China’s rapidly increasing investments in Africa over the past two decades have focused renewed attention on the development path of African countries. While economic growth seems to be an undisputed factor in a country’s development, the suitable political model underlying the economy remains contested.⁽²⁾ In Western countries, economic development is closely connected to a democratic state system and the rule of law.⁽³⁾ Rising Asian economies like China have called the Western dictum into question. China, with its single-party, state-capitalist system, is currently the world’s fastest growing major economy ⁽⁴⁾ and it is investing in African countries without attached conditions related to political reform.⁽⁵⁾ Western economies were hit hard during the latest financial crisis and exposed a particular vulnerability to economic shocks.⁽⁶⁾ In the past, when Western countries such as the United States invested in African countries, they have tied their investment to conditions such as political reform, albeit with few successes.⁽⁷⁾

These recent developments in the East and West have fuelled the discourse on the connection between economic growth and the underlying political systems, and have re-directed the focus to the Chinese model.⁽⁸⁾ This paper examines China’s political non-interference policy towards its African partners and asks, is the primary focus on economic development, independent of the political system, the key to success for the development of African countries?

Western ideas versus Chinese pragmatism in Africa

The African continent has long been at the centre stage of great power competition and the imposition of Western ideas. Financial aid from Western countries and Western-led institutions like the International Monetary Fund (IMF) has been tied to the fulfilment of certain conditions.⁽⁹⁾ Countries like the United States of America (USA) connect their investments in African countries to conditions like respect for human rights law.⁽¹⁰⁾ Support from the IMF implies the implementation of reforms designed in Washington.⁽¹¹⁾ In the past, these approaches of tied-aid have often been perceived as neo-colonial by the recipient countries but also by parts of the international community.⁽¹²⁾ The external design of policies for African countries would inhibit an endogenous development path and thereby hinder long-term successes. An often-quoted example is Nigeria, where the IMF’s policies have led primarily to great economic losses for the country instead of economic development.⁽¹³⁾ Moreover, economists have pointed to the fact that similar IMF policies have been applied to different countries. Thereby the unique circumstances and requirements of each country were ignored to a certain extent and hence progress was impeded.⁽¹⁴⁾

China has evolved as one of the world’s fastest growing and biggest economies in spite of its single-party, state-capitalist system.⁽¹⁵⁾ It is expected to overtake the USA economy as the biggest world economy by 2017.⁽¹⁶⁾ At the same time, China has been under constant criticism by Western political leaders and international organisations for its disrespect of international human rights law. Issues of concern include the lack of an independent judiciary, repression of the freedom of speech and China’s one child policy.⁽¹⁷⁾ Since China is very concerned about its continuing population growth and decreasing resources, it is increasingly investing in resource-rich countries to cope with its own future demand.⁽¹⁸⁾ By 2020, China will overtake the USA in terms of oil imports and will become the largest consumer by 2035.⁽¹⁹⁾ In order to guarantee future supply, China is heavily investing in the upstream and downstream oil sectors in various countries and geographic zones. Countries such as Iraq and Kazakhstan are among China’s business partners but notably, so are many African countries like Sudan, Angola and Nigeria.⁽²⁰⁾ While most African governments welcome this alternative approach and praise it, critics doubt that the Chinese way creates more stability on the long-term in its client states.⁽²¹⁾

The Chinese Way

It is necessary to take a closer look at China’s activities in Africa and their effects to evaluate the possible impact on long-term development. China’s main interest in trading with African countries is their natural resources. African countries’ main exports to China include oil, metals, wood and some food and commodities.⁽²²⁾ In 2004, nearly half of China’s foreign direct investment in Africa was found in Sudan to develop Sudanese oil fields,⁽²³⁾ and China’s state-owned oil company Sinopec recently acquired Total’s stake in Nigerian oil.⁽²⁴⁾ Chinese exports to African countries, on the other hand, include manufactured goods such as cars and textiles, as well as electronics and machinery. Notably, China has also offered resource-backed loans to trading partners like Angola.⁽²⁵⁾ Furthermore, China has invested in building roads and railroads in Angola and Nigeria.⁽²⁶⁾ In comparison to the Western approach, China regards its African counterparts as business partners and not aid recipients. Its policy of non-interference is seen as an indicator for this intention.⁽²⁷⁾ In 2008, Senegal’s president, Abdoulaye Wade, expressed that “China’s approach to our needs is simply better adapted than the slow and sometimes patronising post-colonial approach of European investors, donor organisations and non-governmental organisations.”⁽²⁸⁾

