China's African Safari
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Issue Vol 26.2 Apr-Jun 2011 | Date : 08 Jun , 2011

The first decade of the 21st century has seen subtle changes in Chinese foreign policy. Reasons may be many, but the principal foreign policy determinant has been the demands of the Chinese economy. In order to meet the demands of its heavy industry such as steel and chemicals, Chinese hunger for natural resources and raw material grew exponentially. Its domestic minerals and raw material proved insufficient to meet the demands of its industry Says Bill Emmott, former editor of the ‘Economist’ and author of the book, ‘Rivals’, “…. Abundant Chinese savings enabled the country to accumulate capital, and gave China’s big state owned mining and oil companies the wherewithal to invest abroad. So, as well as buying oil, iron ore and other commodities from the Middle East, Latin America, India and elsewhere, Chinese firms began to invest directly in mines and oil fields, most notably in Africa, in order in increase the supply of those products. In that way, Chinese interests came to spread well beyond its Asian neighborhood across the Indian Ocean to the Middle East and Africa; across the world to Latin America, Australia and Canada.”

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In almost every corner of Africa, there is something that interests China. The continent is rich in natural resources, which promises to keep Chinese booming, fuel hungry economy on the road. The trade between China and the world’s poorest continent totaled about $ 30 billion in the year 2008, a six fold increase since the year 2000. China buys about one third of its oil from Africa, mainly from Angola, where an $ 800 million deal to develop a new field was signed, and from Sudan, where Beijing built a 900 mile pipeline and invested at least $ 8 billion. China is spending another $ 1.2 billion on a new off shore oil field in Nigeria. Meanwhile, Beijing has acquired mines in Zambia, textile factories in Lesotho, railways in Uganda, timber in the Central African Republic, infrastructure development in the Democratic Republic of Congo and retail developments in almost every capital.

Considering Indias growing energy needs and the requirement to diversify oil imports to prevent oil from becoming a strategic weakness, India not only needs to sharpen its diplomatic skills but increasingly factor in, the movement of Chinese battleships in the IOR and the Gulf of Aden.

The reasoning behind China’s new focus on Africa is simple. If its economic boom is to be sustained, Beijing must procure more raw material and new markets for manufactured goods. China’s oil consumption is forecast to grow by at least 10 per cent annually for the foreseeable future. At this level of demand, its domestic reserves will vanish within 20 years. Therefore its thirst for overseas oil. Yet, Beijing’s options are limited. The US and Western powers have already snapped up the world’s largest oil reserves. Saudi Arabia and Iraq with 45 percent of the world’s oil between them, are in effect closed to China. So, the less developed tracts of Africa are an obvious target.

For oil, Chinese companies have made deep investments in Nigeria, Sudan and Angola. Nigeria is sub-Saharan Africa’s largest oil producer and the fifth largest in OPEC after Saudi Arabia, Venezuela, Iran and the UAE. Sudan has total reserves at 5 billion barrels and estimated proven reserves at 700 million barrels with new plans to explore oil in North West Sudan, the Blue Nile basin in South East Sudan and the Red Sea area in Eastern Sudan. With reserves of over seven billion barrels, reputed to be larger than that of Kuwait, it is the most successful non – OPEC country in terms of oil exploration.

Between 2003 and 2008, Chinese direct investment skyrocketed from $ 75 million to $ 5.5 billion in Africa. China is the number one foreign investor in Sudan besides having huge investments in Algeria, Zambia, Lesotho, Ethiopia, Nigeria, Tonga and the Solomon Islands.

Is it all swan song, then? Many countries in these parts of the world initially welcomed the Chinese in every sector from i.e. tapping natural resources to building infrastructure because China, unlike the West, does not tie its aid or investments to human rights. Nevertheless bitterness among local populations is rising against the growing Chinese presence in these countries.

