For the last decade, the Chinese presence in Africa has received international attention and has been tainted by controversy. China’s presence in and economic aid to Africa is, however, not a new phenomenon. Sino-African relations were established in the mid-1950s and China has been providing different types of aid to African states ever since.⁽²⁾ “China is not a new donor – it has been investing in Africa for decades, but the quantity and commitment of China's investment has risen in proportion with its newfound economic strength, challenging western donors as the largest aid donor and business partner in some key countries in Africa.”⁽³⁾ Hence, the magnitude of China’s aid and foreign direct investment (FDI), which increased vis-à-vis its rapid economic expansion and in combination with its rapid rise as a new economic power, inevitably drew traditional donors’ attention.⁽⁴⁾ For instance, Chinese enterprises are currently involved in more than 220 hydropower projects in 50 countries such as Ethiopia, Ghana, Mozambique, Zambia and Nigeria.

China’s engagement in Africa has been based on three economic activities: FDI, aid and trade.⁽⁵⁾ Its aid policy, and economic engagement in general, has been one of the most controversial issues in the media, among scholars and politicians, and thus deserves to be investigated closely.

This CAI paper investigates why traditional donors´ aid policies have had limited success in developing recipient states, and how the traditional notions of the concept of development have influenced this process. This paper then discusses whether the Chinese aid policy differs from those of traditional donors, and whether this has affected traditional notions of donor-recipient relationships. This paper will conclude with a discussion of whether Chinese aid is perceived as more efficient than traditional aid donors in terms of generating development in its recipient states.

Understanding the development paradigm

Although African states have been recipients of Western aid for nearly 60 years, the result has been dissatisfactory in terms of generating self-sustainable socio-economic development. A reason for this underdevelopment has been the traditional (Western) donor perception of development as uniform.⁽⁶⁾ The perception of development has been contextual in the sense that different epochs have inserted different understandings of the phenomenon, and development itself has been perceived as a ‘natural process’, governed by laws and fixed stages. Henceforth, the underdevelopment terminology (as a counterpoint to development) was invented by the previous American president, Harry S. Truman, in 1948. Truman argued that the international community had a responsibility to improve the economic conditions in “underdeveloped areas.”⁽⁷⁾

After nearly 60 years of aid, most African states have experienced low and hampered economic development, mainly caused by traditional donor states’ perception of development. When development is treated as a uniform process, the recipe to enhance development is also believed to be uniform. Henceforth, rich donor states tried to measure and create the same development path they themselves experienced, and experimented with different aid policies such as Structural Adjustment Programmes (SAP) to trigger this development.⁽⁸⁾ In 1980, the World Bank and the International Monetary Fund (IMF), the world’s largest multilateral aid donors, presented a new strategy called SAP in order to enhance development. The SAP emphasised market liberalisation (privatisation, lowered tariffs and quotas, etc.) and introduced ‘conditional aid’ that required states to implement several policies before receiving money from these institutions.⁽⁹⁾ However, SAPs received huge criticism for cutting down spending in social sectors, resulting in negative impacts on people’s health.⁽¹⁰⁾ The strong emphasis for neo-liberal policies in combination with the perception of development as uniform consequently led traditional donors to dismiss alternative development paths for several decades, until Chinese engagement in the continent increased.

Chinese FDI flows into Africa

FDI is believed to contribute to local economic development through increased activity that could “spread to other firms and sectors through technological spillover and increased competition, thus raising productivity for the whole economy.” ⁽¹¹⁾ However, the majority of FDI is mainly channelled into a limited group of states and in attractive sectors ⁽¹²⁾ such as diamond and oil extraction.

Since the early 1990s, China has implemented a new economic strategy for its foreign relations, named ‘going global’. It aims at promoting the international operations of Chinese firms and enhancing their international competitiveness. Rapid economic growth has increased China’s demand for raw materials and energy, and accordingly, the Chinese Government has encouraged Chinese corporations to ensure and enable access to these resources in foreign markets. In 2006, there were approximately 800 Chinese corporations operating in Africa, of which 85% were privately owned.⁽¹³⁾ However, major Chinese corporations operating outside of China are usually partly Government owned, bringing a political dimension into Chinese investments in foreign markets.⁽¹⁴⁾ In addition, Chinese authorities are actively pursuing bilateral trade relations with African states through aid, debt relief and investment (in transportation and communications infrastructure notably) ⁽¹⁵⁾ leading to China’s FDI being closely interlinked with its aid policy.

