Charles-Edouard Renier MBA # 09908061

1 The China’s impact on Africa

 Charles

Table of Contents
Introduction................................................................................................................................................... 3
Recent History ............................................................................................................................................... 4
Why is China interested by Africa ............................................................................................................. 5
China’s successful political and diplomatic approach to Africa ................................................................ 6
China engagement in Africa is driven by securing raw resources................................................................. 7

Need for oil ........................................................................................................................................ 7

Other mineral resources ................................................................................................................... 7

Logging .............................................................................................................................................. 8
China Construction Sector in Africa .............................................................................................................. 9
Success Factors........................................................................................................................................10
China’s telecommunication foray in Africa .................................................................................................11
The Chinese equipment manufacturers:.................................................................................................11
African mobile growth.............................................................................................................................11
Chinese companies encouraged by the government..............................................................................12
China competitive advantage..................................................................................................................12
The growing importance of Chinese Financial Institution in Africa ............................................................13
China ExIm in Africa.................................................................................................................................13
Debt sustainability...................................................................................................................................14
Transparency and governance. ...............................................................................................................15
In short ....................................................................................................................................................15
China environmental footprint in Africa .....................................................................................................15
China- Africa is everything perfect? ............................................................................................................17

Impact of the growth.......................................................................................................................17

China investments concentrating into few countries .....................................................................17

China Support of doubtful regime...................................................................................................17
CONCLUSION ...............................................................................................................................................18

2 The China’s impact on Africa

China’s impact on Africa
Six Centuries ago…

Six centuries ago from 1405 to 1433, a mighty armada of Chinese ships crossed the China Sea, then
successfully ventured west to Ceylon, Arabia, and finally reached the horn of Africa: Somalia1. The fleet
commanded by the eunuch admiral Zheng He, consisted of giant nine-masted junks, escorted by dozens
of supply ships, water tankers, transports for cavalry horses, and patrol boats. The armada's crew
totaled more than 27,000 sailors and soldiers. The largest of the junks were said to be over 400 feet long
and 150 feet wide. Had the Chinese emperors continued their huge investments in the treasure fleets,
there is little reason why they, rather than the French, British, and other European countries, should not
have colonized Africa. Yet less than a century later, all overseas trade was banned, and it became a
capital offense to set sail from China in a multi-masted ship.

Introduction
Yet 600 hundred years later some in the west are considering that the renewed interest by China
towards Africa and the very large influence and links it commands with the continent pave the way for a
new form of colonization of Africa. Some2 even go as far as remembering the utterly offensive
comments, by today’s standards, written by Sir Francis Galton, distinguished explorer and cousin of
Charles Darwin, on June 5 1873 “My proposal is to make the encouragement of Chinese settlements of
Africa a part of our national policy… I should expect that the African seaboard … might in a few years be
tenanted by industrious, order-loving Chinese, living either as a semidetached dependency of China, or
else in perfect freedom under their own law”. Numerous publication point out to the 750,000 Chinese
living and working in Africa, in countries including South Africa, Nigeria, Zambia, Sudan, Algeria, Congo,
Zimbabwe, Mozambique, Angola, Gabon, Guinea, Ethiopia, Cameroon, Egypt and Chad3.

Now as a French born which grandparents were working the land of North Africa during the French
colonization era, I am very sensitive to the world “colonization” and I am also acutely aware that the
colonizer rarely actually believe they are the colonizer on the contrary (just like my grandparents and
even parents had trouble to admit it), usually the colonizer like France or my grandparents always
believe they are actually helping the colonized to develop and are merely enlightening the colonized for
his own good. So I will, in this report analyze the ways in which the interest of China towards Africa are
materializing thru a multiple prong approach: extraction, construction, telecommunications and

1
When China Ruled the Seas. By Louise Levathes. New York: Oxford University Press, 1994
2
Daily Mail How China's taking over Africa, and why the West should be VERY worried
3
“China Safari: On the Trail of Beijing’s Expansion in Africa” , Serge Michel and Michel Beuret

3 The China’s impact on Africa

financial assistance. I will also evaluate the environment risk of China’s involvement in Africa. And at last
evaluate how accurate are the claims from western countries whether political, trade and investment
deals are mutually beneficial neo-colonialism or Surgical Colonialism4.
cial or are they merely a new form of neo

I would like to point out one more thing before beginning though, that many reports have been written
on the sole raw material procurement of Africa for China and while this iiss undoubtedly the main reason,
I will not detail as much this aspect in the analysis as it has been done many times already.

