China’s foray into African markets is not just about minerals and oil. It’s also about tapping a consumer base as big and vibrant as India’s. Raghav Bahl writes.india Updated: Mar 06, 2011 12:55 IST
When a country of China’s size ‘develops’ — nay, doubles its economy every eight years — it scorches the earth for resources. With a fifth of the world’s population, China now consumes half its cement, a third of its steel, and over a quarter of its aluminum, creating a tectonic shift in raw material markets. China’s outbound FDI was over $50 billion in 2008, doubling from the previous year. Its creeping economic hegemony over Sudan, Zimbabwe and other African territories is awesome.
China-Africa trade scaled over $73 billion in 2007; Africa has become China’s second-largest contractual project market and third-largest investment destination. China controls two of the largest oil companies in Sudan, and consumes two-thirds of its oil exports. It helped build Merowe Dam on the Nile, Sudan’s most prestigious project. It gifted Guinea-Bissau a marble parliament building. It buys platinum and iron ore from Zimbabwe. It colonises vast tracts of agricultural land in outright commercial deals.
Joshua Ramo, a former Time magazine foreign affairs editor and Goldman Sachs China advisor, has coined the term ‘Beijing consensus’ to define how China has overtaken the ‘Washington consensus’ in investments, aid and trade to Africa: “It does not impose onerous conditions on African States’ policies, and is more active than the West in promoting industrialism in the global South.”
But the thrust inside Africa has been so deep, uncompromising and wide that local people are pushing back. Take China Metallurgical’s $1.4 billion investment into nickel mines in Papua New Guinea. An assistant labour secretary told Time, “What I don’t understand is why they (the Chinese) are so stubborn to not respect our local culture. We are a democracy. They have to play by our rules or we will rise up.” The locals panic about losing their land, and are miffed at rumours that China will use their nickel for a secret weapons programme. On the other hand, expatriate Chinese engineers call the natives ‘completely uncivilised and running around almost naked’.
China compounds this attitude by shipping armies of labourers to overseas construction sites, often on illegal visas; an estimated 740,000 Chinese labourers were working on projects from Angola to Indonesia in 2008, up 58 per cent from the previous year. These aliens bring along everything with them, ‘from packs of dehydrated noodles to the tell-tale pink-hued Chinese toilet paper’. Such an isolated ‘bubble world’ has been compared to American military bases in the Middle East. Within a few years, petty Chinese traders follow, setting up shop and threatening native entrepreneurs. Unsurprisingly, anti-Chinese riots have become common, ‘from the Solomon Islands and Zambia to Tongo and Lesotho’.
Inevitably, there is also a darker side to this ‘Beijing consensus’, as Chinese arms and reconnaissance devices have found their way into the hands of the ruling juntas. In Namibia, a Chinese State-owned manufacturer of security scanners has been charged with bribing local officials to win a $55 million contract (until 2008, President Hu Jintao’s son was the head of this company, although he has not been implicated in this case). China has also gained some collateral diplomatic advantage by spreading its tentacles in Africa. Historically, African countries have supported Taiwan. Over the last decade, six of them, including South Africa, have switched allegiance. A grateful China has cancelled 150 items of maturing government debt owed to it by 32 African countries. Such a friendly credit policy also fits in with China’s designs on another, much less publicised, facet of Africa.
The conventional wisdom all along has been that China is commercially colonising Africa for oil and minerals. But that’s an obvious conclusion. Hardly anybody has caught on that China could be eyeing Africa’s consumer markets. After all, if you look at all of Africa as one country, its economy is uncannily similar to India. Africa is growing at 6-7 per cent every year; its demographic profile and per capita income is equal to India. There are 150 million elite consumers, and another 500 million aspiring ones — again, a lot like India. And China is doing ‘another America’ to Africa: it is giving cheap loans and tax credits to woo Africa to buy its cars, bicycles, computers, chocolates and T-shirts.
With one deft stroke, China could be filling its consumption deficit — with an economy of India’s size. With one clever move, it could be answering critics who believe that China is doomed unless its citizens begin to consume. Unacknowledged by many, it may be tackling that problem on two tracks, one of which is in faraway Africa! As long as China is full of such surprises, the jury will have to remain out on whether China will falter, or jolt the pundits with its unconventional economics.
( Raghav Bahl is founder and editor of Network18, and the author of Superpower? The Amazing Race Between China’s Hare and India’s Tortoise )
* The views expressed by the author are personal