CHINA-AFRICA TRADE

A spectacular resurgence
By David White

Published: November 21 2006 02:00 | Last updated: November 21 2006 02:00

China's presence in Africa reaches to the very doorstep of the African Union. Next to the pan-African organisation's headquarters in Addis Ababa, Chinese experts have started surveying land for a planned conference facility, built and paid for by Beijing, according to officials.

In the Ethiopian capital, Chinese technicians and businessmen have become a familiar sight. Around the country, Chinese contractors have been building roads, telecommunications infrastructure and, at the headwaters of the Blue Nile in the north, a dam to produce much-needed power.


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Across Africa, the past few years have seen a spectacular resurgence of Chinese involvement, highlighted earlier this month at a high-profile China-Africa Forum summit in Beijing and drawing increasing attention - and concern - from Africa's long-standing western partners.

The new drive comes mainly on the back of China's quest for oil and other natural resources. In fragile, war-damaged countries such as Sudan and Angola, the Chinese have seized opportunities where western lenders or investors have been holding back. But the Chinese advance has other dimensions: markets as well as materials, platforms for export, and, in key regional countries such as Ethiopia, political influence.

It is as builders and financiers that the Chinese have made the biggest impact, mostly through state-owned or partially state-owned companies, in big projects for which they have the advantage of access to low-cost, long-term funding. On a much broader front than ever before, China has established itself as a leading force in African infrastructure, building roads, railways, power stations and bridges at costs reckoned by experts to be 25-30 per cent below those of western counterparts. Because of the high cost of obtaining materials locally and shortages of qualified personnel, many contracts involve bringing supplies and staff from China.

Speaking before the recent Beijing summit, a World Bank official estimated that announcements made this year alone - dubbed China's "Year of Africa" - amounted to commitments of $10bn in African infrastructure. That would, he pointed out, outstrip the flow of traditional international aid or private sector investment in infrastructure projects.

The scale of this involvement has brought increasing calls for greater consultation and exchange of information between China, western donors and African organisations. Just as some African countries have benefited by playing off China against Taiwan, the temptation now is to play off western interests against China.

Chinese lending and investment is widely seen as bypassing the rules that western governments and institutions have sought to agree with African partners in exchange for their support. African Union officials recognise the need for dialogue similar to that with the European Union, and for partnership agreements at a regional level, not only with China but also with India and Brazil.

The Infrastructure Consortium for Africa, set up in the wake of last year's landmark G8 pledges on aid, has invited both China and India to take part as observers at a meeting in Germany in January.

According to a recent World Bank report, 27 per cent of Africa's exports now go to Asia, almost twice the proportion at the start of the decade and almost on a par with the EU and the US.

Chinese-African trade, totalling almost $40bn last year, according to official Chinese figures, has quadrupled since 2000 and is expected to reach $100bn in the next five to 10 years. In Sudan, China has become the dominant export customer and has invested in pipeline, refining and port facilities. In Nigeria, oil rights secured earlier this year are linked to plans to channel $4bn into refineries, power and other infrastructure. A deal was recently reached with a Chinese contractor for an $8.3bn project to rebuild the dilapidated colonial-era railway between Lagos and the northern Nigerian city of Kano, in the first stage of an ambitious 20-year rail modernisation plan.

Experts say a small part of China's activity in infrastructure is outright aid, but the dividing line between government co-operation and investment is often unclear. An $2bn oil-linked low-interest credit line was agreed with Angola in 2004 - extended since then to $5bn or more, and released on a project-to-project basis - under which Chinese companies are eligible to bid for 70 per cent of the work rebuilding infrastructure damaged in the country's 27 years of intermittent civil war. Among other transport contracts, Chinese companies are rehabilitating the legendary Benguela railway from the coast to the borders of Zambia and the Democratic Republic of Congo, originally completed as a British contract in the 1920s.

The Chinese have, of course, been in Africa before. In more ideologically-driven mode in the 1960s and 1970s, China backed guerrilla movements, sent out doctors and agricultural engineers, bestowed hospitals and football stadiums and built the 1,800km Tanzania-Zambia railway - now, 30 years later, expected to be concessioned to a private Chinese company.

"The difference is that the Chinese this time come back smarter," says an international official in impoverished Guinea-Bissau. It is unclear to what extent co-operation projects are linked to China's significant fisheries interests or possible oil exploration. "They are not gifts," the official comments.

In-kind aid of this sort is a regular feature of Chinese co-operation. It is also used to cement political ties among African countries that have dallied with recognition of Taiwan. All but five African countries now have relations with Beijing.

China's role is much wider, more sophisticated and businesslike than it was 30 years ago, and on a different dimension.

The World Bank report puts total financing by China Exim Bank, the export credit agency, at $12.6bn in mid-2006, including power, telecoms, transport, water and sewage. These commitments, it says, now appear to be "significantly overtaking" traditional forms of assistance for infrastructure from OECD countries.