2.5 Summary 45
3 Opportunities and risks for Africa 46
3.1 Economic development and poverty reduction 46
3.1.1 Causes and eects 46
3.1.2 Terms of Trade 48
3.1.3 Inuence on individual sectors 49
3.1.4 Te textile and clothing sector 50
3.1.5 Import growth the other side of the coin 53
3.1.6 Te impact of Chinese direct investment on competition 54
3.1.7 Impact on poverty has China generated pro-poor growth in Africa? 55
3.1.8 Creation of sustainable agricultural and industrial structures 56
3.1.9 A mixed economy en route to Africa 58
3.2 Corporate governance and national governance 59
3.2.1 Labour standards and social standards 60
3.2.2 Environmental standards the Chinese timber industry in Africa 60
3.2.3 Transparency in extractive industries (oil & gas, mining) 65
3.2.4 Dutch Disease and macroeconomic management 67
3.3 Regional governance processes 68
3.3.1 NEPAD 68
5
3.3.2 Examples of critical cases and their eect on the wider region 68
3.3.3 Africas second liberation? 71
4 Options for global structural and development policy 74
4.1 Principles 74
4.2 Human rights and non-interference 75
4.3 Consequences for development cooperation 75
4.4 Economic policy options the Chinese magnifying glass 78
4.5 Recommendations for the multilateral level (G8/EU) 81
4.6 Recommendations for the bilateral level (Germany) 82
4.7 Concluding remarks 84
5 Bibliography 86
6
LIST OF ABBREVIATIONS
ADB Asian Development Bank
AECF Africa Enterprise Challenge Fund
Af DB African Development Bank
AGOA African Growth and Opportunity Act
AFLEG Africa Forest Law Enforcement and Governance
ANC African National Congress
APF African Partnership Forum
APRM African Peer Review Mechanism
AU African Union
AVE Auenhandelsverband des deutschen Einzelhandels
BBC British Broadcasting Corporation
BIEC Bureau for International Economic Cooperation (China)
BLNS countries Botswana, Lesotho, Namibia, Swaziland
BMZ Federal Ministry for Economic Cooperation and Development
BRIC countries Brazil, Russia, India, China
CADF China-Africa Development Fund
CBFP Congo Basin Forest Partnership
CCECC China Civil Engineering Construction Corporation
CCPIT China Council for the Promotion of International Trade
CCS Centre for Chinese Studies
CDB China Development Bank
CEMAC Communaut Economique et Montaire dAfrique Centrale
CMIA Cotton Made in Africa
CNOOC China National Oshore Oil Corporation
CNPC China National Petroleum Corporation
COMIFAC Commission des Forts d'Afrique Centrale
CPC Communist Party of China
CPECC China Petroleum Engineering and Construction Corporation
CPIA Country Policy and Institutional Assessment
CSR Corporate Social Responsibility
DAC Development Assistance Committee (OECD)
DAFC Department for Aid to Foreign Countries (China)
DC Development Cooperation
DEG Deutsche Investitions- und Entwicklungsgesellschaft
DFEC Department for Foreign Economic Cooperation (China)
Df ID Department for International Development (UK)
DIE Deutsches Institut fr Entwicklungspolitik
DPL Development Policy Loan
DSF Debt Sustainability Framework
DWAA Department of West Asian and African Aairs
7
EAC East African Community
EBA Everything But Arms
ECDPM European Centre for Development Policy Management
EIA Environmental Investigation Agency
EIB European Investment Bank
EITI Extractive Industries Transparency Initiative
EPA Economic Partnership Agreement
EXIM Export-Import Bank of China
FC Financial Cooperation
FCFA Franc de la Communaut Franaise-Africaine
FDI Foreign Direct Investment
FES Friedrich Ebert Stiftung (a German political foundation)
FLEGT Forest Law Enforcement Governance and Trade
FOCAC Forum on China-Africa Cooperation
FSC Forest Stewardship Council
GBS General Budget Support
GDP Gross Domestic Product
GIGA German Institute of Global and Area Studies
GSP General System of Preferences
HIPC Heavily Indebted Poor Countries
IDS Institute for Development Studies (UK)
IEA International Energy Agency
IFC International Finance Corporation (World Bank)
IFI International Financial Institutions
IMET International Military Education and Training (USA)
IMF International Monetary Fund
IOC Indian Ocean Commission
IPRCC International Poverty Reduction Center in China
Kf W Kreditanstalt fr Wiederauf bau
LDC Least Developed Countries
MDC Movement for Democratic Change (Zimbabwe)
MDG Millennium Development Goals
MDRI Multilateral Debt Relief Initiative
MFA Multi-Fibre Arrangement
MFN Most Favoured Nation
MOF Ministry of Finance (China)
MOFA Ministry of Foreign Aairs (China)
MOFCOM Ministry of Commerce (China)
NDRC National Development and Reform Commission (China)
NEITI Nigerian Extractive Industries Transparency Initiative
8
LIST OF ABBREVIATIONS
NEPAD New Partnership for Africa's Development
NGO Non-Governmental Organisation
NTB Non-Tari Barrier
ODA O cial Development Assistance
OECD Organisation for Economic Cooperation and Development
PJF Programme-Oriented Joint Financing (DC)
PPP Public Private Partnership
PRC Peoples Republic of China
PRS(P) Poverty Reduction Strategy (Papers)
PSD Private Sector Development
PWYP Publish What You Pay
REC Regional Economic Communities
RoO Rules of Origin
SADC Southern African Development Community
SITC Standard International Trade Classication
SMP Sta Monitored Programme (IMF)
SPA Strategic Partnership with Africa
SSA Sub-Saharan Africa
STAP Short-Term Action Plans (NEPAD)
SWP Stiftung Wissenschaft und Politik (Germany)
TC Technical Cooperation
UN COMTRADE United Nations Commodity Trade Statistics Database
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNECA United Nations Economic Commission for Africa
UNMIS United Nations Mission in the Sudan
USITC US International Trade Commission
VC Value Chain
VPA Voluntary Partnership Agreements
WB World Bank
WBAATI World Bank Africa Asia Trade Information
WEO World Economic Outlook
WTO World Trade Organization
WWF World Wide Fund for Nature
XNA Xinhua News Agency
Amounts quoted in $ in the text are always US dollars.
9
10
0.1. DESCRIPTION OF THE SITUATION
Te Peoples Republic of Chinas (PRC) interest in obtaining supplies of energy and raw materials is the driving
force behind Chinas rapid economic expansion on the African continent which is accompanied by a wholes series
of political initiatives. Te exponential growth in foreign trade, direct investment and development cooperation
(DC) between China and Africa since the end of the 1990s has shocked the Western public.
Although the block of Western industrialised countries as a whole will remain Africas most important trading
partners in the medium term and will retain a key position as foreign investors, China is gaining ground quickly
and is thus increasing the intensity of global competition, including in Africa. Since 1998 foreign trade between the
African countries and China has grown tenfold, reaching an all-time high of $55 billion in 2006. Realistic forecasts
assume that foreign trade will continue to grow, to about $100 billion by 2010.
Almost three-quarters of all of Chinas imports from the region are accounted for by crude oil. In mid-2006,
China obtained one third of its oil imports from Africa. China has built very close economic ties with virtually all
signicant oil-producing countries in Africa. A number of them still have large untapped reserves, even though
Chinese companies are rarely granted access to the best oil elds. Chinas oil diplomacy has been highly successful
in terms of diversifying its supplier countries, but its tolerance of human rights violations and poor governance in
these countries has increasingly attracted criticism from Western industrialised countries.
Direct investment by Chinese state-owned energy and commodity corporations as well as private enterprises in
the manufacturing industry, the construction sector and the services sector has risen rapidly over recent years.
Government support programmes with low-cost loans reduce market development costs for Chinese companies,
thus distorting the market. State banks, currently the Export-Import Bank of China (EXIM) but in future also
the China Development Bank (CDB), play a key role in the expansion of enterprises and nancing development
cooperation. Tere are fears that project nancing by Western development banks and private commercial banks
could be crowded out.
Chinese development cooperation has increased markedly in terms of both volume and the number of countries
supported since the Tiananmen incident. Te Chinese state-owned EXIM Bank in particular oers interesting al-
ternatives to International Financial Institutions (IFI) and bilateral Western loans. Because of limited transparency,
however, the quantity and quality of cooperation cannot be compared on an international basis and are di cult to
determine conclusively. In 2006, the Chinese government announced ambitious targets for expanding DC with a
doubling of nancial inputs and an increase in low-interest loans through the banks. Te priority areas for DC are
infrastructure, health care, agriculture and the education sector.
0 EXECUTIVE SUMMARY AND RECOMMENDATIONS FOR ACTION
11
Chinas advance in Africa follows a characteristic basic pattern (see box).

Four pillars four characteristics
The four pillars on which the upsurge in Chinese-African relations rests are the intensi cation of
a) trade, b) investment, c) development cooperation, and d) immigration. In combination, these
exhibit the following four characteristics:
1. A distinct underlying sectoral pattern with (a) the focus on securing resources (oil, mining,
timber, agricultural commodities) plus (b) a large variety of economic interests in almost all
African industries and countries.
2. Seamless complementarity of trade, direct investment, DC tied to supplies from China, and
immigration or the deployment of migrant workers.
3. Coordinated effort by Chinese state-owned corporations as trailblazers for private enterprises.
4. Huge deployment of state nancial promotion instruments with uid boundaries between
preferential and commercial loans.
It is this broad sectoral approach and the systematic economic linkages that give the Chinese economic oensive its
strength. Te impact on growth and poverty of the various factors of the China boom is ambiguous and di cult
to analyse; on the whole it is presumably positive for Africa, but there are major regional and sectoral dierences.
Chinese engagement in Africas textile and clothing sector has a double-edged eect. Whereas Chinese exports
to African countries have greatly increased, despite the dismantling of trade barriers these countries have not been
able to consolidate their position in global value creation in this sector on a sustainable footing. Te textile sector,
leather goods and footwear manufacture and other consumer goods industries in Africa are acutely threatened by
both preference erosion in the EU/USA and Chinese imports to Africa. Even Chinese companies in Africa are suf-
fering economically. Tis presents challenges for the trade and structural policies of African governments and
their partners in industrialised countries.
Negative impacts of the Chinese presence are also discernible in the construction sector. Admittedly, Chinese
enterprises have contributed to swift improvements in infrastructure and hence to economic growth in Africa,
generally acting in the context of projects negotiated at an intergovernmental level. Tere is a risk, however, of
domestic construction companies being crowded out, and there are sizable shortfalls in the transfer of know-how
and employment of local workers.
China is criticised internationally for wide-ranging violations of anti-corruption, environmental, labour and so-
cial standards in Africa. In particular well-documented illegal logging by Chinese companies in various coun-
tries has predictably critical implications for tropical forests in Africa and hence also for global climate change.
Tis overexploitation of African forests is probably by far the most serious harmful eect on the environment aris-
12
0 EXECUTIVE SUMMARY AND RECOMMENDATIONS FOR ACTION
ing from the involvement of Chinese companies in Africa. In general, however, Chinese violations of Corporate
Social Responsibility (CSR) standards are not comprehensively documented. Tis makes the promotion of trans-
parency in oil and mining revenues, particularly in the context of the Extractive Industries Transparency Initia-
tive (EITI), all the more signicant; Chinas limited willingness to enter into cooperation within the framework of
the EITI must be utilised. Supporting African governments in their management of the eects of Dutch Disease
is equally important.
China is willing to become more closely integrated into the NEPAD process. If this is successful, however, it is
hardly likely to occur without a shift of emphasis in the NEPAD agenda upgrading infrastructure problems and
downgrading governance issues. China is criticised for undermining improvements of governance through its in-
volvement in Angola, Sudan and Zimbabwe. Te criticism is basically justied, but it must not be used to conceal
crucial weaknesses in Western policy vis--vis Angola, Zimbabwe and other African countries.
Chinas unconditional loans and development assistance are mostly welcomed in Africa as they are often regarded as a
second liberation from Western dictates. Te Organisation for Economic Cooperation and Development
(OECD) member countries are thus faced with the challenge of both improving the presentation of their Africa
policy and further enhancing its content and forms. Growing contradictions in the public perception of China in
Africa oer an opportunity for rational, unprejudiced dialogue.
Faced with the choice between a confrontational strategy and a more dialogue-oriented approach, the study argues
clearly in favour of a critical, yet constructive integration of China into various processes and structures of a com-
mon Africa policy. Among the potential platforms for constructive exchange, possible forums within the trilateral
EU-China-Africa dialogue are ranked particularly high. Te Federal Republic of Germany can be assigned the role
of intermediary in key areas on account of its relative lack of political and economic self-interest in Africa.
13
0.2. RECOMMENDATIONS FOR ACTION
In bilateral and multilateral cooperation with China, interfaces emerge in relation to Chinas Africa policy, for
which a series of recommendations for action are presented at general, multilateral and bilateral levels (see
Section 4). Te main areas of focus are directed at the elds of trade policy, industrial policy and development
cooperation. Teir common denominator is:
1. Greater eorts to build the capacities of African partners to master the Chinese challenge.
2. Patient endeavours to integrate the Chinese partners into joint coordination and consultation processes.
3. Systematic elimination of political shortcomings that place the West in a di cult position in the trilateral
debate with China and Africa, above all in the eld of trade and agricultural policy and in dealing with regimes in
Africa suering from poor governance.
4. Improvement of basic information sources.
14
Te Peoples Republic of Chinas political and economic engagement in Africa has a long tradition, and is closely
associated with the political self-image and international claim to leadership of the Communist Party of China
(CPC). As long ago as 1955, at the Asian-African Conference in Bandung, China presented its Five Principles of
Mutual Coexistence that became the foundation of its foreign policy vis--vis non-communist developing coun-
tries. Tese principles are 1.) respect for territorial integrity; 2.) rejection of aggression; 3.) non-interference in the
internal aairs of other countries; 4.) equality and mutual benet; and 5.) peaceful coexistence. Te same principles
remain valid for China fty years on.
Trough political and economic cooperation with Africa, the Chinese government secures support for its own
political objectives in an international context. African countries exert a signicant inuence on voting in multilat-
eral organisations such as the United Nations (UN), as the continent constitutes one of the most important voting
blocks with its 53 states. Te Peoples Republic considers this group of countries to be natural allies, for instance, in
the matter of reforming the UN system. Te fact that a central component of this reform, the revision of the mem-
bership of the Security Council, failed ultimately because of the African voting block underlines this importance.
Alliances with African countries were also important for implementing the One-China policy directed against
political recognition of Taiwan. Only four African countries now recognise Taiwan, after China succeeded in split-
ting Chad away from this block a diplomatic masterstroke in view of Chinas close relations with Sudan, with
which Chad is eectively at war.
1
Similarly, Malawi followed the example of Chad on 27.12.2007. In practice, the
possibility that African countries could rebel and recognise Taiwan limits the political freedom of action of the
PRC at least with respect to those countries that are not particularly dependent on China.
Chinas attempts to recruit South-South partners in Africa for a community of interests in global issues such as the
UN reform, World Trade Organization (WTO) negotiations and reform, global governance processes, etc. have
intensied in recent years. In the context of multilateral organisations, the Chinese government strives to assume
a leading role as the biggest developing country, but in the representation of its foreign policy it emphasises its
equal ranking with African developing countries. Tis is why the Chinese government has always responded touch-
ily to accusations of neo-colonial behaviour in Africa.
It was only in the late 1990s that a decisive change to Chinas traditional agenda in Africa began to take eect:
economic interests in Africa were largely aorded a status equal to that of Chinas political motives. It is the
economic oensive that draws much international attention to the China-Africa question today partly because
this in turn has repercussions for the geopolitical factors. China's growing demand for raw materials and energy
is leading to Africa now being comprehensively drawn into global strategies to secure resources by Chinese state-
owned enterprises (Friedberg 2006: 22) that are barely able to gain a foothold in the Middle East, except in Iran
(Davies, M. 2007).
1

For a critical review of the Taiwan policy see: Eisenman/Kurlantzick 2006.
1 INTRODUCTION:
CHINAS OBJECTIVES, MOTIVES AND STRATEGIC INTERESTS IN AFRICA
15
In their focus on access to raw materials, Chinese economic interests are comparable to those of Western industr-
ialised countries. However, state-owned corporations receive direct subsidies or low-cost loans for their long-term
involvement in the commodity and energy sector in African countries. In 2005, imports of crude oil from Africa
accounted for 25% (mid-2006: 32%) of all Chinese crude oil imports. A further economic motive is to secure agri-
cultural commodities such as cotton, timber, tobacco etc. for the Chinese market.
As Chinese foreign trade has undergone liberalisation and diversication in recent years, hundreds of private Chi-
nese companies have also become active in Africa. Tey use these countries to both sell and produce. Although the
private companies operate at their own risk, their activities, too, receive state support through special facilities in
capital transactions and the provision of information about local markets. Te close dovetailing of the worlds of
politics and business in China allows targeted accords to be arranged between the bureaucracy and companies and
a joint approach in foreign markets. Te impression of an overall strategy for economic development of Africa is
reinforced by the fact that the Chinese government formulates clear industrial-policy objectives and employs a mix
of market-economy and interventionist instruments in order to achieve them (Schller/Turner 2005, 2006).
16
2.1 POLITICAL RELATIONS
When Chinese economic reform began in 1978, the political leadership initially concentrated on a swift economic
catching-up process, and attached only relatively little importance to Africa in comparison with Western industrial-
ised countries and Japan. Tis comparatively low status was reected in the rather sporadic visits by high-ranking
politicians to Africa, a stagnating volume of trade, and stagnating or even declining development assistance inputs.
Te Tiananmen incident led to a crisis in foreign relations with the West, which fundamentally criticised Chinas un-
derstanding of human rights and democracy. In the subsequent reappraisal of foreign relations, developing countries,
and in particular those in Africa, were accorded a high status. Tese countries had largely sympathised with the ap-
proach adopted by the Chinese political leadership towards its own population and expressed solidarity with China
against its political isolation. In the subsequent years, the Chinese government rewarded those African countries that
supported China with attractive development projects, and granted Africa a central position in the programme of
diplomatic visits by high-ranking Chinese politicians (Taylor 1998: 444-452). It is apparent that Beijing continues
to attach a signicant foreign policy role to the African continent. Tis observation is based on the fact that Africa is
only the second region after the EU to which China has ever dedicated a separate strategy paper (MOFA 2006).
In terms of content, Chinese foreign policy unites a multiplicity of interests in the eld of trade and development pol-
icy and interlinks various tactical and strategic considerations. Chinas foreign-policy concept of the path of peace-
ful development emphasises the need for mutual advantage in South-South relations, which led to a specic form of
diplomacy. Chinas foreign policy towards African countries appears to be based on three central objectives:
1. Promotion of its own development and hence of its internal stability.
2. Improvement of access to the international stage and to international markets through a complex diplomatic
strategy; in this context, the intention is to allay the fears associated with the rise of China felt by both estab-
lished and weak actors.
3. In order to achieve the above two objectives, Chinas foreign policy aligns both, foreign-policy and develop-
ment-policy strategies.
In any analysis, this close intertwining often makes it di cult to draw a clear distinction between foreign and devel-
opment policy objectives as well as foreign-trade objectives. In respect of Africa, the Chinese approach comprises:
1. Public diplomacy initiatives such as the construction of public facilities (hospitals or sports stadiums) and
support in the ght against communicable diseases such as malaria and HIV; these initiatives have an impor-
tant inuence on the public perception of China in Africa.
2. Creation of economic incentives in the form of low or completely dismantled trade barriers, in order to oer
Africa export opportunities beyond the traditional trade in commodities.
3. Establishment of a transport infrastructure in order to facilitate access to raw materials and, at the same time,
promote the local economy.
4. Granting of loans, often interest-free, and other development assistance inputs to African governments without
political conditions.
5. Use of multilateral forums in order to achieve Chinese objectives.
2 ANALYSIS OF SINO-AFRICAN COOPERATION
17
One particularly important instrument in this regard is the Forum on China-Africa Cooperation (FOCAC), an
institutional framework or joint platform for relations with African countries. In the course of the three FOCAC
meetings since 2000, China succeeded in bringing all African states around one table except for Burkina Faso,
Swaziland, Malawi, Te Gambia and Sao Tom & Principe, which, at the time, recognised Taiwan but were invited
as observers. At the second FOCAC summit, a plan of action was agreed, aimed at strengthening regional com-
munities such as the African Union and NEPAD (New Partnership for Africas Development).
Chinas policy of non-interference in other countries internal aairs is much criticised by Western states. It is
argued that China cooperates with countries that no longer receive assistance from the traditional donor countries
but which instead are subject to political pressure to reform. It is said that this support for countries with poor gov-
ernance leads to the weakening of civil societies and the subversion of the development-policy concept of national
ownership. Indeed, with the exception of growing pressure on the Sudanese government with regard to the Darfur
question, to date China has exerted no direct inuence on anti-reform governments to resolve conicts or open
their political system.
However, neither has China attempted to create a direct sphere of inuence or satellite states on the African conti-
nent, as is, for example, the case in Myanmar. Contrary to the sweeping claim that China pursues neo-colonialism
in Africa, no governments apart perhaps from Zimbabwe are in a position of such direct dependence on Beijing.
It is also important to distinguish between Chinas direct state involvement and the rapidly growing presence of
private and parastatal companies that operate on a prot-oriented basis without development-policy concerns, and
which are plainly no longer fully controlled by the Chinese central government.
18
2.2 ECONOMIC COOPERATION
For Chinese business, trading with Africa or investing to produce there are not seen as mutually exclusive alterna-
tives. Interaction between trade and investment is not equally pronounced in all sectors, but basically, all available
analyses agree that the upsurge in bilateral economic relations can only be explained by diverse complementarity of
trade, direct investment and development assistance on the Chinese side. Tis study attempts to bring together all
these key complementarities.
2.2.1 CHINAS FOREIGN TRADE POLICY
In addition to securing supplies of energy and raw materials, Chinese foreign trade policy is geared towards opening
new markets for Chinese export goods. Diversifying foreign trade ows has been one of the declared aims of Chinese
foreign trade policy since Chinas accession to the WTO at the end of 2001, and also includes expanding bilateral
foreign trade with Africa. China has agreed most-favoured-nation (MFN) clauses in foreign trade with 41 African
countries. Talks on a free-trade agreement are currently being held with South Africa, which accounts for about a
quarter of Chinas trade with Africa. Te Peoples Republic of China, like the EU or the USA, has its own preference
system for African partner countries. For example, 28 African Least Developed Countries (LDCs) were granted
exemption from customs duties for 190 products (Broadman 2006: 170; Vice Minister Wei Jianguo, 13.11.2006). By
the end of 2007, the number of duty-free product lines had already grown to 454 (China Daily, 14.11.2007). In 2005,
the volume of products imported from Africa under the preference system totalled $380 million, a rise of 88% over
2004. In the rst half of 2006, imports within the framework of the preference system rose by 57% compared with
the equivalent period in the previous year, reaching a level of $250 million (Vice Minister, ibid.).
2.2.2 ECONOMIC SIGNIFICANCE OF SINO-AFRICAN TRADE
Despite high growth rates in Chinese trade with Africa, the region is still insignicant for China relative to its total
volume of trade: in 2005, the proportion of foreign trade accounted for by Africa was only 2.8% (China Statistical
Yearbook 2006: 740). For the African countries themselves, by comparison, foreign trade with China now plays a key
role: In terms of total exports and imports, China has become one of Africas most important trading partners after
the USA since the middle of the decade, and in 2007 is likely to have overtaken all the former European colonial
powers. Already by 2006, China had become the largest exporter to Africa (see Figure 1). Te aggressive course of
negotiations adopted by the EU for new free trade agreements (EPA) with Africa can also be read against this back-
ground.
If the EU is counted as a whole, however, it still lies well ahead at the top of the table, and the Western industrialised
countries taken together are by far the most important trading partners. Of the total volume of foreign trade by
African countries in 1999, the industrialised countries accounted for a share of 66.3%, and China just 4.8% (IMF
2006a: 14-15). By 2006, Chinas share had still only risen to 8.7%, while that of the Western industrialised countries
had declined to 60.5% (IMF 2007).
2

