China and Africa: Challenges and Predictions Cosmopolitan Club in Manhattan New York 8 April 2013 David H.

Shinn Adjunct Professor, Elliott School of International Affairs George Washington University

Thank you for the invitation to speak this evening on the future of Chinas relations with Africa to such a distinguished audience at the Cosmopolitan Club. Some Assumptions Before making any predictions it is important to begin with a few basic assumptions about China that will also impact its relations with Africa. I believe Chinas leadership will remain stable and in full control of the country through at least the Xi Jinping era. Chinas focus will remain on ensuring domestic political stability and economic development. But structural challenges such as its aging demography, continued migration to cities, higher population growth rate as a result of loosening restrictions on the one child policy, higher labor costs, dangerous levels of income inequality, lack of a universal social security system, worsening environmental conditions, more severe weather events due to climate change, increasing domestic pressure for input on decision-making by ordinary Chinese, and growing global competition from other emerging nations will take their toll on Chinas society and system of governance. Nevertheless, Chinas GDP growth rate will continue to out-perform the world average, but at a less impressive rate than during that past three decades. China will also maintain a high savings rate and contribute disproportionately to global economic growth. While it will try to change elements of the existing international order, it will operate within this system rather than try to replace it. Turning to Africa, there will be winning and losing countries among its 54 states. Some countries will offer surprises on the upside and some on the downside. It is a fools errand to predict which ones will be winners and which ones losers. But considered collectively, Africa will do better economically than most world regions. There will be a disproportionately high, as compared to other regions, discovery of new natural resources because Africa is the least explored part of the inhabited planet. Oil and 1

mineral prices will remain high, benefitting those African countries that produce them. Africa will experience modestly reduced rates of poverty and a moderately more skilled workforce. The continuing downward trend in the HIV prevalence rate will add to life expectancy. As a result, productivity will improve and the GDP growth rate for the continent will outperform the global average. Mobile devices and social networking will become a standard feature in African urban communities and many rural areas. This will have increasingly important consequences for governance. No part of African society will be isolated from political and economic developments in other areas of the world. Partly as a result of increased access to information, there will be some improvement in the pace of democratization but most African countries will not achieve or even seek to achieve western style liberal democracy. Africa will also face serious challenges. African countries collectively will barely increase their current agricultural output and the gain will be offset by continued rapid urbanization and a high population growth rate relative to the rest of the world. Climate change will adversely impact North Africa, the Sahel and southern Africa. Some countries, especially in the Sahel and the Horn of Africa, will experience growing resource scarcities. Some regions of Africa will also face continuing high levels of intrastate conflict and domestic terrorism. African countries will demand more equitable relationships with all of their major trade and investment partners, including China. They will be more attentive to issues such as work permits for foreigners, migration of foreign nationals, compliance by foreigners with labor laws and safety regulations, investment standards, the export from Africa of prohibited products such as ivory and rhino horn, the environmental impact of infrastructure projects, importation of counterfeit and adulterated goods and copyright protection. As Africas largest bilateral trading partner since 2009 and possibly its largest investor in recent years, these concerns will fall especially heavily on Africas relationship with China. Implications for Political Relations Chinas policy of non-interference in the internal affairs of individual African countries will remain a core policy, at least rhetorically. But as Chinas interests and presence in Africa increase, there will be a weakening of this policy and occasionally it will be practiced in the breach. There will be less slippage in Chinas policy of no political strings attached to its aid. This will continue to reflect Chinas emphasis on support for state sovereignty. There are, however, economic strings attached to Chinas assistance policy. Large loans for financing infrastructure projects in Africa are tied to Chinese companies, mostly Chinese materials and even a percentage of Chinese labor. These strings will remain in place and even strengthen in the next ten years, raising questions about Chinas win-win slogan. Africans will ask increasingly if Chinas approach is not a win-win-win strategyone win (concessionary Chinese loans for infrastructure projects) for the African country and two wins (loan repayment in oil or minerals and the employment of Chinese companies, materials and some labor) for China. 2

