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Trading with China,
the fears and hopes
By Gideon Sackitey
Accra Oct 18, Ghanadot.com -
Earlier this month, President John Agyekum Kufuor told the
Economist Conferences meeting in Accra that Ghana will
pursue its trade and economic partnership with China, the
world’ biggest emerging economic bloc.
He was of the opinion that the US and the UK, indeed Europe,
were all trading in large volumes with China, and wondered
why countries in Africa who need the full benefits of a
powerful trade bloc are being told not to do so.
President Kufuor said Ghana would be cautious though, not to
fall into the trap of colonialism with China as it did with
a number of European nations that ended with the United
Kingdom.
He said he expected that as leaders from some 40 African
countries converge in Beijing with Chinese leaders early
next month, they will discuss how to explore
the tremendous business
opportunities available for mutual
benefits,
“I hope they will focus on key issues including trade,
technology transfer and investment during the Beijing Summit
of the Forum on China-Africa Cooperation (FOCAC) from Nov.
3-5, 2007.
President Kufuor mentioned that trade would be a big issue
during the conference arguing that it would be so since the
World Trade Organization talks and policy transformations
had not been advanced to protect
the economic development and benefits of developing
countries, especially those within the African Caribbean
Pacific states..
With China emerging as a world economic power, African
countries "definitely" want to explore
the China-Africa trade possibilities.
"China should buy from Africa
and Africa should buy from China. I'm talking about a
win-win situation," President Kufuor emphasized at the
meeting
The comments were very opportune and significant in that it
brought to the fore Africa’s willingness
and ability to go out there and trade with her
so-called partners.
It was an occasion for Africa to
say that what is on offer now is
in sharp contrast to offers by
Western states that only come in the form of aid.
Also, it points out the
irony in the effort by these same countries that
offer us aid and very little trade who
now are warning us against the kind of alliance and
trade pacts we enter with China!
For some us, we are just at a complete loss as to the
real intentions out there.
Indeed, at the recent World Bank Annual Meetings in
Singapore, the US led a major campaign to warn Africa of
Chinese gestures which were running into billions of
dollars. Their point was that China was spreading perhaps
too fast with its aid and support. This support, they
claimed was going to almost everybody who knocked on their
door irrespective of the quality of
governance.
China has always and ever since rebuffed the claim saying
they were ready to tango with anyone who was ready to do so
with them and showed mutual respect for their efforts!
The effort against China is strange.
We are talking about the country with the largest
population on earth. How anyone
could think that the poorest group of people on earth should
not trade and cooperate with one of the richest and hard
working, just for the fact that they think that they (China)
may be habouring some sinister motives
at some future date is just
incomprehensible.
This is especially so when others who have shown sinister
motive in times past are still our friends and partners
today under the guise of development partners, donors etc?
Let us get it all clear. Amid the growing concerns about the
People’s Republic of China’s burgeoning influence around
the globe, is the fact also that China has a lot to offer
its friends. It is offering money, technology, international
political clout and massive infrastructure development.
China’s interest in Africa is not new. It is estimated that
in the 1960s and 1970s, Beijing’s interest centered on
building ideological solidarity with other underdeveloped
nations to advance Chinese-style communism and on repelling
Western “imperialism.”
In recent years, Beijing has identified the African
continent as an area of significant economic and strategic
interest. America and its allies and friends are finding
that their vision of a prosperous Africa governed by
democracies that respect human rights and the rule of law
and that embrace free markets is being challenged by the
escalating Chinese influence in Africa.
This is especially so when China is been very forthright and
speedy with its aid and trade programmes. Loans and funding
agreements are completed and monies released within three
months in some cases as compared to the three to four years
of disbursements by the World Bank and International
Monetary Fund and other Western donor partners.
According to Mr Kwadwo Baah-Wiredu, Minister of Finance and
Economic Planning, this situation is most disturbing for a
government to sign a loan agreement and actually receive the
money in three years when they are going to elections the
next year.