Within Asia, China continued to be the most important trading partner for
Africa in 2006 and 2007.
2

Figures for 1999 and 2006 in this case according to original IMF data for Africa, not including Egypt and Libya.
19
35000
30000
25000
20000
15000
10000
5000
0
-5000
1998 2000
Export Import Balance
2001 2002 2003 2004 2005 2006
Figure 1: Africas most important trading partners in 2006
Figure 2: PR Chinas foreign trade with Africa, 1998-2006 (million US$)
Source: Own calculations, compiled on the basis of International Monetary Fund (2007), including Egypt and Libya.
Source: Compiled on the basis of IMF (2007), including Egypt and Libya.
Even if the level is still low compared with the Western industrialised countries, foreign trade between China and Af-
rica has been developing at headlong speed since the end of the 1990s. Te rates of growth are unprecedented. Starting
from a relatively low volume of $5.5 billion in 1998, the value of foreign trade had grown tenfold by 2006, to $55.3
billion (IMF 2007; China Commerce Yearbook 2007: 88: $55.464 billion). Over the past three years, China also re-
gistered a decit in trade with Africa, which rose from $1.9 billion in 2004 to $2.2 billion in 2006 (see Figure 2).
20
Tis exponential development is likely to have continued in 2007. Te target gure of $100 billion for Sino-African
trade in 2010 appears to be realistic. In most years, Chinas exports to Africa have grown faster than exports to the
Western industrialised countries. Over the past three years this applies likewise to Chinas imports from African
countries. Te rates of growth of imports from Africa during these years were considerably higher than those from
Western industrialised countries as a whole and also from Europe in particular (IMF 2006a: 136).
Te regional structure of foreign trade between China and African developing countries reveils a focus on a small
number of countries (see Figure 3). Tese include Angola, Congo-Brazzaville, Sudan and Equatorial Guinea, along-
side countries with a relatively high level of economic development such as South Africa, Egypt, Algeria and
Morocco. Among the oil-exporting countries, Angola moved yet further ahead of the rest: Its share in Chinas
total volume of imports from Africa reached 38% in 2006 (previous year: 32.9%), while the share that Sudan had
attained in 2005 (13.1%) was almost halved. Tis shift is not likely to have been permanent, however.
Te focus on just a few oil-producing countries can, though, create a misleading impression. It hides Chinas eco-
nomic omnipresence in Africa, and thus Chinas considerable importance for smaller African countries, whose
own volume of trade is low by international standards. It also masks Chinas relative dependence on the supply of
particular strategic raw materials from countries that do not appear in the charts reproduced above.
Figure 3: Chinas most important trading partners in Africa in 2006 (million US$)
Note: Te chart relates to Chinas imports from Africa and Chinas exports to Africa; only countries with which the volume of trade exceeds a total value
of $1 billion are included. Source: IMF (2007).
21
Figure 4: Structure of supplies from Africa to China in 2006
Source: China Commerce Yearbook 2007: 615.
2.2.3 THE STRUCTURE OF MERCHANDISE TRADE
An analysis of the structure of foreign trade between China and the countries of Africa does not reveal a picture
of South-South cooperation but rather the typical characteristics of trade between industrialised and developing
countries. Almost without exception, China exports industrial goods to Africa, while supplies from Africa consist
to a large extent of mineral commodities and agricultural products. Te most important export product for Afri-
can countries trading with China is crude oil, which accounted for an average of 62.2% of Chinas total imports
from these countries during the period 2002-2004 (Broadman 2006: 80-81; 122). Statistics issued by China on
the structure of supplies from Africa in 2006 indicate the proportion taken by crude oil to be as high as 74%.
Agricultural commodities such as cotton and timber accounted for 3% and 2% respectively, iron ore for 3%, and
magnesium and copper ore for 1% each (see Figure 4). A strategic raw material such as cobalt, however, appears to
be insignicant in statistics such as these. Te bulk of these commodities originate from a small number of coun-
tries. Alongside the oil-exporting countries, South Africa is the most important supplier of iron ores and diamonds,
Zimbabwe the biggest supplier of tobacco, and Cameroon the main supplier of timber (Broadman 2006: 80-81;
122), although other sources put this as being Gabon.
22
2.2.4 CHINAS OIL IMPORTS AND OIL DIPLOMACY
China has been a net importer of oil since 1993, and since 2003 has been the second-largest importer on the world
market after the USA. Africa is becoming more and more important as a supplier for both China and the USA. Te
political consequences of this intersection of interests are examined in Section 3. Chinese engagement in the oil
sector is essentially driven by three big corporations: China National Petroleum Corporation (CNPC), Sinopec and
China National Oshore Oil Corporation (CNOOC). In addition, certain other companies are active in Africa:
PetroChina (a CNPC subsidiary), BGP International, and China Petroleum Engineering and Construction Co.
(CPECC). Following restructuring, the three large state-owned enterprises also have private shareholders; the rst
two are vertically integrated along the whole value chain and are under the control of the State Energy Administra-
tion. Teir expansion not only has the short-term goal of securing oil and gas imports, but in the longer term also
aims to secure Chinas position as a global player in the international oil business (Taylor 2006b). Consequently,
one can detect a systematic interrelationship between oil imports and investments in the oil sector: 15% of all
Chinese oil imports are equity oil, in other words oil from sources with Chinese equity participation. A similar ap-
proach can be observed in mining. China not only purchases commodities, it also invests. A more detailed account
of the underlying patterns of the Chinese energy security strategy and of the characteristics of the African oil sector
that are particularly attractive to China as a global latecomer is given in Tjnneland et al. (2006: 2729).
With regard to the supply of crude oil, by the middle of the decade the lions share 47% came from Angola.
A quarter of the imports originated from Sudan, another 13% from the Democratic Republic of Congo, 9% from
Equatorial Guinea, and the remaining 3% from Nigeria (Broadman 2006: 122). In the meantime Chinese energy
companies are active in more than twenty countries in various ways: through direct participation in the develop-
ment of deposits, through long-term supply contracts, and through participation by oil-rich countries in Chinese
downstream activities (oil rening and trading in oil) (Steinhilber 2006: 85). How active Chinese companies have
been in Africa in recent years is apparent from Table 1.
23
Year Country Activity Volume
2002 Algeria Sinopec concludes agreement on development of Zarzaitine oil eld $525
million
2003 Algeria CNPC purchases several oil re neries; agreement on development
of two elds
$350
million.
2003 Algeria PetroChina concludes agreement on joint development of oil resour-
ces and building of re neries
n.s.
2004 Gabon Sinopec concludes contract for supply of crude oil to China n.s.
2005 Angola Sinopec takes over oil eld from Shell; enters into joint venture with
Sonangol (75% share)
n.s.
2005 Angola Loan to Angola for supplies of oil $2 billion
2006 Angola Loan from 2005 is increased >$1 billion
2006 Nigeria PetroChina concludes agreement for the supply of 30,000 barrels of
crude oil per day
n.s.
2006 Nigeria CNOOC wishes to acquire shares in Nigerian oil and natural gas
business
$2.3 billion
2006 Kenya CNOOC concludes agreement on exploration of offshore oil n.s.
2006 Nigeria Acquisition of licences for oil extraction $4 billion
2006 Angola Sinopec acquires 40% share in oil block $1.1 billion
2006 DR Congo Agreement on development of oil resources n.s.
2006 Namibia Start of oil extraction in northern Namibia; construction of an oil
re nery
n.s.
2006 Ethiopia Zhongyuan Petroleum Company begins oil extraction in western
Ethiopia
n.s.
2006 Equatorial
Guinea
CNOOC concludes agreement on joint oil extraction (5-year term) n.s.
Table 1: Recent activities by Chinese oil companies in Africa
Sources: Compiled on the basis of data from Taylor 2006b: 944-945; BBC, 19.2.2006; Tjnneland et al. 2006: 35.
In this way China has been able to reduce its heavy dependence on supplies from Indonesia, Yemen and Oman
since the early 1990s, and diversify its oil imports. African countries are attractive to Chinese oil companies for
a variety of reasons. Angola, Algeria, Libya, Nigeria and Sudan, for example, ve of the six main producers of
natural gas and crude oil in Africa, all have large reserves that have not yet been fully developed. Tey constitute
an alternative to the Gulf states as traditional oil producers because, in contrast with the latter, they are still
interested in Chinese technical and nancial cooperation for exploration and extraction. If Western companies
pull out of any of these countries on account of the political situation, Chinese companies consequently face
less competition. Tis is plainly a major reason for Sudan being integrated into Chinas global resource strategy.
Chinese oil corporations grant such countries low-interest loans to develop oil elds, often tied to deliveries of
Chinese goods and services. Tey thus oer an alternative outlet to countries which have di culties accessing the
international nancial market. In addition, state-owned oil corporations pursue alliances with local companies.
24
Te rapid expansion of Chinese companies in Africas oil sector is accompanied by Western scepticism, or indeed
open criticism. It is argued that Chinas behaviour contradicts principles that have been internationally pursued for
a number of years, particularly by the EITI. Tis initiative promotes increased transparency and rationality in con-
tract drafting and revenue administration in the oil sector. Angola is considered a prime example of where patron-
age and corruption have resulted in the loss of some $4 billion of oil revenues, or 10% of GDP (Taylor 2006b: 946).
Such issues are not addressed by the Chinese government as it operates according to the foreign-policy principle
of non-intervention in internal aairs. In order to consolidate its position in Angola, the Chinese government was
willing to grant credits amounting to several billions for reconstruction of the country, almost without conditions.
As the International Monetary Fund (IMF) had tied its credits, among other things, to stringent conditions con-
cerning the transparency of oil revenues, the government of Angola decided in favour of the Chinese oer.
Chinas oil policy in Africa is also criticised for the pricing and risk management of state-owned oil corporations,
which potentially play a part in crowding out Western companies. Chinese state-owned enterprises in the com-
modities and energy sector, not hampered by short-term prot expectations, can take greater risks than others and
live with a distorted cost structure because of the subsidies they receive. Looking at the global ownership structure
of oil and gas reserves, however, the criticism is admissible to only a limited extent. 80-85% of global oil reserves
and 60% of the worlds reserves of natural gas are in the possession of state-owned or parastatal enterprises, whose
policies are likewise determined not solely by economic factors but also by political considerations and inuence
from national political bodies (Umbach 2007: 41).
An often-cited example of the undermining of universal policy principles such as the observance of human rights,
democracy, transparency and good governance (Umbach 2007: 51) is Sudan, where the battle for control of oil
resources was a key factor in the long-running civil war in the South that cost the lives of hundreds of thousands
of people. Chinese state-owned corporations were able to acquire holdings in the Sudanese energy sector after the
USA had broken o economic relations with Sudan in 1997, and both European and Canadian companies sold o
their shares under pressure from human rights groups in 2003. Te example of Sudan shows that Chinese state-
owned corporations, being late starters, inevitably behave in an opportunistic manner in the global race for energy
resources; because of their rather weak market position, they also invest in risky and marginal resources. To do
this, they use preferential loans without policy conditions, while at the same time they try to avoid international
confrontation (in this case the UN Resolutions relating to Sudan) (Steinhilber 2006: 85-86). Te Wests current
room for manoeuvre and consequences for development policy are examined in more detail in Section 3.2.3.
25
Algeria
7%
Benin
5%
Morocco
6%
Nigeria
11%
South Africa
22% Egypt
11%
Sudan
5%
Rest
33%
2.2.5 DEVELOPMENT OF CHINAS EXPORTS TO AFRICA
Te most important market for China in 2006 was South Africa, which received almost one quarter of Chinese de-
liveries to Africa. Egypt and Nigeria come second in the league table of Chinese exports to Africa (see Figure 5). In
general, South Africa, North Africa and the biggest oil-producing countries dominate the list of Chinas customers.
Te nal destination of the persistently high volume of exports to the small country of Benin, with its long border
to Nigeria, is a matter of speculation.
Figure 5: Most important African markets for Chinese exports (2006)
Source: Own calculations based on IMF (2007).
Te commodity structure of Chinas exports to African countries is fairly dierentiated in comparison to the ex-
ports from these countries including South Africa to China, which are slanted very heavily in favour of raw
materials and energy products. According to Chinese statistics, the largest proportion of exports in 2006 was made
up of mechanical and electronic products, with second place being occupied by textiles, followed by high-tech
products and clothing (see Figure 6).
26
Figure 6: Imports to Africa from China in 2006 (selection of the ten main product groups)
Source: China Commerce Yearbook 2007: 615.
2.2.6 CHINESE INVESTMENT IN AFRICA
Africa is just as marginalised in the worldwide distribution of foreign direct investment (FDI) at about 2.2%,
which is less than half the share it reached in the 1970s (4.6%) as it is in global trade. In absolute terms, the situ-
ation changed signicantly in 2005, however. Te UNCTAD World Investment Report states that the volume of
all foreign direct investment owing to Africa was $31 billion, a dramatic rise compared to $18 billion in 2004. In
the years prior to that, FDI was often in single gures. Te bulk of the investment was concentrated on extracting
raw materials, in particular on oil and gas projects. Te share attributed to mergers and acquisitions was $10.5 bil-
lion, although in this case, too, it can be assumed that a large proportion was earmarked for the extractive industry
(UNCTAD 2006: 40-41).
Still, the majority of foreign investors in Africa come from Europe, primarily the United Kingdom (cumulative
value by the end of 2003 approximately $30 billion), Germany ($5.5 billion) and France ($4.4 billion), along with
the USA ($19 billion). Te biggest Asian investor countries, India and Malaysia, are well behind, at $1.968 billion
and $1.880 billion respectively (both 2004).
3

UNCTAD puts the stock of Chinese FDI at only $1.595 billion at
the end of 2005 (UN 2007: 19). Te gures given by the Chinese government are far higher: it puts the amount of
investment in Africa by the end of 2005 at $6.27 billion (Vice Minister Wei Jianguo, 13.11.2006), and by the end
of 2006 at as much as $11.7 billion (Xinhua 25.4.2007, as quoted in Mayer 2007: 21). According to these gures,
China would already be the third-largest investor in Africa. Other estimates quoted in the press are actually several
times higher still, reaching as much as $30 billion. According to Chinese statistics, up to the end of 2003 most
Chinese direct investment owed to Zambia (cumulative value: $134 million), South Africa ($127 million), Egypt
($56.3 million) and Nigeria ($56.2 million) (China Commerce Yearbook 2004). In this case, too, the individual
gures from UNCTAD dier, even if there is no discernible pattern; UNCTAD lists Sudan as being the frontrun-
ner in Chinese investment at the end of 2005, with a total of $351.5 million.
3

Nominally, Singapore is positioned at the top of the UNCTAD statistics, although this is shown as a single item comprising a $3.5 billion investment
in Mauritius (2003).
27
In relation to total Chinese foreign investment, Africas share is still very low. By the end of 2003 the percent-
age of FDI stocks was 2%; current investments in Africa accounted for 5% in 2003 (Broadman 2006: 97). In so
far as these gures, which reect pure FDI, are adhered to, Africas relative importance for China is no greater
than for any other investor; indeed, according to UNCTADs gures it would be low even in absolute terms. Te
discrepancy with respect to the o cially disseminated China euphoria in Africa and also the various numerical
discrepancies stated above can be explained by the vague demarcation lines between FDI, development coopera-
tion and Chinas investment and trade credits. Tis is where we see the limitations of attempting to view categories
such as foreign direct investment (the precise statistical denition of which has long been a matter of debate for
the IMF and UNCTAD in any case) as entities separate from others, because the mixing of instruments is inherent
to the Chinese system: the apparent confusion is systematic.
According to the most recent, provisional data, the total inow of foreign direct investment into Africa in 2007
remained at the record historic high of $35.6 billion (previous year: $35.5 billion; UNCTAD 2008). Te main
recipient countries in 2007 were:
Egypt ($10.2 billion, previous year: $10.0 billion)
Morocco ($5.2 billion, previous year: $2.9 billion)
South Africa ($5.0 billion, previous year: -$0.3 billion)
Sudan ($2.2 billion, previous year: $3.5 billion)
Tunisia ($1.0 billion, previous year: $3.3 billion)
In 2006, Nigeria also registered major foreign investments, amounting to $5.4 billion (UNCTAD 2007a). One
country still missing from this list as a recipient of considerable direct investment is Angola. It can be assumed that
rising Chinese investment has continued to contribute to the overall FDI trend. Crucial for Chinese FDI is the fact
that it is distributed more evenly between the African countries than investment originating from elsewhere, which
is very heavily focused on North Africa, South Africa, and oil.
Tere is no established typology for the determinants of foreign investment, despite a long debate in international
economics. In empirical research various catalogues are used, which frequently mix investors intrinsic motivations
with assessments of the economic environment. Te greatest intersection with other suggestions concerning the
fundamental motives is probably the UNCTAD typology (e.g. UNCTAD 2006: Chapter IV), in which a distinc-
tion is drawn between four major levels of motivation:
1. Market development (market-seeking motives), which in our view has to be further dierentiated between
investment (a) solely for the support of trade and services and (b) for production in the country of invest-
ment.
2. Raising of e ciency (e ciency-seeking motives), largely for the purpose of saving costs with existing technol-
ogy, in developing countries often in order to make use of a cheaper workforce.
3. Securing supplies of energy and commodities (resource-seeking motives), mainly projects in the oil industry
and mining.
4. Securing of strategic advantages (somewhat curiously called created-asset-seeking motives by UNCTAD) in
28
order to safeguard access to new technologies, to established brand names or other strategic assets.
Within this typology, the motivation of Chinese investors in Africa at rst glance does not dier much from that of
other foreign companies. Te development of natural resources is at the forefront, with lower priority being given to
market development in North Africa and South Africa, while classic production outsourcing to save costs is of any
signicance only in North Africa, particularly in Tunisia, but not in Sub-Saharan Africa. Te number of Chinese
companies active in Africa is estimated by various sources to be at least 700-800, in some cases as many as 1,000.
According to information from EXIM, 100 of the roughly 800 companies that have invested in Africa are medium-
sized to large state-owned corporations, while the remainder are private companies (MOFCOM 2007a).
Although the biggest Chinese investment has been in commodities, to an increasing extent investment has been
directed at other industries such as clothing, agriculture, electricity generation, road building, tourism and tele-
communications etc. (Broadman 2006: 12). Despite the fact that many authors see this diversication as being a
relatively recent turn of events, Table 2 shows that it is not a new phenomenon. In terms of the number of invest-
ment projects, manufacturing industry has always been the most important sector; even with the resource boom of
the present decade and its large-scale oil and mining projects, this will not have changed.
Table 2: Sectoral distribution of Chinas FDI inows to Africa (1979-2000)
Souce: UNCTAD, based on information provided by MOFCOM.
Taken from UN 2007: 56. Te gures relate to the number of project approvals.
Sector/industry Number of projects Investment value (Millions of dollars)
Agriculture 22 48
Resource extraction 44 188
Manufacturing 230 315
Machinery 20 16
Home appliences 36 25
Light industry 82 87
Textiles 58 102
Other manufacturing 34 86
Services 200 125
Others 3 6
Total 499 681
29
Te sector spread, and especially the numerous involvements in light manufacturing industries in Africa, indicate
that Chinese investors assessment of what makes for promising local markets is plainly quite dierent from that of
Western companies. Transnational corporations in the West have not changed their view that Sub-Saharan Africa
remains the least interesting investment region (UNCTAD 2007a), and market development has a role to play in
South Africa and Nigeria at best. In contrast, Chinese FDI is aimed at the whole width of the African market, and
furthermore it assigns a positive value not only to its current state but also its future potential, as well as extending
the concept of important resources to include Africas agricultural and shery resources. Investment is therefore
increasingly to be found in areas such as soya processing and shrimp farming (Kaplinsky/McCormick/Morris
2006: 18-19).
Not all transitional forms can be easily slotted among the four investment motives described above; for example,
production abroad (here: in Africa) for the purpose of acceeding to major export markets can be understood both as
market seeking and as securing a strategic commercial advantage. In fact, the integration of African locations into
Chinese companies global value chains in recent years has primarily extended to the textile and clothing industry,
in which investors from the Peoples Republic and Taiwan have strategically exploited trade preferences under the
US African Growth and Opportunity Act in the whole of Southern Africa (for details see also Section 3.1.4).
An investigation into the investment behaviour of 150 Chinese companies around the world made it plain that
Africa was seen as the second most important investment destination after Asia. Tus 18% of the total of 249
investment projects by these companies applied to African countries. Companies in manufacturing industry ac-
counted for the largest proportion, at 45%, followed by companies in the construction and services sector (35%)
and commodity-based companies (agriculture, crude oil, natural gas and mining) (20%). Te promotion of their
investment by the Chinese government was seen as an important factor for the move to Africa, especially as the
investment environment was rated also by Chinese companies as being poorer in Africa than in other regions, with
regard to the associated political risks (Broadman 2006: 99).
Similar ndings were obtained by another survey of Chinese companies that was conducted by the Asia Pacic
Foundation of Canada and the China Council for the Promotion of International Trade (CCPIT) between May
and June 2005. Of the 296 companies, 14% had invested abroad. Te volume of their commitments amounted to
about 73% of all Chinese foreign direct investment by the end of 2004. Of the total of 78 foreign investments, 9%
were made in Africa, although of those companies that were active abroad, 17 planned to make an investment in
Africa in the following twelve months and 41 companies in the following two to ve years (Asia Pacic Foundation
of Canada and CCPIT 2005).
EXIM has taken on an important role with respect to foreign expansion, as it provides both export credits and
credits for investment and construction projects and international guarantees. To an increasing extent, too, credits
from the state-owned China Development Bank (CDB) are used to promote the Going Global strategy of Chinese
public enterprises; this bank, likewise, is among the politically oriented banks. Loans are to be granted, above all,
to companies operating in the eld of energy and natural resources. Until now the CDB has mainly promoted do-
mestic projects in the electricity and transport sectors (Schller 2007).
30
2.2.7 CHINESE IMMIGRATION IN AFRICA
Te expansion of foreign trade, investment and aid is accompanied by a rapidly growing number of Chinese people
in Africa. In particular these are Chinese workers who are deployed in infrastructure projects or are involved in fac-
tory start-ups and trade agencies in Africa. Tere have been limited waves of immigration by Chinese to Africa in
the past. At the end of the 19th century, for example, workers were recruited for the gold mines in Transvaal at the
instigation of the British (Airault 2006); there is now a large community of South-African-born Chinese (SABC).
In contrast with the situation just a decade ago, however, Chinese have now settled in virtually all countries of
Africa. Tere are no denite gures available, only unconrmed individual sets of data that have been compiled in
the table below.
Table 3: Chinese immigration to Africa (selected countries)
Source: Authors own compilation using data from media, Chinese and German embassies, GTZ information and CCS 2007.
Countries People
Algeria 20,000
Angola 20,000 40,000
Ethiopia 3,000 10,000
Gabon 1,000 3,000
Guinea 7,500
Cameroon 300,000
Madagascar 15,000
Mauritius 30,000
Namibia 8 40,000
Nigeria 100,000
Zambia
Lusaka only:
2,300 < 80,000
30,000
South Africa
low estimate:
high estimate:
100,000 160,000
> 300,000
Togo 3,000
Uganda 5,000 8,000
Zimbabwe 9,000 10,000
31
Anecdotal evidence of growing Chinese presence in all corners of the continent is overwhelming. Various reports
indicate that Chinese migrants are moving into wholesaling and the retail trade, and more generally into the infor-
mal sector, in a whole series of countries (Tjnneland et al. 2006: 12, Annex 1 and p. 45; Betke 2007; McGovern
2006: 98 for Guinea). Country data from Chinese embassies regularly state the numerical lower limit of Chinese
nationals who have settled in African countries for the longer term, as the diplomatic missions no longer have any
control over immigration (Airault op.cit.). In contrast, local and international media indicate the upper limit, quot-
ing very high numbers, partly to paint a picture of various threat scenarios. However, the fact that 750,000 Chinese
have settled in Africa over the past six or seven years is conrmed by a relatively recent report from Xinhua dating
from August 2007, which the New York Times quoted on 18.8.2007. Estimates vary in a ratio of 1:10, just as much
as those for Chinese investment in Africa.
Taking all the information together, the gure from Xinhua does not appear to be exaggerated. Extrapolating on
the basis of the high rates of growth, we assume here for the rst time that Chinese migration to Africa has prob-
ably already passed the one million mark.
4
Tis makes it one of the most signicant migratory movements to Africa
since the end of the colonial period. By way of comparison: the number of French people living in Africa declined
from 327,000 to 258,000 between 1980 and 2004 (Smith 2005: 39). Tis immigration has all the hallmarks of
socially driven mass emigration, with family members following initial emigrants, snowball eects and extreme
language barriers.
5

