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China doubles down in Africa
By Peter Lee
Fortunately for China, the DRC - which currently has only enough foreign exchange on hand for a few weeks of import cover - is maintaining its enthusiasm for the proposed megadeal.
However, neighboring Zambia, which shares in the immense bounty of copper ore crossing the southern Congo, presents a greater challenge for the traditional Chinese way of doing things in Africa.
The wake-up call for China probably came in 2007, during the flush years of the commodity boom, when China's President Hu Jintao was met by protesters in Zambia's capital of Lusaka, and the government cancelled a trip to a China-run copper mine at
Chambeshi to spare him the embarrassment of further protests.
For several years, anti-Chinese sentiment has been central to Zambian opposition leader Michael Sata's electoral platform.
A July 2008 report quoted Sata as follows:
"It is not only Zambia - it's all Cape to Cairo where the Chinaman is," Sata says. "That's the way they look at us. They have no regard for us. They have no regard for our independence. They have no regard for any black person as a human being. Those are very abnormal conditions, very abnormal conditions. Very abnormal conditions, which a civilized society, in this century, cannot accept."
Sata came to the United States to play the human-rights and democracy card at Harvard, and also threatened to play the nearly-defunct Taiwan card:
"…the Patriotic Front in Zambia finds it more prudent to cultivate relations with Taiwan, a democracy and a more advanced country than China, which can provide high quality investment and more equitable trading opportunities."
Sata's provocative stance on Taiwan prompted China to make an exception to its principle of non-interference in local politics and state. In 2006 there was a chance of severing relations if Sata was elected.
China is acutely aware that Sata may gain the presidency in his fourth try, in 2011, and that his defeat in 2006 occasioned anti-Chinese looting and rioting in one of Sata's electoral strongholds, the capital of Lusaka.
In the midst of the recession - and undoubtedly at the prodding of President Hu, who is accustomed to very friendly and deferential welcomes in African capitals - China has stepped up its efforts to repair the damage and ingratiate itself with public opinion in Zambia.
Beijing is confronting two hot-button issues for Sata's base: domination of the domestic textile and garment trade by Chinese traders and imports, and Chinese abuses in the Copperbelt, where a combination of generally miserable working conditions, violent and at times deadly union-busting at the China-run Chambeshi mine and Sata's demagoguery have created a toxic atmosphere of resentment and labor unrest.
A conspicuous political albatross for the pro-Chinese ruling party has been the closure of the Zambia-China Mulungushi Textiles enterprise. Originally a symbol of state-run benevolence, the Chinese interest was turned over to the Qingdao Textile Corporation in 1997 and run along time-tested sweatshop principles, including demanding, abusive managers who locked the employees into the plant at night.
The plant closed in 2006 amid intense rancor and resentment against the Chinese management and turned into a symbol of the Zambian government's unwillingness to protect Zambians against Chinese exploitation.
In March 2009, Zambia's defense minister (the Ministry of Defense holds Zambia's interest in the plant) announced that China and Zambia were jointly studying the re-opening of the plant and the expected creation of 2,500 presumably desirable jobs:
"The team of experts have so far captured a comprehensive factor of what we need to ensure the company is back into serious business and further strengthened. For us as government this is a significant development," said Mr [George] Mpombo.
The defense minister pointed out that Zambia and China would like to ensure the company is utilized to its full capacity.
"For the last two years there have been serious hiccups in operations and a yawning capacity of that company. That company has the capacity to export and do miracles for the country," said Mr Mpombo.
Furthermore, on June 25, it was announced that China Non-Ferrous Metal Corporation would take over operation of the Luanshya Copper Mine, which had been shuttered due to low global copper prices.
The Zambian government was quite frank about the political background to the transaction:
Minister of Mines and Minerals Development Maxwell Mwale said at the official handover in Zambia's Luanshya District on the Copperbelt province that the coming of a new investor was an indication that the government was committed to bringing development to the district because the closure of the mine was turned into a political platform.