Recent History
In 1976, under Mao Zedong, China completed the Tan Tan-Zam
Zam railway, linking Zambia to the port of Dar es
Salaam in Tanzania. But China's contemporary policy towards Africa is rooted in the crisis in China's
international relations after Tiananmen Square in June 1989. Prior to this, Africa's importance in
Beijing's foreign policy had declined during the 1980s as China's 'soc
'socialist modernization'
modernization project called
for massive foreign investment and technology deemed unavailable from Africa. In addition, Chinese
tensions with both Washington and Moscow lessened throughout the decade, further marginalizing
Africa's importance in China's
ina's view. In its conduct of foreign affairs, this translated to China promoting
international stability and commerce. However, after 4 June 1989, China re re-evaluated
evaluated its foreign policy
in light of Western reaction to Tiananmen Square. In contrast, whilst Tiananmen Square ended China's
honeymoon relationship with the West, Africa's reaction was far more muted, if not supportive. As a
result, the China's attitude towards Africa turned from one of benign neglect to one of renewed
emphasis.

This renewal has carried on into the contemporary period whereby China remains active in Africa,
promoting trade linkages and the political support constituency that Beijing feels Africa provides China
in the international arena. Chinese inroads
into Africa got a new kick-start
kick in 1995,
when President Jiang Zemin made a speech
urging Chinese business leaders to “Go “
players 5 As a result
abroad! Become world players!”
bilateral trade between the regions
quintupled, to $55 billion, from 2000 to
2006, and that the figure is expected to
reach $100 billion by 2010. Chinese business
interests in Africa range from oil, lumber,
refining, agriculture, mining, textiles and
banking to the construction of dams,
railroads, highways, bridges, airports and
housing. Some contend that China’s

4
Surgical colonialism refers to resource extraction by a foreign power tha
thatt involves a minimum of local disruption, making the
extraction almost surgical in nature. Bergesen, Albert. "The New Surgical Colonialism: China, Africa, and Oil"
5
‘China Safari: On the Trail of Beijing’s Expansion in Africa” , Serge Michel and Michel Be
Beuret

4 The China’s impact on Africa

 ns in Africa are grandly geopolitical as well as economic. As Jacob Wood, a Shanghai
ambitions Shanghai-born
housing developer based in Africa for more than 30 years, tells them: “I’m going to be honest with you,
China is using Africa to get where the United States is now, aand surpass it.” And is there anything wrong
with that? After that has pretty much the modus operandi of all power in the past, why should China be
different?

Why is China interested by Africa

China’s engagement with Africa today is less motivated by ideological considerations but based on a
commercial agenda that aims to sustain rapid industrialization and economic growth rates. China’s
“socialist market economy” is driven by market oriented State-Owned
Owned Enterprises and its interests in
Africa are geared towards energy resources and minerals to feed its industrialization program. Let’s
make no mistake about it and actually why should there be anything wrong with it? China as we have
seen earlier is playing catch-up with the USA and in order to do so it requires and will continue to
require a vast pool of natural resources. Middle east being largely under control by the United State it
makes sense to look for alternative thru South America (Venezuela, even though it could be a problem
to step into the backyard
kyard of the USA)and of course Africa. Why is China changin
changingg its Foreign Policy
Direction? I will use the Professor D. Zweig analogy:

.Why did Willie Sutton rob banks?

Q.Why
A. Because that is where the money is!
Why has China put relations with African coun
Q.Why countries near top of its agenda?
A. Because that is where the oil is! Africa currently supply 29% of its oil import and it grew by 50%
between 2003-20046.

China‘ s Breakdown of Import from Africa Increase in Export from 1996 to 2006
Fuel Crude material (excl Fuel) Manufacturing Other

13%
8%

17% 62%

6
Chen Wenxian and Mo Lin, “CNPC’s 2004: a fruitful year”
5 The China’s impact on Africa
China’s successful political and diplomatic approach to Africa
In 1982 these Five Principles were written into the Constitution of the People's Republic of China. They
are now a fundamental principle for China in fostering and developing friendly relations with all the
countries in the world

China’s Five Principles of Peaceful Coexistence7:

1. Mutual respect for each other's territorial integrity and sovereignty
2. Mutual non-aggression
3. Mutual non-interference in each other's internal affairs
4. Equality and mutual benefit
5. Peaceful co-existence

African leaders are especially sensitive to the 3rd principles after

“…the Chinese do not peg their economic
activity or aid to political conditions…
You never hear the Chinese saying that
they will not finish a project because the
government has not done enough to tackle
corruption. If they are going to build a
road, then it will be built.” (A Kenyan
Government Spokesperson, quoted in
Obiorah, 2007).
all quite a number of the country with which are currently
dealing with China in Africa have a questionable regimes, and
many of them do have to fight and negotiate with western
countries or organizations. The practical approach used by
Chinese delegate in respect to these principles makes a lot
easier the cooperation between the parties.

