China Policy Institute: Analysis



Eye on Africa: US and China tussle for economic influence

Written by Yvan Yenda Ilunga.

The US and China are increasingly rivals on the world stage, competing over resources, policy and influence. One region where China has spent years establishing a foothold is Africa. Now the US is also keen to reassert itself after years of economic neglect.

The US fired the latest salvo late last year when it pledged to provide at least US$14 billion in public and private assistance in areas such as clean energy, energy, aviation and banking. President Barack Obama told leaders of 50 African countries attending the US-Africa Leaders Summit that Coca-Cola will provide clean water, General Electric will assist with infrastructure development, and Marriott will build more hotels.

But there was a catch, as always. The governments who receive the investments must do more to bolster the rule of law, reform regulations and root out corruption.

That’s a key difference between the US and China in their approaches to Africa and elsewhere. The US likes to attach strings, the Chinese just want to do business. And that’s why China’s economic footprint in Africa dwarfs that of the US. Indeed, it surpassed the US as the continent’s largest trading partner in 2009. About $200 billion of goods and services flowed between China and Africa in 2013, double the $85 billion in trade the US had with the continent.

Africa still offers promise to both superpowers, one waxing, one waning, as a region not yet fully developed but boasting many fast-growing economies. In their pursuit of economic gain, the US and China eye Africa as a fertile land of opportunity. As they race to establish economic control on the continent, it is important to carefully examine the strategies they’re employing. While their economic goals are similar, their terms of engagement are diametrically opposed.

China’s model: investment without meddling

China’s strategy in Africa diverges from the traditional model exemplified by the World Bank and International Monetary Fund. That model, which has regulated the principles underlying international investment and trade for decades, aims to establish accountability and ethics at the center of economic cooperation. Critics contend this model is too Western-centric.

China utilizes a “doing business” model that ostensibly treats African states as equal partners and steers clear of their internal affairs – a strategy that appeals to countries used to Western colonies and dictates.

It’s built on three strategies that China has used successfully to achieve its African trade goals: flexibility, focusing on infrastructure and cementing partnerships with small businesses.

Flexibility. China invests in Africa with a high degree of flexibility and pays little heed to the existence (or nonexistence) of credible financial institutions, contrary to the norm of American and European investment. Instead, its sole focus is on gaining access to natural resources such as copper and gold, with no interest in building up African institutions.

While this approach draws criticism for its lack of accountability, China has managed to seduce many African governments such as Angola and the Democratic Republic of the Congo with the notion of an equal partnership without internal meddling.

Infrastructure. China has long been Africa’s top infrastructure partner. New roads, bridges, hydroelectric dams, schools and hospitals are going up across the country as a result, bolstering economic growth. This hasn’t been without criticism: many question the long-term viability of the structures being built and the fact that Chinese workers are imported to do most of the work. Thus while buildings and bridges may rise, few jobs are directly created.

Small business. Lastly, small business owners in Africa and their Chinese counterparts have established strong ties, particularly in clothing and construction. Trade in these sectors has exploded. Yet again, the rapidity with which these partnerships have developed has created some unease among consumers and analysts. The quality of the Chinese products being imported is often low and comes with no warranty or other guarantee.

Despite the problems and criticisms, these three strategies exemplify why the Chinese model has been successful in Africa.

The US model: building strong institutions

The US has a long history of engagement in Africa, particularly in terms of aid and political and military influence – the case of Rwanda since 1994 exemplifies this. In recent years the USA has been shifting toward building economic ties with the continent.

That’s now accelerating as developing countries such as China and Brazil dominate growth in the global economy, prompting the Obama administration to launch the US-Africa partnership. Previous efforts were bilateral, this new framework has truly continental ambitions.

The US strategy boils down to building strong institutions and focusing on macro projects.

State building. The main thrust of US investment has long been made through development agencies and financial institutions such as the World Bank and IMF, following the traditional model promoted through structural adjustment mechanisms which focuses on poverty reduction, institutional reforms and free market with highly macro-economic focus in its implementation.

With many countries on the continent still in the process of state-building such as the Democratic Republic of Congo and Central Africa Republic, the US focus on institutional reforms and accountability as a precondition of aid should be encouraged. This approach not only facilitates monitoring and management of the funds distributed. It also helps establish a less corrupt economic space for private enterprise. That, in turn, attracts other foreign investors and makes the state more sustainable.