Chinese versus Western Official Development Aid

The 2006 Forum on China-Africa Cooperation (FOCAC), which was attended by 48 African delegations (mainly led by heads of State), became the new starting point for Sino-African relations. Chinese president, Hu Jintao, promised an increase in trade, doubled Official Development Aid (ODA) volume within three years, the creation of a China-Africa Development Fund and substantial debt cancellation. ODA is recognised as the second largest type of capital that is channelled into the African continent, in which new donor states such as China are becoming increasingly important.⁽¹⁶⁾

Compared to Western aid, Chinese aid is not based on conditionality.⁽¹⁷⁾ According to the New Partnership for Africa's Development (NEPAD), “the IMF and World Bank will only lend the continent money after imposing stringent and sometimes controversial conditions.”⁽¹⁸⁾ China, on the other hand, uses a no-strings-attached policy towards its aid recipients. Nor does China intervene in the domestic politics of recipient states. This has been widely criticised by Western states and social activists, since Chinese companies cooperate with rogue states as a consequence of this policy. This non-interventionist approach has, however, been welcomed by many African leaders.⁽¹⁹⁾

However, China´s policy towards African Governments is not completely altruistic since China does receive something in return: trade deals for resources that are in high demand for its own national development. As mentioned before, China uses aid strategically to support its commercial interests on the African continent (similarly to Western donor states).⁽²⁰⁾ For instance, in 2006, China granted a concessional loan to Angola in return for future oil supplies.⁽²¹⁾ Another indirect benefit is that Chinese infrastructure projects are carried out by Chinese enterprises, creating many job opportunities for Chinese people.⁽²²⁾ According to Gu, Chinese workers, however, mainly occupy managerial positions, whilst the labour force in production is essentially made of local people.⁽²³⁾ Nonetheless, whether Chinese enterprises benefit local people has been contested. Several scholars have criticised Chinese engagement in Africa, arguing that Chinese enterprises mainly recruit Chinese people for their development projects - whilst neglecting to give local people the same opportunity. Thus, whether local people gain new job opportunities or not, does not have any clear-cut answers.

Another aspect that makes Chinese aid more attractive is that China does not have the same colonial history with Africa as Western countries, triggering a new aid paradigm.⁽²⁴⁾ China has treated its aid recipients as equal partners, compared to the traditional Western approach based on asymmetrical relationships.⁽²⁵⁾ Xu Weizhong states that the Chinese Government aims to “establish and develop a new type of Sino-African cooperative relation built on political equality and mutual trust, win-win economic cooperation and reciprocal cultural cooperation.”⁽²⁶⁾ Thus, China’s aid has changed the structure and outlook of traditional aid policies imposed by Western states.

The international community and traditional donors such as the European Union (EU) and the World Bank have come to change their approach towards their aid recipients, in an attempt to compete with China. At the 2007 EU-Africa Summit, it was expressed that “the EU and Africa, operating on equal terms, were resolved to build a new strategic political partnership for the future, overcoming the traditional donor-recipient relationship.”⁽²⁷⁾ Kjøllsdal and Welle-Strand, in line with many other authors, suggest that the Chinese involvement in Africa has impacted the classical donor states approach, as Western countries attempt to maintain their influence on the continent.⁽²⁸⁾

Chinese ODA in practice

China’s aid is perceived as an alternative source of income to Western donor states and international organisations. The NEPAD, within the African Union, indicated that investments made by major developing economies such as China and India are welcomed since they constitute opportunities for development.⁽²⁹⁾ What makes China’s aid so attractive and different from Western aid from a developmental perspective?

China is a developing state itself, and its own experience of rapid economic growth in combination with reduced poverty rates has made it trustworthy and a successful development model.⁽³⁰⁾ At the beginning, the Chinese aid to Africa mainly consisted in sending Chinese experts to establish and develop the agricultural and medical sectors. For instance, for the last decades China has sent 16,000 medical personnel to several African states as a part of their ODA policy.⁽³¹⁾ Nowadays, China’s foreign aid is mainly provided through grants, technical assistance, concessional finance, interest-free loans and debt relief.⁽³²⁾ This aid is essentially channelled through infrastructure investment, the development of production systems and university scholarships.⁽³³⁾ From a developmental perspective, it could be argued that the combination of these three types of aid creates the preconditions for successful development. Former Chinese leader, Deng Xiaoping, focused on the same aspects in his policy reform that successfully developed China: know-how, industrial production and export/import opportunities. It is important to note that there are no publicly available official figures on Chinese aid, since China considers this information as state secrecy. The absence of official figures has fostered speculations in the international community, making it difficult to accurately assess the Chinese influence on Africa´s development.⁽³⁴⁾ However, from the point of view of local leaders, such as the Zambian president, Levy Mwanawasa,⁽³⁵⁾ and former Ethiopian Prime Minister, Meles Zenawi, China’s ODA has established the preconditions of Africa´s long-awaited development.

