The China Brand

Unlike most companies investing in Africa, Chinese companies are inextricable from their country of origin. The successes and failures of Chinese companies are generally reported as being those of China itself as if Beijing had direct control over all Chinese businesses in Africa.

For the Chinese government the China brand is important in different ways in different markets. Initially in Africa Chinese policy makers were not overly worried by the way China was perceived. The nature of their large investments and the less fashionable investment environments in which they operated meant that few active efforts were made to change perception.

At the same time China’s brand has to be robust to challenges from other major economies and at home. The narrative of South-South cooperation and non-interference in domestic policies has been very successful in pariah markets such as Zimbabwe and Sudan, but less so in larger markets. While small Chinese companies often cause trouble for the Chinese state, Beijing is unwilling to disown them for fear of admitting that the state is not in absolute control. This perhaps explains the ubiquitous ‘China Inc.’ concept whereby all the country’s actions are considered as contributing to a single entity.

Many commentators assume that all Chinese investments relate to an overarching Africa strategy managed by party members in Beijing. This mistake is not corrected by Beijing despite its effects on China’s reputation. Earlier in the year this blog commented on the lack of management from Chinese state entities of the Collum Coal mine incident in Zambia. African workers were fired upon by their Chinese supervisors causing uproar in Zambia. The company running the mine was a small family run operation, but Chinese officials in Zambia were not forthcoming in defending or condemning the actions. This basic public relations exercise would be the first thought of a Western embassy experiencing the same scenario.

Gradually a perception of poor quality in China’s engagement has grown up in Africa, brought about by reaction to low cost Chinese consumables, especially counterfeit goods. However this is also brought about by effective pricing. Chinese telecommunications giants Huawei and ZTE have experienced enormous growth in Africa, but both have pursued different strategies. Both can offer far lower cost alternatives to their rivals, but Huawei prices its services higher than ZTE’s in order to avoid a perception of poor quality.

This poor quality perception has however spread to China’s wider relationships, and African governments although wooed by Chinese wealth and support often consider Chinese investment to be inferior. This has manifested itself in the media with concerns that Chinese companies dump goods on African markets, and that their labour practices are inhumane. In some cases they are, but China’s overarching brand means that the careless actions of small and economically insignificant companies can have a large effect on state level negotiations governing Beijing’s strategic priorities.

This may be the cause of the Ugandan government’s decision to block a US$74 million loan from the Import and Export Bank of China (EXIM) meant for a digital migration project. Last year, Huawei Technologies faced controversy over its tender for fibre-optic cabling in Uganda. The $106 million project was also funded by a loan from EXIM Bank of China. Huawei is accused of inflating the cost of the contract in addition to flouting procurement procedures.

China’s brand is associated with a great many different things, and managing the perception of this brand is increasingly vital to China’s success. As China moves into more mainstream markets, governments have choice over who will invest. China has struggled to compete in new oil markets like Ghana, Uganda and Nigeria where western multinationals are active.

In response China’s soft power has been in force with regular announcements of impressive investments in the media, and increasingly an attempt to deal with aspects of its poor reputation head on. The Forum for China Africa Cooperation has been particularly active in promoting a Chinese take on African affairs.

In competition with this brand European and US governments have sought to discredit China’s involvement. There were three instances of this attempt in recent months. British Prime Minister David Cameron was guilty of the most blatant attempt in his claims that China is invading Africa. The response last week from a Chinese academic points out both the increased media scrutiny of the veracity of these statements, and also the hypocrisy in Western power’s accusations of invasion or colonialism in order to maintain their own trade relationships.

This was also recently apparent with Hilary Clinton’s tour of Africa when she hinted that China’s involvement was neo-colonial, or recent claims by the German government’s African advisor that China was responsible for land grabs. This was not supported by the recent Oakland Report (HT Deborah Brautigam).

Increasingly Chinese media is defending itself on these accusations. This week the Chinese Foreign Ministry issued a rebuttal of these allegations pointing to the lack of evidence for Chinese land grabs, and the extensive agricultural aid which China enacts in Africa. This increased media engagement with both Chinese and international media is evidence of Beijing’s intention to improve China’s brand.

China’s response has been slow, but is increasingly becoming clearer. The Chinese government has begun to fund programs which seem aimed at improving perception of Chinese businesses. An example this week comes in the form of the China Africa Industrial Forum (CAIF), launched on July 20th in Beijing. It aims to represent Chinese businesses, listing key Chinese companies investing in Africa. The organisation gives awards for the best Chinese businesses operating in Africa, in order to signpost companies which Beijing wants associated with the China brand.

This follows other projects aimed at improving perception. For example China has announced agreements earlier this year with the Ugandan and Nigerian government to help stop Chinese counterfeit goods from entering the countries. Although this response might appear to be a public relations exercise, the recognition of African complaints about Chinese investment is a vital step in improving outcomes for African people.

Although the China brand is a fallacy in terms of Beijing’s control, it has been a powerful tool in China’s rise in Africa. The mud throwing that has emanated from places such as Washington DC, London and Berlin is mostly a pragmatic response to a perceived marginalisation of Western economic as well as cultural influence in Africa. However Beijing is now making attempts to improve its reputation and some of its less attractive practices. Western powers will need to re-engage with their strengths in Africa. Experience, expertise and strong relationships in order to be a part of Africa’s burgeoning rise.