Based on my personal experience, however, this strategy isn’t well received by Africans, who regard it as another symbol of an unequal partnership, with the US imposing its conditions. This inflexible and sometimes overbearing approach sometimes brings more frustration than interest in cooperation.

Big projects. The second US strategy of targeting macro projects in energy, mining and other sectors also often falls flat. The rationale behind making such investments is valid but the idea that the benefits will trickle down has failed to bear fruit. The promotion of economic growth in Africa requires the creation of a stronger middle class, which in turn requires more small- and medium-sized businesses.

On this, China gets it right. The US will need to reconsider this focus and do more to deal with Africans at the micro level if it wants to establish a long and lasting presence there.

Additionally, the US tendency to interfere in the political affairs of many countries in Africa – such as Libya – gets in the way of cooperation.

Economic cooperation needs to be based on mutual trust, and this is only be possible if the US is less forceful in its terms of partnership. Unless the US becomes more flexible, it is unlikely to rival China as Africa’s top partner.

Everyone can win

Both the Chinese and the American terms of engagement in Africa may be strategically and ideologically valid and justifiable. There are strengths and weaknesses to both approaches. China’s flexibility in contracts and everything else creates a fast win—win situation but does not promote good governance or state building, both of which are sorely needed in Africa. The US focus on the need for institutional reforms is important, but without a more flexible and adaptive approach this will not work.

As the US shows a growing economic interest in Africa, a key question will be whether the Obama administration can establish a stronger partnership that focuses on business ties and not military force. Just as China can learn from the US emphasis on state building, the Americans should take a page from the Chinese playbook. The end result would be truly a win-win for everyone.

Yvan Yenda Ilunga is a Visiting Scholar in the Division of Global Affairs at Rutgers University. This article was originally published on The Conversation. Read the original article. Image Credit: CC by Adam Cohn/Flickr.

The US and China Compete for Immigrants

Written by Isaac Medina.

Are the US and China vying for the same international demographic? According to New York University’s Melissa Lefkowitz, the Chinese government is in the process of drafting new migratory regulations which would allow applicants in the technology industry to settle in China permanently: “[a]n expert privy to the [Ministry of Public Security’s] recent activities […] has said that the draft regulation will target immigrants in the technology field who have lived in China for ten consecutive years.” This development comes just four months since the new migration regulations, the Entry-Exit Administration Law (Chujing Rujing Guanli Fa), officially went into effect. For a nation that has not historically been welcoming to immigrants, the draft law definitely signals a significant change in attitude. Interestingly, in that same month, the White House released a report in support of a draft Senate immigration bill that would ease green card requirements for “those who earn advanced degrees in science, technology, engineering, and math.” Highly skilled workers, the report argues, will help mend America’s wobbly economy.

Unlike America’s draft bill, however, China’s draft entails more than just economic advantages for the government. At the recent Central Committee’s Third Plenum, Chinese President Xi Jinping was given a mandate to establish a State Security Committee (Guojia Anquan Weiyuanhui), which experts believe will focus more on internal security than foreign policy and national defense. Under this new framework, the kind of security threats that internet movements pose for the regime should be among the Committee’s top priorities. The 2009 Urumqi riots and the botched Jasmine Revolution, for instance, were both organized through now-blocked social media engines like Facebook. It is therefore unsurprising that the Chinese government has a vested interest in obtaining the best and brightest IT and technology specialists while it seeks to strengthen its domestic security apparatus.

China is decidedly no stranger to cyberspace. On the contrary, Beijing is very much invested in perfecting the relatively new art of cyberwarfare, an increasingly concerning area of contention between the US and China. Last year’s revelation that the People’s Liberation Army (PLA) had stolen enormous amounts of data from various US organizations is a testament to Beijing’s involvement in offensive cybernetic activities, as are the cyberattacks conducted earlier this year against The New York Times, The Wall Street Journal, and The Washington Post. A recent report by the US-China Economic and Security Review Commission confirms that these activities have continued since their initial exposure in February. Perhaps the US immigration initiative will help curb the Chinese cyberwarfare threat in addition to contributing to economic recovery.

