On 24 January 2013, United States (US) Secretary of State, John Kerry, told the US Senate Committee on Foreign Relations that, “China was all over Africa” and that, “in some place we [US companies and interests] aren’t even in the game.”⁽²⁾ Kerry was criticised in some quarters for describing developments in Sino-African relations as part of a ‘game’ being played between the United States and China.⁽³⁾ Kerry’s description of the Chinese being “all over Africa” was rhetoric heavily laden with negative connotations. However, language aside, Kerry’s assessment that China has rapidly expanded into Africa, sometimes at the expense of US and Western interests, is demonstrably true.

The extraordinary growth of China’s economic interests in Africa is one of the most important trends in the continent’s history since the end of the Cold War. China-Africa trade passed US$ 1 billion in 1990, rising to US$ 10 billion in 2000, then increasing 15-fold in little over a decade to US$ 150 billion in 2011,⁽⁴⁾ surpassing the United States as Africa’s largest trading partner in 2009.⁽⁵⁾ In 2012, the figure rose to US$ 198 billion, with some analysts now predicting that the figure will rise to US$ 385 billion by 2015.⁽⁶⁾ To put this into further perspective, trade between the US and Africa amounted to only US$ 108.9 billion in 2012.⁽⁷⁾

China’s projected share of trade, investment and developmental assistance has led to some analysts floating the idea that Beijing may soon enjoy a level of political influence in Africa that was historically held by the United States and former European empires over the last 150 years.⁽⁸⁾ Bold assertions indeed, but one does not have to agree with such an assessment to recognise that China’s rise in Africa symbolises its wider attainment of superpower status, acting as a great 21st century rival to the United States. This paper presents a ‘big picture’ analysis of why China has been able to rapidly expand into Africa on the scale which it has. It explains this expansion has been due to four principal reasons, all of which have strengthened China’s capacity to promote its interests within the continent, namely, that Chinese companies are more globally competitive than ever before;  China’s effective use of economic diplomacy and the linking of trade to aid; that China has made significant developments in the utilisation of ‘soft power’, and lastly, and most controversially, the use of illegal activities such as bribery and corruption to gain a competitive advantage.
Chinese companies: More globally competitive than ever before

China’s manufacturing base is the contemporary workshop of the world. Like the British Empire during the nineteenth century, goods produced efficiently and cheaply outsell comparable locally manufactured goods. In Sub-Saharan Africa (SSA), this guarantees an impressive degree of political influence without the need to exercise measures of formal control. Fourteen years after the initiation of the ‘Going Global’ strategy, Chinese companies have become more and more competitive in Africa, establishing distribution and service channels which provide a solid foundation for further successes.⁽⁹⁾

This increased competitiveness can be explained by three factors. Firstly, China’s state-owned enterprises (SOEs) and commercial entities have become better at what they do. They have improved their operations in globally competitive markets across Africa. In this sense, they are replicating what historically successful companies the world over do, effectively supplying consumer or business-to-business demand at competitive rates. However, these developments are not limited to the sectors already closely associated with China’s growth in Africa, such as in the mining and construction industries. Chinese telecommunications companies like Huawei and ZTE have made big strides in markets formerly dominated by players from the US and the Republic of Korea.⁽¹⁰⁾

Secondly, the main competitive advantage of most Chinese companies vis-à-vis Western firms and other Asian producers is their low cost base. This is derived from historically unprecedented levels of economies of scale through China’s ‘factory cities’,⁽¹¹⁾ and is also aided considerably by the Chinese Government’s policy of currency undervaluation. For Chinese service providers operating in Africa, this cost advantage is maintained by comparably lower labour costs.⁽¹²⁾ For example, Chinese managers and engineers often live in relatively modest accommodation, with relatively frugal expense accounts compared to their Western counterparts.⁽¹³⁾

Thirdly, governmental strategies intended to support the Going Global strategy have assisted companies looking to move into Africa. One example of this is how Beijing’s developmental assistance to Africa has significantly assisted its own companies in the construction industry, as seen when China Export-Import Bank (China Exim Bank) disbursed billions of dollars into infrastructure projects in SSA.⁽¹⁴⁾ These concessional loans have often been tied to arrangements guaranteeing that the public tender of contracts are principally awarded to Chinese SOEs, and that 50% of the procurement of equipment, technologies, materials or services must be sourced from China.⁽¹⁵⁾ The Chinese state plays a critical role in aiding its companies abroad through export promotion policies which make use of cheap credit to provide exporters with significant advantages over the competition.⁽¹⁶⁾ Here you see the blending of China’s long-term strategic interests and the commercial interests of its companies. These companies operating in industries of importance therefore play a strategic role in Chinese foreign policy and so SOEs are well connected and extremely well funded. This interlinking of Beijing’s long-term strategic interests and narrower short to medium term commercial interests would explain why so many Chinese officials routinely move back and forth between governmental posts and senior positions within SOEs.⁽¹⁷⁾