China today has diplomatic relations with fifty of Africas fifty-four governments. Four countries still recognize Taiwan. Since 2008, there has been an informal truce between Beijing and Taipei on efforts to obtain diplomatic recognition of countries recognized by the other side. Consequently, there have not been serious efforts in the last five years by Beijing to replace Taipei in the four African countries that recognize Taiwan. Likewise, Taipei has not worked to gain recognition from any of the fifty African countries that recognize Beijing. This situation is not likely to continue indefinitely. China already has more important trade relations with the four countries that recognize Taipei than does Taiwan. When Xi Jinping turns over power to his successor, all independent countries in Africa will probably recognize Beijing. One of the more poorly understood aspects of the China-Africa relationship is the interaction of the Communist Party of China (CPC) with ruling African parties and governments. This has been an important tie, especially in the case of African countries that have problematic relations with the West or follow a governing model or economic development program closer to that of China. If one assumes, as I do, that the CPC will remain in control through the Xi Jinping era, I believe the CPCs ties with African ruling parties and governments will become even more important in most, but not all, African countries. Decisions by the CPC to permit (or not) greater individual liberty such as press freedom will determine the willingness of more democratically inclined African governments to solidify their ties with the CPC or back away from them. Implications for Economic Relations China will maintain its commanding percentage of Africas total trade, but this lead will shrink as Chinese labor costs increase and the price of its exports goes up. Increasingly, other emerging nations such as India, Brazil, Turkey, and Vietnam will chip away at Chinas export market and also become more important competitors for purchasing Africas raw materials. There will even be increased export competition from western countries as they realize the greater ability of Africas growing middle class to purchase high quality products. While China has increased the quality of some of its products such as those manufactured by Huawei, ZTE and Mindray, it has developed a reputation for selling low quality, albeit cheap, products in Africa. Some Chinese companies will improve product quality to meet these concerns, but this will drive up costs and reduce sales. Until now, China has experienced an export sweet spot in Africaa demand for low cost goods without too much consumer concern about quality. This market will change in Africa with growing numbers of Africans demanding higher quality. Chinas domestic focus in recent years on concerns about air and water quality will have a significant impact on the way it deals with the environmental implications of its projects and investments in Africa. As pressure grows from African governments, civil society and international environmental advocacy groups, China will take steps to ensure that it is more attentive to preserving Africas environment. Major infrastructure projects will routinely have 3

environmental impact studies, often done by non-Chinese companies. China will also take steps to crack down on private Chinese companies and individuals engaged in the export from Africa of prohibited products such as ivory, rhino horn and illegally harvested hardwoods. Similarly, China will take more seriously the issue of corporate social responsibility (CSR) by its state-owned and even private companies operating in Africa. This topic has attracted attention in China and will impact its activities in Africa. Chinas definition of CSR is still evolving and does not seem to be interpreted as broadly as it is in western countries, but this will still be a positive development. After a number of missteps leading to charges that China engaged in land grabbing in Africa to grow food for export to China, there was a notable stepping back from these proposed projects. In fact, investors from India, Saudi Arabia and even the United States have been more active in this area, although most of the projects do not qualify as land grabbing. Chinas increasing demand for food imports is causing the government to take another look at leasing land overseas for food production. Consequently, it will revisit agricultural investment in Africa and try to identify ways that it can produce food for export without alienating Africans and being charged with land grabbing. This will probably result in joint ventures with African investors and arrangements whereby the crop is sold both in Africa and exported to China. Implications for Military and Security Relations China, which currently has about 1,500 non-combat peacekeepers assigned to six UN missions in Africa, will continue to participate in peacekeeping and security operations but will do so only if they are under the United Nations, African organizations or done independently of western-led organizations. While China will resist putting PLA troops and police personnel on the ground in anything other than the most benign circumstances, pressure from African countries will result in China sending combat troops to one or more future peacekeeping operation in Africa. China is a major supplier to African countries of military equipment, especially small arms and light weapons. Its percentage of total transfers, especially more sophisticated conventional weapons and military aircraft, will increase in the coming years. At the same time, growing complaints about the existence of Chinese small arms and light weapons in African conflict zones will result in a greater effort by China to monitor the ultimate destination of its weapons transfers and to crack down when the weapons end up in the hands of unauthorized parties. The military and security relationship has been the most undeveloped part of Chinas interaction with African countries. This will change as Chinese interests in Africa experience increasing threats. There is an estimated one to two million Chinese nationals or persons of Chinese origin living in Africa. These nationals increasingly find themselves in harms way. Chinese have experienced kidnappings in the Niger Delta, kidnappings and killings in Sudan and 4