China bid $50 million for the controlling foreign interest in the mine, and promised $400 million in investment, including the seemingly mandatory hospital, school and sports facilities infrastructure outlays.
It appears that China's posture in Zambia has quickly evolved from old-style socialist solidarity to unfettered Wild West capitalism run by entrepreneurial Chinese enterprises to adult supervision - strategic engagement directed by the Chinese government.
It remains to be seen if Beijing's public relations and financial efforts are enough to stem the Sata tide in 2011.
China also displayed its commitment to strategic engagement in Angola, site of its most conspicuous triumph in its post 9/11 drive into Africa.
The basic objective of the $6 billion oil-for-infrastructure deal has been met; as Angola has joined Saudi Arabia and Iran as one of China's three biggest suppliers of crude.
The notoriously independent and prickly Angolan government is determined to keep channels to the West open, and recently denied China's Sinopec petrochemical corporation the opportunity to invest in an $8 billion new refinery at Lobito; instead Angola decided to come up with the money itself and give the design and build contracts to former US vice president Dick Cheney's old outfit, KBR.
Nevertheless, since the global recession and the drop in international oil prices has punched a hole in Angola's balance sheet, China has stepped forward with new credits: $1 billion from its Export-Import Bank in December 2008, and another $1 billion from the China Development Bank in March of this year.
Additionally, China purchased almost one million barrels of oil from Angola for its strategic petroleum reserve, which can be interpreted simultaneously as an opportunistic move to take advantage of low prices, an attempt to find a better home for its bloated forex reserves than US T-bills, and an expansion of oil imports in tough times that Angola would appreciate.
Lucy Corkin of South Africa's Center for Chinese Studies at Stellenbosch University writes in the March 2009 China Monitor that the new credit appears to illustrate Beijing's efforts to develop policy-driven engagement with Angola beyond the narrower self-interest that drove the original oil-backed loans:
"The size of the loans and the eagerness of several Chinese financial institutions to lend to Angola signify the strategic importance with which Beijing views Luanda as Chinese banks vie to engage with Angola to curry favor with the Chinese State Council."
In a sign that China is interested in promoting indigenous financial development and integration, and not just writing checks to interested governments, on June 16 the ICBC/Standard Bank joint venture concluded the largest Chinese investment banking transaction to date in Africa - an $825 million loan (plus $140 million in bridge financing) to finance the expansion of Botswana's Marupule power station.
Not unsurprisingly, supply and build for the project will be handled by China National Electric Equipment Corporation.
Jiang Jianqing, the president of ICBC - which now bills itself as the largest bank in the world in terms of market capitalization - flew out from Beijing for the signing ceremony to emphasize that China was open for business to Africa in these tough times:
"Africa is a huge market with massive potential," Jianqing said. "Africa needs urgent foreign investment, especially after the impact of the global crisis, so we will look at more projects to invest [in]."
"The financing of the Morupule B Power Station is just one of 65 projects that the ICBC is currently funding on the African continent and is evidence of China's strong appetite for African investment opportunities," said Jiang.
Hu Jintao's 2009 tour of Africa - which covered the distinctly non-strategic states of Senegal, Mali, Tanzania and Mauritius - was apparently designed to demonstrate that China was not just in Africa for the oil, cobalt and copper, as Peking University's Zha Daojiang told Reuters:
"The itinerary appears intended to show that we treat all the African countries, big and small, equally," said Zha. "There's also the implicit message that China's relationship with Africa isn't solely defined by resource and energy investments."
It appears that China hopes to emerge from the global recession not only with its economic standing intact; it intends to enhance its position and present itself in Africa as the responsible, perhaps indispensable stakeholder that the West has claimed to yearn for but is perhaps not anxious to see materialize.
Peter Lee writes on East and South Asian affairs and their intersection with US foreign policy.
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