Economic diplomacy and the linking of aid to trade

Another factor explaining China’s rise in Africa is Beijing’s economic diplomacy. In 1995, China’s State Council instructed the Commerce Ministry to reform its Africa policies, prioritising any link between aid and trade.⁽¹⁸⁾ By the late 1990s, most senior leaders in the Chinese Government and Chinese Communist Party (CCP) were directly involved in the country’s economic diplomacy on the African continent. China’s extraordinary growth in Africa during the 21st century highlights the importance of that high-level strategic decision. This is another illustration of the importance of senior level policy-making in supporting and executing the Going Global strategy. Commercial opportunities in Africa’s growing markets are a pull-factor to China’s SOEs, but the push-factor has been high politics with the Chinese Government and CCP. The best example of this high-level policy engagement with Africa is the Forum on China-Africa Cooperation (FOCAC).⁽¹⁹⁾ Under China’s ‘state-capitalist’ model, Chinese officials are able to promise three-year engagement plans, amounting to billions of dollars of aid and investment, much to the delight of African audiences.⁽²⁰⁾ This policy is only feasible because China’s political system allows the government to exert direct control over its SOEs, and because it still has considerable influence over commercial entities. China’s competitors in Africa, principally the US, Britain, France and India, cannot deliver long-term commitments on the same scale.

Chinese aid and development packages have also been attractive to African Governments because of the ‘no strings attached’ style of the Chinese model. This model, although criticised in many circles, does not lead to situations as was seen in Kenya, when the pace of development was restricted by the International Monitory Fund’s decision to withhold aid following compliance failures relating to the absence of progress on corruption.⁽²¹⁾ China’s model is popular amongst African governments because it focuses on the hard spend in areas like infrastructure development, and is not conditional of any demonstrable improvements relating to issues of good governance.

Furthermore, China’s wider ‘non-interference’ policy on human rights has strengthened its political and economic relations with regimes the West have reduced or cut ties with. Western concerns over human rights developments in certain African countries have led to Western commercial disinvestments ⁽²²⁾ and the weakening or breaking of diplomatic ties. This provided the opportunity for Beijing, with its policy of non-interference, to strengthen its hand in places like Zimbabwe ⁽²³⁾ and Sudan,⁽²⁴⁾ both of which are particularly excellent illustrations of how China took advantage of these developments.

Developments in China’s utilisation of power

The essence of Joseph Nye’s classic articulation of the notion of ‘soft power’ is that seduction and co-option are preferable means of persuasion to coercion, bribery and the use of force.⁽²⁵⁾ To this day, China’s expanded development of soft power in Africa is still underestimated by Western analysts, who still principally focus on China’s ‘hard’ investments in the form of large-scale infrastructure projects. In detailing China’s developments in the arena of soft power, we once again return to the significance of high-level policy decisions taken in Beijing. For example, the entry of China Central Television (CCTV) and newspaper, China Daily,⁽²⁶⁾ into the African marketplace was not a commercial response to demand from African consumers. If China’s newly available media content is at all commercially successful, then Beijing will consider this an added bonus. The decision to establish CCTV Africa, and expand Xinhua’s ⁽²⁷⁾ pre-existing presence, was the result of a decision to expand its media presence for the purposes of perception management and long-term soft power interests. This also happened at a time when well known Western media organisations, such as the British Broadcasting Corporation (BBC), began scaling down their African presence for commercial reasons.⁽²⁸⁾

In contrast to the notion of soft power, most controversially, illegal activities, bribery ⁽²⁹⁾ and corruption have also been used to advance particular economic and political interests. Added to this is the flouting of labour laws,⁽³⁰⁾ and the disregard of environmental laws ⁽³¹⁾ to maintain the competitive advantage of comparably lower costs. According to Transparency International’s Bribe Payer Index 2011, Chinese companies are the second most likely in the world to use bribery abroad (behind Russia).⁽³²⁾ In addition, corruption is still a serious problem in China,⁽³³⁾ and inevitably corrupt practices will be transferred abroad.

Concluding remarks

China’s long-term national security interests, along with its role as a superpower to rival the US, are tied to its ability to maintain a strong and internationally competitive economy. China’s rise on the African continent has been a consistent and steady one, with very little to no interruptions. This relationship deserves the attention of Western states not only because of the diversion of African resources, but also because a deepening relationship with African states will also enlarge China’s voting block at the United Nations.

In this area, China’s Going Global strategy is strongly supported by a series of high-level policy initiatives implemented by Beijing. There are a number of African ‘pull-factors’ to explain China’s interest. These are the availability of natural resources and entry into emerging markets with impressive growth potential.