,
China had become by 2006 the world’s largest holder of
capital, with over $1 trillion in foreign reserve and has been
trying to fuel its future growth to carve out a position in the
energy and strategic minerals markets and capital starved
Africa made in a perfect fit. Beyond the FDI investment
what has seduced a number of African governments has
been, the willingness of the Chinese government to provide
a whole package of inducements alongside any leasing or
supply agreements, aimed at elite-defined needs ranging
from presidential palaces to large-scale infrastructure
projects, has proved to be crucial to securing deals in
Africa. 8
The Chinese are doing more than the G8 to
make poverty history. If a G8 country had
wanted to rebuild the stadium, we’d still be
holding meetings! The Chinese just come and
do it. They don’t hold meetings about
environmental impact assessment, human
rights, bad governance and good governance.
I’m not saying it’s right, just that Chinese
investment is succeeding because they don’t set
Sahr Johnny, Sierra
high benchmarks.
Leone’s ambassador to China

Indeed, Beijing officially announced that they would not interfere with any interest in the domestic
affairs of African governments, in direct contrast to the European Union (EU) or the United States (US),
both of whom have selectively applied conditions to their development assistance programs.

7
http://www.chinese-embassy.org.uk/eng/wjzc/t27084.htm
8
China in Africa. London: Zed Books, 2007,

6 The China’s impact on Africa

China engagement
ngagement in Africa is driven by securing raw resources.

Need for oil

China went from the leading Asian oil exporter

to the second largest world consumer in 2003
and the third largest global importer in 2004.
Africa possesses the world’s third largest oil
reserves, an estimated 9.5% of global known
deposits in 2007, behind thehe Middle East (61%)
and North America (11.6%), and ahead of South
and Central America (8.5%). Even though it
seems little compare to middle east, but it has
been largely untapped and boast the fastest
growth rate in identified oil reserves, which
doubled in the past two decade. In 2006 oil
represented three-quarters
quarters of China’s imports
From the Continent: Angola (51%), Sudan (18%), Congo Brazzaville (13%) and Equatorial Guinea (11%).9
Congo-Brazzaville
And as demonstrated by the chart, China current need for oil is only a fraction of what it will represent
in the next 15 to 20 years.

Other mineral resources

China also became externally dependent on other sectors of the extractive industry than oil whi which again
fueled its growing economic interaction with the African continent in the new century. Over the last 10
years China overcame the USA as the world’s leading consumer of most base metals: aluminum, iron
ore, lead and zinc, and holds significant shar
shares
es in all other minerals. South Africa is the leading producer
of platinum (80% of total production and 90% of world reserves) and manganese (75% of world
reserves), and the world’s second largest gold producer (overtaken by Australia in 2007). The DRC is the

9
http://www.voltairenet.org/IMG/pdf/China_and_Africa_s_Natural_Resources.pdf
7 The China’s impact on Africa
leading cobalt producer (36%), possessing half of the world’s known reserves, and is also a significant
diamond producer. The DRC, South Africa and Botswana together account for over half of global
diamond-mining output and 60% of known deposits.20 Among other African countries that possess
significant reserves of minerals that have recently attracted Chinese interest are Gabon (manganese),
Zambia (copper and iron ore), Zimbabwe (platinum) and Angola (diamonds, copper and iron ore)10. In
absolute terms, Chinese imports of non-fuel mining products from Africa increased from $286 million in
2000 to $2.6 billion in 2006. In 2006 diamonds imports occupied the largest share (27%), followed by
platinum (17%), copper (15%), cobalt and manganese (11% each). Here as well, an evolving reliance is
starting to show. Over 80% of China’s cobalt and 40% of manganese imports originate in Africa, with the
DRC and Gabon, respectively, the main suppliers11.