Although the Chinese development formula is perceived as more credible than the Western recipe, the critique directed towards China could not be ignored. The China Exim (Export-Import) Bank is responsible for concessional lending and works closely with the Chinese Government in order to enhance Chinese interests abroad.⁽³⁶⁾ The China Exim Bank has been a central financier of large hydropower, mining and agricultural projects on the African continent without assessing their impacts on the environment and people affected by these projects.⁽³⁷⁾ The negative implications of infrastructure projects have also triggered grassroots protests among affected local people. For instance, prospective relocated people by Sudan´s Merowe Dam expressed their discontent with the project.⁽³⁸⁾

Infrastructure development has become “the centrepiece of Chinese aid.”⁽³⁹⁾ The World Bank has traditionally been the central actor with regards to financing infrastructure in developing countries. The World Bank’s grants are, however, based on conditionality. For instance, before obtaining a loan for an infrastructure project, states are usually required to carry out environmental and social impact assessments. While this requirement has had extremely positive socio-economic and environmental impacts, it has discouraged many middle-income states from applying to the World Bank and made Chinese aid more attractive.⁽⁴⁰⁾ Western states and non-governmental organisations (NGOs) have therefore criticised China for neglecting the social and environmental impacts of infrastructure projects on local people’s livelihood. Widespread criticism has in turn raised concern among Chinese leaders about the environmental and social impacts of infrastructure projects. In 2008, a local environmental group informed the China Exim Bank that one of their dam projects, the Belinga Dam in Gabon, was to be built in a national park without any environmental assessment. The China Exim Bank responded by suspending the planned loan for the project.⁽⁴¹⁾ This is an illustration of the increasing awareness of social and environmental impacts of Chinese projects in Africa. However, this has not necessarily been systematically translated into action, as many projects supported by the Chinese Exim Bank still fall short of proper (if not any) impact assessment.

Conclusion

China´s rise and rapid economic growth have resulted in more active aid relations with African states. The Chinese non-interventionist approach has challenged traditional donor-recipient relations by focusing on equal partnership and by removing conditionality. China’s aid differs from traditional aid both theoretically and practically, presenting an alternative way of development for African countries. By comparing traditional (Western) actors and China, this paper has highlighted the nature of Chinese aid and its emphasis on infrastructure, know-how and industrial development, which have been welcomed by several heads of state on the African continent. The fact that China itself is a developing state that is experiencing rapid economic growth, has made several African leaders embrace Chinese guidance in development practice.

Investment in infrastructure projects is at the heart of Chinese aid, establishing the preconditions for long-term development. However, major infrastructure projects financed by Chinese enterprises and banks have drawn negative attention from local and international communities, due to their adverse implications on people’s livelihood and the environment. Correspondingly, the Chinese Government and banks have started to better assess the social and environmental impacts created by their infrastructure projects. However, China´s engagement is new and its success is dependent upon whether it finds a recipe that establishes a sustainable development process in the African continent.

Written by Zeynep Erdal (1)

NOTES:

