China's strategy in Africa and natural resources FDI
By Jon Fernquest[Introduction | Vocabulary | Article | Reading Questions | Answers]
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Africa is attracting more and more Foreign Direct Investment (FDI) nowadays.
New FDI is driving growth in Africa which grew 5.2% in 2005.
China is one of the largest investors in Africa.
Even more notably, China has broken the long established pattern of only western developed nations and Japan investing heavily in Africa.
Most of the new FDI has been for "exploiting natural resources" such as oil. Only natural resource rich countries benefit from it.
This natural resource FDI is "a form of investment that generally doesn't lend itself to broad-based, sustainable economic growth in the poorest nations of the world," according to a recent United Nations report from the UNCTAD.
Today's article provides a thorough overview and background on China's investment in Africa and how it is reshaping the world economy.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What region in the world is the only place that countries can still battle over mineral resources like they in the era of imperialism before World War II?
2. How long has the west had exclusive rights over sub-Saharan Africa's resources?
3. Which country is now challenging western predominance in Africa? Why?
4. How is China winning goodwill in Africa?
5. What formal organisation has been founded to be the centerpiece of cooperation between African countries and China?
6. What percentage of African countries and colonies are members of the CACF? (Note: A calculation and a little research are needed)
7. What influence does Taiwan have in Africa?
8. What are China's three foreign policy objectives in strengthening African ties?
9. What African industries has China invested in?
10. What percentage of China's imported oil does Sudan supply?
11. What other countries has China made substantial oil-related investments in recently?
12. What is China's army doing in Africa?
How many soldiers are there?
13. How has the trade between China and Africa grown during the last two decades and more recently?
14. In the new China-Africa trade what goods have been controversial?
15. Has China done anything about the human rights problems of Africa such as genocide?
16. How have European countries responded to China's inroads into Africa?
Bangkok Post Article: October 16, 2006
China's grand Africa strategy
By SANOU MBAYEAfrica is the world's only remaining soft target where outside powers can battle it out for access to mineral resources, and China has invested billions in African countries to secure its energy supplies
Ever since the Berlin conference of 1883, which Belgium's King Leopold II called the sharing of Africa's cake, the West has assumed exclusive rights over sub-Saharan Africa.
But while centuries of struggle to end colonial rule and apartheid have not changed this much, now Western influence is being challenged by China, which likewise covets Africa's rich reserves of minerals and resources.
China is winning goodwill across the African continent by tapping into shared anti-colonial resentments and by treating the continent seriously. The next meeting, later this year, of the China-Africa Cooperation Forum (CACF) - established to promote trade and investment - will include 46 African heads of state, along with China's leaders. In any case, Chinese President Hu Jintao, Vice President Zeng Quinghong, and Prime Minister Wen Jiaboa visit the continent regularly.
China's moves to strengthen its African ties have three objectives: to consolidate secure energy and mineral supplies, to curtail Taiwan's influence on the continent (which harbours six of the 26 countries with which it maintains full diplomatic relations), and to augment China's burgeoning global authority.
China has invested billions of dollars in African oil production, mining, transportation, electricity production and transmission, telecommunications, and other infrastructure.
In 2004 alone, China's foreign direct investment in Africa represented $900 million of the continent's $15 billion total.
For example, Chinese representatives disbursed almost $2.3 billion to acquire a 45% stake in one of Nigeria's offshore oil fields and promised to invest an additional $2.25 billion in develop the reserves.
Angola, which currently exports 25% of its oil production to China, was granted a $2 billion loan in exchange for a contract to supply China 10,000 barrels of oil per day.
Sudan, which supplies 7% of China's total oil imports, has benefited from the largest Chinese investments. The China National Petroleum Corporation holds a 40% stake in the Greater Nile Petroleum Company and has invested $3 billion in refinery and pipeline construction.
Moreover, 4,000 Chinese People Liberation Army troops are deployed in southern Sudan guarding an oil pipeline.
Trade figures tell a similar story of growing influence. Sino-African trade grew by 700% during the 1990s, doubled from 2000 to 2003, to $18.5 billion, and then jumped to $32.2 billion in the first 10 months of 2005.
While trade and investment ties with China helped boost the continent's overall economic growth to a record-high 5.2% in 2005, China also cancelled $10 billion in bilateral debts from African countries.
Yet closer relations have brought controversy. African countries have become large buyers of Chinese weapons and military equipment. In so unstable a continent, one saturated with weaponry, pouring in more guns is hardly welcome.
Yet, as Chinese Deputy Foreign Minister Zhou Wenzhong put it, business is business, and China separates business from politics.
Of perhaps greater long-term worry is the support that China provides for Africa's authoritarian rulers. Economic growth without social justice merely prolongs the denial of decent living conditions to the majority of Africa's people for the benefit of a tiny rich minority.
The fact that China, within a decade, has overhauled Africa's balance of power, relegating the US and the UK to third and fourth place and challenging France for first place as the continent's main economic and commercial partner, has irked these competitors.
France has stepped up its monitoring of China's African activities. To tie Europe closer to Africa, British Prime Minister Tony Blair even proposed eliminating the European Union's agricultural subsidies under the Common Agricultural Policy.
Africa is the world's only remaining soft target where outside powers can battle it out for access to mineral resources. But the last thing Africa needs is to be a battleground in an economic and political war. As Africans know from past experience, countries have no friends, but only interests.