Sparked by high unemployment, 100 Algerian and Chinese migrant workers clashed in the capital Algiers in the year 2010. Nine Chinese oil workers in Sudan were kidnapped by an unknown group and five among then were killed. In Zambia 500 employees at a copper mine went on strike and damaged a Chinese dormitory. Chinese managers were taken hostage in Lesotho, street vendors in Maseru destroyed Chinese shops. In Ethiopia, ethnic Somali rebels killed nine Chinese oil workers and kidnapped seven more. In Tonga in the year 2006, pro-democracy protesters damaged 30 Chinese owned shops. In Solomon Islands, upset at the election of a new Prime Minister accused of using Chinese money to buy votes, demonstrators destroyed the capitals’ China town.So, what’s happening? If China is pumping so much money into these regions, why should riots happen? Why is there a groundswell of resentment against Chinese presence? In an article ‘The World of China Inc’ in ‘The Time’ magazine, Hannah Beech/Ramu have explained, “when China began its global investment push in the early part of this century, the flood of new money was welcomed, particularly in those parts of Asia, Africa and America that felt abandoned by West, China’s promise not to politicize aid and investment by attaching pesky conditions like improved human rights pleased many governments…in exchange for the natural resources needed to feed China’s economic engine, Beijing began an assiduous campaign to win foreign hearts and minds by financing stadiums, hospitals and lavish government offices.

Chinas oil consumption is forecast to grow by at least 10 per cent annually for the foreseeable future.

Some countries, however, are no longer as willing to extend a red carpet toward the globe-trotting Chinese. Although political strings might not come with Beijing’s cash, there are economic catches. The roads, mines and other infrastructure on offer are most often built by armies of imported Chinese labor, cutting down on the net financial benefit to recipient nations. Chinese companies investing abroad also tend to ship in nearly everything used on building sites, from packs of dehydrated noodles to the telltale pink – hued Chinese toilet paper. It’s not only the contracted Chinese workers who show up, either. Within a few years, their relatives invariably seem to materialize to set up shops selling cheap Chinese goods that threaten the livelihood of indigenous entrepreneurs. Locals who do get work on Chinese-funded projects complain that their bosses don’t heed national labor laws ensuring minimum wage or trade-union protection. Over the past three years, anti-Chinese riots have erupted everywhere from the Solomon Islands and Zambia to Tonga and Lesotho.”

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They go on to describe the picture in Papua New Guinea (P.N.G). “Prime Minister Michael Somare returned home from Beijing, triumphant at having snared the country’s largest foreign-investment project to date. The euphoria was shortlived. Landowners brandished slingshots and announced they wouldn’t sign off on their tribal territory being used for mineral extraction, no matter what document was signed in China’s Great Hall of the people. Environmentalists cried foul over plans to deposit mine waste in the sparkling Basamuk Bay, while local workers protested conditions that even P.N.G.’s Minister for Labor and Industrial Relations David Tibu described as slave like and “not fit for pigs or dogs.” Skirmishes repeatedly broke out between villagers and the 1,500 plus imported Chinese laborers, some of whom were working illegally in P.N.G. At the same time, anger has boiled over because of an influx of thousands of Chinese who over the past couple of years have monopolized businesses that by law should be reserved for P.N.G. nationals. In May, anti-Chinese riots convulsed cities nationwide, and several people were killed amid the looting of Chinese owned shops. “Our timber,” says Damien Ase, founder of the nonprofit Centre for Environmental Law and community Rights in Port Moresby. “But we get so little in return.”

India_Defence_ReviewEdward C. Chow in his study ‘China’s Soft Power in Developing Region’ for Centre for Strategic and International Studies (CSIS) says: “Indeed, here, as elsewhere in Africa, limitations on China’s attractiveness as an alternative development model and a more generous business partner may actually be on display. After the initial appeal of the newcomer, it turns out that Chinese commercial demands are not much different from the West’s in exploiting African natural resources. Chinese chauvinism is similar to Western racism; the use of large numbers of Chinese workers on projects disadvantages local labor; and the import of cheap Chinese goods, such as textiles, competes against indigenous products. Expectations have been raised by high – level political engagement and rhetoric, but they are difficult to fulfill on the ground.”In addition to local resentment, China is faced with difficulties at another level. Bill Emmott former editor of ‘Economist’, has quoted in his book Rivals: “Big investments and resources supply contracts in African countries such as Angola, Zambia, Nigeria, Ethiopia, Somalia and above all Sudan have confronted China with a new set of dilemmas”. In Sudan, in particular, China has found it hard to reconcile its traditional stance against interference in any other country’s sovereign affairs with its other now traditional stance of supporting the decisions of multilateral institutions such as the United Nations.