Historically, Indian immigration is much older, and presently runs to even higher numbers in absolute terms. It
is clearly concentrated in four countries: South Africa (1,200,000), Mauritius, where Indians form the majority of
the population (716,000), Kenya (102,500) and Tanzania (90,000) (Biallas/Knauer 2006: 4). Compared with this,
Chinese immigration plainly encompasses the whole of Africa, and according to the rst serious studies its charac-
teristics are dierent. While by far the majority of immigrants of Indian origin assume the nationality of their host
country, at least Chinese entrepreneurs mostly remain foreign nationals. Both groups rely on economic networks
of supplier and customer relationships dened along ethnic lines, but they integrate into the respective national
economies entirely dierently (Broadman 2006; divergent from this Airault 2006 and other sources there). Despite
all the problems, the massive immigration illustrates the social depth and permanence of the Chinese engagement
in Africa.
4

A local source estimates that, if all the waves of immigration since the start of the 20th century are added together, the Chinese diaspora in the Republic
of South Africa alone has reached this number (CCS 2007: 117)
5

A further lack of clarity is added to the estimates of the true sizes of the families residing in Africa due to the fact that members of the Chinese diaspora
prefer to send their children to secondary schools in China.
32
2.3 CHINAS DEVELOPMENT COOPERATION WITH AFRICA
Tere is a long tradition to Chinas development cooperation with countries in Africa. Te guidelines for Chinese
development cooperation formulated in 1964 by the countrys premier at the time, Zhou Enlai, continue to apply
to this day, and are reected in the principles of the new Africa strategy presented in 2006.
2.3.1 ORGANISATION OF CHINESE DEVELOPMENT COOPERATION
Te Chinese central government, with the State Council at its head, constitutes the highest decision-making level,
which also has a key role to play in development cooperation. Te National Development and Reform Commission
(NDRC) sets guidelines for the policies of the ministries concerned, i.e. for the Ministries of Commerce, Finance
and Foreign Aairs: MOFCOM, MOF and MOFA.
6
Te Commission is a macroeconomic management agency
under the State Council which formulates all policies for economic and social development. However, the true
extent of the coordination of development policy and programmes in particular has still not become fully clear to
foreign observers (Manning 2007: 2). Te process of Chinese development cooperation is highly complex in detail,
as a multiplicity of institutions are involved in decision-making and implementation. A general overview of the
relevant actors in Chinese development cooperation is presented in Figure 7.
7
Te most important ministry for implementing DC is MOFCOM, which is responsible for both incoming and
outgoing development-assistance funds and for bilateral development policy. In contrast with the situation in Ger-
many, the Ministry of Commerce is therefore simultaneously also responsible for DC. Te overlap between these
functions reects the integrated approach of Chinese DC. Within MOFCOM there are various departments with
particular development cooperation responsibilities:
Te Department for Aid to Foreign Countries (DAFC) is responsible for Chinas external assistance. According
to information from the Ministry, it is responsible for formulating and implementing Chinas development-policy
plans, issuing grants and interest-free loans from the government, and signing contractual agreements with
foreign DC partners.
Te Bureau for International Economic Cooperation (BIEC) is situated at the same hierarchical level; it manages the
implementation of projects, for example organising training courses and the provision of materials for develop-
ment projects. Tis department is also responsible for the administration of technical cooperation (TC), interest-
free loans and grants.
Te Department for Foreign Economic Cooperation (DFEC) is responsible for the Chinese companies in Africa
that implement the projects.
Finally there are also geographical units within MOFCOM, including the Department of West Asian and Afri-
can Aairs (DWAA), which has an advisory role.
MOFCOM is also responsible for the granting of concessionary credits, although these are processed via EXIM.
6

It is probably the case that structures of the CPC are also involved in the formulation of Chinas Africa policy in the broader sense, as outlined by
Sautman/Hairong, in: Wild/Mepham 2006, p. 55.
7

A similar description of the structure and problems of Chinese development cooperation is given by Davies, P. 2007, particularly Section 5.
33
Policy coordination takes place between MOFCOM and MOFA, but also with other ministries that are involved
in development cooperation.
Figure 7: Chinese Institutions for development cooperation in Africa
Source: Shabani 2008 based on Manning 2007, Davies, P. 2007, Chan 2007 and Gill/Reilley 2007
Te Ministry of Foreign Aairs, MOFA, plays a part in formulating policy; for example it drafted Chinas Africa
policy. Like MOFCOM, it has geographical units, including two Africa-specic departments (West Asia and North
Africa, Sub-Saharan Africa). MOFA is responsible for diplomatic contacts and for coordinating specic policies
within the framework of bilateral undertakings. In the context of DC, MOFA tends more to act as an adviser to
MOFCOM.
Agreement on the budget is reached between MOFCOM (Department for Aid to Foreign Countries) and MOF,
after the State Council has determined what proportion of the national budget is to be assigned to development
assistance. Multilateral contributions to international nancial institutions likewise fall within the sphere of re-
sponsibility of MOF.
Te content of each individual country programme is agreed upon in a dialogue with the Chinese embassies in
the respective countries (Manning 2007: 3). Te embassies and the Economic and Commercial Counsellors (ECC)
O ce a unit belonging to MOFCOM and administratively attached to the embassies monitor implementation
of the projects and report on progress to the Chinese government. For important projects a separate representation
should be in place in the country (Ai Ping 1999, in Tjnneland 2006: 10). In view of their current presence and
wide-ranging duties, the capacity of the embassies for comprehensive monitoring appears to be rather limited.
34
In addition, other ministries also have a part to play, such as the Ministry of Health for medical projects or the
Ministry of Education for projects in education, and the Ministry of Agriculture for rural development. A number
of Chinese provinces and cities also have their own DC projects, although the extent of these and the areas on
which they focus are largely unknown.
China EXIM Bank is a state-owned bank under the direct control of the State Council, and to date is Chinas only
credit institution that extends concessionary loans. Te bank has its own separate department for that purpose.
EXIM also oers export credits (export buyer and export seller credits) and international guarantees to promote
Chinese investment in Africa. With assets of some $52 billion (2006), it is considered to be the worlds third-largest
export credit agency. Te bank has granted concessionary loans to over 100 countries and has a total outstand-
ing balance of receivables from Africa of $8-9 billion, although this includes concessionary loans and commercial
credits. Te central role of EXIM in Chinese DC at the level of practical implementation is also stressed in a BMZ
report on the German-Chinese consultations in April 2007. Te World Bank is already engaged in a consultation
process with EXIM on nancial project management, and is planning parallel nancing projects with the bank.
EXIM, but also the China Development Bank (CDB), is able to pursue a (relatively) independent policy with re-
spect to the granting of credits from its own funds. Te expansion of foreign activities by the CDB will once again
result in a change to the competitive situation in the award of contracts for major projects. According to its bal-
ance sheet total, the CDB is the largest development bank, ahead even of the World Bank. Like EXIM, it answers
directly to the State Council not the Ministry of Finance and renances itself through issuing loans. At the
end of March 2007 the CDB had outstanding credits in Africa valued at $1 billion, although it is not involved in
the implementation of Chinese concessionary development assistance in the narrower sense. Te bank supported
the establishment of the China-Africa Development Fund (CADF), which was announced in late 2006 and in the
meantime has been set up, with the sum of $5 billion; the CADF itself however is an independent commercial fund.
Tere are also reform plans in place for the CDB, according to which the state bank is to become a commercial
credit institution (Davies et al. 2008: 24).
In addition to its bilateral DC activities, China is represented in multilateral DC institutions such as the World
Bank and in the United Nations Development Programme (UNDP), as well as in regional development banks
such as the Asian Development Bank, the African Development Bank and the Inter-American Development Bank.
Te Chinese government has signed up to the Millennium Development Goals and the Paris Declaration on Aid
Eectiveness, but to date has been very reluctant when it comes to establishing transparency and coordinating its
projects with other donors (Tjnneland et al. 2006: 10). Te interpretation that China is likely to have signed the
Paris Declaration in its capacity as a recipient of development assistance is probably true.
35
2.3.2 INSTRUMENTS AND PROCEDURES OF CHINESE DEVELOPMENT COOPERATION
Te basic forms of Chinese DC are as follows (Davies, P. 2007: 48.; Manning 2007:3, Annex 1:1):
1. Grant aid, in other words non-repayable aid, which in the main is made available in the form of material assets
and is provided for social projects such as hospitals, schools and housing and for material and technical support,
education/training and humanitarian assistance.
2. Interest-free loans, made available directly by the government, evidently intended above all to nance infrastruc-
ture projects.
3. Preferential credits or concessionary credits, with interest rates below the market level, granted exclusively via
EXIM. Te dierence between the market rate of interest and the lending rate is paid by MOFCOM to EXIM
as a subsidy.
Forms 1 and 2 are the responsibility of a department of MOFCOM, the Executive Bureau of International Eco-
nomic Cooperation, which has only about 100 employees in China and has to call upon the resources of the
Chinese embassies for information about specic countries. Representatives of this MOFCOM department visit
the DC projects half-way through the project term and after completion. Which of the DC instruments is chosen
depends on a combination of conditions pertaining to the country and the project. In general, there is a tendency
to oer DC in the form of material assets or by means of tied aid. Chinese companies that are assigned in DC are
selected from a group of companies that have had to prove their eligibility. Te employment of Chinese workers in
DC projects is ostensibly made dependent on the requisite qualication, without there being an automatic prefer-
ence for Chinese workers in the projects (Manning 2007:3). Te proportion of African workers deployed appears
to be heavily dependent on the particular country; in Angola, for example, it is only 30%, while in Tanzania it is
over 80%.
EXIM also provides low-interest export credits for African buyers. According to calculations by the authors of
the OECD study "Prudent versus Imprudent Lending" (Reisen/Ndoye 2008), the grant element is approximately
40%. Tese credits must be taken into account in the debate on issues relating to the debt sustainability of African
countries.
Chinas development cooperation is almost exclusively project-based, with the projects mostly being part of a wider-
ranging engagement comprising trade and investment. Apart from pilot projects used to test new development
ideas, China primarily implements turnkey projects, i.e. projects in which all components from the initial planning
through to completion are provided by China. Probably the best-known Chinese project in Africa to date is the
railway line between Tanzania and Zambia. Mega-projects such as this are the exception, however: according to
information from Brutigam (2007) the average size of Chinese projects is $3-10 million.
36
2.3.2.1 THE ANGOLA MODE: A NEW, OLD FORM OF COOPERATION
8
Chinese loans, above all for the nancing of infrastructure projects, are increasingly secured by natural resources;
this is referred to as reserves-backed lending. If a developing country does not have enough nancial capacity or
is unable to provide the required guarantees, it can use its natural resources for this purpose instead. Put simply,
infrastructure is exchanged for natural resources. Tis form of implementation was used on a large scale in Angola
after the civil war, which is why it is called the Angola Mode or also the Angola Model (CCS 2007: passim).
Te Angola Mode requires careful coordination between the various participants. In addition to the two govern-
ments, a Chinese company is needed for creating the infrastructure, and another one is required for extracting
the resources. Depending on the preference of the Chinese government, the companies can obtain the contracts
through a bidding process or through selection by the government. Te procedure is illustrated in Figure 8.
8

Te description given in Section 2.3.2.1 follows Shabani (2008).
Figure 8: Chinas Angola Mode
Source: Shabani (2008)
37
9

See also the critical analysis by Misser (2007).
10

Te description in the following is based largely on Davies, P. (2007: 49-51) and the interviews with o cial representatives of Chinese DC and
researchers conducted by this author.
Although this mode enables nancially weak countries to invest in urgently required infrastructure, the advantages of
this alternative payment variant are as yet unclear and are substantially dependent on the mostly unknown con-
tract details. In the case of the $2 billion credit facilities granted to Angola in 2004, the repayments are to be made in
the form of delivery commitments amounting to 10,000 barrels of crude oil per day, sold internationally at the spot
market price. In comparison with contracts with other banks, therefore, the contract with China can certainly be
considered to be advantageous for Angola. BNP Paribas, for example, set the oil price for the repayment of a loan of
$2.2 billion at only $25 per barrel, which is less than 50 per cent of the current market price (Corkin 2007b: 6).
Te most bizarre variant of the Angola Model can be be found in DR Congo, where a consortium comprising EXIM
Bank, China Railway Engineering Corp and SINOHYDRO signed an agreement with the Congolese government
on 17.9.2007 to form a joint venture, with the capital split in a ratio of 32% to 68% between DR Congo and China.
Te agreement covers the exchange of cobalt, copper and gold mine concessions in Katanga for infrastructure projects
(rail and road links, and social facilities). According to the value of the mineral tonnages pledged in Annex I of the
Protocole daccord (as published in the Congo by Le Phare No. 3237, 28.12.2007), this would be Chinas largest
ongoing business undertaking in Africa. However, the agreement arranges that all the prots from the rst phase
will be used exclusively for amortisation of the mining investment. As there is no time limit to this phase, it remains
entirely unclear when the infrastructure building will begin, especially as, at $3 billion, only just under half of the
measures will be nanced through funds from the project. Here, the step-by-step arrangement built into the An-
gola Model apparently falls apart. Unless there are more precise, condential accords in place, this agreement thus
conrms the fears that African recipient countries suer huge disadvantages on account of unfavourable contractual
arrangements.
9
2.3.3 SCOPE AND RELATIVE IMPORTANCE OF CHINESE DEVELOPMENT COOPERATION
IN AFRICA
Data relating to the nancial scope of development cooperation is not published by the Chinese government in any
form comparable to that from Western industrialised countries. No reports are provided for the Development As-
sistance Committee (DAC) of the OECD. Tere are two possible explanations for the failure to publish meaningful
statistics: either the Chinese government is not willing to let the gures be known, or alternatively it is not in a posi-
tion to supply reliable statistics.
10

Reluctance to publish can be explained by three principal arguments. Firstly, China wants all African countries to
feel they are being treated equally and not to be annoyed if other countries receive more funding than they do them-
selves. Secondly, it is a matter for each individual African country to specify the DC funds they receive from China in
their national statistics. Te third factor, and perhaps the most plausible argument for a possible intention to hold the
gures back, is attributable to Chinas national development challenges. Although China has made major progress in
poverty reduction, 300 million Chinese still live in poverty (according to the most recently revised national product
gures); it is therefore relatively di cult for the government to justify why it grants large sums of money as develop-
ment assistance to African countries. Te high degree of tied aid in Chinese development cooperation should also be
seen in this light.
38
It is also argued, however, that China is simply not capable of making such statistics available because of the
fragmented system of DC and the di culty of assigning a monetary value to Chinese labour inputs and supplies
of materials and equipment. Moreover, there is still no clear denition for the dividing line between development
cooperation and commercial cooperation. According to information from MOFCOM, the gures are deliberately
not published because data acquisition is not based on international standards; gures could either be overesti-
mated or underestimated. To that extent, the problems with recording Chinese DC therefore result from both
weaknesses and strengths at the same time from an underdeveloped national aid system, but also from the close
dovetailing of aid with investment and trade promotion, portrayed in Section 3, which is precisely the particular
strength of Chinas Africa policy. Against this background, it appears more likely that China will leave the big grey
area surrounding its development cooperation untouched for quite a while yet, and will not subject itself to the
DAC standards.
Because of the unclear records, any comparison with other countries DC can only be an approximation. Germanys
bilateral and multilateral DC inputs for Africa as a whole, for example, amounted to $1.9 billion in 2002 (the last
year for which, according to data from the World Bank, there is an o cial Chinese gure for development assist-
ance in Africa), while bilateral ODA to Africa reached a level of approximately $1 billion.
11
One estimate (Broad-
man 2006: 274) of the volume of Chinese DC for the whole of Africa assumes a gure of $1.8 billion for the same
year, whereas Qi Guoqiang estimates total Chinese DC for 2006 at $1.05 billion, which is of a comparable magni-
tude to average German bilateral DC.
Another possible way of producing evidence about the scope and structure of Chinese DC with Africa is to analyse
announcements from the o cial news agency Xinhua, which can be supplemented by reports from the African
media. Taylor (1998) had used Xinhua reports of bilaterally agreed aid inputs as the basis for his analysis of Chinese
development cooperation in Africa up to 1993. In his investigation of Chinese DC, he concluded that the reorien-
tation of Chinese foreign policy after the Tiananmen Incident coincided with a rise in Chinese DC with Africa.
Taylor refers to data in bilateral agreements, in other words to DC commitments. Between 1980 and 1987 the
contributions pledged each year amounted to about $200-300 million, falling to a low point in 1988 of only $60.4
million and 13 recipient countries. In 1990, on the other hand, the number of countries in Africa receiving nan-
cial pledges rose to 43, and the extent of payments to $374.6 million. World-wide, China provided nancial DC to
52 countries, so the regional concentration had already become apparent even at this time (Taylor 1998: 450).
Taylors approach is followed below, showing the contributions made within bilateral agreements between China
and African countries. Te contributions comprise credits, including interest-free credits, and non-repayable nan-
cial support (grants, donations). Te data cover the period 2000-2006, during which time the nancial volume
ran to some $5.248 billion, credits for Angola amounting to $4 billion accounting for a considerable proportion of
this. Altogether, interest-free credits of about $87 million were granted. Tis accounted for 7% of total lending, not
including the large-scale credits for Angola (see Figure 9).
11