Logging12
China has been the principal
destination for tropical timber
from Africa for six of the last
seven years. China's imports
account for much of the surge in
the region's exports - some of
which are characterized by
speculative behavior - and, by
implication, changes to
governance in the industry. China
is a leading donor to the region of
political and military "aid".
For a rather longer time, markets
in France, Italy, Spain, and to a
lesser extent Portugal have dominated the trade. This geographic concentration in the Southern EU
suggests a role for the EU in regulating imports - in ways that do not dilute demands (which appear
rather more widespread in Northern Europe) for improvements in both governance and socio-
environmental standards in producer countries. Of course, some of the imports by the Southern EU are
subsequently exported, for example, once they have been transformed.

10
USGS (US Geological Survey), Mineral Commodity Summaries 2008. Washington, DC: US Department of the
Interior, USGS, 2008.
11
Foster V et al., Building Bridges: China’s Growing Role as Infrastructure Financier for Africa.
Washington, DC: World Bank, 2008
12
www.globaltimber.org.uk/africa.htm
8 The China’s impact on Africa
China Construction Sector in Africa

The Chinese Ministry of Commerce pointed out that

there has been a 106 percent rise in the value of
newly signed contracts for Chinese companies
operating overseas, taking the total up to US$ 32.7
billion in 2006. Chinese turnover in overseas
contracting business is expected to increase by 15
year during the 11th Five Year Plan
percent year-on-year
period (2006-2010)13. While the scale of Chinese
Chine
Official Development Assistance to Africa has also
increased, Chinese firms have been able to win open
tenders. When considering the Engineering News
Record (2006), the top 225 international contractors
in Africa are still European with the largest market
mark
share (49.33% in 2005), while French firms alone captured 23.96%, more than all the Chinese
construction firms combined (21,36%). Amongst the major players in the construction sector are
American, British, Italian, Japanese, Chinese and Korean firms. Th
Thee latter two had an average growth
rate that was higher than the industry average. In Sub
Sub-Saharan
Saharan Africa, the countries that recorded the
highest number of active Chinese construction firms are Angola and Nigeria (10), Botswana (9), Congo
(8), Equatorial Guinea,
uinea, Ethiopia, Ghana, South Africa, and Uganda (7) while in North Africa about 13

13
Most of the references and the text from this section on construction are directly extracted from the report :
Chinese Investments in Africa :Anthony
Anthony Yaw Baah and Herbert Jauch
9 The China’s impact on Africa
Chinese construction firms operate in Algeria and 12 in Sudan. Again it will come to no surprise that
these countries are the same where China invests heavily to gain access in the extraction sectors.
Actually a lot of the package that China offers to gain extractions contract are very global contracts
providing assistance in construction and infrastructure deals.

Success Factors
The competitiveness of Chinese construction companies may largely be attributed to their access to
cheap capital, low labor costs, hands-on management style, high degree of organization, and general
aptitude for hard work. For example, local and foreign construction enterprises operate on profit
margins of 15-24 percent, while Chinese companies usually operate on margins of 10 percent or less
making them extremely competitive and relegating the former (local and foreign companies) to the
margins14. The price difference is often significant and ranges between 25 and 50 percent. This is not
only due to lower profit margins but also due to lower wages, often below the legal minimum wages.

An added advantage for Chinese construction companies is the support from their government while
other local and foreign companies are privately owned without financial assistance from their
governments. There is a growing Chinese presence in the Mozambican construction sector and notably
the recently built soya processing plant of the China Grain and Oil Group. Currently, over a third of
Mozambique’s road construction program, amounting to 600 km is being carried out by Chinese
companies. Most tenders are awarded to the Chinese construction companies because of their relatively
low prices, it is also because of the enforcement of some provision included by the Chinese government
in the loans made to African countries.

14
Centre for Chinese Studies. (2006). China’s interest and activity in Africa’s Construction and Infrastructure
Sectors: A research undertaking evaluating China’s involvement in Africa’s construction and infrastructure. Sector
paper prepared for DFIDI China. Stellenbosch: University of Stellenbosch, South Africa.
10 The China’s impact on Africa
China’s
’s telecommunication foray in Africa

The Chinese equipment manufacturers:

Huawei offices in Africa ZTE is state-owned, while Huawei and CITCC have a mix of
private and public ownership. All three, however, have
access to funds from China's state-owned
owned banks. In some
cases, according to the World Bank, these Chinese banks
have directly provided the money for Chinese
telecommunications tions equipment to be supplied to African
governments. In other cases, Chinese telecommunications
companies have been able to finance deals through their
own lines of credit. ZTE has a US$500m line of credit with
China's Ex-Im Im Bank, issued in 2004, while Huawei
H has a
US$600m credit from the same bank, issued in 2006, and a
massive US$10bn credit line from the China Development
Bank, issued in 2004. This money is not simply, or even
primarily for Africa though, but is intended to finance these companies' glo global
bal operations.
operations
As typing this report Huawei grabbed the No. 2 spot in the wireless telecommunication equipment
market15 in the world,, passing Nokia Siemens. Of course this success is not only due to the company
early forays in Africa, but it certainly hel
helped it in its rise to the top.

