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Obrigado, China: The dark underbelly of Sino-Luso relations

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The recently held Macau Forum, where China reinforced its commitment to its Lusophone brethren with a US$290 million loan package, has thrust this seemingly incongruous bilateral diplomatic and trade union into the spotlight.

The Macau Forum, shorthand for the verbosely titled “Forum for Economic Cooperation between China and the Portuguese-speaking Countries,” was established in October 2003 in order to promote commercial ties with Lusophone nations. During this time, trade between China and the Lusophone countries has more than tripled, growing from US$10 billion (shortly before the formation of the Forum) to US$117 billion in 2011.

And while the Macau Forum ended with the launching of 18 initiatives meant to deepen cooperation between the two parties, that is merely the tip of the iceberg.

The Chinese Ministry of Foreign Affairs has repeatedly highlighted the unique compatibility of Portuguese-speaking countries with Beijing’s ambitious “Belt and Road” initiative as the sustaining principle of the continued alliance. But is this a positive development for the Lusophone world, or is it actually a devil in disguise?

China’s Second Continent

Modern Sino-African relations date back to the late 1950s, when China began offering economic and military backing to liberation movements in an effort to foster a united front against the two main superpowers of the day: the US and the USSR. The colorful history between China and Lusophone Africa — also known as ‘Países Africanos de Língua Oficial Portuguesa’ (PALOP), was borne out of anti-colonial support Beijing provided to the five countries of Angola, Mozambique, Guinea-Bissau, Equatorial Guinea and São Tomé and Príncipe during the 1960s and 1970s.

Fast-forward to the present, and a different picture emerges. Even if China’s contemporary interest in the Portuguese-speaking world affords Beijing diplomatic ties with a diverse collection of nations on four continents, it stands in stark contrast to the ideologically-driven involvement of the previous century and its turn of the century ‘Go Out Policy.’ Nowadays, Beijing maintains a mostly non-conditional policy of foreign aid and investment that has, more often than not, been associated with supporting incumbent regimes at the expense of national populations.

The most often cited critique of China’s pivot to Africa is its incessant search and exploitation of natural resources — and Beijing’s allocation of diplomatic and monetary resources toward Africa’s Lusophone countries is no exception. Therein lies the rub: while Beijing claims to fight poverty in sub-Saharan Africa by disbursing generous amounts of aid and infrastructure loans, many of the challenges besetting these countries can in reality be blamed squarely on China’s meddling.

Take Angola, the one-time poster child of China’s Africa expansion. The country’s relationship with Beijing was so close that it gave rise to the so-called “Angola model” of economic development. After Luanda emerged from a scathing civil war that left its economy and its credit rating in tatters, the prevailing elite headed by Jose Eduardo dos Santos turned to Beijing’s mandarins for help. The Communist Party came through with a live-saving US$2 billion, oil-backed credit line to help Angola rebuild. Under Beijing’s patronage, Angola became Africa’s second largest producer of oil and China’s number one supplier of crude.

The fairy-tale lasted for a while: Luanda’s skyline is dotted with shiny Chinese-built skyscrapers, and the city routinely tops the list of world’s most expensive places. But the glamour ends at the waterfront. A rapacious elite used the oil proceeds to create a countrywide venal system that relies on generous cash disbursements to stay in power. According to IMF figures, Angola’s gap in oil revenue between 2007 and 2010 was US$32 billion. The Financial Times’ Tom Burgis blew the whistle on how the Chinese aided and abetted dos Santos in consolidating his regime, all at the expense of a deeply impoverished population.

After oil prices came crashing down, Angola was no longer able to service its US$25 billion debt to China. Since the loans were supposed to be paid in oil, most of the country’s crude production now goes toward debt repayment, leaving precious little to finance the country’s economic development. Spending has decreased by 40% and cuts to water sanitation and waste collection “have spread disease in a country six places from the bottom of the World Bank’s index of inequality.”

Similarly, Mozambique can blame much of its current misfortune on Chinese mercantilism. The country is gifted with vast deposits of natural resources, recently discovered offshore gas deposits, and generous fish stocks. Unlike Angola, though, Mozambique’s foreign debt and accompanying economic problems cannot be traced back to Chinese loans — on the contrary, they are the result of Chinese illegal fishing in its waters.

By a recent count, 129 out of the 130 vessels operating in Mozambique’s territorial waters were registered in the Middle Kingdom and the country is losing US$35 million every year to the practice. This is alarming for the financial security of a country that IMF ranks 179th out of 185 in terms of GDP per capita. The World Food Program estimates that 34% of households are “food insecure and face perpetual hunger.” To stop the bleeding, Mozambique bought several patrol boats through the state backed EMATUM agency, which got the government in hot water with international creditors who deem the acquisition too expensive for its finances. There is a haunting disconnect between the priorities of Mozambique (where a third of its citizenry suffer from poverty) and China (which scours a 1,500 mile, poorly monitored coastline to essentially poach food resources desperately needed by the local population).

As the attendees concluded the Macau Forum on a hopeful note, stressing their commitment to further cooperation, one could be forgiven for overlooking these tensions. The walking contradiction between Beijing’s lofty rhetoric and its thoroughly disappointing treatment of economic partners will not, however, last forever. African leaders are becoming more dubious of China’s intentions, whether because they are drowning in debt and unable to maintain venal political structures (like Angola) or because their countries are actively undermined by Chinese economic interests (like Mozambique).

Jon Connars
Jon Connars is an American investment risk analyst and researcher currently shuttling between Singapore and Bangkok with expertise in the ASEAN region. He has been featured in The Hill, The Diplomat and Asia Times.
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