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In recent years, the UN has wanted to send peacekeepers to the western Sudanese province of Darfur, to prevent further genocide, and the Sudanese government has refused to accept them. At first, the Chinese response to this was to do nothing and hope the world would look the other way.

If China is pumping so much money into these regions, why should riots happen? Why is there a groundswell of resentment against Chinese presence?

But in 2007-08 the Darfur issue threatened to damage China’s image in the run-up to the Beijing Olympics. Steven Spielberg was caught in the middle: the famous film director was acting as a consultant on the Olympics opening ceremony and on a film being made about the games. Hollywood hit out at Hollywood: Mia Farrow asked in an article in the Wall Street Journal for whether Spielberg wanted to be ‘the Leni Riefenstahl of the Beijing Games’, a comparison with the director who made a film for Hitler about the 1936 Berlin Olympics. Stung by such publicity, the Chinese government began to try to persuade the Sudanese to comply with the UN request. But Spielberg quit, regardless.”

So, what lies ahead? China’s growing trade and purchases of commodities from resource rich African countries gives those countries more money with which to buy manufactured goods; the newly created China African Development Fund is to make $ 5 billion available for Chinese investments in Africa, (2010), whereas China invested $ 6 billion in the period 2000 – 2006. So, despite local resentment and backlash against Chinese investors and its labor force, the present Chinese investment pouring into Africa are unlikely to cease. In fact, the US as the leading economic power has a strong interest in maintaining Chinese integration into global markets including oil markets as long as they adhere to international rules. Increased Chinese investment will mean increased supply for the world markets from which all countries can prosper.

India’s Energy Stakes in Africa

Africa has become a major attraction for Indian oil companies in recent years. Currently, around 24 percent of India’s crude oil imports come from sub-Saharan Africa, mainly from Nigeria. Importantly, China and US too draw heavily from there. India has invested in Sudan, Angola (so too has China), Ivory Coast (presently under turmoil) and Ghana. Countries like Chad, Niger, Republic of Congo, Gabon are also of immense significance in terms of their energy potential and the Indian Government and its oil companies are trying to get a foothold there. But these countries are also getting the attention of China.

“¦the US as the leading economic power has a strong interest in maintaining Chinese integration into global markets including oil markets as long as they adhere to international rules.

The discovery of vast energy sources in sub-Saharan Africa which holds seven percent of the World’s oil reserves and has an 11 percent share of current production, has raised the strategic importance of the African continent. It is estimated that sub-Saharan African governments will receive US$ 200 bn in oil revenues over the next decade. Major world powers like the US and China are scrambling to stake out their oil claims. This scramble will lead to great instability in the continent in the years to come. Additionally, oil wealth has brought with it the perils of conflict and rise of ‘authoritanism’ in these countries.

Incidentally, Oil has been the reason for prolonging, if not starting the conflict in Sudan, Nigeria and Angola. This scramble for Africa can lead to greater militarization of the continent as major powers pour in military assistance and weapons to protect their energy supplies. Both the US and China are preparing accordingly. The US has recently raised its Africa Command with an eye towards the potential conflict that may emerge out of this scramble for oil. Considering India’s growing energy needs and the requirement to diversify oil imports to prevent oil from becoming a strategic weakness, India not only needs to sharpen its diplomatic skills but increasingly factor in, the movement of Chinese battle ships in the IOR and the Gulf of Aden.

India_Defence_ReviewOnly a fortnight ago, Chinese battle ships for the first time, made a port call in the Gulf of Aden. Thus, it is not only oil and piracy in the Gulf of Aden but the spectre of Chinese military presence which will require India’s undivided attention in the years to come. India must watch its step carefully to ensure that it competes viably with China and continues to ensure that every successive contract that China laps up does not leave it without one. After all, India has its own industry and growth to feed. Does the World and Africa have enough for both? Can one exclude the other? Let the future unfold. India has to compete with China in Africa not only for its oil but also for its markets to buy Indian goods. Will competition be on the basis of mutual cooperation and adjustment or exclusion, only time will tell.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Rohit Singh

Rohit Singh is a Research Assistant at the Center for Land Warfare Studies (CLAWS)

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