African mobile growth

Africa grows fast in population,
ion, currently 900 million plus and it is one of the regions where telecom
industry develops
evelops the most rapidly, and mobile communication in Africa is progressing exceedingly fast.
Mobile telephony has proven to be particularly liberating in Africa, where fixed line coverage is still weak
to nonexistent. In most of the continent, mobile phones have arrived not as competitors tto fixed lines
but as a long-awaited
awaited solution to the frustration of communications isolation. The ITU reported that
Africa had shown the strongest growth in mobile phone usage over the previous two years, with an
impressive 39% annual subscription growth be between 2005-2007,
2007, with the result that 90% of all African
telephone subscribers today use mobile phones rather than landlines16. Still though att present, there are
approximately 390 million cell phone subscribers, but with less than 45% penetration rate it sstill has
great potential for further development.

15
http://www.fiercewireless.com/story/delloro
http://www.fiercewireless.com/story/delloro-huawei-grabs-no-2-spot-gear-market/2009-11--
16?utm_medium=rss&utm_source=rss&cmp
16?utm_medium=rss&utm_source=rss&cmp-id=OTC-RSS-FW0
16
‘Africa leads growth to 3.3bn cellphone users’, Agence France Press, May 27th, 2008.
11 The China’s impact on Africa
Chinese companies encouraged by the government
This is evident in the recent efforts of Chinese telecommunications companies to secure contracts to
build infrastructure and wire Africa for the 21st century for example Ethiopian Telecommunications
Corporation, says that ETC has signed a contract worth about US$2.4 billion with three Chinese
companies to help upgrade and expand the African nation's telecom services17. Eight companies,
including Siemens, Nokia, Alcatel and Ericsson, participated in the bidding, but ultimately three Chinese
companies, ZTE, Huawei and China International Telecommunication Construction Corporation, won the
deal. Also ZTE and Huawei, each won deals during the Forum on China-Africa Cooperation of 2006.
Chinese investment in African telecommunications and information and communication technology
(ICT) generally, is growing. The World Bank has estimated that Chinese investment in African ICT totaled
around US$3bn from 2001- 07, constituting 17.4% of China's estimated African investment total.3
China's involvement in Africa's ICT sector has, according to the Bank, mainly taken the form thus far of
equipment sales to national incumbents, either through commercial contracts or through inter-
governmental financing arrangements which are tied to the purchase of Chinese equipment by African
telecommunications. The biggest deal to date was signed in 2006, and is a four-year, US$1.5bn ICT
project in Ethiopia, to be undertaken by China's ZTE, Huawei, and Chinese International
Telecommunication Construction Corporation (CITCC). ZTE began construction for the project in 2007.
The involvement of these companies does not limit itself to the equipment sometimes they get involved
in the operation of mobile phone enterprise or joint venture in order to fulfill their promises to some
governments.

China competitive advantage

Asked to comment on rumors that Vodacom Congo might switch its equipment contract from Alcatel to
Huawei, one Vodacom official said: “Alcatel, Huawei, whatever. All the equipment comes from China18.”
Regardless of where any given telecommunications service provider comes from, the chances are that
its equipment, from hand-sets to base stations, was made in whole or in part in China. The quality of this
equipment is rising all the time, while what remains a constant is its phenomenal, irresistible price
competitiveness. Because of this price competitiveness, this price power, it is the equipment that China
manufactures which is the country's main contribution to the telecommunications sector in the DRC,
and perhaps in the continent as a whole. In particular, the low price of Chinese telecommunications
equipment makes hand-sets affordable to more people, and particularly the poor, and also means
telephone service companies get more equipment for their money, which translates into wider coverage
for all consumers. China's price power in telecommunications equipment appears as an unambiguous
good for Africa as a whole, mercifully not mitigated by any adverse impact on domestic manufacturing,
since Africa does not manufacture telecommunications equipment. This is in contrast to many other
sectors, and particularly the textile industry, where the benefits to African consumers of cheap Chinese

17
http://www.chinatechnews.com
18
Price Power: China’s role in the telecommunications sector of the Democratic Republic of Congo
Gregory Mthembu-Salter
12 The China’s impact on Africa
clothing are mitigated by the disastrous impacts on African textile manufacturing, which can have
significant implications for employment levels19.

