China and the west work best together in Africa

As the vast archive of wiki-leaks material is digested and worked through, we are occasionally offered an interesting glimpse of the thinking of American policy makers. A story surfaced last week which showed that US policy makers are both suspicious and wary of China’s role in Africa, but beyond the threat of competition for resource contracts, China poses little threat to US interests. The story was from the American embassy in Malawi, and displayed a slightly negative perception of their Chinese counterparts. One key criticism of China’s engagement with Africa has been the lack of political conditionality attached to China’s deals. However conditionality has not always been a successful policy for western donors, and there is serious discussion in the aid community as to whether it is counterproductive in many environments.

Western countries made their donor relationships conditional after becoming frustrated with the cycle of corruption, wasted aid, and eventually debt cancellation.This is a paternalistic response, controlling how support is given and used as a result of a lack of trust in recipient governments’ commitment to taking  a responsible course themselves. Western criticisms of Chinese support mainly concern political conditionality whereby support is contingent on policy reforms safeguarding democratic elections and free speech. In an international context this seems reasonable.  If western powers are to provide funding and support to developing countries, it makes sense that these donors would demand political reforms which the donor countries see as being necessary for the recipient’s future success.

Beyond political conditionality countries also regulated their donations through tied aid, and support in kind.  Many recipient countries did not have sufficiently strong oversight and accountability to deliver aid effectively, and therefore donors began to make the decisions for them. Loans became contingent on the way they were spent, ensuring that money was spent in ways the donor decided was best for the country. In order to protect the donor’s own interest this often included the condition that money from country x would be spent on procuring services from businesses in country x. However in the last decade western donors have moved away from this type of tied aid agreeing that self interest in aid decision making polluted the positive goals of support and created wastage as inefficient operators delivered poorly targeted or substandard work.

Unfortunately by removing domestic decision making from host governments, conditionality weakens countries ability to govern and causes a sense of condescension. Developing countries have found this approach especially patronising when donors have got their conditions wrong. Being forced to take rather than make decisions has exacerbated capacity issues in developing governments, as they have become reliant on foreign intervention, and have been refused experience in their own statecraft. Imposed structural adjustment in the 1980s was particularly damaging in this regard.

China has operated with a different set of principles. Over the past decade the concepts of win-win, and south-south cooperation have been centred on China’s offerings of cheap credit and world leading infrastructure companies, alongside a strong risk appetite and a pragmatic and cooperative approach to dealing with African governments. An exciting development for the future is the possibility of transferring urban manufacturing jobs to Africa. Beijing has been able to afford to take risks, having built up large surpluses. Discounting loans and investing in risky assets provides the chance to build resource security and a Chinese sphere of influence. It is largely due to China’s relationship building in Africa that Beijing is seen as the leader of the developing world, championing the inclusion of emerging powers in the UN Security Council and driving the transition from the G8 to the G20.

China’s risk appetite has been driven by necessity. In order to provide the inputs for its rapidly expanding economy Beijing has been driven to take risks in countries which developed powers considered off limits. In bilateral terms, western governments refuse to deal with some countries where resource potential has value, but where government is repressive or unreliable. However where resource potential is particularly high western governments have tended to make exceptions to their political positions. Competition for resources has driven Beijing to make exceptions in less competitive markets. Unable to get sufficient stakes in Saudi Arabia or Libya, Chinese policy makers dealt with Sudan and Angola. In Angola, China’s concessional loans trumped a rival World Bank offering, allowing President Dos Santos to circumvent western political intervention. On the whole the Chinese deal has performed well and Angola has grown impressively (Angola’s political situation is far from perfect, but nevertheless the country is economically transformed, and stable after a drawn out and debilitating civil war).

Despite criticism over a lack of conditionality in Chinese aid and state investment in Africa, both are highly conditional. While predictably Beijing does not demand democratic reforms, Chinese loans are targetted at specific projects, and within the large bilateral deals- such as China Ex-Im Bank’s $2bn loan to Angola in 2006- very large proportions are accounted for by specific offerings delivered by Chinese companies.

However these offerings are agreed in cooperative terms. Beijing does not tell African countries what the African countries need, but tells them what China can offer cost effectively. This has generally meant road or rail construction, but also government buildings and national stadia. Unfortunately it has also meant military support. Loans are often offered at discounted interest rates, and the fact that aid is tied is generally inconsequential, as Chinese providers in construction and telecommunications are almost universally cheap, fast and of fair quality. China therefore avoids the pitfalls of tied aid by offering the most efficient contractors in areas of need. China’s success at competitive tenders in Africa raises the question of whether the loans need to be tied at all (HT Sven Grim).

The second attitudinal element to China’s success is its pragmatism. Chinese contractors have built everything from churches to wind farms. If a government wants a national football stadium built rather than a hospital or a school, China will not second guess it. If a country needs power generation and decides that the environmental and social impacts of hydro-power are acceptable, then China will build a dam. The assumption that the western way is inherently better looks increasingly naive. Political conditionality is important. It is vital that transgressors against freedoms, human rights, and even good governance are held to account, and that China’s arms deals with repressive governments are highlighted and discouraged. Ideally this should occur domestically as international pressure can serve to isolate and galvanise dictatorship as in Zimbabwe. In contrast the ‘good cop, bad cop’ engagement in Sudan provided pressure on President Al-Bashir while also offering a way out for his government, enabling a calmed situation in Darfur and the eventual succession of Southern Sudan.

The west has always assumed that it knew how developing countries should develop, yet there are few examples of countries that followed the Washington consensus, and reached middle income status. The Asian tigers relied on strong state leadership to bring about national champions in industry, and reform dormant agriculture. Brazil has become a world power after shunning the restriction of the IMF and the World Bank and taking its own path. Western criticisms of China’s engagement are becoming increasingly tired as African governments, and even western multinationals queue up to work with China (Rio Tinto and Chinalco have a Joint Venture in Guinea, while Tullow Oil announced its cooperation with CNOOC in Uganda last week).

The irony of the situation is that often the west’s bilateral engagement has been well meaning, while Beijing has been simply pragmatic. Yet China’s engagement has catalysed a transformation in Africa over the past decade, which western multinationals are now happy to be a part of. Just as world economic conditions were right for the rise of Japan, China, the NICs, and the NECs throughout the latter part of the last century, globalisation appears to be opening the door for Africa now, and the variety of engagement from developed and developing countries will be a key element in Africa’s future success.