I recently read in the New York Times Magazine a very interesting article on China and how it has built up enormous holdings in poor, resource-rich African countries. Although it may seem as a blessing to the local economy it does have its drawbacks. You can read the full article here but I have edited it for students doing Development Economics topic at A Level.
Everywhere you look on the globe China’s presence can be felt, driven by its insatiable demand for resources and new markets as well a longing for strategic allies. In 2000 China had 5 countries as their largest trading partner but that has increased today to more than 100 countries including New Zealand, Australia and the USA. Although there has been a slow down in China, President Xi Jinping has indicated that over the next decade approximately $1.6 trillion will be put into infrastructure and development throughout Asia, Africa and the Middle East. This is serious money that makes a bold statement as to their intentions globally.
China hasn’t held back in trying to secure sufficient resources to keep their economy going. Besides oil and gas China’s state-owned companies have bought mines around the world eg:
- Peru – copper
- Zambia – copper
- Papua New Guinea – nickel
- Australia – iron ore
- South Africa – iron ore
- Namibia – uranium
However as the Chinese economy slowed recently the demand for imports of commodities dropped thus impacting on some of these commodity exporting countries – in particular mines in Western Australia, Zambia and South Africa have been forced to close.
When China met Africa
You maybe aware of a previous blog post in which I talked about the DVD documentary ‘When China met Africa’ which focused on Chinese investment in Zambia – a very good look at the micro environment that businesses operate in. Investment in Africa by the Chinese started in 1976 with a 1,156 mile railroad through the bush from Tanzania to Zambia but it wasn’t until the 2000’s that Chinese authorities realised that there was a need for resources to fuel its own internal growth. With this in mind Chinese companies were given free reign to go and seek these resources.
With the end of the Cold War and the Middle East becoming a major conflict area, the US involvement in Africa started to dwindle. Furthermore with the Trump administration raising doubts about free trade agreements and global warming there is an opportunity for China to push its own initiatives and push for global leadership. A Trans Pacific Partnership without the US is very appealing to the Chinese authorities as it allows to become a dominant player in negotiations with other members.
China tends to provide no-strings financing that, unlike Western aid, is not conditional on human rights, clean governance or fiscal restraint. The Namibian finance minister welcomed China as an alternative but although the Chinese want you to be masters of your own destiny and dictate what you want, there are conditions which doesn’t necessarily make their presence truly beneficial. Namibia has seen significant Chinese investment especially in the Husab Uranium Mine ($4.6bn) the second largest uranium mine in the world. It is estimated that it will increase Namibia’s GDP by 5% when the mine reaches full production although almost all of the uranium will go to China for nuclear energy and thereby reducing its dependence on coal. Approximately 88% of China’s energy comes from fossils fuels, 11% from hydropower, solar and wind and only 1% from nuclear power. In order to reach clean energy goals and lose the mantle of chief polluter in the world, China has put a lot of emphasis on nuclear power and they have 37 nuclear reactors with another 20 under construction. The aim is to have 110 reactors by 2030 and become an exporter of nuclear-reactor technology.
The Chinese company China General Nuclear (CGN) has a 90% stake in the mine with the Namibian government 10%. Although Namibians are benefitting from all the infrastructure investment by the Chinese they have saddled the country with debt and have done little to reduce the 30% unemployment rate – Namibia has one of the most unequal societies in the world. In China independent unions are essentially illegal but Namibians have the Metal and Allied Namibian Workers Union (MANWU) which accused Chinese state-owned companies of paying Namibian workers only one third of the minimum wage and also using Chinese workers for unskilled jobs that by law should be going to Namibians. As the unions’s secretary said “the Chinese will promise you heaven but the implementation can be hell”. Also scandals involving Chinese nationals include tax evasion, poaching endangered wildlife, money laundering have done little to enhance the mood of locals.
Over the last decade China has got a reputation for pillaging and pilfering the natural world with its growing demand natural resources as well as the illegal wildlife trade. Chinese businesses have had public backlash over their proposals that could do damage to the environment. One company wanted to clear a 30,000 acre forest so that it could plant tobacco – the soil in the forest is totally unsuitable for this purpose. Another wanted to set up donkey abattoirs to meet China’s demand for donkey meat and skin whilst a Nambian-based Chinese company requested to capture killer whales, penguins, dolphins and shark in Namibian waters to sell to aquatic theme parks in China. Under pressure from activists the Chinese firm withdrew their request.
Is China the World’s New Colonial Power?