For example Congo Chine Telecom’s (CCT) unique selling point is not coverage or broadband, but
rather that it offers the least expensive mobile telephone service in Congo
For Congolese consumers, the point is that thanks to CCT they can spend less than they would otherwise
have had to communicating with each other and the world. In a poor country, reeling like everywhere
else from high food and fuel prices, this is no small achievement. And this can be generalized thru the all
continent. And for users of other networks, the price challenge posed by Huawei will keep Alcatel and
Ericsson's prices lower then they might otherwise have been, again to the consumers' benefit.

In conclusion when China's price power manifests as the enforcement of low wages and poor working
conditions by its companies in Africa (in all extraction industries), it has an oppressive effect, stunting
the potential of workers. Offering low prices to consumers, by contrast, is the same phenomenon at
its most liberating, and a major Chinese achievement in Africa.

The growing importance of Chinese Financial Institution in Africa

China ExIm Bank (China Export Import has traditionally been the leading Chinese financial institution
working in Africa, focusing the bulk of its attention on providing export finance, credit lines and
participation in project finance. Also China Development Bank (CDB) CBD has been also providing
finance for corporations and has made overseas investments including buying a stake in Barclays and
lately in Polish telecoms and has been involved in key deals in Africa.

China ExIm in Africa20

The Bank's activities are not reported regionally, but there is clear evidence of significant and expanding
operations in Africa. In 2005 the Bank extended its export buyers credit market to Africa. In January
2006 the government released its official "African Policy" which specifically "encourages and supports
Chinese enterprises' investment and business in Africa, and will continue to provide preferential loans
and buyers credits to this end." 2 In addition, several ExIm projects have been announced in the media.
Although such reports are sometimes not reliable, reported projects in the past two years alone include:
• A possible $1.2 billion in new loans to Ghana, including $600 million for construction of the Bui
dam;
• $2.3 billion in total financing for Mozambique for the Mepanda Nkua dam and hydroelectric
plant, plus another possible $300 million for the Moamba-Major dam;
• A $1.6 billion loan for a Chinese oil project in Nigeria;

19
Same reference as preceding
20
This paragraph on China is extracted from an article from EXImCenter for Global Development by Todd Moss and
Sarah Rose.
13 The China’s impact on Africa
 • $200 million in preferential buyers credit for Nigeria's first communications satellite;
• A $2 billion line of credit to Angola, with the possibility of another $9-10 billion;
• Reports of loans and export credits for other projects in Congo-Brazzaville, Sudan and
Zimbabwe.

By comparison, US ExIm supported transactions in all of sub-Saharan Africa totaled less than $500
million in 2005. China Exim Bank pursues a ‘two-big strategy’ of focusing on big companies and big-ticket
projects. The Bank extends 90% of its export credits to state-owned enterprises
and to large projects (of more than RMB 100 million each)21. At the end of 2007 the outstanding loans
on China Exim Bank’s balance sheet amounted to RMB 321 billion. The Bank approved RMB 263 billion
and disbursed RMB 196 billion in loans in 2007.6 By this date, China Exim Bank had already outgrown
the World Bank and all other export credit agencies.
According to official data, China Exim Bank had approved loans for more than RMB 100 billion for Africa
by June 2007, and its outstanding loans in Africa amounted to RMB 50 billion.7 In September 2006 the
Bank entertained relations with 36 African countries and had 259 African projects in its portfolio. The
World Bank estimates that more than 80% of these loans were concentrated on Angola, Nigeria,
Mozambique, Sudan and Zimbabwe. Projects in the power sector accounted for about 40% of the
commitments, followed by general or multiple-sector commitments (24%), transport (20%), telecoms
(12%) and water projects (4%)22.

The CDB will also continue to play an important role in concert with the China ExIm Bank through
investment in the US$5bn China-Africa Development Fund. According to the draft plan, the fund will
start from one billion US dollars, and then add up to three billion US dollars in the second phase, until
eventually amount to five billion dollars. The fund will be used to support African countries' agriculture,
manufacture, energy sector, transportation, telecommunications, urban infrastructure, resource
exploration and the development of Chinese enterprises in
Africa.