The ongoing Darfur conflict illustrates the problem. Despite its declared commitment to non-interference, China's interests in Sudanese oil imply otherwise. Thus, China threatens to veto any resolution of the United Nations Security Council that might impose sanctions against the Arab ruling class in the Sudanese government, whose troops and government-allied militias are perpetrating genocide against Sudan's black citizens, using Chinese-made helicopter gunships based at airstrips maintained by Chinese oil companies.
Until China sees its economic interests in Africa as tied to the continent's political development, such horrors will continue. Africa's economy may grow, but Africans will continue to suffer.
The writer is a Senegalese economist and a former member of the African Development Bank senior management team. Copyright: Project Syndicate, 2006.
Vocabulary
imperialism - the dominance of powerful countries over distant lands, during the age of imperialism from 1860 European countries controlled much of the world (See Wikipedia)
predominance - having the most power and importance in a group
winning goodwill - helping and being friendly so that other people or countries like you
grand strategy -
a soft target - an easy unprotected target, east to get, the original word comes from the military: "A military term refering to an un-armoured or otherwise unprotected object to be destroyed. For example, a soft target would be an automobile or a house while a hard target could be a main battle tank or a well defended installation." (See Wikipedia)
mineral resources - metals like silver, gold, tin, and copper
The Berlin Conference of 1883 - the conference between European countries that began the race to colonise Africa (See Wikipedia on the Berlin Conference)
exclusive rights - you and only you are the owner
apartheid - the government policy of discrimination against black people that existed in South Africa for several decades (See Wikipedia on the history of South Africa during the apartheid era)
covets - likes and wants to get something that someone else owns
tapping into - making use of, exploiting
resentments - anger about something
China-Africa Cooperation Forum (CACF) -
consolidate - gather together, unify
curtail - stop or reduce
harbours - protects wrongdoers
augment - add to
burgeoning - increasing, prospering
infrastructure - the basic services that make everyday life and business possible such as water, electricity, waste removal, roads, telephone, and internet
foreign direct investment (FDI) -
disbursed - (formal) money paid, money distributed
China Petroleum Corporation - China's largest oil and gas company (See Wikipedia)
Chinese People's Liberation Army (PLA) - the official name of China's army
bilateral - between two countries
saturated with - completely full of (no more can be added)
business is business - this idiom means that business is a separate activity and should not be disturbed by other issues such as political controversies (On reason for this is that business is important for survival, without business families cannot feed, clothe, and house themselves)
social justice -
prolongs - made longer
overhauled - repair, change, and improve
irked - made angry, irritated
Answer Key:
1. What region in the world is the only place that countries can still battle over mineral resources like they in the era of Imperialism before World War II?
http://en.wikipedia.org/wiki/Imperialism
2. How long has the west had exclusive rights over sub-Saharan Africa's resources?
For 123 years, since the Berlin conference of 1883.
3. Which country is now challenging western predominance in Africa? Why?
China is challenging it, because Africa is rich in minerals and natural resources that China wishes to obtain.
4. How is China winning goodwill in Africa?
a. Treating the continent seriously
b. Tapping into shared anti-colonial resentments
5. What formal organisation has been founded to be the centerpiece of cooperation between African countries and China?
China has established the China-Africa Cooperation Forum (CACF) as the centerpiece of cooperation.
6. What percentage of African countries and colonies are members of the CACF? (Note: A calculation and a little research are needed)
79% (48/61) From Wikipedia there are 61 territories which means country or colony and there are 48 members of the CACF.
7. What influence does Taiwan have in Africa?
Taiwan has a bad reputation for aiding and supoporting African countries with very poor human rights records. (See article)
http://www.g21.net/asia29.htm
This is what the article means when it sas that Taiwan "harbours six of the 26 countries with which it maintains full diplomatic relations."
8. What are China's three foreign policy objectives in strengthening African ties?
a. Consolidate secure energy and mineral supplies.
b. Reduce Taiwanese influence in Africa.
c. Add to China's authority in the world
9. What African industries has China invested in?
"China has invested billions of dollars in African oil production, mining, transportation, electricity production and transmission, telecommunications, and other infrastructure."
10. What percentage of China's imported oil does Sudan supply?
7%
11. What other countries has China made substantial oil-related investments in recently?
Nigeria and Angola.
12. What is China's army doing in Africa?
How many soldiers are there?
There are 4,000 Chinese soldiers guarding an oil pipeline in Sudan.
13. How has the trade between China and Africa grown during the last two decades and more recently?
Trade has been accelerating (growing at a faster and faster rate).
It grew very quickly (700%) during the 1990s. Doubled during the first three years of the new millenium (2000-2003), then during the first 10 months of this year it has almost doubled again.
14. In the new China-Africa trade what goods have been controversial?
The arms trade which could add to political instability ("African countries have become large buyers of Chinese weapons and military equipment. In so unstable a continent, one saturated with weaponry, pouring in more guns is hardly welcome").
15. Has China done anything about the human rights problems of Africa such as genocide?
No, China has supported authoritarian rulers in Africa. It has threatened to veto any sanctions on Sudan's government for genocide.
16. How have European countries responded to China's inroads into Africa?
France is monitoring their activities closely and Britain has even suggested eliminating EU agricultural subsidies to provide more opportunities in agricultural trade for African countries.