Western governments and organisations criticise China’s approach because it supports the policies of rogue governments like that of Sudan. These governments would in turn prevent economic and political reform, which Western governments, and several scholars, regard as indispensable for long-term development. Furthermore, Chinese companies have come under crossfire for their bad treatment of African workers. In 2010, Chinese employees opened fire when workers of a mine in Zambia protested against the bad working conditions in place.⁽²⁹⁾

Chinese non-interference and African development

The American economist, Paul Krugman, in 1994 developed a thesis that held that Asian growth in the tiger states was “a myth.”⁽³⁰⁾ He argued that reliance on foreign direct investment, especially in capital, as was the case in the tiger countries, would only lead to short-term growth. Instead, total-factor productivity, which can be understood as an economy’s technological dynamism, is the guarantor of long-term stability and progress.⁽³¹⁾ Hence, to generate economic growth and progress, an economy does not only require increasing labour and capital as inputs, but also technical innovation.⁽³²⁾ According to the theory of total-factor productivity, the diversification of an economy and investment in research is a necessary factor to foster resilience and long-term growth. Therefore it seems that China’s investments alone, without a larger strategy to reform the local economies and to foster research and innovation leaves African economies vulnerable. Developing and implementing such strategies is particularly difficult in conflict-torn countries such as Nigeria or the Democratic Republic of Congo, where ownership of resources is still unsettled. These contexts exacerbate the implementation of fixed structures since it would require the agreement and commitment of all involved actors.

Economic development can only lead to long-term success and stability if an economy is resilient enough to withstand outside shocks. In the modern world, economies cannot prosper without participating in global markets.⁽³³⁾ These in turn interconnect them with different players and institutions. Vulnerability can decrease by a diversification of risks. Hence, if a crisis occurs and hits only one or a few trading partners out of many, the negative repercussions will be minimal. However, participating in the global economy also exposes a country to developments beyond its own actions.⁽³⁴⁾ The recent financial crisis showed that the interconnectedness of several institutions worldwide rendered the consequences of the crisis quasi uncontrollable. Henceforth, countries need to exercise some control and regulate their global activities to minimise risks, especially in financial markets.⁽³⁵⁾ Therefore, it is not enough for African countries to participate in international trade and to create favourable conditions for foreign direct investment. Governments in the concerned countries have to create a system of rules and control to protect their growing economies from outside pressures. However, as mentioned before, unclear structures of resource ownership and protracted conflicts in several African countries impede the successful implementation and monitoring of such rules.

Reliability is a further factor, crucial for the long-term development of a country. This refers to the reliability a government offers to investors and international business partners. Significantly, it is a factor, which is not only economic in nature but also political. A stable political system signals reliability and predictability and hence strengthens the position of an economy vis-à-vis the outside world, but also to local businessmen.⁽³⁶⁾ It therefore seems as though reliability depends on political stability and economic incentives. Only if a population has the legitimate hope for an improvement of its situation, will political stability occur strong enough to reflect reliability. Looking at the current political landscape, it can be observed that in several cases state-capitalist countries, such as Russia, offer less reliability than market-capitalist countries, like the USA.⁽³⁷⁾ As Ian Bremmer describes, the steel and mining company ArcelorMittal operating in Russia was called on by the Russian Government to continue its mining activities against the company’s own decision to decrease its production levels.⁽³⁸⁾ Hence, foreign direct investment only becomes attractive for foreign companies if it acts within a clear legal framework.⁽³⁹⁾

Another factor is the importance of a country’s participation in the globalised economy. In today’s world, it is imperative for countries to participate in international trade regimes like that of the World Trade Organisation. Non-members suffer from unfavourable trading conditions, which the current 158 members grant each other. Membership requirements for instance imply trade-liberalising measures that often seem contradictory to the building-up of a local economy. As the political scientist John Ikenberry notes in his assessment of China’s competition with the USA for world hegemony, the current international system is a Western one.⁽⁴⁰⁾ China will be able to challenge the USA, but not the international system, since it is one described as “easy to join and hard to overthrow.”⁽⁴¹⁾ The system offers incentives to join because in a globalised world, all states depend on trading partners to succeed and make profits.⁽⁴²⁾ While China is an alternative trading partner for African states to Western countries, African countries in the long run must act within the Western embossed order to guarantee long-term development. Its focus on China could pressure the West, especially in institutions, to offer incentives to the African countries to divert its outlook. However, African states must understand the rules of this Western system in order to play its cards right.