The investment world was surprised in October 2007 when it was announced that Industrial and
Commercial bank of China would take a 20% stake in South Africa’s Standard Bank for US$5.5bn. This
was a significant outlay, even for ICBC, as the outlay equates to 8% of its capital. The reasoning seems
sound from a strategic point of view; ostensibly Standard Bank will help ICBC serve its corporate
customers in Africa and Standard Bank will gain a foothold in China

Debt sustainability.
Much Chinese lending has been on the back of debt relief. Several of China ExIm's borrowers (Ghana,
Mozambique, Congo-Brazzaville) have recently received major debt reductions through the heavily

21
Standard & Poor’s, Bank Credit Report, Export-Import Bank of China. New York, 10 August 2006, pp.2ff.
22
Zhen G, ‘Infrastructure development in Africa supported by the Export-Import Bank of China’, PowerPoint
presentation, 17 January 2007.
14 The China’s impact on Africa
indebted poor countries (HIPC) initiative. New lending, which is often nonconcessional, could be an
economic problem if low-income countries accumulate too much debt too quickly and find themselves
back in an unsustainable situation. Politically, the costs are even higher. The recent G8 debt relief
initiative granted up to 100% debt relief for HIPCs partly on the basis that these countries were too poor
to bear any debt. If those same countries immediately borrow again, creditors (and legislatures and
taxpayers) who are still appropriating funds to pay for debt relief may (rightly) view such efforts as
indirectly subsidizing new Chinese lending

Transparency and governance.

China ExIm does not report its own activities in the same way as the other similar agencies (for
example, the terms of its loans in Africa are rarely made public) and the Bank does not place reporting
demands on its clients. This not only undermines export credit rules aimed at keeping a level playing
field, but could also hurt global efforts to reduce the secrecy around the financing and contracting of
large infrastructure or oil projects, such as the Extractive Industry Transparency Initiative (EITI). Angola,
for example, has able to resist IMF demands for increased budget transparency partly because China
ExIm has been willing to lend

In short
Chinese banks, in line with classic pattern or rationale for expansion into new markets, are following
their clients into Africa using a strategy that focuses on joint ventures with local partners. This is paving
the way greater Chinese involvement in commercial banking and perhaps, ultimately, retail banking. The
investment of Chinese banks in local African banks and the financing provided for exports and projects
and finally corporate lending may prove to be what is needed to further spur development of
sustainable industry in Africa. If Chinese banks can see a strong return on banking activities, it may
continue to develop the network and try the cooperation and equity participation model in other
emerging markets such as Latin America. The benefit for Africa, however, would be if the banking
operations spread beyond a narrow focus on Chinese funded projects and Chinese corporate to more
comprehensive banking operations on the ground. The scramble for Africa may yet spill over into
banking

China environmental footprint in Africa23

Concerns over China’s environmental footprint in Africa have arisen for at least five reasons:

1. China’s investments in Africa are concentrated in sectors that are environmentally sensitive
(such as oil and gas exploration, mining, hydropower and timber extraction), and in

23
China’s Environmental Footprint in Africa Peter Brossard China in Africa policy Briefing
15 The China’s impact on Africa
 infrastructure projects that help to facilitate environmentally sensitive investments (such as
roads, railway and power transmission lines).

2. While investments in the mining, oil, gas, hydropower and timber sectors generally carry high
environmental risks, China’s strategy of making previously inaccessible resources accessible
compounds these risks. Chinese investors are developing projects in remote, ecologically fragile
regions, in areas that have so far been protected as national parks and in countries with weak
Governance structures.

3. China’s domestic policies have prioritized economic growth over the protection of the
environment, often with harrowing results. The Chinese government has set in place laws,
regulations and institutions to protect the environment, but with limited success24.17 China risks
exporting its domestic environmental track record to other parts of the world through its foreign
investment strategy. Its domestic environmental policies may even encourage China’s worst
polluters to relocate their production to places like Africa.

4. International financial institutions have since the 1990s adopted environmental guidelines and
standards to address the environmental impacts of their projects. Major Chinese investors,
financiers and equipment suppliers have so far not adopted such standards, or have developed
policies that are not necessarily in line with international standards. Western financiers and
companies are concerned that Chinese competitors are using lower environmental standards as
a strategy to win a larger business share in the international infrastructure and extractive
sectors.