Source: BMZ, Bi- und multilaterale Netto-ODA nach Lndern 2002-2006, in: http://www.bmz.de/de/zahlen/imDetail/index.html
39
Te chart makes it clear that grants were denitely a signicant factor in some years, although credits dominated
overall. Tis nding is not consistent with conclusions presented by other authors, which name long-term, interest-
free or low-interest loans as the most important form of Chinese DC (Taake 1994: 203-205; Ai Ping 1999, in Tjn-
neland et al. 2006: 10). Furthermore, considerable uctuations in DC contributions can be identied, even if the
large-scale credits granted to Angola are disregarded.
Te regional distribution of the credits in the period 2000-2006 shows that the lions share went to Angola.
Precisely how much remains unclear, even on completion of this study. In 2004, and evidently also in 2005-2006,
Angola was granted a credit line of $2 billion by EXIM for, originally, twelve dierent projects (CCS 2006: 18).
In May 2007, a further $500 million was added. In addition, the Angolan government was also the recipient of
credits of the order of $2.9 to $9.8 billion from China International Fund Ltd. in Hong Kong (CCS 2007: 23-25,
39). Places two and three in the credit-allocation rankings, by considerable distance, are occupied by Tanzania and
Botswana. Namibia and Uganda follow in fourth place, with roughly equal amounts of credit, with Ghana and
Zimbabwe ranking fth.
In an analysis of the terms of Chinese loans conducted in 1994, it was found that as a general rule the term of the
loan was 20 years, often at an interest rate of 0% and 5-10 years of grace period. If a country was unable to make
the repayments, the loan was extended to 20-30 years or was converted into non-repayable grants. Over and above
that, in certain cases it was agreed that instead of repayments in foreign currency the loan would be repaid in the
debtor countrys local currency or in the form of supplies of goods to China (see Angola Mode). All in all, the grant
element is said to have amounted to 80-90% (Taake 1994: 203-205; Ai Ping 1999, in Tjnneland et al. 2006: 10).
Some current examples of the terms of Chinese credits to African countries since 2001 are listed in Table 4. Repay-
ment periods of 10-15 years and an interest rate of 3% appear to be the norm. According to statements made by
Figure 9: Composition of Chinese DC with Africa 2000 2006
Source: Compiled on the basis of reports from the Xinhua News Agency and African media in the period 2000-2006 (not including the credits to Angola
amounting to US$4 billion).
2006
2005
2004
2003
2002
2001
Interest-bearing credits Interest-free credits Grants
2000
0 100 200 300 400 500 600
Y
E
A
R
US $ [millions]
40
EXIM to the OECD, the bank does not issue interest-free credits; it says that any such loans are granted directly
by MOFCOM. It goes on to say that the terms set by the bank for commercial loans are as favourable as possible
and generally comprise an interest rate of LIBOR plus a surcharge of less than 200 basis points (2%). Te interest
rates for concessionary loans are set in a range between 1.5 and 4 per cent and appear to vary according to recipient
country (Angola 1.5%, Mozambique 2%, Zimbabwe 3% to which fees for management and allocation of 1.75%
are added) (AFRODAD Zimbabwe 2007: 24, AFRODAD Mozambique 2007: 15, 20; Fandrych 2007: 70). While
EXIM does receive subsidies for the interest on concessionary loans, it tries to achieve self-sustaining nancing
through a system of cross-subsidising (Manning 2007, Annex 1: 8).
Te expansion of nancial support for Africa can be traced back above all to the increase in credits granted by
EXIM. By the end of 2005, a total of 55 projects in 22 African countries are said to have received $800 million
in nance from this bank. According to information from the bank management given to the OECD in February
2007, credits from EXIM are granted to (private) companies, but generally they had additional government guar-
antees. Te bank can choose between two options: 1.) organising the credit as a package, with Chinese companies
being selected and the recipient country playing a part in the decision, and 2.) using credit guarantees. In Ghanas
case, for example, the supply of cocoa beans was used as a guarantee for nancing of a hydroelectric power plant.
Because of the rapidly growing volume of development credits, there is a widespread fear among the shareholders
and management of international nancial institutions that China is undermining the HIPC II/MDRI debt relief
initiatives with non-concessionary new lending, and by operating as a free rider is actively contributing to new
over-indebtedness among African countries. Te criticism of Chinese lending by the World Bank and the planned
Table 4: Current examples of credit terms in Chinas development cooperation
Note: *Includes a grant element of 16%; **in the same year: debt relief of 13.6 million dollars, equivalent
to 55% of Kenya's total debt with China.
Source: Compiled on the basis of reports from the Xinhua News Agency and African media in the period
2000-2006. See also: AFRODAD study on Mozambique (2007a).
Country Credit volume Credit terms
Algeria (2002) $6 million Repayable within 25 years
Angola (2004) $2+2+0.5 billion Secured by supplies of crude oil (EXIM credit line)
Botswana (2003) $27.3 million Repayable within 15 years; annual interest rate of
3%*
Kenia (2001) $6.05 million Interest-free, repayment within 5 years**
Liberia (2006) $5 million Repayment within 10 years, starting in 2021
Mauritius $16.2 million Repayment within 15 years at 3% interest
Mozambique (2007) $40 million Interest rate: 2% + 1.75% fees, repayment within 20
years, 5 years of grace
Zimbabwe (2004) $2.4 million Interest-free, but to be used within 3 years (credit
from 2000)
41
retorsion measures have been the subject of substantial objections from international Non-Governmental Organi-
sations (NGOs) (summarised in: Oddone 2007), relating primarily to the counterproductive and unjust impact
of sanctions on recipient countries. A thorough analysis of the alleged imprudent lending to Africa by the new
donors has been undertaken by Helmut Reisen and Sokhna Ndoye (Reisen/Ndoye 2008; Reisen 2007). Tey nd
no evidence for any deterioration of the debt service indicators as a result of Chinese lending in Africa neither
in HIPC nor in non-HIPC countries. Furthermore, in connection with the debt debate, Ndoye/Reisen argue that
more attention should be paid to the contribution made by China to growth in Africa and hence to improving the
denominator of the debt service indicators. It is noticeable that the accusation of credit-policy free-riding made
towards China has now disappeared entirely from the World Banks vocabulary.
12
Nonetheless, integrating China into a common framework for assessing the creditworthiness of recipient countries
remains a justied political concern. Tis can take place in the context of a multilateral consultation process, for
example, in which ndings from the World Bank and IMFs Debt Sustainability Framework (DSF) are put up for
debate. In view of its extensive nancial involvement in a number of African countries, such consultation ought to
be in China's own interest. Whether, given the Chinese sensitivities, a consultation process on debt sustainability
necessarily has to take place under the auspices of the World Bank, is another question. It is possible that the Afri-
can Development Bank would be a more suitable option.
O cial Chinese statistics likewise provide information about the scope of development projects in the broader
sense and their regional distribution, specically among the data on contracted projects, labour services coopera-
tion and design and consultation services. Te details given here relate to the sales volume of Chinese companies
that oer contracted projects and labour services overseas. Te projects and services have received state approval
and are recorded in the statistics by MOFCOM. Te total volume of this type of economic cooperation with Africa
rose from $1.3 billion in the year 2000 to $6.274 billion in 2006 (China Statistical Yearbook 2006: 763). It is as yet
unclear what proportion of this is development assistance and what is rather commercial cooperation. According to
information from Wang (2007), 50% of the contracted projects can be counted as development assistance. By this
method he arrives at an annual value of $1 1.5 billion for the period 2004-05. Given the gures quoted above,
however, an assumption of a quota of 50% would work out as development assistance worth $3.1 billion in 2005.
Debt relief: Te Chinese government has repeatedly cancelled debts for the poorest African countries. In the pe-
riod 2000-2006, the amount of debt relief ran to a total of $381 million. Te countries to benet most from this
were Ethiopia, Tanzania, Mali and Uganda (see Figure 10). All in all, debt remission is said to amount to some $1.3
billion for 31 African countries (Fues et al. 2006: 2). As announced in November 2006, this policy will be further
expanded and the prospect of debt relief will be held out for all interest-free government loans to the poorest African
countries that were due at the end of 2005 although only for those countries that maintain diplomatic relations
with the Peoples Republic (XNA, 4.11.06). Tis covers 168 zero-interest government loans for 33 African countries
valued at about $1.4 billion (Brutigam 2007: 17).
12

Te credits promised to DR Congo mean that for the rst time a HIPC country would become a Chinese debtor on a very large scale. Tis would
still not be the same as free-riding.
42
Technical cooperation: Within Chinese development cooperation, some projects are run under the designation
technical assistance, although the Chinese authorities do not have a precise denition of this category either. Tra-
ditionally, it mainly includes projects in infrastructure sectors such as railways, electricity generating stations or
broadcasting, but also in social sectors and agriculture.
In the medium term, the Chinese government wants to further broaden the nancial framework and the content
of its development-policy engagement. At the China-Africa summit in November 2006, President Hu Jintao an-
nounced (XNA, 4.11.2006) the following intentions on the part of the Chinese government:
Doubling the amount of development-policy support for Africa between 2006 and 2009 (the current level of
contributions was not stated, however, so no basis for comparison is available);
Provision of low-interest loans totalling $3 billion and low-cost procurement loans amounting to $2 billion for
development projects over the next three years;
Setting up a China-Africa Development Fund valued at $5 billion in order to encourage Chinese companies to
invest in Africa;
Building a conference centre for the African Union in order to support the eorts by the countries of the African
continent to achieve greater integration;
Opening the Chinese market for the duty-free import of 440 lines of goods (previously 190) from African LDCs
with diplomatic relations to the Peoples Republic (trade assistance);
Establishment of three to ve trade and economic cooperation zones in Africa in the coming years;
A greater number of individual projects, such as training of 15,000 African experts and managerial personnel,
seconding a further 100 Chinese agricultural experts to Africa, constructing ten technology demonstration
centres and 30 hospitals, providing RMB 300 million for medicines to treat malaria, building 30 centres for the
prevention and treatment of malaria, seconding 300 young volunteers, constructing 100 schools in rural regions,
and increasing the number of government scholarships for African students from 2,000 per year at present to
4,000 by 2009.
Figure 10: Regional distribution of debt relief in the period 2000-2006 (million US $)
Source: Compiled on the basis of reports from the Xinhua News Agency and African media in the period 2000-2006.
43
2.3.4 PRIORITY AREAS OF CHINESE DEVELOPMENT COOPERATION IN AFRICA
According to o cial Chinese gures, there have been 700 development projects in 49 African countries since 1956.
Tese projects have been implemented in a variety of elds: agriculture, animal husbandry, sheries, food process-
ing, light industry and textiles, energy, logistics, transport, hydropower, education and culture (Vice Minister Wei
Jianguo, 13.11.2006). Tere are no o cial gures as to the precise breakdown of the projects in percentage terms.
From the available information it can be concluded that Chinese DC focuses on four major areas. Te rst priority
is the expansion of infrastructure, which is linked to the opening up of energy and commodity resources and of lo-
cal markets, but which also reects Chinas own development experience and international competitive advantages.
In addition, cooperation in the health sector, agriculture and the education sector is very important.
Chinas rst high-prestige construction project in Africa was the Tanzania-Zambia railway, the building of which
began in 1967. As a result of this project, China reports that the railway network in African developing countries
was extended by about 2,000 km and the road network by over 3,000 km within the framework of Chinese DC
(Vice Minister Wei Jianguo, 13.11. 2006).
13

Cooperation with African countries in the health sector has a long tradition. A medical team was deployed for the
rst time in 1964, at the invitation of the Algerian government. Altogether, since then more than 15,000 Chinese
doctors have worked in at least 47 African countries, where they have treated about 180 million African patients.
Te cooperation takes place both at higher levels of government and through the exchange of medical expert groups
and the training of medical personnel. China regularly makes medical equipment and medicines available free of
charge, for example for treating malaria and HIV patients. In addition, Chinese medical personnel are involved in
military units belonging to UN peacekeeping forces. Civilian cooperation in the health sector takes place within
an institutional framework under which the health authorities in particular Chinese provinces cooperate with a
specic African country.
China attaches considerable importance to the agricultural sector. As well as traditional agricultural irrigation
projects (primarily for rice and vegetables), China implements extension projects and provides agricultural imple-
ments. In addition, a new economic factor will play a decisive role in future: it already became evident that rising
per capita incomes and the emergence of a wealthier middle class in China will give rise to increasing demand
for food and higher prices on the world market. Tis will apply above all to products with relatively high income
elasticity of demand, such as meat products, sh, fruit and beverages. Occasionally there are even predictions of
increases in the price of coee and sugar as a result of rising Chinese demand (Jenkins/Edwards 2006: 27). Tere
is considerable investment by Chinese companies in the agricultural processing industry in Namibia, for example,
and in cotton production in Zambia (Alden 2005: 7).
Cooperation in the education sector covers scholarships to African students to attend universities in China, co-
operation between educational establishments and the training of experts in China. Te total number of African
scholarship holders from 52 countries is put at roughly 15,000, and 19 Chinese universities have cooperation
13

Te statement by the minister is evidently to be understood as a historical summary of relations between China and Africa up to the start of the current
upswing. Te Tanzam railway itself is 1860 km long.
44
agreements in place with 23 universities in Africa. Government administrative personnel receive training paid
for through the African Human Resources Development Fund. Te upgrading of about 7,000 experts has already
been nanced from this fund; a further 10,000 are to receive support from the same source in the next three years
(Hofmann 2006: 6).
2.4 OTHER AREAS OF COOPERATION
In addition to cooperation in the elds of trade, investment and development assistance there are also other areas to
be considered, including military cooperation. Chinas cooperation with African countries in the military sphere,
particularly through supplies of arms, is generally regarded as being a destabilising factor. China is the worlds
fth-largest supplier of weapons, and one of the largest in Africa (Curtis/Hickson 2006), and has repeatedly sup-
plied weapons to countries in Africa engaged in conicts. One example is the civil war in southern Sudan, which
cost the lives of two million people. Te military hardware that China exported to Sudan included substantial
numbers of combat aircraft. Te objective pursued by these arms deliveries was to protect Chinas own investments
in the Sudanese oil industry and stabilising oil supplies, since Chinese state-owned corporations had acquired the
largest share (40%) of the most important oil joint venture. Weapons have also been supplied to other countries,
however, for example to Ethiopia and Eritrea in the crisis years of 1996 and 2003. More recent arms deals have
been concluded with among others President Mugabe of Zimbabwe, who ordered 12 FC1 ghter aircraft and
100 military vehicles from China.
On the other hand, within the framework of FOCAC China supports a plan of action that is directed against the
possession of atomic weapons and their proliferation. China is also involved in UN peacekeeping activities, and
regularly places troops at the UNs disposal for this purpose.
In the economic sphere, the services sector is accorded great potential. As the incomes of the Chinese middle
classes continue to rise, holiday travel to Kenya or other African countries is rapidly growing. Te opening of Kenya
to Chinese tourists led to the number of visitors in 2005 alone rising by 31%, to 11,000 individuals (Hofmann et
al. 2006: 8). Te expansion of tourism is an integral part of the Africa policy adopted in 2006. Tis includes grant-
ing more African states the status of approved destination and making them accessible to Chinese tourist groups
(MOFA 2006, Chinas Africa Policy, Section 7).
Closer cooperation is also envisaged on the Chinese side in the eld of science and technology. Te areas chosen
are applied research, technological development and technology transfer, scientic cooperation relating to organic
agriculture, the exploitation of solar energy, geological surveys, mining, and research and development for new
medicines. Expansion of cooperation in matters relating to the environment (including climate change, water,
biodiversity, and measures to prevent desertication) is to take place primarily in the context of technological
exchange.
45
2.5 SUMMARY
In summary, Chinese DC can be characterised by a high degree of complexity, which in many areas can doubtless
be seen as conducive to development in Africa. Te dierent political objectives and regulatory structures in China
compared with Western donor countries, however, give rise to a variety of contradictions and potential conicts.
Problems arise above all on account of the conditionalities linked to Western bilateral and multilateral assistance, in
contrast with Chinas principle of non-intervention, and from the dierences in the DC credit terms, which reect
the political and economic objectives of the Chinese government and Chinese companies.
However, the contacts with the OECD and close cooperation between EXIM and the World Bank since 2006 are
pointers to Chinas fundamental interest in a greater degree of exchange at the multilateral level, and indeed also at
the bilateral level with individual donor countries. Accordingly, a recommended course of action that suggests itself
here is to establish and expand an exchange of this nature which could focus on the following themes:
1. More transparent gathering of statistics on credits and other forms of development cooperation
2. Development cooperation approaches to poverty reduction in Africa
3. Methods of evaluating development cooperation
4. Sustainable lending versus growing new indebtedness of developing countries
46
3 OPPORTUNITIES AND RISKS FOR AFRICA
3.1 ECONOMIC DEVELOPMENT AND POVERTY REDUCTION
3.1.1 CAUSES AND EFFECTS
From what we have seen in the previous sections, the increasing complexity of Sino-African cooperation has be-
come apparent. From the sustainability point of view, both the causes and eects of the recent boom need to be
examined. As it is clear that Chinas interest in Africa has for a long time not been limited solely to oil and ores, the
causes of such a broad bilateral commitment are not obvious, since there is a lot less that links Africa economically
and culturally to China than to Europe. Tis causal analysis is still in its infancy, despite the availability of one or
the other model that is meant to explain the increasing political, cultural and economic interconnections between
the two regions.
14
When examining the economic and social impacts of Chinese involvement on Africa and the question of the sus-
tainability of such impacts, it is necessary to take account of the following factors:
Global repercussions of Chinas growth, for example on commodity prices and the environment, which are also
felt in Africa.
Export and import of goods and services between China and Africa.
Capital movements, above all Chinese direct investment in Africa, but recently also South African investments in
China.
Movement of the "labour factor": migrant workers and Chinese mass emigration to Africa.
All forms of Chinese development aid.
Some of these factors have direct consequences for economic growth in Africa, and especially on poverty, while
others have indirect impacts; in this context, eects on the development of government revenues are particularly
highlighted.
In order to present an assessment of the opportunities and risks arising from this complex relationship for Af-
rica, at least in summary, the authors examined all relevant fundamental analyses by Goldstein et al. (2006), the
World Bank (2006), Jenkins/Edwards (2005) for the Department for International Development (Df ID) and
Kaplinsky/McCormick/Morris (2006) for the Institute for Development Studies (IDS) Sussex using the methodo-
logical framework developed there for analysing the 'Asian drivers' as applied to Mozambique (Bosten 2006) and
UNCTAD 2005a+b and 2006. To provide greater clarity, the key problem areas can be presented as a matrix (see
Table 5).
14

For details see Goldstein et al. 2006: Chapter 1 and passim, and the presentation of the gravitation model in Broadman 2006. Models of this type
attempt to portray the economic attraction between countries or groups of countries through including a wide range of factors, i.e. also political and
cultural factors.
47
Table 5: Selected welfare impacts of the economic ties between China and Africa
Impact of trade (import / export) Impact of foreign investment
Global market Terms of trade greater value for
Africa as a result of the China effect
(mixed)
African markets Chinese imports: lower cost of
productive inputs and of consumer
goods (positive),
crowding out of domestic production
(negative)
Import of construction services with
little impact on employment (mixed)
Overall welfare effect unclear
Boosting trade
Impact on competition varies accor-
ding to sector and country (mixed)
Third markets (USA, EU,
Japan)
Textile and clothing exports by
Chinese rms in SSA to USA: MFA,
subsequently AGOA preferences: so
far positive, in the long term critical
No comparable effect in EU trade
Investment in textile production en-
courages trade, in some cases large
impact on employment (positive)
Chinese market Chinese commodity imports: signi -
cant income factor for African gov-
ernments, secondary effects however
dependent on nature of contracts
between African governments and
Chinese export rms
Chinese tariff policy mostly positive
for African exports to China
Huge Chinese investment in securing
the supply of raw materials for China
(oil, mining) (positive)
To date only a small number of South
African companies involved in China
(untapped potential)
All of these analyses highlight the great potential for growth in the Sino-African relationship, but they certainly
dier in their long-term assessment. In general terms, i.e. in an overall assessment of all eight elds of the matrix,
although their basic attitude is positive, the OECD and IDS (as well as UNCTAD 2005a) are considerably more
sceptical towards the developmental eects of the new China-Africa relationship than the World Bank, which sees
Africa as moving down its own Silk Road to the East (Broadman 2006: Africas Silk Road). Te appraisal of the
policies of third parties such as the USA or EU also diers (see in particular the debate on the prospects for the
clothing industry, Section 3.1.4).
48
3.1.2 TERMS OF TRADE
When it comes to analysing the impacts of the China-Africa boom it is essential to distinguish between short-term/
cyclical eects and long-term consequences. Tis assessment is also di cult, as is particularly apparent from the de-
velopment of import and export prices. Te development of the terms of trade for Africa, characterised by decades
of decline, switched direction in the mid-1990s (see Figure 11). In parallel with these price changes, export volumes
(1999-2004) grew at a rate that had not been seen in Africa since the late 1960s.
Te upward trend in Africas terms of trade has already persisted for a distinctly longer period than an economic
cycle in the major industrialised countries. Tis gives rise to the central question as to whether, under the inuence
of Chinas industrialisation path, the Prebisch-Singer hypothesis of the secular decline of commodity prices and
hence the terms of trade of typical developing countries has been invalidated, at least in the medium term. Tis
evidently depends on the evaluation of the underlying supply and demand elasticities.
0
1980 1984 1988 1992 1996
110
100
90
80
70
60
2000 2004
Export volume (left scale)
Terms of trade (right scale)
100
200
300
400
500
600
700
Africa
Purchasing power of exports (left scale)
Figure 11: Africas terms of trade
Source: UNCTAD 2005b: 93.
According to an analysis by the IMF (2006b: Chapter 5), which is shared here, speculative overheating of prices
of non-oil commodities, which can just as quickly be reversed, is not likely. Te trend will probably level o, but
at least in metals it will continue. It is the result of Chinas growth path which, viewed historically, is dispropor-
tionately industry-intensive and, examined more closely, material- and energy-intensive; in other words it is an
expression of the fact that at its current level of income China has a considerably larger secondary sector than
other industrialised countries had at a comparable stage of development. It is not possible to depart from such a
growth path in the short term, as UNCTAD (2005b: 49-51) also argues, unless one accepts the hypothesis that
over-manufacturing and over-investment will be rapidly corrected (for more on this debate and its consequences for
Africa, see Alves 2006: 8 .).
Te terms of trade are not following a uniform trend for all African countries. Zafar (2007) examines the China
eect on the prices of the most important African import and export products in 2000 to 2004; the study dem-
49
onstrates that the 48 countries of Sub-Saharan Africa can be divided roughly equally into winners, winners-losers
and losers. Among the losers Zafar counts in particular oil-importing textile producers such as Madagascar and
Mauritius, but also the coee producers and other agricultural exporting countries whose prices have barely risen to
date. However, his analysis also illustrates the sensitivity of the results to the choice of investigation period. Shift-
ing the period to the years 2005 to 2007 leads to dierent conclusions for the latter group. Tis leads us to a closer
examination of individual sectors.
3.1.3 INFLUENCE ON INDIVIDUAL SECTORS
Te eects of Chinese economic engagement on growth, jobs and income dier quite considerably among indus-
tries. As outlined above, Chinas economic engagement in Africa consistently takes the form of a complementarity
of trade and direct investment. What eect this actually has in practice depends on other factors, such as the
labour intensity of production, the composition of the personnel (Chinese or African workers), whether the invest-
ments are export- or import-related, or the distribution of prots.
On the whole, Chinese engagement in Africa is concentrated in four sectors: 1) extractive industry, in other words
oil, gas and mining; 2) textiles and clothing; 3) construction and civil engineering; and 4) logging of tropical tim-
ber. Te same rule applies for all four sectors: China becomes involved through both foreign trade (in goods and
services) and direct investment. Tis four-sector structure is not set in stone. Te recent boom in Chinese invest-
ment in Africa extends to considerably more branches of industry. As discussed in Section 2, examples include:
Telecommunications (Angola, Namibia, Nigeria, DR Congo, Madagascar, Niger)
15
Transport (Angola, Nigeria)
Assembly of automobiles and motorcycles (Togo, Uganda)
Wholesaling and retail (Angola, Cape Verde, Tanzania and many others)
Tourism and hotel trade (Sierra Leone)
Pharmaceutical industry (Uganda, Togo)
Fishing and sh processing (Gabon, Namibia, Mauritania)
Cultivation and processing of soya (Mozambique).
16