the Ogaden region of Ethiopia and 36,000 had to be evacuated from Libya in 2011. Increasing Chinese investment in Africa, the establishment of more companies and a long-term presence will result in growing numbers of attacks. While the Chinese will not be singled out, terrorist, extremist and criminal elements will treat them the same as other foreigners. Host country security will not always protect them; increasingly China will use its own resources for this purpose. China will also reduce the degree of security risk that it is willing to accept in Africa. The western Indian Ocean region is becoming of greater importance to China. China imports significant quantities of oil, bauxite, chromite, coal, copper, gold, iron ore, nickel, cobalt, phosphates, titanium, tungsten, uranium and zinc from Africa and the Middle East. China has been developing its naval capacity, especially its long-range submarine fleet and recently its first aircraft carrier, so that it has a capability beyond the South China Sea. So far, Chinas naval activity in the western Indian Ocean and along the eastern African coast has consisted of occasional port visits and engagement since 2009 in the Somali anti-piracy operation in the Gulf of Aden. China will step up its naval visits to the western Indian Ocean in an effort to demonstrate greater ability to keep open the sea lanes that convey so much of its commerce on Chinese commercial vessels in both directions. There is an ongoing debate in China whether it should eschew its traditional policy of not having overseas military bases or establishing military alliances. While China will continue to avoid both of these developments in Africa, there will be formal arrangements such as contracting with African governments or companies for warehousing, long-term resupply of visiting PLA Navy vessels and guaranteed access to certain African ports. These arrangements may be linked to Chinas support for and training of African navies. Implications for Interpersonal Relations While Xinhua has been active in Africa since the early 1960s, it has become the largest international news service in Africa. China Radio International, China Central Television and some thirty Confucius Institutes have joined Chinas effort to expand its soft power outreach. China will significantly increase its media interaction with African governments in order to publicize its view of the world and underscore its successes. While most African governments will welcome this expansion, Chinas efforts to engage African private media outlets will increasingly meet resistance because Beijings government-controlled media raise questions of credibility. A growing number of African governments will also begin to question the motives of Chinas media output, although most will continue to prefer Chinas positive press coverage of developments in Africa over more critical western coverage. One of the most difficult challenges China will face in Africa is the management of the growing number of Chinese entrepreneurs and small traders. In addition to assuring their security in conflict situations, the government of China will be pressed by negatively-affected African groups and a few African governments to do something about the competition that the 5

Chinese pose to their African counterparts, especially African small traders who often do not compete successfully with the Chinese. Africans will insist that the Chinese obtain work permits and put additional pressure to restrict the number of permits offered. The Chinese often sell at lower prices basic products that have host country competition, making it difficult and sometimes impossible for the African manufacturer to stay in business. This has become a serious concern in several African countries and is certain to spread to others. The movement of growing numbers of Africans, especially students and entrepreneurs, to China, and Chinese in all walks of life to Africa will increase the understanding of both sides about the other. This will generally have positive implications for the relationship, at least among educated elites in both China and Africa. It is not clear, however, that the movement of increased numbers of Africans to China will be received positively by the wider Chinese public, where attitudes towards Africans often involve stereotypes and even racial prejudice. Implications for Relations with the United States The United States and China compete in Africa for exports, the winning of commercial contracts and occasionally over investment opportunities. But the United States competes in these same areas with European and other countries. There is nothing unique about this competition. As the United States shows renewed interest in exporting to and investing in Africa, there will be a modest increase in this competition with China. The increasing bilateral security ties that China will develop with African countries will draw some concern in the United States. Chinese support for UN and African Union peacekeeping operations and efforts to end piracy in waters off Africa are not an issue. More formal military ties with African countries will raise eyebrows in Washington even though the United States has such agreements with some African countries. The degree of negative reaction from Washington will depend on the purpose and nature of the arrangements. Although rarely identified and discussed, there are areas where the United States and China have similar policy goals in Africa. Both countries seek political stability, economic development, poverty reduction and the elimination of several negative challenges such as terrorism, piracy, drug trafficking and international crime. While the United States and China often disagree on the tactics and strategy for dealing with these issues, the fact that their overall goals are the same will increasingly cause both countries to find ways to work together to achieve the desired end result. There have already been cases where cooperation has occurred: implementation of the Comprehensive Peace Agreement between Sudan and South Sudan, support for a national government in Somalia, combatting piracy in the Gulf of Aden and mutual support for UN peacekeeping operations. The die has been cast and cooperation will increase even in controversial areas such as countering terrorism in Africa, although these issues will require some yielding of long-standing positions by both sides. 6

One area of potential cooperation that has been especially disappointing is the economic development of Africa where almost all China-U.S. initiatives to collaborate have failed. Both China and the United States have unique contributions to make, especially in areas such as health care and agriculture. Both countries have a long history of assisting African countries in these areas and much of their effort is complementary, especially in combating malaria. The prevention of natural disasters and provision of emergency relief are other areas where the two countries can cooperate to the advantage of African countries. U.S.-China cooperation is much more likely to occur if African leaders press both sides to work together. Unfortunately, a number of African leaders still operate in the belief that they can achieve more if China and the United States compete in Africa. While this is true in the case of trade, bidding on contracts and even some investment opportunities, this approach should not apply to collaboration on economic development, supporting political stability and combatting scourges such as terrorism, piracy, and international crime. A growing number of African leaders will conclude that U.S.-China cooperation in Africa can work to their advantage in certain areas and they will encourage both countries to make it happen. I would be pleased to take your questions.