Written by Andrew Day ⁽¹⁾

NOTES:

(1) Contact Andrew Day through Consultancy Africa Intelligence’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) Musakwa, T., ‘Transcription of the segment of John Kerry’s nomination hearing during which he said “China is all over Africa”’, China Africa Project, 3 February 2013, http://www.chinaafricaproject.com.
(3) Bates, R., ‘Too often the West sees Africa as a pawn in a power game: John Kerry for one should know better’, The Independent, 30 January 2013, http://www.independent.co.uk.
(4) Brown, D.E., ‘Hidden dragon, crouching lion: How China’s advance in Africa is underestimated and Africa’s potential underappreciated’, Strategic Studies Institute, September 2012, http://www.strategicstudiesinstitute.army.mil.
(5) Wonacott, P., ‘In Africa, US watches China’s rise’, Wall Street Journal, 2 September 2011, http://online.wsj.com.
(6) Foxman, S., ‘Trade between China and Africa could surge 25% this year – and that’s just the beginning’, Quartz, 11 April 2013, http://qz.com.
(7) Ibid; ‘US Foreign Trade: Trade in goods with Africa 2012’, United States Census Bureau, http://www.census.gov.
(8) Brown, D.E., ‘Hidden dragon, crouching lion: How China’s advance in Africa is underestimated and Africa’s potential underappreciated’, Strategic Studies Institute, September 2012, http://www.strategicstudiesinstitute.army.mil.
(9) Ibid.
(10) O’Brien, K., ‘Microsoft and Huawei to sell Windows smartphones in Africa’, New York Times, 4 February 2013, http://www.nytimes.com.
(11) Brown, D.E., ‘Hidden dragon, crouching lion: How China’s advance in Africa is underestimated and Africa’s potential underappreciated’, Strategic Studies Institute, September 2012, http://www.strategicstudiesinstitute.army.mil.
(12) Ibid.
(13) Ibid.
(14) Liu, B. and Stocken, R., 2011. “The role of China’s construction industry in Africa’s infrastructure development”, in Standard Bank's Guide to Transactional Banking in Africa 2012. PPP Company Limited: South Africa.
(15) Ibid.
(16) Brown, D.E., ‘Hidden dragon, crouching lion: How China’s advance in Africa is underestimated and Africa’s potential underappreciated’, Strategic Studies Institute, September 2012, http://www.strategicstudiesinstitute.army.mil.
(17) Klinck, H., ‘The strategic implications of Chinese companies going global’, Foreign Military Studies Office, 2012, http://fmso.leavenworth.army.mil.
(18) Brown, D.E., ‘Hidden dragon, crouching lion: How China’s advance in Africa is underestimated and Africa’s potential underappreciated’, Strategic Studies Institute, September 2012, http://www.strategicstudiesinstitute.army.mil.
(19) Ibid.
(20) Ibid.
(21) Jenkins, C., ‘IMF withholds Kenyan aid’, BBC News, 18 January 2001, http://news.bbc.co.uk.
(22) Manhas, R., 2007. Talisman in Sudan: Impacts from disinvestment. Compact Quarterly, 2007(1), http://www.enewsbuilder.net.
(23) Waterfield, B., ‘EU poised to ease sanctions against Zimbabwe’, Telegraph, 17 February 2013, http://www.telegraph.co.uk.
(24) Daiss, T., ‘China’s Sudanese dilemma: Secure oil whatever the cost’, Independent, 3 April 2013, http://blogs.independent.co.uk.
(25) Nye, J., 2004. Soft power – The means to success in world politics. Public Affairs: Cambridge.
(26) China Daily is an English language newspaper available in Africa. It was first published 12 December 2012 in Nairobi, Kenya. Like all other Chinese media, it works within censorship guidelines established by the state ‘Publicity Department’ based in Beijing.
(27) Publisher of the China Daily newspaper.
(28) Jacobs, A., ‘Pursuing soft power, China puts stamp on African news’, New York Times, 16 August 2012, http://www.nytimes.com.
(29) ‘The Chinese in Africa: Trying to pull together’, The Economist, 20 April 2011, http://www.economist.com.
(30) Sichone, C., ‘Zambia: Chinese mine firms flout labour laws’, Times of Zambia, 4 November 2011.
(31) Taylor, I., ‘China’s environmental footprint in Africa’, China Dialogue, 2 February 2007, http://www.chinadialogue.net.
(32) Hardoon, D. and Heinrich, F., ‘Bribe Payers Index Report 2011’, Transparency International, http://bpi.transparency.org.
(33) Hatton, C., ‘How serious is China on corruption?’, BBC News, 28 January 2013, http://www.bbc.co.uk.