5. China’s economic expansion in Africa has added to Western concerns that the country’s rapid
economic growth will put a heavy strain on the world’s resources and the global environment.

24
The great leap backward?’, Foreign Affairs, September/October 2007, for a good summary of China’s
environmental problems and their link to inadequate governance structures.
16 The China’s impact on Africa
China- Africa is everything perfect?

Impact of the growth
There is a strong correlation between the growth in Africa and China as demonstrated by the chart to
the left, so much so that economist talk about China and Africa’s new coupling. Also we can see from
the graph in page 5 that the trade between
the 2 countries has grown exponentially in
the last few years. But
ut at the same time
Africa’s trade deficit
icit with China is growing
at equally rapid rate if not higher rate. Many
Africans, especially those in the textile and
clothing, footwear and furniture sectors
have lost their jobs because of what many
African entrepreneurs see as unfair
competition from cheaper Chinese goods.
Nearly 70,000 jobs are estimated to have
been lost in the textiles sector in South
Africa due mainly to the importation of cheaper Chinese substitutes. A total of 2 000 Zambians lost their
jobs when a local textiles company closed do down.
wn. The situation in Ghana, Sierra Leone and other
countries in the sub-Saharan
Saharan African region is not different. This has serious consequences for Africa’s
effort to take millions of its people out of poverty and destitution.

China investments concentratconcentrating into few countries

Chinese investments in Africa tend to concentrate in the oil sector which means a few countries (mainly
the oil-producing
producing countries) are actually benefiting from Chinese direct investments in Africa. Chinese
companies are winning manyy contracts in Africa due to the support they receive from the Chinese
government. A loan from the Ex-Im Im Bank, for example, often requires the debtor to select Chinese
companies which tend to source a significant proportion of their equipment, materials, ttechnology, and
labour from China (Konings, 2007). This practice effectively deprives the local communities of jobs.
Those who are employed by Chinese companies often have to endure harsh working conditions and very
low levels of pay. As mentioned earlier iinn this section, 50 employees lost their lives in Zambia at an
explosives factory run by a Chinese firm in 2005 due to poor health and safety conditions in the factory.

China Support of doubtful regime

China’s support for controversial regimes like those of Sudan and Zimbabwe, and especially the supply
of weapons to them is a threat to political, social and economic stability. Furthermore, China’s apparent
lack of concern for human and labor rights has come ome under attack from unions and other civil society
organizations.. Chinese companies have also been accused of violating environmental rights in some

17 The China’s impact on Africa

local communities in Africa. In doing so China was also able to thru political consideration further its
agenda, following the one country one vote at the ONU one some decision. China has developed strong
relationship with African leader so that it could count on their vote at the ONU.

CONCLUSION
The rapidly growing economic ties with China have contributed to Africa’s strong economic growth in
recent years. As a developing country, China can offer advice and goods that are better suited to the
needs of African societies than the advice and products from industrialized countries. For example,
China is a world leader in renewable energy technologies, which are essential for rural electrification in
Africa. Chinese investment and consumer goods are usually more affordable than Western products.
Finally, Chinese loans and aid flows allow African governments to eschew the often dogmatic economic
policy conditions of international financial institutions like
Chinese diplomats have also publicly defended the World Bank and International Monetary Fund (IMF).
China's record on the continent, saying Beijing These ties are further revealed by the apparent “coupling”
was "selfless" in its desire to provide help and of their economies we can see a parallel in GDP growth
serve as a development model for poor between the two economies.
countries.Chinese Premier Wen Jiabao's extensive
tour of Africa. 2006
However in spite of all the good word of economic aid and
of assisted development (see box on the left), China sole intent in this “partnership” is, I believe, and
officials barely conceal it, it is the acquisition and the control of resources. China is in this aspect no
different than any other countries, China’s supporters point out that the West hardly has a glowing
record in Africa from the days of the colonial carve-up to the fall of the Berlin Wall when, for almost a
century, the US, Britain and others meddled in the affairs of African states with scant regard for the
desires of African people. However just as other countries have learnt in the past, plundering these
countries without regards for the people (no the small elite but the vast majority of inhabitant of Africa),
or the environment ultimately will backfire on China and it will also slow down the economic growth of
the world which China has became so dependant to fuel its own growth thru its export machine. It is sad
that China should take the path of the past and repeat the mistake that France and other countries have
done in the past, especially when we know that Sub Sahara Africa has 82% of working poor.

18 The China’s impact on Africa