Te range of industries is so broad that beyond the major sectors there is no clearly discernible pattern yet except
that commitment is not necessarily directed at achieving maximum protability, even though all Chinese compa-
nies, whether state-owned or private, require approval from their home country before investing in Africa. Recent
developments in China and Africa suggest that there will also be another major sector in which Chinese invest-
ments will be bundled: export agriculture. Particular mention is made of livestock breeding, animal feed, sheries
and biofuels (among others, China Monitor 2006: 4-8).
Te major Chinese investments in mining include: Congo copper/cobalt; Gabon manganese, iron ore; Zim-
babwe platinum, ferrochromium smelter; Kenya titanium ore project; Mauritania iron; Zambia copper &
copper smelter.
17
With regard to the debate surrounding the securing of strategic natural resources, it should be
15

Reference to the three last-named countries from Tjnneland et al. 2006: 8.
16

Bosten 2006: 8; analysed there as a further example of Chinese involvement in a global value chain.
17

For more details about the organisation of Chinese resource extraction in the ferrous/non-ferrous metals sector and relevant Chinese projects in Africa,
particularly the Belinga mine in Gabon, see Holslag et al. 2007: 12, 22, 28.
50
emphasised that China takes a fundamentally dierent approach from the one adopted by German industry in Af-
rica
18
and, by analogy with equity oil (see Section 2.2.4), seeks to secure imports of raw materials through acquiring
interests in mines and ore smelters. (First complementarity of trade and investment)
Estimates suggest that Chinese construction companies are currently able to win up to a third of all public tender
processes in Africa. On the positive side, African government representatives see this as a means of obtaining con-
struction services signicantly more cheaply and more quickly than from Western construction rms. Technically
this appears as export of services to Africa, coupled with permanent branches for the companies in other words
once again a variant of the pattern described above. (Second complementarity of trade and investment)
On the negative side, several sources highlight the mass inux of Chinese workers (10-20,000 in housing construc-
tion in Algeria alone), the relatively small amount of subcontracting to local companies, and the reputedly excessive
use of imported materials. Employing Chinese building workers is the classic model which has also already been
used to carry out large-scale projects such as the Tanzania-Zambia railway. Another criticism is that the ability to
compete on price can be traced back to the advantageous costing opportunities open to state-owned enterprises
(margin compression, cheap renancing) and lower quality standards. Finally, there is also criticism that Chinese
construction companies benet from tied aid associated with Chinese development assistance, especially for the
prestige building projects referred to in Section 2. In this connection it should be noted, however, that while Ger-
man bilateral DC has been largely untied for many years, tendering for construction projects within development
cooperation with the European Union, for example, is restricted to EU bidders. In some cases tied aid of this nature
even applies to Scandinavian DC projects (Bosten 2006 on Mozambique).
While caution is advisable in making any sweeping criticism of the tied aid associated with Chinese infrastructure
projects, in fact African governments do have considerable room for manoeuvre in negotiating quotas for local em-
ployment, skill transfer and subcontracting to local suppliers (local content rules).
19
Although their direct impact
on poverty is plain to see, evidently too little use is made of the available leeway. Positive examples conrm various
local economic eects resulting from sensible project design: a ring road is being built around both Addis Ababa
and Dakar, each one a highly ambitious project to relieve the centre of the city. 30 to 40% of the orders are being
executed by Chinese rms, but without exception these all work with local personnel and also subcontractors.
20
3.1.4 THE TEXTILE AND CLOTHING SECTOR
Te development-policy problems surrounding Chinese engagement in Africa are most apparent in the textile
sector. A number of West African countries, along with Tanzania and Uganda, export raw cotton to China (and
India); in the opposite direction, yarns, fabrics and clothing form the second-largest block of exports from China to
Africa. Yarns and fabrics are inputs for clothing factories in Africa, primarily in Mauritius, South Africa, Nigeria,
Lesotho, Swaziland and Madagascar, in other words typically not in the same countries that produce the cotton.
21

18

Exceptions to this are Wintershall and RWE Dea in Libya.
19

While economic policy experience with the political stipulation of local content quotas for export industries can at best be described as mixed, the
applicability of this instrument in the construction sector can be seen in a considerably more positive light.
20

Personal Communication from DEG, Cologne, May 2007.
21

According to USITC (2007: 3-40f.), exceptions in the form of individual textile factories in Madagascar, Lesotho or Botswana, which do use African
cotton, conrm the rule, as they make use of raw materials from other African countries and their yarns and fabrics go into end products intended for
the regional market, and hardly at all for export to the USA or EU.
51
Moreover, these rms in Sub-Saharan Africa, in so far as they are integrated into global value chains, do not pro-
duce for the African market but mostly for markets in the North, principally in the USA. Te African market is
increasingly being served by cheap imports from China, which have risen massively in recent years. In a remote
analogy with the classic Atlantic triangular trade familiar from colonial times, we refer to the pattern that has
emerged as the Chinese trade triangle (see Figure 12 below).
Te debate around African cotton had an entirely dierent focus in recent years. Especially in the context of the
WTO Doha Round, the main concern was the negative inuence that the USAs subsidies for 25,000 cotton far-
mers have on the world market price and hence on the export revenues of the four West African producers Benin,
Burkina Faso, Mali and Chad in particular; German Development Minister Heidemarie Wieczorek-Zeul is lending
her support to this issue within the framework of the Cotton Initiative. Has this initiative now become obsolete in
view of the sales prospects for African cotton in China? Te answer is clearly no. Cotton prices have been aected
less than the average by the global commodity price boom that we have seen since the mid-1990s, despite a short-
term high point in 2003. China is itself the worlds biggest cotton producer, and is in fact a swing producer, i.e. in
some years (most recently 2000) it is a net exporter. It is not certain whether this will change to a lasting depen-
dence on imports of raw cotton (Goldstein et al. 2006: 26., particularly Tables 6 and 9). Among other things the
ending of the WTO Multi-Fibre Arrangement (MFA) favours further growth in the Chinese textile industry, while
rising wage costs can have an inhibitory eect.
22

Figures in the illustration according to UN COMTRADE database and Broadman 2006: ow 1: US$1.4 billion, ow 2: US$2.3 billion, ow
3:US$2.5 billion, ow 4: US$2.1 billion (2005). With reference to 3: all exporters, including Taiwanese ownership and third parties.
Figure 12: Chinese triangular trade in textiles
1: Cotton imports from (West) Africa
2: Yarn and fabric exports to Africa (raw material for 3)
3: Clothing exports by Chinese rms in Africa to the USA (AGOA) and EU
4: Clothing exports to Africa (nal consumption)
22

52
23

Tere are forerunners to this trend which stretch back into the 1970s (China in Zambia), or into the 1980s, when the rst wave of Taiwanese invest-
ment in the textile sector was seen in Swaziland.
Incentives for Chinese investment in the textile sector in Africa, integrated into the networks of Chinese multi-
nationally operating companies, initially came about through the quota system under the MFA and then through
the USAs African Growth and Opportunity Act (AGOA) in 2000. After switching production to Africa, Chinese
textile companies were able to capitalise on the preferential access to third markets for clothing and bed linen.
Te exemption from customs duties granted under AGOA led to a veritable export boom in nished textiles and
clothing to the United States. A whole series of African countries benet from this, particularly Botswana, Kenya,
Lesotho, Madagascar and Swaziland. Te opportunities that have arisen from AGOA and up to the beginning of
2005 also from the MFA have partly (and in some countries: exclusively) been seized by rms from the Peoples
Republic and partly by Taiwanese rms which have set up shop in Africa within a very short period of time
specically for this purpose; according to Lall (2005: 998f.), referring to the extreme example of Lesotho, the eect
is making it appear more like a new Asian tiger than a typical African Economy.
23
Chinese direct investment is
thus a signicant reason for African export success in third markets. Following some distance behind the oil sec-
tor, it conrms the positive relationship between Chinese FDI and exports, in this case to third countries. (Tird
complementarity of trade and investment)
As a general rule AGOA requires local sourcing, in other words the use of primary products yarns and fabrics
produced in the region (or in the USA). Tere are virtually no integrated chains of this nature in Africa; new invest-
ments, such as a denim mill costing $100 million in Lesotho, are the exception. AGOA grants African countries an
exemption, originally until 2007 but now extended until September 2012 under the Africa Investment Incentive
Act (AGOA IV), according to which they can use inputs from third countries above all from China. Tis is ow
no. 2 in the above chart. It relates to lesser-developed countries, in AGOA IV also to Botswana and Namibia, but
not to Mauritius or South Africa.
In principle the EU has as many as three similar preference systems: the General System of Preferences (GSP),
the Cotonou Agreement and, introduced at almost the same time as AGOA, the Everything But Arms (EBA)
initiative, which oers African low-income countries access to the European market free from customs duties and
quotas. However, almost all of the export growth achieved by African countries that have been able to boost their
exports to the EU because of EBA (Malawi, Tanzania, Zambia) is made up of sugar in other words, of all the
possible products, one of the three for which the European Union has conceded only partial market liberalisation.
Processed products, which include textiles and clothing, have not made a substantial contribution to this growth.
Even though the USA and the EU have similar preference regimes, the dierence in their impact is striking. From
2001 to 2005, exports of clothing from Sub-Saharan Africa to the USA rose by 54%, while exports to the EU fell
by 11% (USITC 2007: 3-38). As there is no doubt that the exible Chinese companies would themselves have
utilised the opportunities of the triangular trade via Africa in view of the special EU quotas (growth restrictions
for 10 sensitive categories of textile imports from China) imposed in June 2005, the question must be asked as to
why this trend failed to materialise and therefore what possibilities there are for making EU-Africa relations more
development-friendly in the context of the growing Sino-African interconnections. Te EBA rules of origin are the
main cause: clothing exports to the EU are only granted preferential treatment if they pass through two stages of
production (weaving and sewing) in an LDC, or if they obtain yarns or fabrics from a region that is formally ap-
proved by the EU. Strangely, none of these regions are in Africa, and of course China is not among them either. Te
53
EU rules of origin are therefore considerably tougher than AGOA and have evidently failed as a development incen-
tive in this sector. Te weaknesses of both regimes, but above all those of the EU GSP/EBA, point emphatically to the
responsibility of the G8 in trade policy to improve models of this type. In Section 4.4 and the Technical Annex (see
long version of this report available online) we will return to explore specic consequences and recommendations.
Finally, the fourth ow in the above chart has emerged after the nal demise of the MFA in January 2005, from
mass Chinese exports of clothing to Africa. One often-quoted example is that 80% of all T-shirts imported into
South Africa originate from China. Several sources believe that, because of this import glut, something like 75,000
jobs were lost in the South African textile industry, and eight factories had to close in Kenya, six in Lesotho and
four in Swaziland. Mulungushi Textile Mills, the biggest textile factory in Zambia, which was built three decades
ago by China itself and is still under Chinese management today, also had to close in January 2007 (Te Guardian,
5.2.2007).
In fact there is no denite evidence of how many of these negative developments can be attributed to backsourcing
of third-market exports to China itself and how many to increases in imports of nished clothing. Whatever the case,
we know little with certainty about the consequences of the various ows in the Chinese trade triangle, whether
positive or negative. In-depth sectoral studies are required. What should not be rejected out of hand is a negative
variant according to which, without additional trade-policy support from the G8, the four ows in the Chinese
trade triangle could be reduced to just ows no. 1 and no. 4, raw cotton exports and apparel imports, in a few years
time. Tat would be fatal for Africa.
With regard to agricultural products and although they largely grant LDCs exemption from customs duties, the EU
and the USA nd themselves quite fundamentally in a di cult position, because they distort the market through
subsidies and again in the case of the EU obstructive rules of origin. Tis becomes agrant in the case of raw
cotton, which does not have zero tari status in China. Te USA, however, is not able to plead for reductions in
Chinese taris as long as it continues to pay huge subsidies to US cotton farmers based on the revolving Farm Acts.
A critical geopolitical situation is taking shape in which China which by common consent generally pursues a
liberal trade policy has largely done its homework with respect to agricultural trade with Africa, whereas this
does not apply to the EU and the USA, despite the ostensibly so advantageous AGOA and EBA regulations.
3.1.5 IMPORT GROWTH THE OTHER SIDE OF THE COIN
As was already made clear in Section 2, the rise in African imports of Chinese clothing plainly often supported
by the theft or imitation of fashionable designs of local pagnes, the traditional African clothing (reported from
Nigeria, Togo etc.) is just one example of the rapid growth in Chinese exports to Africa, primarily comprising
mass-produced goods for daily consumer needs, such as plastic items and electrical goods. Tere is no lack of striking
descriptions of the resulting changes to everyday life in Africa.
Te competitiveness of Chinese products in Africa is also partly attributable to the low exchange rate of the yuan.
Despite minor revaluations against the US dollar, the currency is still considered to be distinctly undervalued,
54
which is the subject of criticism not only from the USA. A further revaluation of the yuan would therefore be not
only a contribution to a more equal balance of trade between China, the USA and the EU, but also a hitherto barely
heeded contribution to strengthening the competitiveness of African producers. Such a measure would also have
the advantage of rendering superuous any pro tanto protection measures, for example import quotas, like those
that China had to grant to South Africa in 2006 in order to protect its textile industry (see also Section 3.2.4).
24
Te distribution of imports is handled via a rapidly growing network of Chinese wholesalers and retailers through-
out Africa (including Chinese immigration and penetration even of the informal sector). Chinese people are invest-
ing on a broad scale in trading establishments, supermarkets and small businesses. Tis brings us nally to a fourth
complementarity of trade and investment in Chinas relations with Africa.
Te export drive in Africa is vigorously defended by Chinese politicians and diplomats. Tey argue that these are
the goods that Africa needs. Te economic consequences, though, remain contradictory, situated between two
poles: huge job losses in some industries
25
on the one hand and price reductions for African consumption on the
other. Te latter is comparable with the impact of importing second-hand clothing from Europe, which has conse-
quently remained controversial in development-policy circles.
3.1.6 THE IMPACT OF CHINESE DIRECT INVESTMENT ON COMPETITION
Assessing the competitive eects of Chinese direct investment (FDI) in Africa presents a particular methodologi-
cal problem quite apart from the widely diverging statistics on the scope of the investment. Actually, there are
no comprehensive assessments of the impacts on competition in African markets. Still the clearest picture emerges
from the new World Bank survey in Ghana, Senegal, South Africa and Tanzania; the ndings are included in
Broadman 2006. Te starting point is the exceptionally high proportion of all larger companies surveyed in the do-
mestic market of each country (39% per company and sector) normally not an indicator of intensive competition.
In general terms, FDI can strengthen competition in domestic markets or, alternatively, displace local providers
and dominate the market, thus reducing competition (UNCTAD 2005a). Te eect on incomes and jobs, in turn,
depends on the particular combination of circumstances in each country. In its four-country study (not including
oil-producing countries), the World Bank shows that sectoral market shares of individual suppliers tend to decline,
the higher the proportion of foreign direct investment. In general, therefore, FDI appears to be more procompeti-
tive than anticompetitive (Broadman 2006: 198). However, the correlation is not especially strong, the assessment
is not representative of all Africa including the oil-producing countries, and it does not include any indication on
the eects that specically Chinese (or Indian) direct investment has on competition (sceptical: Holslag et al. 2007:
37).
One well-founded claim, on the other hand, is that Chinese capital investment in Africa is signicantly more
likely than that of European or other origin to lead to new investment (greeneld investment) rather than merely
to company takeovers or joint ventures. In this regard, all other things being equal, it has a positive eect on the
number of competitors (Broadman 2006: 208, 312). In contrast, evidence from various sources suggests that Chi-
nese capital in construction and civil engineering can achieve a market-dominating position from the large-scale
24

Pushing through a drastic revaluation of the yuan is di cult, however, not least on account of the fact that a large proportion of Chinese currency
reserves are held in dollars. In the event of a reversal, there would also be consequences for the dollar-euro exchange rate (and thus also for the African
currencies that are tied to the euro).
25

Lyman 2005 refers to job losses in the textile industry of Kano and Kaduna, northern Nigeria. Tere are similar reports, for instance, from South
Africa, Ghana and Morocco (Africa International, Oct. 2006).
55
government contracts won. Under the central control of Beijing, this evidently plays a part in gaining a hold in the
construction market in Africa. Te picture therefore remains contradictory (along the same lines: Mayer 2007a,
with other sources).
3.1.7 IMPACT ON POVERTY HAS CHINA GENERATED PRO-POOR GROWTH IN AFRICA?
Let us nally turn to the question of the eects on welfare in general and the impact on poverty in particular. As
has already become clear from both the sectoral observations in 3.1.2 and the analysis of cross-sectoral factors (3.1.3
and 3.1.4), it is very di cult to provide a comprehensive answer to this question. Even soundly based approaches
to estimating such impacts for a region as a whole or for individual countries, such as the one proposed by Jenkins/
Edwards 2005 (summarised there in Figure A 5.1), or the analysis of the various impact channels in Kaplinsky et
al. 2006, have their limitations in terms of methodology:
We cannot assess whether on balance Chinas impact is likely to be positive or negative, and for which countries and
regions, and for which particular stakeholders in particular countries and regions (ibid.: 33).
Our study, too, does not go substantially beyond this. It is simply too di cult to arrive at any certain conclu-
sions regarding the overall welfare impact and the reduction of poverty. Moreover, textbook di culties with
the methodology of welfare analysis occur in this context as well. For example, using a comparative static analysis
that compares a situation towards the end of the last decade with the present situation, it can be assumed that,
including the assessable indirect impacts, the overall eect on welfare from increases in exports to China, newly
created export opportunities to third markets, cheap imported goods and construction services (both generating a
consumer surplus) is positive. In short, Africa has probably beneted from China's engagement, including the poor
segments of the population. Among other things this is based on the assumption that the growth in imports, apart
from clothing, mostly does not squeeze out existing domestic supplies in Africa. Even the huge slimming-down of
the African clothing industry had already begun a long time before, or in fact had even been held in check by the
fresh AGOA induced Chinese investments. Looked at dynamically and over the longer term, however, this nding
is not certain, as missed opportunities to establish any local supply for certain goods in Africa that is investments
never made and respective linkage and multiplier eects have to be included in the calculations.
All in all we have to state that in this brief analysis it is not possible to establish with certainty whether the propor-
tion of above-average growth over recent years in Africa that can be attributed to China has indeed been a form of
pro-poor growth:
In terms of the absolute denition of pro-poor growth, it probably has been.
In terms of the relative denition of pro-poor growth, which also includes distribution eects, the situation is
unclear.
As a consequence of strategically designed public policy of African authorities, that is in terms of the economic
policy denition of pro-poor growth, it certainly has not been.
56
It is not merely a matter of academic interest to examine in greater detail the combined welfare impact of Sino-African
economic relations in future. Te fact that there is still no analytical certainty on this issue is also an obstacle when
engaging in economic dialogue with both Chinese and African decision-makers. For example, criticising the ood
of cheap Chinese imported products is trite and politically ineective as long as it is not possible to present an ap-
proximate weighing up of the positive and negative eects. Improving the evidence is key to the dialogue with African
decision-makers, and the eectiveness of economic advice depends on this evidence, as will be illustrated below. In
turn, the sustainability of the fragile welfare eects from Chinas growing engagement in Africa is itself crucially
dependent on eective economic policy.
3.1.8 CREATION OF SUSTAINABLE AGRICULTURAL AND INDUSTRIAL STRUCTURES
First of all it should be acknowledged that Chinese entrepreneurs are among the most dynamic in Africa, including
in manufacturing industries. Tey make a substantial contribution towards integrating Africa into a number of global
value chains (VCs), in the textile sector, in agriculture and shing industries, and in others. In general, however, the
debate about the potential of these global VCs suers from the shaky assessments of what can be expected in the long
term from VC integration, as distinct from the arms-length trade on markets with anonymous buyers and sellers.
What is clear, however, is that it is precisely Africas most important value chain, textiles and clothing, that faces
particular di culties, with the central part of the chain, in which SSA could realize a comparative advantage (yarns
and fabrics), barely existing in Africa at all, as outlined above. Now, one key question is whether the combined eects
of the MFA ending, the AGOA and EBA rules, in addition to pure market factors, will lead to a vertical reintegra-
tion of production chains in the textile and clothing industry at a small number of locations. Among those locations
would probably be China but probably not Sub-Saharan Africa (Goldstein et al. 2006). Another question is whether
the geographical fragmentation of VCs, which has become possible also as a result of modern communications
technology, will broaden and incorporate more African locations (Broadman 2006, further to some of the literature
on value chains).
Tis is compounded by the rise of imports of light industrial products into African markets, with a contrasting welfare
eect, not forgetting the currencies that have been revalued because of the Dutch Disease eects, which can reinforce
the above trends by making exports more expensive and imports cheaper. In all of the analyses, therefore, there is con-
sistent acknowledgement of the risk that the current, partly China-triggered economic boom in Africa might in the
end lead to a cementing of the low-level entrapment of the continent as no more than an exporter of raw materials.
What are the core recommendations on how to go about addressing this situation?
Te World Bank, whose valuable empirical work in Africas Silk Road is often cited here, has virtually no specic
industrial policy or trade policy recommendation at all for the China-Africa relationship apart from further trade lib-
eralisation and further improvement of the investment climate, in other words a simple extension of existing policy
recommendations. A number of somewhat more precise observations (op. cit.: 182) can even be interpreted as a hidden
recommendation for use of the so-called Swiss formula, i.e. for disproportionately large tari reductions by Africa in
relation to its trading partners. Te fact that Broadmans Silk Road is often interesting in terms of its analysis but
57
when it comes to recommendations on economic policy reads in large part like a word-for-word copy of any number
of Doing Business reports from the same bank must be very much held against it.
26

In contrast, the more critical analyses from the OECD, UNCTAD and IDS yield policy-related ndings that devi-
ate from the pattern just described. In view of the foreseeable development that the recent boom in the Southern
African clothing industry, brought about mostly by AGOA, can very quickly come to an end in the pincer move-
ment between preference erosion on US/EU markets and Chinese imports on African markets, and that other
labour-intensive manufacturing industries face a similar problem, the OECD, IDS-Df ID and UNCTAD advocate
support for pro-active policy on the part of African governments which combines elements of both trade policy
and industrial policy (see in: Kaplinsky/McCormick/Morris 2006: Section 4.1 Te challenges posed to industrial
policy and sectoral choice).
Tis is a position that is shared here. It creates considerable scope for international dialogue on economic policy and
for advisory support from German TC. Industrial policy is seen here and in the relevant literature not as a protec-
tionist policy that merely comprises import substitution and establishes peaceful conditions in a protected market
for a small number of privileged African producers. On the contrary, experience with the rapidly growing Chinese
competition underlines the need for African factory owners, too, to assert themselves from the very beginning in
the competition surrounding both imports and exports. Nor is the new industrial policy as described for developing
countries by Dani Rodrik, Ricardo Hausmann, Sanyaya Lall, Ha-Joon Chang, IDS authors and others character-
ised by governments believing they know better than the private sector which direction an African economy should
develop. Instead, put briey, this is a common search process for dynamic advantages (dynamic capabilities in Ka-
plinksy et al. 2006) in market segments and for promotion geared to achieving such advantages. In the end, Chinas
own successful development path acts as a powerful plea for industrial policy in other developing regions, too.
27