(1) Contact Zeynep Erdal through Consultancy Africa Intelligence's Finance and Economy Unit ( finance.economy@consultancyafrica.com).
(2) Kjøllesdal, K. and Welle-Strand, A., 2010. Foreign aid strategies: China taking over? Asian Social Science, 6(10), pp. 3-13; Ogunsawo, A., 1974. China´s Policy in Africa 1958 – 1971. Cambridge University Press: London.
(3) Glennie, J., ’WikiLeaks cables: China's aid to Africa has strings attached’, The Guardian, 10 December 2010, http://www.guardian.co.uk.
(4) Gu, J., 2009. China´s private enterprises in Africa and the implications for African development. European Journal of Development Research, 21(4), pp. 570-587.
(5) Guerrero, D.-G. and Manji, F., 2008. China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(6) Brautigam, D., 2011. The Dragon´s gift: The real story of China in Africa.  Oxford Press: New York.
(7) Rist, G., 2008. The history of development: From western origins to global faith, Zed Books: London.
(8) Brautigam, D., 2011. The Dragon´s gift: The real story of China in Africa.  Oxford Press: New York.
(9) Ibid.
(10) ‘Structural Adjustment Programmes’, World Health Organization, http://www.who.int.
(11) ‘African Economic Outlook 2010’, African Development Bank, Organisation for Economic Co-operation and Development and United Nations Economic Commission for Africa, 2010, http://www.un.org.
(12) Ibid.
(13) Gu, J., 2009. China´s private enterprises in Africa and the implications for African development.  European Journal of Development Research, 21(4), pp. 570-587.
(14) Salidjanova, N., ‘Going out: An overview of China´s outward foreign direct investment’, USCC Staff Research Report, U.S.-China Economic & Security Review Commission, 2011, http://www.uscc.gov.
(15) ‘African Economic Outlook 2010’, African Development Bank, Organisation for Economic Co-operation and Development and United Nations Economic Commission for Africa, 2010, http://www.un.org.
(16) Ibid.
(17) Mhute, T., ‘Alternatives to aid: Efficiency of bond market’, Consultancy African Intelligence, 2 October 2012, http://www.consultancyafrica.com.
(18) Subramoney, S., ‘Africa has the advantage – it now needs to win the game’, New Economic Partnership for Africa’s Development, 2 June 2010, http://www.nepad.org.
(19) Sautman, B. and  Hairong, Y., 2008. “Friends and interests: China´s distinctive links with Africa” in Guerrero, D.-G.  and Manji, F. (eds.). China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(20) Mhute, T., ‘Alternatives to aid: Efficiency of bond market’, Consultancy African Intelligence, 2 October 2012, http://www.consultancyafrica.com.
(21) Kjøllesdal, K. and Welle-Strand, A., 2010. Foreign aid strategies: China taking over? Asian Social Science, 6(10), pp. 3-13.
(22) Guttal, S., 2008. “Client and competitor: China and international financial institutions” in Guerrero, D.-G.  and Manji, F. (eds.). China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(23) Gu, J., 2009. China´s private enterprises in Africa and the implications for African development. European Journal of Development Research, 21(4), pp. 570-587.
(24) Guerrero, D.-G. and Manji, F., 2008. China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(25) Kjøllesdal, K. and Welle-Strand, A., 2010. Foreign aid strategies: China taking over? Asian Social Science, 6(10), pp. 3-13.
(26) Weizhong, X., 2008. “Sino-African relations: New transformations and challenges” in Guerrero, D.-G.  and Manji, F. (eds.). China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(27) Kjøllesdal, K. and Welle-Strand, A., 2010. Foreign aid strategies: China taking over? Asian Social Science, 6(10), pp. 3-13.
(28) Ibid.
(29) Subramoney, S., ‘Africa has the advantage – it now needs to win the game’, New Economic Partnership for Africa’s Development, 2 June 2010, http://www.nepad.org.
(30) Brautigam, D., 2011. The Dragon´s gift: The real story of China in Africa.  Oxford Press: New York.
(31) Sautman, B. and  Hairong, Y., 2008. “Friends and interests: China´s distinctive links with Africa” in Guerrero, D.-G.  and Manji, F. (eds.). China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(32) Kjøllesdal, K. and Welle-Strand, A., 2010. Foreign aid strategies: China taking over? Asian Social Science, 6(10), pp. 3-13.
(33) ‘African Economic Outlook 2010’, African Development Bank, Organisation for Economic Co-operation and Development and United Nations Economic Commission for Africa, 2010, http://www.un.org.
(34) Brautigam, D., 2011. The Dragon´s gift: The real story of China in Africa.  Oxford Press: New York.
(35) Ibid.
(36) Kjøllesdal, K. and Welle-Strand, A., 2010. Foreign aid strategies: China taking over? Asian Social Science, 6(10), pp. 3-13.
(37) Guttal, Shalmali. 2008. “Client and Competitor: China and International Financial Institutions” in China´s new role in Africa and the South: a search for new perspective. Bangkok: Focus on the Global South
(38) Bosshard, P., 2009. China dams the world. World Policy Journal, 26(4), pp. 43-51.
(39) Sautman, B. and  Hairong, Y., 2008. “Friends and interests: China´s distinctive links with Africa” in Guerrero, D.-G.  and Manji, F. (eds.).  China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(40) Guerrero, D.-G. and Manji, F., 2008. China´s new role in Africa and the South: A search for new perspective. Focus on the Global South: Bangkok.
(41) Ibid.