Bridges Weekly Trade News Digest • Volume 10 • Number 37 • 8th November 2006

China Vows To Ramp Up Aid, Investment, Trade With Africa

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Political and business leaders from China and several African countries vowed to expand trade and investment flows, as well as other forms of bilateral cooperation, during a 4-5 November summit in Beijing.

In his opening speech, Chinese President Hu Jintao promised to double Beijing’s current level of development assistance to African countries by 2009. In addition, he pledged USD 5 billion in concessional loans and credits over the same period along with a further USD 5 billion to set up a fund that will encourage Chinese businesses to invest in Africa. By some accounts China is already a bigger lender to the continent than either the US or the World Bank.

Hu announced new debt cancellation initiatives and the extension of duty-free market access to more products from Africa’s least-developed countries that have diplomatic relations with China. He also unveiled plans to train 15,000 African professionals and to support regional efforts to combat malaria and promote economic integration.

Vows to double trade flows

The summit also saw USD 1.9 billion in business deals struck between China and Africa primarily in the minerals, infrastructure and telecommunications sectors. These include Chinese state-owned conglomerate Citic’s USD 938 million agreement to build an aluminium smelter in Egypt and China Civil Engineering Company’s commitment to build a USD 300 million highway in Nigeria.

Senior officials from 48 of the 53 African countries — including 35 heads of state — attended the third conference of the Forum on China-Africa Cooperation, making it the largest ever. They adopted a declaration, proclaiming the establishment of a "new type of strategic partnership" between China and Africa, calling for enhanced "South-South cooperation and North-South dialogue to promote balanced, coordinated and sustainable development of the global economy." The document urged rich countries to boost foreign aid spending, honour commitments to open markets and expand debt relief in order to help African countries reduce poverty, control desertification, and achieve the UN Millennium Development Goals.

Governments vowed to double trade volumes between Africa and China to USD 100 billion by 2010. The USD 50 billion in trade projected for this year already represents a near-fivefold increase on five years ago.

Much of the growth in China-Africa trade and investment has been driven by China’s drive to secure imports of commodities, including oil, to feed its rapidly growing economy. One third of China’s oil imports come from Africa - primarily from Sudan and Nigeria. In recent years Chinese companies, many of them state-owned or affiliated, have vastly increased their operations in the continent.

Concerns about China’s loans and investment

Critics warn that China’s commercial involvement — like its loans — has not been tied to human rights, governance, or environmental principles. In the face of popular pressure most Western banks and governments, as well as the World Bank, have established minimum conditions for making loans to support investment projects. Indeed, the summit was attended by the presidents of Sudan and Zimbabwe, who run authoritarian regimes that have been ostracised by much of the international community for their poor human rights records.

World Bank President Paul Wolfowitz recently criticized China for not basing loans on the Equator Principles, a voluntary set of social and environmental standards, followed by nearly 80 percent of the world’s commercial banks. He said that Chinese lenders risked repeating Western banks’ history of making loans to support damaging behaviour by corrupt regimes.

In a press release on China’s Africa summit, Sophie Richardson, deputy Asia director at Human Rights Watch, insisted that claiming to be a "great friend of the African people and a responsible major power… doesn’t square with staying silent while mass killings go on in [the Sudanese region of] Darfur. Africans do not need another external power enabling abusive regimes," she added. "They need all powers, including China, to place human rights at the centre of their policies."

Chinese officials reject these claims, insisting that they simply do not wish to impose values on their trading partners. They also dismiss complaints from Western companies that Beijing has used its newfound influence to promote the interests of China’s state-owned enterprises. Charles Onyango-Obbo, a Ugandan political commentator, suggested that Western criticism of China for failing to adhere to environmental standards when making loans to Africa was hypocritical. Writing in regional newspaper The East African, he noted that the US had no similar qualms about its massive trade with China.

South African President Thabo Mbeki said that transparency and good corporate governance would have to be central to the evolving partnership between Africa and China.

The summit declaration stressed the participating African countries’ commitment to the ‘one-China’ policy. This is an oblique reference to Taiwan, which Beijing views as a renegade province. Nevertheless, the New York Times reports that China did invite the five African countries that have diplomatic relations with Taipei instead of Beijing to the summit. None elected to attend.

ICTSD reporting; "China to Double Aid to Africa," UN INTEGRATED REGIONAL INFORMATION NETWORKS, 4 November 2006; "President Hu: wide-ranging consensus reached during Beijing summit," XINHUA, 5 November 2006; "Will China’s overture to Africa help Indian cause?", TIMES OF INDIA, 6 November 2006; "Summit ends with pledges on aid and swipe at critics," FINANCIAL TIMES, 6 November 2006; "China Courts Africa, Angling for Strategic Gains," NEW YORK TIMES, 3 November 2006; "Africa, China must work as partners," BUSINESS DAY, 6 November 2006; "The Beijing Africa Summit," DAILY TRUST (Abuja), 3 November 2006; "’Win-Win’ Deals at China-Africa Summit," INTER PRESS SERVICE, 6 November 2006; "Wolfowitz slams China banks on Africa lending," FINANCIAL TIMES, 24 October 2006; "China in Africa: Strictly Business," COUNCIL ON FOREIGN RELATIONS, 6 November 2006; "We have read Africa’s future, and it is written in Chinese…", THE EAST AFRICAN, 6 November 2006.