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    China Business
     Aug 9, 2012

China, Africa show lessons
learnt with $20 bn pledge

By Gavin du Venage

To some, China's recent pledge of US$20 billion in loans to Africa is cynical checkbook diplomacy designed to placate increasingly noisy criticism of its ongoing dragon safari. It more likely represents the maturing of a relationship for which, in its early days, neither party was quite prepared.

The promised credit was announced by President Hu Jintao in Beijing at the recently concluded Forum on China-Africa Cooperation; he also called for coordination between the two to defend against the "bullying" of wealthier countries.

His remarks were juxtaposed against a more guarded tone from some of the African attendees, who at previous summits would


have wholeheartedly endorsed the developing relationship.

South Africa's President Jacob Zuma probably spoke for many when, in his address to the forum - and to President Hu, who was present - he warned that the current commodities-heavy trade from Africa to China, and the reverse flow of manufactured goods, needed to change.

"Africa's commitment to China's development has been demonstrated by the supply of raw materials, other products, and technology transfer," Zuma said. "As we all agree, Your Excellency, this trade pattern is unsustainable in the long term."

He also touched on the raw nerve of colonialization, which continues to shape Africa's role with the rest of the world.

"Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies." He added: "We certainly are convinced that China's intention is different to that of Europe, which to date continues to attempt to influence African countries for their sole benefit."

His remarks were widely reported as a sign of a cooling relationship, just as Hu's loan announcement was seen as a beginning of a "charm offensive".

The reality probably lies somewhere in between. Trade between Africa and China before 2000 was minimal to the point of being non-existent. African exports to China in 2000 were less than $4 billion, according to the Trade Law Centre in Stellenbosch, while China's total investment in Africa was less than $500 million. In 2009, China overtook the US to become Africa's single largest trading partner and China's investment in the continent is now approaching $16 billion.

Almost overnight, African countries found themselves courted by a power that had seemingly endless financial resources and a disinclination to saddle agreements with political demands. A river of money began flowing out of Beijing and few, if any, questions were asked by grateful African states about long-term strategic implications.

For its part, China had to engage with a continent of 53 countries, each with its own political culture and at widely varying degrees of development. It had to painstakingly set up government-to-government institutions and lay the groundwork for an environment in which its companies could operate.

"It has been as much of a learning curve for China as it has been for us," says Matthew Macdonald, a research analyst at The Centre for Chinese Studies at Stellenbosch University. "People forget that China is also a new economic power, and is learning to wield this power as it goes along."

Once Chinese companies began winning contracts, they flocked to Africa in droves: more than 2,000 Chinese enterprises have invested or started businesses across the continent. While many are state-owned companies, the majority are not.

Regardless of their ownership, activities of these companies reflect on China, even though Beijing has little control over their offshore behavior. Just as outsiders often see Africa as a monolithic entity rather than a geographical union of disparate countries, Chinese activities on the continent are often viewed as being directed from Beijing.

For the Chinese authorities, managing its image across the breadth of Africa has been made more complicated by the wave of regime changes - by bullets and ballot - that have taken place over the past few years.

"The unspoken first rule of Chinese engagement in Africa is not to interfere with domestic policies," says McDonald. "The uprisings in various countries have shown that this has its drawbacks."

China has reportedly lost around $4 billion in Libyan investment following the toppling of the Gaddafi regime; it also lost substantial oil holdings in Sudan, an important supplier, when the south ceded to become an independent country last year. Previously, China had ignored Western-led sanctions on the Sudanese government, and when the country split in two, Beijing found itself having to deal with former rebels-turned-government who now viewed China as a hostile sponsor of their former oppressor.

If there's a single lesson to be drawn from this, it's that warm government-to-government accords cannot entirely be a substitute for public support. China seems to be aware of this. Its so-called charm offensive appears to be about building its image among ordinary Africans, rather than a public relations exercise aimed at Western critics, or paying off African politicians.

This would explain Hu's commitment at the forum to import more non-mining products from Africa, as well as to invest more in African industry. China also pledged to increase the number of duty-free goods it will take from the continent.

The expansion of agricultural centers and the dispatching of doctors will also present a different China to Africans more accustomed to seeing Chinese people as competitors at local markets or overseers in mines.

Such initiatives are of course also widely used by Western non-government organizations, particularly those with links to European or US governments. It is not always clear how successful they can be in respect of image building. Rock stars Bob Geldoff and Bono, who have saved countless lives through humanitarian campaigns against hunger, are vilified by many African intellectuals and leaders who accuse them of peddling the image of Africa as a disaster zone, keeping investors away and thus making its problems even worse.

Still, China and the raucous collection of African states are now moving towards a new phase in their understanding of each other.

"The political and economic environment has fundamentally changed over the past decade," Xue Lan, professor of Public Policy and Management at Tsinghua University told a forum at the International Development Research Center in Canada recently. "International relations are also going to have to change."

Gavin du Venage is a business writer in South Africa, specializing in commodity and investment analysis.

(Copyright 2012 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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