“What this does is that, governments who rely on donor funds
(and Ghana, like many African countries actually rely
heavily on donor funding, about 60 per cent of their
national budgets) have very little funds to go round for
projects in their initial years and this could affect their
electoral fortunes,” Mr Baah-Wiredu stressed.
To him, anything that goes beyond six months and beyond is
not the best for a country. Can you imagine a beggar
standing by the corner having people come only to say, I
will give you money, but wait till evening or two days time?
That is how I see the whole picture and it is bizarre.
The argument from the West is that China aids and abets
oppressive and destitute African dictatorships by
legitimizing their misguided policies and praising their
development models as suited to individual national
conditions.
Beijing holds out China’s unique development
model—significant economic growth overseen by a disciplined,
one-party totalitarian state with full authority, if not
control, over all aspects of economic activity—as an example
for others to emulate.
Another aspect of the argument is that China rewards its
African friends with diplomatic attention and financial and
military assistance, exacerbating existing forced
dislocations of populations and abetting massive human
rights abuses in troubled countries such as Sudan and
Zimbabwe. As a consequence, Chinese support for political
and economic repression in Africa counters the liberalizing
influences of Africa’s traditional European and American
partners.
The most pernicious effect of the renewed Chinese interest
in Africa is that China is legitimizing and encouraging
Africa’s most repressive regimes, thereby increasing the
likelihood of weak and failed states.
These are real issues that actually bother the minds of
African leaders as they engage China on many fronts. The
foolery of Mugabe for instance is something of great concern
to his peers and most importantly to his people.
But we must not forget that for African countries to be able
to stand up to China over some of these issues, they must
gain some leverage and clout by perhaps forming a
negotiating bloc with China on how development and
assistance could be structured.
Political pundits on both sides of the debate agree that the
West’s interest are only in the raw materials from Africa
and will now have to compete with China for it. Hence, the
call for concern. Countries like the United States are alert
to the potential long-term disruption of American access to
important raw materials and energy sources as these
resources could be “locked up” by Chinese firms for their
domestic market.
The Chinese government firms have gone ahead to invest
billions of dollars in foreign exchange and have used
Chinese engineering and construction resources on
infrastructure for developing oil, gas, mineral, and other
natural resources in dozens of African countries, including
Algeria, Angola, Gabon, Nigeria, Sudan, and Zimbabwe. Their
new African energy investments are clearly intended to
supplement its Middle Eastern oil imports.
Sudan, which now supplies 7 percent of China’s total oil
imports, has benefited from the largest Chinese investments.
The China National Petroleum Corporation (CNPC) is the
single largest shareholder (40 percent) in the Greater Nile
Petroleum Operating Company, which controls Sudan’s oil
fields, and has invested $3 billion in refinery and pipeline
construction in Sudan since 1999.
In March 2004, Beijing extended a 2 billion dollar loan to
Angola in exchange for a contract to supply 10,000 barrels
of crude oil per day. Under the agreement, the loan will be
heavily reinvested in infrastructure construction, with 70
percent of the loan funds going to Chinese companies and the
remaining 30 percent going to local subcontractors.
In West Africa in July 2005, PetroChina concluded an $800
million deal with the Nigerian National Petroleum
Corporation to purchase 30,000 barrels of oil per day for
one year.
In January 2006, China National Offshore Oil Corporation (CNOOC),
after failing to acquire American-owned Unocal, purchased a
45 percent stake in a Nigerian offshore oil and gas field
for $2.27 billion and promised to invest an additional $2.25
billion in field development.
Gabon’s declining oil industry also saw massive investment
from China National Petrochemical Corporation (SINOPEC),
which plans to explore Gabon’s onshore and offshore oil
reserves.
Going South, where China has had a long history of
historical ties, South Africa and Zimbabwe remain Beijing’s
major sources for platinum and iron ore.
In 2004, there were more than a dozen exchange visits of
high-level party and government officials between China and
African countries. Most of the exchanges have centered on
economic and energy cooperation. For instance:
In February 2004, Chinese President Hu Jintao visited
Algeria, Gabon, and Nigeria—the three African oil giants—to
consolidate further the security of energy supplies.