Concluding remarks     

While China’s politics of non-interference seems to create impulses for economic development and shows first successes, long-term development can only be the product of economic and political development. Even though the Chinese example shows that a political system does not need to be democratic in nature for a prospering economy as proposed by the West, it still has to offer basic conditions. These are reliability, resilience, total-factor productivity and an understanding of the rules of the current global system. China’s policy towards Africa can strengthen its reliability vis-à-vis the West and pressure Western governments and international institutions to create incentives for African countries to diversify its investors. However, African countries, and especially those China invests in, such as Nigeria and Zimbabwe, show significant differences in comparison to China’s rise or the rise of the Asian tigers. Basic political stability and a functioning administration are imperative for factors such as reliability.  Therefore, the Chinese way and its approach to Africa can inspire development, but it will only lead to long-term development if political reform accompanies economic growth.

Written by Sophie-Charlotte Fischer ⁽¹⁾

NOTES:

(1) Contact Sophie-Charlotte Fischer through Consultancy Intelligence Africa’s Asia Dimension Unit ( asia.dimension@consultancyafrica.com). This CAI discussion paper was developed with the assistance of Megan Erasmus and was edited by Nicky Berg.
(2) Ikenberry, J., 2008. The rise of China and the future of the West. Foreign Affairs, 87(1), pp. 23-37.
(3)Bremmer, I., 2012. The end of the free market: Who wins the war between states and corporations? Portfolio Trade: New York.
(4) Ikenberry, J., 2008. The rise of China and the future of the West. Foreign Affairs, 87(1), pp. 23-37.
(5) Shinn, D.H. and Eisenman, J., 2012. China and Africa: A century of engagement. University of Pennsylvania Press: Philadelphia.
(6) Bickerton, C., 2011. Crisis in the Eurozone: Transnational governance and national power in European Integration. Political Geography, 30(8), pp. 415–416.
(7) Wallis, W., ‘Drawing contours of a new world order’, Financial Times, 24 January 2008, http://www.ft.com.
(8) Ikenberry, J., 2008. The rise of China and the future of the West. Foreign Affairs, 87(1), pp. 23-37.
(9) Wallis, W., ‘Drawing contours of a new world order’, Financial Times, 24 January 2008, http://www.ft.com.
(10) Ibid.
(11) Bird, G., 2009. Reforming IMF conditionality. World Economics, 10(3), pp. 81-104.
(12) Ibid.
(13) ‘Nigeria: IMF’s policy failure’, All Africa, 28 March 2003, http://allafrica.com.
(14) Bird, G., 2009. Reforming IMF conditionality. World Economics, 10(3), pp. 81-104.
(15) Ikenberry, J., 2008. The rise of China and the future of the West. Foreign Affairs, 87(1), pp. 23-37.
(16) Shinn, D.H. and Eisenman, J., 2012. China and Africa: A century of engagement. University of Pennsylvania Press: Philadelphia.
(17) ‘China’, Human Rights Watch World Report 2012, 22 January 2012, http://www.hrw.org.
(18) ‘World energy outlook 2011’, International Energy Agency, 9 November 2011, http://www.worldenergyoutlook.org
(19) Ibid.
(20) Jiang, J. and Sinton, J., ‘Overseas investments by Chinese national oil companies’, International Energy Agency, February 2011, http://www.iea.org.
(21) Alessi, C. and Hanson, S., ‘Expanding China-Africa oil ties’, Council on Foreign Relations, 8 February 2012, http://www.cfr.org.
(22) Ibid.
(23) Wallis, W., ‘Drawing contours of a new world order’, Financial Times, 24 January 2008, http://www.ft.com.
(24) ‘Total sells Nigeria oil stake to China's Sinopec', BBC, 29 November 2012, http://www.bbc.co.uk.
(26) Alessi, C. and Hanson, S., ‘Expanding China-Africa oil ties’, Council on Foreign Relations, 8 February 2012, http://www.cfr.org.
(26) Ibid.
(27) Wallis, W., ‘Drawing contours of a new world order’, Financial Times, 24 January 2008, http://www.ft.com.
(28) Ibid.
(29) Laing, A., ‘Zambian Miners shot by Chinese managers’, The Telegraph, 19 October 2010, http://www.telegraph.co.uk.
(30) Krugman, P., 1994. The myth of Asia’s miracle. Foreign Affairs, 73(6), pp. 62-84.
(31) Ibid.
(32) Ibid.
(33) Bremmer, I., 2012. The end of the free market: Who wins the war between states and corporations? Portfolio Trade: New York.
(34) Bickerton, C., 2011. Crisis in the Eurozone: Transnational governance and national power in European Integration. Political Geography, 30(8), pp. 415–416.
(35) Ibid.
(36) Bremmer, I., 2012. The end of the free market: Who wins the war between states and corporations? Portfolio Trade: New York.
(37) Ibid.
(38) Ibid.
(39) Ibid.
(40) Ikenberry, J., 2008. The rise of China and the future of the West. Foreign Affairs, 87(1), pp. 23-37.
(41) Ibid.
(42) Ibid.