Specic measures range from appropriate monetary, currency and scal policy and obligations for Chinese inves-
tors/construction companies to employ local labour and use domestic products through to the negotiation of sector-
specic international preference and protection rules. Within the China-Africa constellation, particular importance
is attached alongside or indeed even ahead of temporary protection measures to two policy elds in which China
has been successful in its own economic policy: namely exchange rate management and technology transfer. In the
South African debate there are already proposals to move away from the (IMF-inspired) control of money supply
and instead primarily use exchange rate targets, even if that means accepting moderate import-induced ination-
ary eects. Furthermore, the negotiation of technology and know-how transfers within the framework of Chinese
investments potentially has an enormous eect. Mayer (2007a: 25) rightly points out that joint ventures between
local and foreign rms have played a key role in knowledge transfer in Chinas own industrial development. Te
information available to date about existing joint ventures in manufacturing industry in Sub-Saharan Africa has
very little to say about organised technology transfer and spillovers beyond the factory fence (UN 2007: 57-61).
Let us illustrate the issues surrounding new industrial policy with an example. Ethiopia exports hides and furs,
to China and India among others, and traditionally has a notable footwear and leather goods industry, the top
end of which is able to cope with European consumption standards, but which still struggles with cost and quality
26

At this juncture the biographical note may be appropriate that Harry Broadman was initially White House Chief of Sta and then Trade Representa-
tive in the administration of George Bush Senior. When President Clinton took o ce in 1993, he left the White House and went to the World Bank.
27

Cf. the explanation in the box: Te return of industrial policy in the long version of this text, available online.
58
problems. Ethiopia itself sees this as a key industry in its industrialisation strategy. Of late, the footwear industry
had come under huge pressure from cheap Chinese imports, threatening its very existence. A tari of just 35% is
imposed on shoes, which is not stemming the ow of Chinese imports. Information on how the numerous small
enterprises in the footwear industry are coping with the Chinese challenge remains contradictory; following mas-
sive initial losses and bankruptcies, in the meantime they appear to be adjusting better to the competition in terms
of cost and quality criteria (Gebre-Egziabher 2007; CCS 2007: 65-67, with further literature). Putting stronger
external protection in place for this core sector of Ethiopian industry but above all targeted upgrading of design
and technology, appears to make sense as development policy. So far it has achieved only limited success (Kaplin-
sky et al. 2006). An appropriate industrial policy design would also have to address the problem that many of the
larger enterprises in Ethiopia are owned by the governing party which makes market orientation and consistent
management of quality and costs more di cult.
3.1.9 A MIXED ECONOMY EN ROUTE TO AFRICA
A key political economy aspect regarding Chinese capital ows to Africa is the fact that both Chinese state-owned
and private enterprises are involved, as well as mixed and intermediate forms such as joint ventures and companies
owned by Chinese provincial governments. In terms of industrial policy, the Peoples Republic is taking advantage
of the benets of a mixed economic system also in its advancement in Africa. Tere are many documented cases of
state-owned enterprises acting as trailblazers in risky undertakings. In the eld of housing construction in Algeria,
18 state-owned and private Chinese construction companies operate alongside each other, without any discernible
principle (Bourcier/Oumeddour 2005: 7). Chinese construction rms report that their head o ce in Beijing stipu-
lates that orders must be concentrated in certain countries, while other countries are reserved for other Chinese
companies. Yet another construction company reports of instructions to perform its cost calculations with a prot of
3% or even at loss, instead of typically 15% in bids submitted by Western rms.
28

Over and above such descriptions of individual cases, a few general assertions can be made about the mechanisms
of the Chinese going global policy. Direct investment by Chinese companies in other countries is an important
vehicle of the process of internationalisation promoted by the state. Tis places Chinese enterprises in a relatively
better position than Western competitors, whose prot expectations have to be guided by average international
returns. Te capital costs of Chinese companies are lower thanks to favourable nancing opportunities, or in the
case of state-owned corporations tend to zero, thus enabling them to make higher bids when aiming to take over
other companies.
Te policy measures adopted by China include, in particular:
1. Decentralisation of authority for approval of foreign investments by Chinese companies to local administrative
levels.
2. Loosening of the control of capital movements and the provision of foreign currency for foreign investment.
Between 2003 and 2005 the state authority for exchange control increased the framework for investment by
Chinese companies abroad from $3.3 to 5 billion. In the meantime, the restrictions on foreign investment and
the requirement to obtain approval have been largely relaxed.
28

Taylor 2006b: 942 fn.
59
3. Direct and indirect subsidies. Tese involve on the one hand low-interest loans from the state-owned com-
mercial banks, while on the other the state-owned Export-Import Bank of China (EXIM) makes credits avail-
able for Chinese foreign investors on favourable nancing terms. EXIM is one of the three banks which issues
what are commonly referred to as politically oriented loans in order to achieve industrial policy goals.
4. Provision of information by MOFCOM regarding the general conditions on foreign markets, such as legisla-
tion pertaining to investment and taxes (Schller/Turner 2005: 10).
It is to be assumed that the $5 billion development guarantee fund for direct investment in Africa announced at the
third FOCAC summit in late 2006 represents a further increase to the funds listed under point 3, above.
Going beyond all of this, the core question is how deeply the strategic coordination of public-sector and free-market
elements penetrates into Chinese Africa policy and how much free-market dynamism unfolds. Tis is also a relevant
research topic in the context of German Africa policy. Since the start of the economic reforms in 1978, Chinese
state-owned enterprises (SOEs) have enjoyed a relatively large degree of autonomy regarding price and investment
decisions compared to the former Soviet system, including in their home country, and have been able to enter into
joint ventures with private companies in other countries. Te World Bank called this Chinas stealth privatisa-
tion in a report on the experience of growth in the 1990s (World Bank 2005: 168). Tey evidently also enjoy this
autonomy in Africa, while on the other hand they continue to benet from wide-ranging government assistance.
Taken together, these two factors give Chinese direct investment a high degree of exibility.
3.2 CORPORATE GOVERNANCE AND NATIONAL GOVERNANCE
Chinese rms apparent disregard for all types of behavioural norms governmental, ethical, environmental,
labour and social standards is an area of major international concern in the light of Chinas engagement in Af-
rica. China is increasingly coming under political pressure in all of these spheres. In view of the extent of Chinese
economic activities, including mining, timber and construction, the potentially enormous impacts on already pre-
carious social standards, preservation of tropical forests and corruption in Africa that may arise of breaches of cor-
porate social responsibility (CSR) must be a matter of great interest. Available evidence and reports from press and
politicians according to which Chinese partners do not spend much time on environmental impact assessments
or human rights (Hilsum 2005: 239) abound. China, or Chinese rms, do not report on any eorts in the eld
of CSR in Africa, whatever form they might take. Te start of a trilateral CSR dialogue on Africa and support for
the establishment of Chinese CSR reporting from Africa are thus to be among the recommendations for bilateral
and multilateral dialogue with China.
In view of the severe criticism of standards violated by Chinese companies in Africa, it is noticeable that the World
Bank only marginally addresses the topic in its comprehensive analysis of the relationship between China and
Africa. In the wording of the Bank, it ought to crop up as a behind the border constraint for Sino-African eco-
nomic cooperation. However, it is only lightly touched on regarding product certication and certication under
ISO, and in relation to Chinese companies it is assessed positively: standards are observed (Broadman 2006: 246.,
particularly Box 5.4). Te policy recommendations made by the World Bank thus lack a clear, critical statement on
60
environmental and social standards in relation to Chinese engagement in Africa a further white spot in the Bank's
assessment of economic relations between China and Africa.
3.2.1 LABOUR STANDARDS AND SOCIAL STANDARDS
Any critical assessment of the set of problems outlined above is faced with a substantial obstacle, however: there are
no internationally veried ndings on the violation of labour norms and other social standards by Chinese compa-
nies operating in Africa. We are not aware of any sizeable investigations that pick up on this question, for example
with regard to the employment conditions in Chinese textile and construction companies or the use of child labour.
Te Clean Clothes Campaign documents infringements of labour standards in textile factories in Southern Africa,
some of which are in Chinese ownership (Cleanclothes 2002). Tere were protests about unpaid overtime in March
2005, for example, by Chinese workers in Chinese textile factories in Mauritius.
Te situation is best documented in Zambia, one of the countries in Africa where Chinese companies have been
investing on a broad base for many years: Te trade unions there have been complaining strongly about low wages
and miserable working conditions for a long time now.
29

Christian Aid documents the very low wages in copper
mines, and reports that in the copper mines in Chambeshi operated by the Chinese company NFC, out of 2200
workers only 52 have a permanent contract of employment, by contrast with on average half of the workers in other
Zambian mines (Christian Aid 2007: 24). Apparently various serious accidents have occurred at this mine because
of the infringement of labour and safety standards, including an explosion in an a liated ordnance factory in April
2005 which cost the lives of 50 people. On repeated occasions in the past two years, violent conict has broken
out between the Chinese management and the mine workers. Out of fear of protests erupting, in 2007 the Chinese
President had to call o his visit to Chambeshi, where he was scheduled to lay the foundation stone for a new cop-
per smelter (with an investment of over $200 million) (Frankfurter Allgemeine Zeitung, 7.2.2007). Te Zambian
government had to close a Chinese coal mine in the south of the country for safety reasons.
In the light of the repercussions on Chinas reputation in Africa that are already being felt, appeals to the Chinese
governments international responsibility may not be without hope. However, to what extent the central govern-
ment of the Peoples Republic is actually able to take action and exercise control vis--vis business enterprises op-
erating in other developing countries is an interesting subject for research, although largely untapped at least for
Africa. We do not know what Beijing controls in Africa, and consequently often tend towards ideas of political
omnipotence which may well no longer have much in common with the reality of Chinese foreign relations.
3.2.2 ENVIRONMENTAL STANDARDS THE CHINESE TIMBER INDUSTRY IN AFRICA
China is one of the most sparsely wooded countries in the world: the area of forest land is only about 1200 square
metres per head, compared with the global average of almost 6500 square metres. Because of the devastating en-
vironmental impacts, a logging ban has been successively introduced in natural forests (not in plantations) in at
present 13 of the 27 Chinese provinces, beginning in 1998. Since that time, imports of timber have become es-
sential for Chinese industry. China has systematically backed this legislation up with trade policy: since January
29

Low pay is dened by trade unions in a comparison of mines in Chinese ownership and those owned by others. According to a report in the Frankfurter
Rundschau of 5.2.2007, workers at the largest Zambian textile company, Mulungushi Textiles, in Kabwe, which is Chinese-owned, protested outside
the Chinese Embassy because of low wages and temporary closure of the company. In 2004, the government had demanded of the same company that
it must not lock its workers into the factory at night.
61
1999 the import of logs, sawn wood, rewood, wood chips etc. has been exempt from duty, whereas the export of
logs is forbidden and that of sawn wood is restricted (Stark/Cheung 2006: 21). Today, China is by some distance
the biggest importer of industrial round timber and also the biggest importer specically of tropical timber, as can
be deduced from the annual reports of the International Tropical Timber Organization (ITTO).
Whereas the area of forest in China itself is slowly beginning to recover, this is not the case in Africa. While Africa
has only one sixth (16%) of the worlds forest stock, it registered more than half (55%) of global losses of forest cover
between 2000 and 2005. Since 1990, forest cover has been falling at one of the highest rates in the world, along with
Latin America. During this period, Africa has lost 9% of its forests (FAO 2007). Given everything that we know
today, Chinese timber companies are making a signicant contribution to these losses.
If the ows of Chinas timber imports are plotted on a map of the world, deliveries from Africa pale in comparison
with the huge quantities supplied from Russia (about 2/3 of log imports), Malaysia, Indonesia or Papua New Guin-
ea.
30
Even each of the (relatively speaking) most important African supplier countries Gabon, the Republic of
Congo, Equatorial Guinea accounts for less than 2% of Chinese log imports: an entirely dierent situation to that
with oil. Te ow of information is similarly asymmetrical. For timber imports from South-East Asian countries
such as Malaysia, Indonesia or Myanmar there are wide-ranging studies and soundly based estimates of illegal sup-
plies from non-governmental organisations such as the Environmental Investigation Agency (EIA), Global Timber,
Global Witness, Greenpeace and the World Wide Fund for Nature (WWF). In contrast there is no general, Africa-
wide study, as conrmed in the overview in Chan-Fishel (2007).
Technically the best, albeit institutionally relatively untransparent source on African timber exports to China is the
British NGO Global Timber.
31
Its summary description for a number of African countries (see Figure 13) illustrates
how the roles of China, the EU and the rest of the world in the exploitation of Africas tropical forests have been
reversed since the start of the decade. For these African countries, China has become the most important customer
for tropical timber, no longer Italy or France.
30

See the cartographic representation in Global Timber 2007, and Greenpeace 2007: 22.
31

It must be said that, for an international advocacy NGO, the lack of any self-declaration of the nature and membership of this organisation on its
website is remarkable.
62
Figure 13: Chinas illegal timber trade
Taken from: Global Timber 2007 (www.globaltimber.org.uk)
In most cases it is not easy to distinguish between illegal logging (failure to obtain licenses, exceeding quotas, or
disregard for export bans on unprocessed timber, which apply in many African countries) and formally (according
to the partner countrys regulations) legal but illegitimate, ecologically destructive logging. Global Timber uses a
broad denition of illegitimacy and illegality, dened as being in conict with either the letter or intent of the law
or otherwise associated with corrupt practice. According to this, the situation in the four countries presumed to
be the main exporters in Africa is as set out in the box below. In response to a similarly anarchical situation, in Fe-
bruary 2008 Sierra Leones Minister of Forestry renewed a timber export ban that expressly was rst and foremost
aimed at Chinese companies (BBC News, 12.2.2008).
63
32

Information from the GTZ Country Director in Tanzania, Axel Drken.
Illegal Chinese timber imports from Africa (selection)
Cameroon: 80% (primarily logs)
Congo (Brazzaville): 90% (agrant disregard for the law, including by the country's current
ruler in the granting of concessions; China's primary interest is logs but
the law seeks processing prior to export)
Equatorial Guinea: 90% (agrant disregard for the law concerning maximum allowable cut
and de facto concession size attributable to one company (and its sponsors)
which supplies most of China's imports)
Gabon: 80% (agrant disregard for the law China's primary interest is logs
but the law seeks processing prior to export; tax not paid on two thirds
of area allocated as forest concessions)
To date, East African countries have barely appeared in these reports, if at all. Other sources, however, refer to il-
legal logging in Tanzania not shown at all on the Global Timber map which is said to extend into the northern
parts of Mozambique. A report by the Tanzanian Ministry of Natural Resources and Tourism highlights another
important aspect of the problem: the loss of revenue for African governments from misappropriated export duties
(Milledge et al. 2007: 3). Te report by the Tanzanian forestry ministry was compiled with Norwegian support.
32

Te recommendation derived indirectly from this is to oer support for similar studies to other African govern-
ments, particularly the main Chinese supplier countries in West and Central Africa, and to call for active contribu-
tory work by the Chinese government.
In Mozambique, the enormous extent of illegal logging (the Chinese Takeaway) and the openly cynical attitude
of participating Chinese rms and traders in relation to the environmental consequences has been veried in detail
with the support of Christian Aid, particularly in the central province of Zambzia (MacKenzie 2006 probably
the best available country study). Lemos/Ribeiro (2007: 66) add that the occurrences in Zambzia are also repeated
in the provinces of Cabo Delgado, Nampula and Niassa, and accuse China of using a wide range of measures to
actively hush up illegal logging.
In 2007, China imported more than 2.5 million cubic metres of tropical timber from Africa. Te principal supplier
countries were Gabon, Equatorial Guinea, the Republic of Congo and Cameroon. To a large extent, the massive
Chinese timber imports from Southeast Asia, Russia and various African countries are nothing other than the ex-
port of an environmental problem. A considerable proportion of the imports are driven by a timber industry that
has the nature of an extractive industry, not that of sustainable forestry.
What action is being taken against this undesirable development at the international political level, and what can be
done in addition? In Africa, the international initiative Africa Forest Law Enforcement and Governance (AFLEG)
oers a generally suitable framework for action. As yet, however, AFLEG has barely had any operative eect.
Taken from: Global Timber 2007
64
Te European Union supports AFLEG in the context of its Action Plan for Forest Law Enforcement Governance
and Trade (FLEGT). Its central element, since October 2005, has been the Voluntary Partnership Agreements
(VPA) that are currently being negotiated with ve countries Cameroon, Gabon, Ghana, Indonesia and Malaysia.
Tese agreements are meant to dene timber products which may only be imported into the EU if they are certied,
including products from third countries (for diagnosis and recommendations for action, see Bhringer/Falkenberg/
Hess 2007).
Non-governmental organisations criticise two key points in the FLEGT Action Plan. Firstly, the fact that there
are ongoing VPA negotiations on the illegal timber trade signies by implication that there are still no eective
regulations in place. Te implementation of nally negotiated agreements cannot be expected to begin until 2009
at the earliest. Secondly, the VPAs concluded will have no eect on Chinese imports and exports. No VPA is being
negotiated with China, despite the fact that the country is quickly establishing itself as the worlds leading furniture
supplier, including the export of products made of African tropical timber to the EU and USA another form of
Sino-African triangular trade with the West.
Te same criticism is directed at the new initiative by the President of the USA against illegal logging. In its study
quoted above (2007; Partners in Crime), Greenpeace documents the widespread laundering of illegally logged
tropical timber from Papua New Guinea, Indonesia and Gabon, which nds its way via China to European and US
wholesale markets in the form of plywood, and calls for legislative measures to ban illegal imports of this nature.
A probably more realistic demand is the call for legal certicates of origin for timber products and furniture, par-
ticularly for items made with valuable African timber species (including okoum).
33
In its study, the WWF refers to
the possibility of exerting pressure on Chinese companies via consumers (Chunquan et al. 2004: 8). Indeed, global
branding, a factor which companies from China are increasingly forced to address, is opening up new avenues for
bringing global pressure to bear.
Essentially, the entire subject matter belongs on the agenda of the EU/G8 dialogue with China with regard to the
issue of climate change. Illegal timber imports and the enormous extent of environmental pollution in China itself
cannot be taken as proof that the Peoples Republic will refuse to participate in environmental protection measures
in Africa. Jared Diamond ttingly describes Chinese environmental policy as lurching between ever more devas-
tating environmental damage both within its own borders and beyond and the occasionally just as huge and
sweeping response by the central government in favour of the environment (Diamond 2005: Chapter 12). Tis abil-
ity to respond can also be backed with negotiations aimed at achieving better compliance with forestry standards
in Africa. Tree further news reports underline the Chinese central governments growing openness in relation to
this matter:
1. Adoption of guidelines for Chinese forestry companies working overseas to curb the practice of clear felling
(state forestry authority and MOFCOM) (Kabisch 2007).
2. Signing of the German-Chinese forestry agreement on 5.9.2007 between the German Federal Environment
Ministry (BMU) and the Chinese state forestry authority, with the objectives of adopting a joint approach to
counter illegal logging and introducing certication.
3. Agreement (January 2008) between Chinas State Environmental Protection Agency (SEPA) and the World
33

