Wednesday, January 6, 2010

153) China and Africa: a long-term perspective (book review)

Book review:

Deborah Brautigam
The Dragon’s Gift: The Real Story of China in Africa
(Oxford: Oxford University Press, 2009)
Review by Dr. Sean W. Burges (University of Ottawa)

Central argument: China’s engagement with Africa resembles a whole-of-government policy coherent approach to national and international development policy that uses foreign aid instruments to mobilize export and commercial financing with a view to encouraging long-term profitable investments in Africa by Chinese firms in the primary, secondary and tertiary sectors.

Summary: The central theme uniting Brautigam’s book is that the Chinese government has taken a long-term view of what is involved in national development that differs from the approach typically found in OECD-DAC member development agencies. In a phrase redolent of the ‘outward development’ logic found in Latin American countries such as Brazil, Chile and Peru, China decided in the mid-1980s that national development required that the country ‘go global.’ Policy-makers in Beijing examined their own experience during the post-Mao opening and noted that their economic revival was precipitated by massive inflows of Japanese FDI seeking to exploit first Chinese natural resources such as iron ore, then human resources such as abundant cheap labour. Underpinning this development was a period of resource-backed financing that saw Japanese loans and investments for Chinese physical infrastructure secured against guaranteed rights for future purchases of commodities such as iron and coal at market prices. This is the model that is being replicated by the Chinese in Africa and which is also leading to Western concern that China is a new imperialist economic power. Brautigam argues that this concern is misplaced and misses the point of Chinese engagement in Africa.

Exporting the Chinese model: Reflecting on the antecedents for their country’s accelerating economic growth, policy makers in 1990s Beijing placed China in the context of the wider Southeast Asian development experience and noticed that there was a process of ‘creative destruction’. With economic development came a change in the underlying cost-base of production that would cause one industry to die out domestically and move to another country while another, higher-value added industry rose to replace it. The result is a cascading chain redolent of the ‘V’ pattern made by a chevron of flying geese, which is the metaphor Kaname Akamatsu (annex 1) used to describe Southeast Asian industrial development. Inflows of imports and FDI start a process whereby concentration on primary resource extraction comes to be replaced by preliminary manufacturing and eventually more complicated production processes. Brautigam argues that this is the understanding of the national development process that lies at the heart of Chinese engagement with developing areas such as Africa. Development is thus viewed as a cooperative process that will generate returns for both the investor and recipient.

Why is China in Africa? Chinese involvement in Africa is driven by three main factors. The first is a holdover from China’s early communist days, which called for cooperation (not development assistance) between developing countries in the struggle for national progress. An explicit element of this is a stringent public support for national sovereignty and autonomy, resulting in a Paris Declaration-compliant attitude that national development strategies are the business of national governments, not international organizations or development agencies. Chinese loans and grants are consequently bereft of the governance conditionality marking Western development projects. Indeed, Chinese officials interviewed by Brautigam are quite sanguine about corruption, noting that it is a naturally occurring phenomenon in developing countries and an important part of the informal bureaucratic process. That said, there is a underlying commercial imperative to Chinese projects in Africa that requires sustainable results and profitability, which not only mitigates against the excesses of public corruption and juridical insecurity, but also all-but-requires local partners to facilitate successful navigation of the local business environment. This latter aspect is critical because it perforce draws local economic actors into the Chinese economic orbit and facilitates a ‘learning by doing’ approach to manufacturing and exporting that is bolstered by China’s extensive repertoire of technical and professional training programs.

The second element of Chinese development assistance is strictly political: chequebook diplomacy to prevent other countries recognizing Tawain as an independent country rather than the renegade province that it is in Beiing’s eyes. While the sums involved in Chinese development assistance driven by these two factors are not negligible, they are not of the same magnitude as OECD-DAC member ODA expenditures. Lower expenditures are, Brautigam explains, compensated for by a much lower cost base for Chinese development assistance. Simply put, Chinese technical advisors are paid significantly less than their Western counterparts and generally live at the site of the project they are assisting in what would often be considered rudimentary and minimalist dwellings in a Western context. Tolerance for these daily hardships is higher amongst Chinese advisors because the conditions are not always markedly different from what they experience during their daily lives in China.

The third rationale for Chinese involvement in Africa is the cause of concern in the Western development community. In simple terms, China simultaneously views Africa as a source of raw materials, a market, an export platform and a site for profitable foreign direct investment. As Brautigam makes clear, this attitude is not any different than that found in most Western capitals. What is different is the manner in which China is pursuing these four economic incentives for engagement, which in turn contributes to confusion about Chinese development activities on the continent.

Assessing China’s Involvement in Africa: Development financing, termed cooperation by the Chinese government, is not provided as a stand-alone good. Rather, it is used to advance Chinese investment penetration into the recipient economy along the lines of the flying geese model. This creates a complex mix of advantages and disadvantages. On the negative side is the reality that a significant portion of Chinese aid is tied, which reduces its efficacy. The counterbalancing positive is that much of this tied aid is linked to economic development projects which are supported through their formative or regenerative phase by a variety of Chinese national, provincial and private financing mechanisms. Ultimately these projects, which are often joint ventures, must become self-sustaining and profitable. The national prestige factor attached to the projects means that significant efforts are given to making new and legacy projects a success, which has resulted in rapid Chinese reentry into such challenging contexts as Sierra Leone and DRC. The danger is that African or Chinese entrepreneurs do not always do the due diligence for a project and wrongly assume that the Chinese government will continue to support a money-losing venture.

