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    Greater China
     Jun 15, 2012

Africa: China's promised land
By Cedric Muhammad

Aside from the parallels between policy, emigration and entrepreneurship in 18th-century Alsace and 20th-century China there is another equally important feature of Reuven Brenner's provocative viewpoint that we interpret as having a bearing on why Africa, more than any other place on earth, is a potential promised land for ambitious entrepreneurial Chinese who have grown up under the one-child policy:
"Neither Chinese law, nor Chinese courts are today reliable institutions. There is no great commercial legal tradition in China. And such tradition can neither be imposed, nor created quickly. So how will the Chinese expand their family businesses? Whereas in Europe, large families succeeded to pool together their resources and expand family

businesses backed by legal institutions - and that's how Western European corporations developed before having access to developed financial markets - this arrangement cannot be done in China for the simple reason that the one-child policy kept families small. There are no brothers, sisters, and for the coming generations no first cousins.

How will then the small family businesses, that reached their limits and would like to grow, expand?"
Since it will take long before China will have developed sophisticated financial markets (which do need solid legal backing), the expansion will have to take place through voluntary associations between "trusted" families. This is what happened among Jews within the larger European community, or happened elsewhere in the world among tribes which, for one reason or another were discriminated against (such as the Chinese in Thailand), and where the countries had no reliable legal framework. What shape and form these voluntary organizations will take, I do not know. But people are ingenious in the ways they can adapt - even if the adaptation has long-term neurotic consequences, which are not anticipated, and whose origin will be long forgotten when they surface."

Our short answer to the question posed by Brenner, "How will then the small family businesses, that reached their limits and would like to grow, expand?" is one word: Africa.
Moving to Africa is the 'ingenious adaptation' that we believe millions of Chinese are gambling upon in order to escape environmental degradation and the impact of the one-child policy. The journey west also permits enough breathing room for Chinese ethnic trading networks to expand and collaborate in ways not possible on the mainland. The weakened condition of African central authorities dominated by kinship based systems (tribes, ethnic groups, religious communities and even 'gangs') makes the necessary 'voluntary associations between trusted families,' more possible there, than anywhere else.

Though not connected with the one-child policy in the minds of elite 'China-in-Africa' intellectuals, the dilemma of Chinese firms - even in Africa - struggling to reach scale is real. Brenner's expectation that the Chinese face a continued challenge in expanding family businesses and that such expansion can only take place through voluntary associations is an insight that can be shown to already be a factor in the Chinese experience in Africa. In an October 1, 2011 paper by Terutomo Ozawa and Christian Bellak we read:
"It is true that Chinese entrepreneurs and migrant workers (estimated to be over one million) are already in Africa and will continue to accompany any large-scale, China sponsored development projects, and will create many more small-scale business clusters across the continent than in the recent past.

But these private investments - mostly by 'family multinationals' - may not be large enough to spur local industrialization ... And further in a footnote we see, 'Excepting a few manufacturing investments by China's large private companies (eg Huawei Technologies, Holley Group, and Haier), China's investments in Africa's manufacturing are made by individual entrepreneurs and small companies (Gu, 2009).' " [1]
Of all of the different groups of Chinese moving into Africa we anticipate it will be those coming from the province of Fujian that will have the most success in executing a strategy to expand family businesses. Not only does Fujian have the advantage of being the prized possession of a Chinese-Taiwan competition - enabling it to attract capital from both sides - it also has been arguably the most successful in establishing migration networks between both continents while enjoying close to US$2 billion in trade with Africa. With those statistics and momentum toward a commercial code governing Chinese businesses in Africa it would not be hard to imagine a repeat scenario from 20 years ago which saw 75% of the foreign capital invested in mainland Chinese businesses pouring in from the Chinese diaspora. Simply replace 'mainland Chinese businesses' with 'Chinese businesses based in Africa.'

There is no denying the risk that China runs in jumping borders into foreign land. Although Chinese designs on Africa are more imperialist in nature than a form of Western evangelical colonialism (we don't see the Chinese as seeking to impose their culture on unsuspecting Africans) already dust-ups in several African countries - typically over the expanding market share of small scale Chinese traders - have occurred. For some these are minor growing pains, for others ominous signs that China has violated a law of Biblical proportions. If ever there was a necessary test of Acts 17:26 - "From one man He created all the nations throughout the whole earth. He decided beforehand when they should rise and fall, and he determined their boundaries" - 300 million Chinese moving into the borders of Africa is providing it.

Although the economic and geopolitical motivations of China's aggressive move into Africa are enormous, the demographic reasons are the most poignant, even desperate. In that sense China needs Africa, not to thrive but actually just to survive.

For China, Africa is not a future colony as so many superficially think but quite possibly her only possible neurotic promised land.

Cedric Muhammad is CEO of Africa PreBrief, a firm guiding US-based Frontier Investors. This article is drawn from a special report, "300,000,000 Million Reasons: What China Really Wants In Africa". He can be found on Twitter here

1. Terutomo Ozawa and Christian Bellak. 2011. Will The World Bank's Vision Materialize? Relocating China's Factories to Sub Saharan Africa, Flying Geese Style. Global Economy Journal Volume 11, Issue 3, 2011, Article 6.

(Copyright 2012 Cedric Muhammad.)

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