Te same applies to certain particularly sought-after types of wood from Papua New Guinea.
65
Bank subsidiary International Finance Corporation (IFC) on the introduction of the Equator Principles for
social and environmental sustainability in project nancing by Chinese banks (China Daily, 25.1.2008).
Tere are also opportunities for trilateral action at the regional level, as illustrated by an example of what has
happened within the Congo Basin Forest Partnership (CBFP). Te CBFP is an association of the ten countries
bordering the Congo River system with the declared purpose of conserving biodiversity and the sustainable use of
natural resources (www.cbfp.org). In 2007, Germany, in the person of the BMZ representative Hans Peter Schip-
ulle, took over the role of facilitator of the CBFP from France. On the initiative of the German facilitator, for the
rst time a representative of the Chinese forestry authorities took part in the CBFP meeting in Paris in October
2007. Generally, the export of tropical timber from Africa certied by the Forest Stewardship Council (FSC) is
only taking o slowly. However, forestry experts from Central Africa consider the conversion of timber exports to
meet the FSC standard within a transitional period of about six years to be realistic provided that the EU decides
to adopt a corresponding timetable for the certication of its imports of timber and wood products. Te submission
of a binding EU timetable of this nature thus appears to be one of the most important measures that can be taken
to curb the overexploitation of African forests carried out by Chinese, Malaysian and other rms, and is therefore
included as a key multilateral recommendation in Section 4.
Tis examination of the forestry sector does not, incidentally, exhaust the discussion of the environmental con-
sequences of Chinese economic activities in Africa. Critical reports on shing (not covered here) and mining (see
next section) indicate that in a comprehensive review of the situation it would also be necessary to include other
sectors in the appraisal.
3.2.3 TRANSPARENCY IN EXTRACTIVE INDUSTRIES (OIL & GAS, MINING)
As already outlined in Section 2.2.4, Chinese involvement in the African oil sector is wide-ranging, and it is criti-
cised because of the lack of governance conditions attached and because of the blatant undermining of Western
sanctions (Sudan, Angola). Te question thus arises as to what mechanisms are available, apart from public and
diplomatic criticism, to persuade China to take a more constructive position in the extractive sector. Generally
speaking, an approach along these lines appears to be by no means unpromising, because at least (a) two major
mechanisms exist and (b) Chinese companies have already had initial experience with both of them.
Firstly, there are opportunities for global action in view of the increasing Chinese interest in being listed on the US
Stock Exchange and other international stock markets, which involves meeting certain corporate standards. Te
state oil corporation CNPC has already had to face up to a negative experience on Wall Street and then, by way
of alternative, tried to oat a subsidiary set up specically for the purpose of becoming listed (Alden 2005: 158).
Tjnneland et al. report that all three large Chinese oil rms are already listed on the stock exchanges in New York
or Hong Kong. Western oil companies already have minority holdings in the Chinese Big Tree. Conversely, in-
vestment funds have revoked their interests in CNPC because of its activities in Sudan, which shows the limited
possibilities for applying pressure in this way.
66
Secondly, integrating the Chinese government and the Chinese state-owned oil-producing companies into the
process of the Extractive Industries Transparency Initiative (EITI) is an important political undertaking. Tis
initiative is concerned with measures to increase transparency and rationality in the contractual arrangements
with oil companies and in the administration of oil revenues on the part of both the companies and the govern-
ment. As China, being a latecomer in the global competition for oil, has a worse starting situation in Africa than
the established players, it has to date exhibited only limited willingness to cooperate with EITI. However, Chinese
diplomats and scientists do take part in relevant events. Terefore it seems that the government has not yet adopted
a nal position.
Under favourable circumstances the government of Nigeria is particularly interesting as a political gateway in the
region, as Nigeria pursues a home-grown EITI strategy (NEITI), in other words it adjusts itself to the previously
described Chinese conception so that the Chinese reservations against subordination to a British or G8 initiative
are not applicable. However, NEITI participation rst has to be publicly formulated as an expectation of Chinese
policy, and will hardly occur as an automatic political turnabout (an aspect possibly relevant for the German an-
chor country strategy for Nigeria). A matter of strategic importance, practically a political breakthrough, would
be to use the Chinese inuence on the government of Angola to give up its mere EITI observer status that it once
again defended at the EITI conference in Oslo in 2006 and to take eective steps towards resource transparency.
Particular importance can be attached to targeted German DC with China in the context of the regional EITI TC
project in the Communaut Economique et Montaire dAfrique Centrale (CEMAC). China obtains oil from ve of
the six CEMAC member states.
Until now transparency initiatives for mining in Africa have as a rule remained behind EITI, which has a clear,
although not exclusive focus on oil; the exception is the Kimberley process in the diamond sector. Te Chinese
involvement in the mining sector in DR Congo and Zimbabwe is especially serious in this regard; this is why a new
German transparency initiative in mining under discussion for DR Congo in 2007 can become politically interest-
ing. Te study by Christian Aid quoted above also records that the privatisation of the copper mines in Zambia
forced by the World Bank and IMF led to contracts between the government and the new operators of the six min-
ing businesses, including the Chinese company NFC, by which in 2004 as little as 0.7% of the production value
accrued as government revenue a fraction of the rates common in other countries (Christian Aid 2007: 25). Te
adage of the paradox of plenty gets a quite particular meaning here: not that particularly high commodity revenue
disappear in dubious channels but that extremely low payments are evidence of an irrecoverable part of national
wealth being given away by the government. Tese conditions are xed for 15 to 20 years, and can only be changed
through the exertion of huge international pressure on the government and on companies acting unethically. Te
contracts, which are bordering on immoral, have been the subject of scrutiny by the Zambian government for some
time now.
All of the initiatives to integrate China into a system of resource transparency as described above are still in their
infancy or are nothing more than political ideas. A hard-headed view of the policy must therefore nally point
to the most probable medium-term consequence of the Chinese approach in Africa. In the foreseeable future, the
expansion of Chinese involvement in the oil sector will lead to:
67
an initial increase in corruption and the mismanagement of public revenues, commonly summarised by the term
resource curse,
the twin initiatives EITI and Publish What You Pay (PWYP) having to put up with political setbacks,
Chinese and US disregard for elementary governance standards eectively compounding each other in countries
such as Equatorial Guinea (a CEMAC member).
Tis makes strategic endeavours to counter this trend on several political levels transatlantic dialogue, China
dialogue, G8/EITI, country-specic measures all the more important.
3.2.4 DUTCH DISEASE AND MACROECONOMIC MANAGEMENT
Questions regarding the transparency of contracts and revenues cover by no means all the problems that Africa has
to face up to in connection with higher exports of oil and other commodities to China and more generally on the
world market. One risk that should be particularly highlighted is that of so-called Dutch Disease, i.e. appreciation
of the local currency with a series of undesirable side-eects for other branches of industry that have to compete
in the export market. Te risk is particularly strong if these are the same countries whose previously successful
clothing exports come under pressure because of problems described elsewhere in this study. One country deserv-
ing mention is Zambia, whose currency is under constant upward pressure on account of rapid increases in copper
exports to China. Zambian exports of textiles and owers are already suering as a result of the appreciation of
the kwacha. According to information from the Zambian central bank, only the parallel rise in the price of oil has
partly neutralised this eect and to that extent, paradoxically, had a benecial impact.
Te eects of Dutch Disease become extremely critical in connection with the general ood of imported consumer
goods to Africa described above. Tis increase in imports is a general phenomenon and also aects countries such as
Ghana or Benin, from where China does not obtain any notable amounts of mineral raw materials. In commodity-
exporting countries, however, appreciation of their currencies and hence the fall in the cost of imports further intensi-
es the import pressure. Te undervaluation of the yuan against the dollar (and even more so against the euro) that
still continues despite a certain adjustment of both the nominal and the real, eective (trade-weighted) exchange rate
(Alves 2006: 21-23) has to be counted as part of this trend. All the elements taken together are particularly harmful
for Africa.
Tere is extensive literature about Dutch Disease. Trough appropriate macroeconomic policy, the distortion can
be mastered, as the Netherlands and Norway, and in Africa above all Botswana, have proved over the long term.
Successful macro management may well require technical assistance on currency and trade policy, which Botswana
has put to successful use. In South Africa there is already a lively debate in political and expert circles as to whether
exchange rate control in circumstances where there is pressure to revalue should not be given a higher priority among
the political economic objectives.
68
3.3 REGIONAL GOVERNANCE PROCESSES
3.3.1 NEPAD
In the self-image of African leaders, the New Partnership for Africas Development (NEPAD) just like the AU
itself largely matches what Chinese Africa policy understands by African ownership. Within the overall agenda
of NEPAD, however, it is necessary to distinguish, with regard to their political implications, between two di-
mensions: a) the overarching good governance agenda, and b) the sectoral development programmes, for example
the comprehensive plans for agriculture, food security or infrastructure, consolidated in Short-Term Action Plans
(STAP).
At the EU-China summit in Helsinki in autumn 2006, the EU agreed to enter into closer cooperation with
China regarding its Africa policy, which includes the promotion of NEPAD. Tat said, on this occasion, China
emphasised again the ve principles of its foreign policy (see Section 1). While the EU underlined its adherence
to the principles of good governance and human rights, the Chinese side highlighted peaceful coexistence and
non-interference in the internal aairs of other countries. Te political leaderships agreed to engage in a structured
dialogue on Africa and open up practical means of cooperation, including joint support for the NEPAD initiative
(China-EU joint statement).
Although NEPAD is not an implementable or nancial programme in itself, and implementation of the action
plans is meant to proceed via the Regional Economic Communities (REC) or individual member states, the ques-
tion as to the area (good governance or sectoral action plans) in which NEPAD will gain the greater operative
importance also depends on Chinas participation: if it is accepted and desired that China plays a greater part in
NEPAD, the Western donor community will have to recognize that the priority areas in NEPADs philosophy and
in the NEPAD action plans will somehow shift from good governance to infrastructure and other more practical
areas (Taylor 2007b). As the African Development Bank (Af DB) was named the lead agency for the infrastructure
action plan, with its four components Water (including Integrated Water Resource Management), Energy, Trans-
port, and Information and Communication Technologies, it has a special role to play in integrating China into the
process without losing sight of governance issues altogether.
3.3.2 EXAMPLES OF CRITICAL CASES AND THEIR EFFECT ON THE WIDER REGION
In critical descriptions of Chinese Africa policy, three countries are regularly picked out: Angola, Sudan and Zim-
babwe. Te criticism is familiar: through the money and military assistance that it provides, China undermines
Western or UN sanctions and eorts towards good governance/human rights/resource transparency, and for good
measure in Angola it acquires the attering image of building up the country almost on its own (Wirtschafts-
woche, 7.8.2006) or in Zimbabwe of having gained a partner country which China all but owns (Lyman 2005).
Tere is no doubt that the Peoples Republic has hitherto not played a constructive role in the attempts to enforce
these principles in the three countries mentioned. It does seem, however, that some dierentiation is in order, which
at the same time should determine how Germany might position itself.
69
In Angola, the Western strategy of sending in the IMF for public nancial management and extractive industries
transparency while French and US oil companies continue to operate unhindered had not been successful either.
Critics are also of the opinion that the Angolan government had good reasons to reject wide-ranging cooperation
with the IMF (such as for example a Sta Monitored Programme SMP) (Deutsche Welthungerhilfe 2006: 21),
as the IMF linked stabilisation measures with further-reaching, highly controversial demands for privatisation and
deregulation. Besides, with more information available, it is becoming very clear that the recent history of relations
between Angola and China are by no means entirely harmonious. Some time ago, on 9.12.2004, the Secretary of
the Angolan Council of Ministers at the time had to leave his post under pressure from the Chinese as he was ap-
parently involved in diverting part of the rst Chinese $2 billion credit (Servant 2007).
Likewise in Zimbabwe, there is no promising Western strategy in sight. A coalition of political forces that could
bring about a change in policy is yet to be found. On 22.3.2007, China and Zimbabwe signed a Memorandum of
Understanding on greater cooperation in - of all things the rural sector, which has been ruined by the Mugabe
regime.
34
Although it may be obvious to criticise this, caution is called for if, for example, we refer to a report from
Africa Condential according to which in the period 2005/2006 British and South African banks supplied the
Mugabe regime with a nancial lifeline of more than 400 million dollars, including a loan from Barclays Bank on
concessionary terms for the agricultural sector, aimed at consolidating the land-reform programme and boosting
falling farm productivity (Africa Condential, 19.1.2007). According to the same report, the Standard Chartered
Bank and the British insurance company Old Mutual support the regime through the regular purchase of govern-
ment bonds. Finally, there is the question whether the promised big things in the cooperation between China
and Zimbabwe will in fact come to anything, as since then the People's Republic has clearly distanced itself from
the Mugabe regime, and in September 2007 let it be known via the rst Chinese special envoy for African Aairs,
Liu Guijin, that from then on China would limit itself to humanitarian aid in Zimbabwe (Kleine-Ahlbrandt/Small
2008: 48, 51f.). Te ultimate test for a new Chinese attitude towards the Mugabe regime would be a cessation of
Chinese arms supplies, as it would be in Sudan.
In Sudan, Chinas massive involvement in oil and infrastructure is the precise opposite of its declared policy
of non-intervention, as criticised by Askouri (2007) in his review of Chinas activities in Sudan. Other sources,
though, state that the Chinese role in consolidating the peace process in southern Sudan through its participation
in UNMIS is actually rather constructive. In the Darfur conict, China was obliged for the rst time to tolerate
a UN Resolution that deviated from its policy of non-intervention, even if in Western judgement it was well short
of what was politically necessary. Since then, the Chinese government has itself increased the pressure on Sudan.
On 31.7.2007, China supported a move in the Security Council to create the mixed UN-AU peacekeeping force.
As the Darfur conict and the newly established peace in the south are not independent developments and as the
highest-yielding oil elds in Sudan are for the most part situated in areas that are the subject of historical dispute
between Northern and Southern Sudan, China has an interest in conict resolution in the west of the country for
this reason too. For the time being, in February 2007, China removed Sudan from the list of countries in which it
promotes foreign investment by Chinese rms.
34
For more detail see Karumbidza 2007 on Chinas Zimbabwe policy, including its operations in the agricultural sector.
70
Te fact that the USA in particular does not demand tougher sanctions with all of its political resolve, nor insist
on the enforcement of sanctions that have already been agreed upon (no-y zone), has a lot to do with the US
standpoint that Sudan is basically willing to cooperate in the ght against Islamist terror (Prendergast 2007). Tis,
again, limits the opportunities to criticise China, although without aecting the crux of the international criticism,
namely that the regime in Sudan is only able to survive thanks to Chinese oil purchases and weapons deliveries.
A fourth country case that must be mentioned is Equatorial Guinea. At rst sight, this is a geostrategically in-
signicant collection of islands and a piece of African mainland with half a million inhabitants. It is foreseeable,
however, that political dealings with Equatorial Guinea, whose government has one of the worst track records for
human rights in Africa, will have a relatively important part to play in future political dialogue with China, despite
the small size of the country. Te Peoples Republic has enhanced the status of Equatorial Guinea through state
visits, cancelled debts which Equatorial Guinea would easily have been able to clear itself and promised new aid.
However, as long as the United States continues to shield the Obiang government from international criticism solely
on account of its oil interests, the credibility of any Western criticism of Chinas Africa policy is undermined. In a
way, Equatorial Guinea represents the clearest case of Western inconsistency in the application of its own political
principles.
35

In Angola and Equatorial Guinea, what appears according to good governance criteria to be inconsistency in
the Western position, particularly that of the USA, in truth results from a highly consistent policy of securing
energy supplies on the part of the United States, backed with military force. Michael Klare, who engages intently
in academic analysis of this approach, talks in this connection of the militarisation of African oil production
(Klare/Volman 2006: 297). Te programmes providing military training and arms supplies to the most important
oil customers were so similar that the conclusion had to be drawn that Chinas eorts to acquire oil assets in Africa
followed an essentially indistinguishable pattern to that of the United Kingdom, France and the USA (ibid.: 304).
In our observation this is incorrect in only one signicant aspect, namely that China does not maintain any notable
military bases in Africa or at least not yet.
As long as there is still no sight of an international energy security policy that is acceptable from the governance
standpoint, not even for a small country such as Equatorial Guinea, the development community in particular
will have to accept the continuing presence of an alternative rationale in Africa policy according to which military
assistance and development assistance are instrumentalised for oil interests. Let us therefore turn the idea around:
perhaps it is time in international debate to address possible civilian forms of internationalising the security of
energy supplies in dictatorial states such as Equatorial Guinea or Chad as an alternative to the low-level military
competition with China for the loyalty of local elites (ibid.: 306) or to the threat of a new cold war in Africa
(with China) (DIE ZEIT, 28.12.2006). As a general rule, the best method to pursue the securing of resources on a
sustainable basis is to support stable democracies, as in Botswana, with military protection being only a secondary
option.
35

According to Klare / Volman (2006: 300), in scal year 2006 new International Military Education and Training (IMET) programmes were also
envisaged by the USA for o cers and men from Sudan and Equatorial Guinea.
71
3.3.3 AFRICAS SECOND LIBERATION?
Contrary to what might be suggested by the o cial trumpeting in African government circles, Chinas new engage-
ment on the African continent is by no means welcomed unanimously or without qualication. An accurate picture
of African opinions on China still has to be drawn, as Obiorah (2007:39) observes. Regardless of nuances, however,
the public reaction in Africa without exception includes an expression of liberation from Western dominance and
Western dictates, even though as a result of Chinas support no one is in fact being liberated and even in countries
other than Sudan and Zimbabwe the eect is a priori stabilisation of the neo-patrimonialist regime type (Taylor
2007a, b). Almost without exception, this sense of liberation is also articulated by political gures, academics and
journalists who otherwise have a critical attitude towards their own governments. Even President Mbekis often-
quoted comments about a possible new form of colonialism related to the nature of trade relations with China, not
to the political dimension.
Tis common response pattern across the continent is in marked contrast to the emphasis on national ownership
and respect for the sovereignty of the partners, which have been the guiding themes surrounding new forms of
Western cooperation in recent years. For Western donors, their African partners have already been sitting in the
proverbial drivers seat for a long time, and in that respect their enthusiasm for China is disappointing. Te
strange political response pattern obviously has to do with the Wests incomplete departure from the Washington
Consensus and the often cited Beijing Consensus (Ramo 2004) as an alternative policy model. Related to devel-
opment cooperation, there is actually a whole range of possible reasons for the striking discrepancy between the
(African) sense of liberation and the (Western) emphasis on ownership and partnership:
1. Western donors are former colonial powers, and will remain so; China is not counted among them and can
always present itself as a developing country.
2. Te 1980s and 1990s, with their prescribed structural reforms and the transition from bipolar to unipolar
Western dominance, were seen in Africa across all political camps as a time when economic (policy) freedoms
were reduced.
3. Te new forms of development cooperation in a spirit of (greater) partnership NEPAD, HIPC II/PRSP, Paris
Declaration, budget support are still too recent, and have either not yet been communicated eectively
enough or have been inconsistently implemented across Africa.
4. With regard to the promised scrapping of political ex ante conditionalities, the new Western development
cooperation is in fact not really new at all. Te intensied debate in the Western donor community itself is
indicative of this, above all the persistent controversy with the World Bank concerning loan conditionalities.
5. African observers know that Western assistance particularly in the form of lending will never be entirely
free from conditions because of the obligation on Western donors to be accountable to their domestic constitu-
encies. Te problem does not exist in this form with Chinese lending.
6. Western assistance is still too bureaucratic and far too long-winded; it does not have the doer image of
Chinese cooperation, and despite all of its successes it is di cult to furnish evidence of its eectiveness over
wide areas.
7. Aggregate gures on Chinese assistance (10,000 experts trained in the past four years) seem huge to the
72
naked eye in comparison with equivalent numbers from individual Western donor countries disaggregated over
time and by region.
8. Western assistance does not have the beacons of cooperation similar to the Tanzania-Zambia railway, which
despite problems still possess symbolic power (and have real economic status) even decades later.
9. Te Western community does not succeed in establishing the same interaction between trade, investment and
o cial aid the special Chinese form of public-private partnership which in the case of China creates the
picture of a general upturn in bilateral relations.
10. Military deployments by Western powers (even if China participates in some of them) are perceived with
ambivalence, and this will remain the case.
11. Te Forum on China-Africa Cooperation (FOCAC) is part of highly eective media treatment which is lacking
for bodies such as the African Partnership Forum or, as seen in Lisbon at the end of 2007, for the discordant
relations between the EU and Africa.