In June, Chinese Vice President Zeng Qinghong visited
Tunisia, Togo, Benin, and South Africa, which have
significant mineral reserves.
In October–November 2004, National People’s Congress
Chairman Wu Bangguo visited Kenya, Zimbabwe, Zambia, and
Nigeria.
All of these visits focused on joint oil, mineral and
renewable resource exploration opportunities in the region.
In return, top leaders from Kenya, Liberia, South Africa,
and Zimbabwe visited Beijing and secured further investment
and economic assistance from China.
In 1999, the annual volume of trade between China and Africa
was 5.6 billion dollars.
After the establishment of the Chinese African Cooperation
Forum (CACF), Sino–African trade more than quintupled to
29.5 billion dollars in 2004. By the end of October 2005,
annual Sino–African trade for the year totaled 32.2 billion
dollars, surpassing the 2004 total.
Comparatively, the volume of trade between the United States
and Africa also increased remarkably, more than doubling
from 26.9 billion dollars in 1999 to 58.9 billion dollars in
2004. However, African trade with China is growing at a much
faster rate: an average of more than 50 percent annually
since 2002.
In 2004, Chinese direct investment in Africa reached 135
million dollars, with 77 additional Chinese companies doing
business in the region. At the fourth CACF Senior Officials
Meeting in August 2005, attended by delegations from 46
African countries and observers from six African regional
organizations, China proposed upgrading the third CACF
ministerial meeting in 2006 to a summit meeting involving
the heads of state from China and Africa, which was welcomed
by all participants.
China has also offered aid to its African partners, ranging
from building infrastructure to treating infectious diseases
such as malaria and HIV/AIDS.
Estimates have it that 15,000 Chinese doctors have worked in
47 African countries treating nearly 180 million patients.
Chinese-sponsored roads, hydro dams and railways are under
construction in Ghana, Kenya, Rwanda, and Nigeria, and a
mobile telephone network is being built in Tunisia.
As China’s power and influence grows, Beijing is becoming
more willing to challenge the United States, EU nations, and
others in international arenas to protect its interests in
Africa. Over time, differences between China and democracies
over human rights and basic political and civil rights will
sharpen.
Some experts have called for the development of a
coordinated, comprehensive strategy by the West, led by the
US where they engage a consistent, constant, and coherent
presence to counter the illiberal forces that stunt African
development.
Some are even of the opinion that President George Bush
should take an extensive and down to earth visit to Africa
and push his cabinet members to do same propagating sound
American policy cooperation as well as increasing the
American diplomatic profile.
Other have also said that the US should go a step further by
denying bilateral economic assistance to countries that
consistently violate human rights or resist the transition
to representative government and by promoting this policy in
both international financial institutions in addition to its
“good governance” requirement under the Millennium Challenge
Account aid for instance.
Many say that while AGOA is a positive step, the United
States should continue to press the region and individual
countries for permanent free trade agreements that
liberalize trade in goods and services, lower investment
barriers, and strengthen property rights.
Such agreements would encourage stronger economic growth and
increase economic ties between the United States and trade
partners in Africa. “Charity" and
international aid will not solve Africa’s problems, but
economic reform and growth can.
America and Africa’s partners, if they really call
themselves so, should encourage development of energy
resources and seek new international partners on the
continent in the form of new areas of cooperation that would
bring about immediate change in the lives of the millions
currently wallowing in poverty, disease and squalor.
China is actively expanding its influence in Africa to
secure supplies of natural resources, to counter Western
political and economic influence while expanding China’s
global influence.
If they do not, Africa in the words of President Kufuor at
the Economist Conference in Accra would turn where its cup
can be filled most and can trade her way through to growth
and strength with her partners:
After all, like he said: “… once bitten twice shy, and we
know a snake when we see one.”
Gideon Sackitey, ACCRA, October 17, Ghanadot.com
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