While the story that Brautigam tells of Chinese investment in Africa is, on balance, positive, she is clear that there remain significant frictions. Discussion of industrial sectors such as auto parts in Nigeria and export-processing in Mauritius are presented as evidence that Chinese investment can provide a catalytic spark to ignite a sustainable and competitive industrialization process. In keeping with the ‘flying geese’ model, this spark comes from the transfer of technology, production processes, workplace attitudes and managerial techniques that accompany FDI. The friction is found in cultural dissonances, revolving particularly along different expectations of labour that see Chinese management demanding something at times resembling the long hours and dangerous working conditions found during the European industrial revolution and China’s current economic surge. While this dissonance has not resulted in the massive imports of Chinese labour reported in Western newspaper, it has worked to ensure that the vast majority of managerial positions are filled by Chinese migrants. The suggestion in Brautigam’s text is that this may change with time, in turn reflecting the Chinese attitude that national development is a decades-long process.

The clear conclusion to be drawn from Brautigam’s book is that China’s involvement in Africa cannot be understood if viewed strictly through the lens of OECD-DAC approaches to development assistance. Rather than viewing the continent as needing development assistance, Beijing appears to have simultaneously cast the region as a source for needed natural resources, the next location for out-sourced production and a market for goods produced in China and by locally-based joint ventures. The underlying business focus is critical because it suggests that while China is staunchly avoiding the sorts of conditionality seen in Western development programming, the imperative that ventures be self-sustaining and profitable works to push evolution of the sorts of underlying governance structures that have emerged as the focus of development discourse. A patient approach to the evolution of these structures combines with a contemporary emphasis on the physical infrastructure that forms the backbone of a developed economy to suggest that China has decided to invest and stay in Africa, not take a place as simply another development donor.

About the author
Deborah Brautigam teaches in the International Development program at American University in Washington, DC. She has also held faculty appointments at Columbia University in New York (1987-94), and Silpakorn University in Thailand (1978-79), and has also been a visiting fellow at the University of Liberia in Monrovia, the University of Mauritius, Fourah Bay College in Sierra Leone, and the Christian Michelsen Institute in Bergen, Norway. She has served as a consultant for the United Nations, the World Bank, and the U.S. Agency for International Development in Cambodia, Sri Lanka, Egypt, and various Sub-Saharan African countries.

Brautigam has been a recipient of a Fulbright Senior Regional Research Award for Africa, and a Fulbright-Hays Faculty Research Grant, and has also been awarded fellowships from the Council on Foreign Relations, the Woodrow Wilson International Center for Scholars, and the German Marshall Fund. She is the author of Chinese Aid and African Development: Exporting Green Revolution (St. Martin's Press, 1998) and Aid Dependence and Governance (Almquist & Wiksell, 2000), co-editor of Taxation and State-Building in Developing Countries: Capacity and Consent (Cambridge University Press, 2008) and some two dozen articles and book chapters on foreign aid, the political economy of development, and the politics of economic policy.

Annex 1:
Kaname Akamatsu’s Flying Geese Theory of Economic Development
Kaname Akamatsu, “A Historical Pattern of Economic Growth in Developing Countries,” The Developing Economies (1962): 3-24.
The visual model is that of a ‘V’ of geese flying through the air marked by three types of countries – leading countries, rising countries, and following countries – travelling through seven stages of development.
Stage One – Developing-country industry develops to feed the exchange of native products for industrialized-country products.
Stage Two – Native handicraft industry crumbles because of competition from imports manufactured goods produced in industrialized countries.
Stage Three – Industrialized-country capital and techniques invested in the developing country for large-scale production of primary goods for export and construction of the necessary infrastructure.
Stage Four – Industrialized-country capital turns to preliminary processing of raw materials in the developing country prior to export, establishing an elementary industrial base.
Stage Five – Developing-country capital begins to run the industries processing raw materials. Capital goods are imported from the industrialized countries for the domestic production of consumer goods based on nationally-available raw materials. The developing-country import structure begins a shift from a focus on consumer goods to capital goods.
Stage Six – Manufactured goods in general are produced in the developing country irrespective of where the raw materials are sourced. Imports are dominated by the import of capital goods needed for manufacturing.
Stage Seven – Industrialization of the developing country is so advanced that it becomes possible to export all manner of manufactured consumer goods and local producers begin to supply the capital goods necessary for the production process.
These seven stages overlap and represent the cascading flow in economic complexity and capacity from a ‘lead goose’ down through the rest of the gaggle in which it has invested, first in the production of raw materials and then consumer goods. Perhaps the most apt empirical referent is the shift in production processes from Japan throughout Southeast Asia in the Twentieth Century, which ultimately brought China near to the end of Stage Seven in the first decade of the Twenty-first Century. In this context, China can now be cast as a leading ‘goose’ and a number of African countries as rising ‘geese’ (Ghana, Kenya, Mauritius, South Africa) and following ‘geese’ (DRC, Sierra Leone, Sudan) depending on the nature of their national production structure and penetration of regional and global markets.

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