Dissenting voices and publications such as the collection of essays entitled African Perspectives on China in Af-
rica (Manji/Marks 2007), however, are increasing rapidly (likewise: Gaye 2006). Despite the dominating sense
of liberation, responses among the African public are by no means one-sidedly positive. On the contrary, we see
growing criticism of China all the more strongly articulated the further it is removed from the government camp
in any particular African country, apart from the assertive South African government. Te criticism relates to all of
the negative eects that we have documented in this study: the ood of imports, poor product quality, the employ-
ment of Chinese construction workers, but also support for dictatorial regimes, etc. At the same time, this criticism
is directed at the authors own African governments if they simply accept such occurrences without contradiction.
Te best-known responses have been strikes and protests by Zambian mineworkers in 2006, and the agenda of that
countrys opposition candidate in the presidential election, which was critical of China. While African governments
are only slowly becoming aware of the double-edged nature of the Chinese advance on the continent, criticism of
China is being heard more and more in the population, above all among the urban workforce in numerous African
countries. Growing resentment is probably the most commonly used expression in media reports in recent years.
In Africa, the perception from below is frequently more negative than the perception from above.
However, we have found barely any voices that now combine the emerging criticism of China with a more positive
assessment of the West, its development aid and its economic activities. Te need for a politically coordinated re-
sponse to the set of political motives outlined above therefore remains unchanged. With a view to options for politi-
cal action in German and European Africa policy, however, it is noticeable that some motives can be inuenced by
an improved communication strategy even if development aid is unchanged, whereas other points of criticism may
make it necessary to eect substantial changes to Western and hence also German development cooperation.
73
74
4 OPTIONS FOR GLOBAL DEVELOPMENT POLICY
4.1 PRINCIPLES
Chinas recent push into Africa draws its geopolitical momentum from the fact that it combines greater political
and military cooperation with a considerable and geographically broadly based surge in economic relations in four
elds at the same time:
1. Trade
2. Investment
3. Development assistance
4. Immigration
It follows from this that every political response by third parties that is unable to match this simultaneity apart
from immigration, which is di cult to emulate will have a lesser eect and can only be considered a partial an-
swer. As far as we are aware, there is little indication so far that any comparable dynamics will unfold on the part
of the G7/G8 or the OECD countries. Tis is the origin of the nervous attention accorded to Chinas economic ini-
tiative attention that would be disproportionate in terms of the absolute orders of magnitude, although not with
regard to the rates of growth. Consequently, as well as honouring promised (1.) increases in ODA and speeding
up implementation of pending DC reforms, it is clear that (2.) trade concessions and (3.) investment promotion
are key geopolitical responses for the G7/EU. Te relevant focus in the context of the Africa agenda during the
German presidency was appropriately chosen. Te G7 and EU will continue to put (4.) good governance and the
observance of human rights on the agenda of bilateral or trilateral dialogues, precisely because these issues are not
taken into consideration within the Chinese package.
Fundamentally, the political alternatives among the possible responses to the Chinese advance in Africa are clear:
it is possible to try a counter strategy, as consistently put forward by the Heritage Foundation for example. One
part of this can be a kind of public demonisation of Chinese engagement in Africa, as can be seen in the German
press (Arms, Oil, Dirty Deals How China is Pushing the West out of Africa, Spiegel Online, 12.1.2007) and
in political responses. Looked at in the cold light of day, it must be expected that despite dissent in the USA itself
(Lyman 2005 among others) against a containment policy of this nature, there of all places, the political inclina-
tion to adopt a covertly confrontational approach will be strong, particularly for as long as China and the USA are
competing for strategically important shares of oil imports and other strategic raw materials in the same countries
with varying shades of dictatorial regimes.
Te alternative to this can be a policy by the European Union and, if possible, also the G8, which does not hold
back with justied criticism of the Chinese approach but tackles a widespread integration of the Peoples Republic
of China into development programmes and political processes in Sub-Saharan Africa. A central premise for a poli-
cy along these lines is the self-critical recognition of the weak points of the EU/G8s own action in virtually all core
issues relating to peace policy, migration and migrants legal status, economic policy and development policy, which
prohibit the adoption of a lecturing tone from the position of a know-all or representative of universal values.
75
4.2 HUMAN RIGHTS AND NON-INTERFERENCE
Te human rights dialogue is a particularly di cult part of this argument. On the one hand, Chinas ve principles
of peaceful coexistence can easily be criticised with reference to the Charter of the African Union, which has just
abandoned the principle of non-intervention in the case of serious infringements of human rights. Te contrast at
the level of policy principles is striking (Alden 2005: 157f.). Tis creates room for manoeuvre in the debate and
establishes a basis for demands to China to abandon political blocking attitudes, such as on the question of Darfur,
more quickly. However, Western countries are also repeatedly accused of inconsistency on human rights issues in
Africa, including in connection with the debate surrounding China. Two core arguments can be distilled from a
confusing and emotional debate, as set out below.
Firstly: Western policy is likewise said not to have advanced human rights and civil liberties in Africa for a long
period of time. Historically speaking, and in the light of stark contemporary examples (Angola, Equatorial Gui-
nea, Togo), this is di cult to deny. Also for the period after 1989, almost one and a half decades of uninterrupted
Western hegemony on the continent, it is not easy to prove the contrary in terms of the causes; the primary factor
in the change to Western attitudes after 1989 was that there was simply no need for Realpolitik anymore to support
almost every pro-Western dictatorial regime in the rivalry between competing systems, not some sudden change
of heart by the West to embrace principles of political morality. Te cessation of the competition with the Soviet
system created space for an Africa policy more consequently oriented towards democracy and fundamental rights,
not the other way round. Te political classes in Africa are aware of this sequence of events.
Secondly: Triangulation with the handling of human rights problems in China itself is becoming important. Te
human rights dialogue with China itself, whether or not it is e cient, thus becomes a background to the call for
human rights and civil liberties in Africa; and the historical and country-specic asymmetry in demanding human
rights, which characterises the position of Western countries, prohibits a moralising discourse. In certain circum-
stances it may make sense to address African issues directly in the human rights dialogue with China. Te Federal
Republic of Germany is well positioned to bring up the critical cases of Zimbabwe, Equatorial Guinea and Sudan
as its stance is not compromised by political inconsistencies on the ground.
4.3 CONSEQUENCES FOR DEVELOPMENT COOPERATION
Consequences for bilateral and multilateral development cooperation have already been addressed above. In es-
sence, the expansion of Chinese aid for Africa merely reinforces a worldwide trend to broaden the provision of
development nance and inputs. Low commercial lending rates present recipient nations with the opportunity
to obtain low-cost alternatives to IMF/WB loans; oers of assistance from private foundations are rising hugely,
especially after the donation made by Warren Buett to the Gates Foundation doubled the foundations capital,
thus paving the way for an annual payout of some $3 billion around the world making this foundation alone one
of the largest individual donors, with all the Africa work that it does. Tis fact on its own means that developing
countries generally have more choice in the matter of who they want to cooperate with a situation which appears
to be di cult to reverse, and which now is being amplied by Chinese development cooperation.
76
Several consequences emerge from this:
1. According to the most recent DAC statistics on ODA in 2007, the OECD/G7 donors were not able to meet their
commitments to increase ODA made in Gleneagles in 2005 and previously in Monterrey. Because of the Chinese
package they are losing even more ground and credibility on the political front. References to increases in ODA
through debt cancellation do not oer any political relief, because China is also participating in debt cancellation
(most recently for Liberia). Keeping to pledges to increase ODA and swiftly translating the pledges into reality is
therefore one of the most important conclusions if traditional donors among them Germany want to hold their
own in the new competition with China and other new donors.
2. It is essential to integrate the new donors (China, private international foundations, etc.) into mechanisms
of global aid accountability and corresponding processes in the recipient countries (MDG strategies and PRSP).
However, these mechanisms should be adapted in order to accommodate the highly pragmatic and results-oriented
mode of operation of the new actors. In view of the little gratitude from Africa for what has become known as part-
ner country ownership, which the Western donors declared in connection with PRS and budget support, it is not a
sensible political response to keep the new DC architecture in place without making changes. Nor is it a sensible
response to tear it down again without further ado and revert entirely to the old project-oriented style of deve-
lopment cooperation simply because the Chinese approach to date has precisely matched the traditional practice of
implementing individual projects.
In this connection there are two specic recommendations: Firstly, greater Chinese presence can be used as an
opportunity to improve the setting of priorities in the context of PRSPs or Joint Assistance Strategies if the part-
ner countries can indeed expect this to result in a better division of labour between all donors, old and new.
Secondly, the Chinese challenge once again presents the task of addressing the problem of the large number of
donors (Faust/Messner 2007: passim) so as to avoid an altogether uncontrollable situation of the large number
plus one. Te BMZ study Towards a Division of Labour in European Development Cooperation: Operational
Options argues along similar lines. In the best-case scenario, integrating China can also consist of proposing a
leading role for Chinese DC in a suitable country and sector for example in infrastructure, perhaps in conjunction
with the Af DB and reducing others, also including EU donors, to the position of silent partners.
On condition that a reform of the reform has taken place, it appears promising to reach a state where even a
donor attached to traditional procedures such as China is constructively involved in national MDG strategies in
African partner countries, in PRS processes (largely identical), and more broadly in implementation of the Paris
Declaration. China has signed the Paris Declaration, and in individual instances provides budget support, as yet
still uncoordinated (Liberia, Central African Republic). Te principles of the Paris Declaration, particularly the
engagement with partner systems and orientation with the partners priorities, are fundamentally close to principles
of Chinese Africa policy; consequently, China can now also be required to participate in the benchmarking agreed
under the Declaration.
77
3. Te reform of the conditionalities for multilateral credits, currently a matter of dispute between the management
of the World Bank, a number of shareholders (UK in the rst place) and international NGOs, must be completed.
Tis aspect is where Chinese aid has so far deviated most from the policy of the IFIs. We observe a certain degree
of schizophrenia in the present discussion. Te World Bank and the International Monetary Fund are accused of
still attaching too many political conditions to their lending; the Chinese are reproached for precisely the opposite,
i.e. not doing so. Concentrating on a small number of core demands in this eld rather than wider-ranging ma-
croeconomic and sector-policy-related requirements would probably have the best chance of gaining support from
the Chinese side as well.
We are the experts in poverty reduction: A factor in favour of the potential for constructive yet critical co-
operation is the repeatedly expressed Chinese self-assurance in being able to make a substantial contribution to
ghting poverty in Africa on the basis of the experience the country has gained at home. It is indeed the case that
China has made the largest contribution to reducing poverty in the world in absolute terms, and was thus a key
witness in the international debate on pro-poor growth.
36
China announced its programmatic aspiration to play a
part in global poverty alleviation at the international conference on poverty reduction held in Shanghai in 2004
(see Section 2.3), the results of which (best practices, scaling-up) can be followed up. Institutionally, this issue is
apparently the responsibility of the International Poverty Reduction Center in China (IPRCC), even if its role and
actual room for manoeuvre in development-policy matters still needs to be examined. At the time when this study
was being completed, at the end of February 2008, the OECD-DAC PovNet organised a workshop with IPRCC,
which conrmed its intention to participate in the international debate and Chinese activities in Africa. Te Board
of Trustees of the institution, which was established in 2005, includes UNDP, the World Bank, ADB (Asian De-
velopment Bank) and Df ID.
Possible oers of cooperation at the bilateral and multilateral level should be focused on the priority sectors of
Chinese DC in Africa. Specically, there appears to be Chinese interest in cooperation in the following three elds
of technical cooperation:
1. Expansion of training provision aimed at poverty reduction (joint nancing and design of courses, provision
of trainers, assistance with the evaluation of training courses).
2. Selection of pilot regions for joint projects on poverty reduction (e.g. Tanzania or West Africa).
3. Joint research activities for comparative studies.
36
See also Section 3.1.7, and the study on applying Chinas experience to Africa (Ravallion 2008).
78
4.4 ECONOMIC POLICY OPTIONS THE CHINESE MAGNIFYING GLASS
Te relationship between China and Africa can be boiled down to this simple formulation that appeared in the
daily newspaper Nation in Nairobi: China has an Africa policy. Africa doesnt have a China policy (12.6.2006);
Gaye (2006) struck a similar note in the title of his book: China Africa: Te Dragon and the Ostrich. What we
are dealing with here is glaring economic policy asymmetry: one country with a strategically planned industrial
policy both within its own borders and beyond faces 48 countries south of the Sahara which, apart from South
Africa, Mauritius and Botswana, are unable to present any formulated policy that might attempt to link industrial,
agricultural and foreign trade aspects.
All of the evaluated sources agree that the political preparation for such promotional policies is still very much in
its infancy in Africa despite the obvious urgency, and that it must be feared that, as for example in the classic case
of imports of second-hand clothes, once again only trader and consumer interests will win through. One possible
recommendation for action by the EU or Germany may comprise supporting African partners in presenting the
issue for public debate on a unilateral, bilateral or trilateral basis, thereby sparking a process of rational political
decision-making in their own countries founded on economic arguments.
Te success of intensied capacity development will crucially depend on the conceptual bringing together of macro-
economic advice, private sector promotion and trade policy consultancy, which are typically still fragmented
between various executing agencies, policies, donors and projects.
It is not only African governments that are facing industrial and agricultural structural policy tasks in the context
of trade with China. Teir Western partners, too, such as the European Union, can be confronted with specic
requirements regarding the negotiation of the Africa-related Economic Partnership Agreements (EPA) and the re-
denition of Everything but Arms (EBA).
Actually, the EPA negotiations have a range of critical dimensions which indirectly can have an eect on the
China-Africa relationship.
37
Tere is broad consensus that an individual economic-policy response to Chinas ad-
vance in Africa only makes sense for a few countries in Africa, and that this should normally take place in larger
regional groupings. To date, no regional economic community has been capable of assuming any such position. Te
possible reduction of the well-known multiple overlaps between the regional economic communities in Africa (the
spaghetti bowl) could be of considerable help in determining appropriate positions. Te EU Commission is now
stressing the positive impact of the planned EPAs on regional economic integration in Africa. By the cut-o date of
31.12.2007, however, the dominant impression must be that EPA negotiations in Africa are, if anything, threaten-
ing to lead to an atomisation of existing regional communities with two exceptions: the East African Community
(EAC) and the Indian Ocean Commission (IOC), which have forced through interim agreements against the will
of the EU Commission.
Furthermore, in view of the current growth in imports from China, calls for a massive reduction in taris by Afri-
can countries in relation to the EU may well be extremely counterproductive. While it is true that tari concessions
37

For more about the critical points of the negotiations about the EPAs in general, see: Klingebiel (ed.) 2006: 85-90, and Asche/Engel
(eds.) 2008, forthcoming.
79
to the EU within the framework of the EPA would not automatically also apply to China, third parties are already
demanding that such concessions be converted into reduced Most Favoured Nation (MFN) taris, in other words
general tari reductions, which would also benet Chinese imports to Africa, or that similar free trade agreements
be concluded with China (for the World Bank: Hinkle/Newfarmer 2006 and Broadman 2006: 182).
Cheap Chinese exports might lead to the perverse scenario that Africa still mainly exports unprocessed raw ma-
terials even in 15-20 years time. Terefore, the economy of Germany in particular, with its focus on exporting
machinery, plant and vehicles, has nothing to gain from an Africa strategy by the EU that is entirely focused on
liberalised trade. German industry must have a genuine interest in realistically rising sales opportunities for ma-
chines, plant and commercial vehicles in Africa. In the export of plastic bowls, cheap bicycles and shoes to Africa,
China will be unbeatable. Tis can be a guiding principle for the German political back-up to the EPA negotiations,
especially when dealing with the adjustment of customs taris. It is recommended that BMZ should insist on a
dierentiated stance of this nature as the negotiating position for the EU Commission.

Finally, the former US ambassador Princeton Lyman, in his analysis of US-China-Africa relations, makes a valid
reference to the geopolitical and economic potential of opening up agricultural policy: Both the United States
and Europe also still have one more major economic card to play: opening their markets to African agricultural
products. Te benet to Africa could dwarf all that China and India together could do for Africas development
(Lyman 2005).
Te opening of agricultural markets by, above all, the dismantling of agricultural subsidies in the EU and USA gains
new geopolitical signicance in the China-Africa context, among other things because analyses by the World Bank,
OECD and others without exception class China itself as a country that is relatively open to imports. Neither the EU
in the context of the EPAs nor the United States under the AGOA, however, are oering any further cuts in agricul-
tural subsidies.
Everything But Arms (EBA), the EUs trade preference system for least developed countries, has until now been
largely ineective, because in contrast with the AGOA the rules of origin for imports from manufacturing
industry to the EU have had an almost prohibitive eect. Te reform of this system is a matter of great urgency if
African export opportunities are to be increased, above all suspension of the double-stage processing requirements
in the textile sector i.e. the rule that two signicant processing stages have to take place in the African partner
country or in the region. As explained above, the USA, with the AGOA, is already more progressive than the Eu-
ropean Union. In the meantime, the European Commission has oered a package of simpler rules of origin within
the EPA negotiations, although only on conclusion of an Economic Partnership Agreement. Te EBA system,
which continues to exist, is therefore hardly a fall-back position for LDCs which do not want to become involved
in an EPA.
Whatever the nal outcome of the EPA negotiations will be they narrowly avoided disaster at the end of 2007 it
is now already clear that all preference systems for developing countries are subject to an erosion of the advantages
that are associated with them. Tis applies in particular to the textile sector after the quota regulations from the
80
MFA, which held Chinas market dominance in check, nally came to an end on 1.1.2005. It is therefore advisable
to return once again to the underlying problem and work towards a solution that takes us further. Te double-
stage rule, which in principle both regimes the USA and the EU include, is derived from the understandable
development principle of preventing mere re-exports and promoting the establishment of the longest possible value
chains in Africa. Except that in view of the high capital mobility in so-called footloose industries such as textiles
and clothing, this can have a counterproductive eect for Africa hence its suspension within the framework of
the AGOA and the planned new EU rules of origin.
Te fundamental idea of promoting long value chains and the threatening erosion of the impact of the previous
promotional instruments give rise to a dierent proposal for reform. Instead of imposing the requirement as a nega-
tive condition (If no , then no ), it should, more sensibly, be designed as a stimulus: clothing that is made
from fabrics and threads produced locally or in the region is rewarded with a special scal incentive. In places where
the tari is already at zero, it cannot be reduced any further. Consequently, the only remaining technically easy
solution is a negative import duty in eect a limited development subsidy from the EU for integrated manufacture
in Africa.
38

In the literature, Africa is given a certain chance of inheriting the position of China and Hong Kong as a global
location for labour-intensive forms of manufacture according to the ying geese model, if wage levels in Asia
continue to rise. Measures such as those discussed above are geostrategically signicant because in this situation it
will be decisive also for African countries to expand on the trade policy advantages which oer foreign investors
including those from China even greater incentives to establish new companies in Africa.
It is also possible to conceive of potential responses by the EU in the eld of the exchange of personnel. In a variety
of cultural and political respects, the countries of the European Union are closer to Africa than they are to China.
Especially in the light of the growing politico-cultural competition with China it appears obvious to instigate an
opening-up for exchange with the new generation of African elites. For these groups in particular referred to by
Df ID as drivers of change visa regulations can be loosened and new opportunities for circular or shuttle migra-
tion can be created in order to make life easier for economic and political elites sometimes here, sometimes there,
and in particular to make greater use of the varied African diaspora to promote economic exchange. Te EU can
clearly display more political initiative and imagination along these lines.
In summary, a thesis that was put forward in the title of this subsection is conrmed: much as if they were placed
under a magnifying glass, Chinese-African relations intensify economic problems which had also already arisen in
Africas relationship with its Western partners even before the most recent upsurge. Tis results in particular from
the high degree of responsiveness of Chinese investors in the global economic context.
38

Te technicity of this solution is not entirely simple; for more about a possible reform of the previous double-stage rule see the Technical Annex in the
online version, using references from the EU Commission's Directorate-General for Trade.
81
4.5 RECOMMENDATIONS FOR THE MULTILATERAL LEVEL (G8/EU)
Even with a sober assessment of the possibilities for success, the EU should intensify its search for opportunities
to address issues of common interest in a three-way dialogue between Africa, China and the EU. Only the be-
ginnings of such trilateral political discussions have taken place so far at the government level or also at the level
of policy-advisory institutions, foundations and non-governmental organisations (e.g. EU Helsinki conference).
According to the analysis presented here, numerous specic issues suggest themselves. We can point to resource
transparency (EITI), the conguration of the triangular textile and clothing trade, or questions of common inter-
est about appropriate forms of new development cooperation: the new DC architecture of budget support and
Joint Assistance Strategies is still by no means set in stone even among Western donors, despite all the progress;
why therefore should the debate about the future shaping of the architecture not be held jointly with China? Other
complexes of common interest are sectoral issues such as the setting of priorities in the NEPAD programmes of
action. China forming a loose association with the African Partnership Forum (APF) or the Strategic Partnership
with Africa (SPA) appears to be one possible option, after promising beginnings, such as Chinese observer missions
to the DAC Peer Review.
Finally, the EU can utilise the Chinese challenge as a positive incentive for continuing development of its own EU
Africa strategy. Te new joint EU-Africa strategy was adopted at the EU-Africa summit in Lisbon at the end of
2007. Tis provides a basis for also improving the complementarity of trade policy, investment policy and develop-
ment policy. It is proposed to secure the inclusion of the China theme using the analysis presented here.
In general, dialogue platforms which lend themselves for this purpose are:
Structured EU-China-Africa dialogue in accordance with the agreements at the Helsinki meeting
G20, including use of the ongoing G20 Finance work to dene global standards, with Chinese participation
(as proposed by Fues et al. 2006: 4)
Regular invitations to China to participate in DAC processes (peer reviews, Paris Declaration follow-up)
Sectoral NEPAD forums
G8 and NEPAD / African Partnership Forum
Coordination committees of the African Development Bank, particularly for infrastructure or a consultation
process on matters relating to debt sustainability in Africa
Te Strategic Partnership with Africa, which is particularly suitable for various aid-related issues below the political
radar of the APF
Te UN Economic and Social Council
And thematically:
Intensication of the EITI dialogue with Chinese representatives
Identication of one or more pilot countries where China can be included in donor coordination, sector
programmes and the optimisation/simplication of DC procedures
Submission of a binding timetable by the EU Commission on the FSC certication of timber and timber
products (among other things) from Africa
EPA negotiations by the EU: consideration of interconnections with the China issue as outlined, also with regard
82
to GSP and EBA, especially reform of the investment-inhibiting rules of origin
Transatlantic dialogue (G8) with the USA on critical aspects of the US Africa policy with repercussions for
China:
Governance in oil-producing countries (Equatorial Guinea, Angola),
Trade policy : US Farm Act / cotton subsidies, establishment of a common, Africa-friendly interpretation of the
WTO rules (reciprocity etc.).
4.6 RECOMMENDATIONS FOR THE BILATERAL LEVEL (GERMANY)
Looking beyond the issues raised during the German 2007 presidency of the G8 and EU, various possibilities for
action are available to the Federal Republic. Going by previous experience gained by BMZ, there should be some
scepticism, however, as to whether great openness to dialogue can be expected on the Chinese side and whether in
particular an individual bilateral actor such as Germany will be able to achieve a great deal in this eld. Some of
the conceivable measures are interlinked with multilateral activities, which in some cases can increase the chances
of success:
Intensication of interministerial policy-making within the Federal German Government on the issue of China
and Africa (and with reference to other issues such as security policy and trade policy) together with German
policy advisory institutes
Expansion of the human rights dialogue with China to include the subject of Africa
Inclusion of China in EITI/CEMAC projects
Inclusion of China in the Congo Basin forest partnership (COMIFAC)
Joint pilot measures for poverty reduction focusing on three priority areas, as described in Section 4.3
Greater exchange of experience with China on mechanisms by which the Chinese economy is going global,
including:
Forms of interaction between state-owned and private companies, CSR.
Exchange between MOFCOM and BMZ through workshops, in order to initiate a debate on various approaches
for development projects and means of monitoring them. For example, MOFCOM reports that it has begun
introducing ISO 9000 standards for the management of projects; the actual signicance of this would have to be
claried.
Exchange of experience and nancing methods between the German Kf W and the Chinese development banks
EXIM and CDB.
China-Afrika-Monitoring:
Reliable information about either positive or critical aspects of Chinese activity in Africa, particularly cross-nation-
al information, is rare. Te German government and its partners should launch appropriate initiatives or support
existing ones to obtain a clearer picture:
Commission soundly based back-up research on the welfare impacts and relevance to pro-poor growth of China-
Africa economic relations.
Provide (a) political, (b) human resources and (c) nancial support to UN institutions and to NGOs operating
globally and within Africa to produce a comparative appraisal of the state of knowledge on the environmental
83
impacts of Chinese (and other) companies.
39
Support African governments in obtaining a well-founded picture of the impact of Chinese actors in strategic
sectors according to the example of the Tanzanian Forestry Ministry.
Introduce observations and conclusions from China-Africa studies into present public policy debate in Africa
(possibly via political foundations).
Resource policy:
Chinas interest in Africas renewable and non-renewable resources in oil extraction, mining, forestry and agricul-
ture places immense demands on African governments and social actors in the three classic core economic policy
areas of regulatory policy, process policy and structural policy. With regard to regulatory policy, the legal and insti-
tutional framework for sustainable exploitation of resources must be safeguarded; in relation to process policy it is
a matter of keeping control of macroeconomic eects (including the eects of Dutch disease), while an appropriate
set of promotional instruments is needed under structural or generic industrial policy. In order to master these
complex requirements, African partners denitely need greater help from outside (TC).
Te industrial and trade policy of selected African governments must be given targeted support within the
framework of German development cooperation, focussing on sustainable economic development, in the following
ways:
Organisation of general or sector-specic conferences to discuss both the positive and negative impacts of the
China-Africa upsurge on growth and jobs, where appropriate with the inclusion of Chinese partners, also taking
account of cross linkages with issues surrounding Dutch disease/exchange rates and EPAs.
Putting the subject forward in donor coordination bodies for private sector development (PSD) in partner
countries, possibly with greater involvement of representatives from China.
Mandating Germany's executing agencies to incorporate the subject systematically into bilateral DC priority areas
and to organise a cross-nation exchange of experience in Africa.
Institutional and technical capacity development for ministries of economics and trade, chambers of trade and
economic institutes in Africa.
In the light of the comparison with the promotional instruments employed by the Chinese government and its state
banks, it would make sense without wanting to go as far as imitation to intensify the Africa dialogue with
German businesses, specically from the following angles:
Assessment of the risk of African investment locations
Securing the supply of strategic raw materials
Further development of German promotional instruments
Finally, consideration must be given to feeding the above activities back into the German Federal Presidents
Africa initiative in order to enhance the political visibility of selected measures.
39
Specically on this aspect, see the suggestions in: Davies, P. (2007: passim).
84
4.7 CONCLUDING REMARKS
To conclude, it should be pointed out that drawing attention to the large number of possible initiatives and plat-
forms is not meant to give the impression that all doors are open to bilateral, trilateral and multilateral exchange
with China about development in Africa.
Chinas emerging presence across Africa is part of a far-reaching geopolitical power shift towards a multipolar
world (Messner 2006; Humphrey/Messner 2006), which cannot be rolled back or neutralised by friendly invita-
tions to come and be a part of the institutions and procedures of a unipolar world. As long as the Chinese approach
on the African continent primarily consists of a search for geostrategic gaps, niches and ssures, opportunities
for integration into a constructive dialogue will remain limited. According to all current assessments, a degree of
sobriety is called for in all expectations. Constructive oers of dialogue must be consistent with Chinas (and, by
analogy, Indias) own interests.
However, the more important China becomes as an economic, political and development partner for Africa, the
more the Chinese government and Chinese companies will have to face up to the questions regarding the eec-
tiveness, transparency, organisation, safety and sustainability of their initiatives in Africa that the other partners
have already been concerned with, more intently, for a long time. Tere are a number of interesting signs that China
is moving along this path, which is where the most promising openings for a multipolar dialogue are to be found.
85
86
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