But aside from cyberwarriors, the Chinese government also employs an estimated 280,000 “internet commentators” (wangluo pinglunyuan) commonly called “the 50 Cent Party” (Wu Mao Dang). These government employees allegedly get paid half a yuan for every post they write that portrays the Party in a positive light. Chinese netizens are commonly used as a barometer for Chinese public opinion, being one of the few outlets for the population’s grievances. The importance of the Chinese blogosphere was highlighted in 2011 when former Premier Wen Jiabao’s famously held a dialogue with netizens in an attempt to assuage chronic popular discontent with various social problems. The activities of the 50 Cent Party work alongside the Chinese government’s Golden Shield Project (Jin Dun Gongcheng), better known in the West as the Great Firewall of China. There was recent speculation that China’s internet restrictions could be relaxed within the new Shanghai Free Trade Zone. However, Xinhua and Global Times have denied the rumors.

It is a tantalizing prospect that Beijing and Washington may be competing in such a non-traditional area. Nevertheless, as the two countries venture further into uncharted waters, it is unlikely that Beijing will get ahead in the immigration race anytime soon. Despite the draft law’s eased restrictions, “the majority of foreign long-term residents of China will not be considered eligible for permanent residency status.” At more than one billion citizens, perhaps the last thing the Chinese government wants is more people. Yet a rapidly dwindling workforce and exploding senior population may have prompted China to look for more IT specialists overseas. Whether for economic gain or cyberwarfare, only time will tell if the Middle Kingdom will truly become the new land of opportunity.

Isaac Medina holds an MIR from Peking University and was previously based at the National Bureau of Asian Research and the American Foreign Policy Council.

China’s business schools must contribute more to the needs of industry

By Mike Bastin.

China’s higher education system, and its business education in particular, continue to produce record enrolment figures. However, the report challenges the quality of the education provided, especially at China’s business schools.

Worryingly, the report points to a clear disconnection between education content and business needs. It is this apparent yawning gap between the country’s business education and training and its business needs that has to be addressed as a priority.

Here are three initiatives that are key to any much-needed improvement:

Firstly, take all forms of business education and training inside Chinese companies. Such an initiative, by universities and/or corporate training providers, would surely be the quickest way to understand the particular needs of Chinese business and establish a firm link with any education and training provided.

In-company business education and training, whether taking place inside the company or involving education and training programmes tailored specifically to an organisation’s business needs, is nothing new outside China, but remains a rarity across mainland China’s business landscape.

Secondly, business education and training at Chinese universities could contribute more to the needs of Chinese business with far more integration with international business schools and overseas business training organisations.

Presently, too many leading international business schools, especially US schools, simply seek to use “exchanges” and “agreements” with Chinese business schools to attract Chinese students overseas and reap a considerable income in fees and additional charges. The Chinese government could do more here and force a more genuine mutually beneficial partnership. For example, talented international business and management academics could be offered better incentives to work at Chinese schools for longer periods of time, rather than fly in for a month or two to deliver one course, often on their own, before promptly flying out once again.

Thirdly, the Chinese government’s role is crucial if China’s higher education and training sector is to meet the changing needs of China’s business base. Business, especially business education and training, works best when governments take a definite laisser-faire approach but still offer incentives to foster engagement between business and business education providers. Sadly, the current Chinese leaders remain wedded to the “party knows best” mantra of old. Furthermore, recent comments by China’s apparent incoming leader indicate continued state involvement in higher education across China. The Chinese government should step back from such a position and allow a more pragmatic partnership between Chinese business and China’s business schools where the ongoing, evolving needs and challenges facing Chinese industry drive the provision of business and management education and training.

chinese industryFor example, Chinese business schools could be relieved of the burden of the party representative who sits on their management committee, often with more power than the dean. Party representatives could be replaced with a business representative whose sole task would be to monitor and anticipate Chinese business education and training needs and feed such knowledge into the teaching and training provision of each Chinese business school.

A country’s competitive industry, and its business and management education and training sector, should be a harmonious marriage where business education adapts itself to industry’s changing business and management needs. At present in China, the business community and the business education sector are not even on first-name terms.

This article originally appeared in the Soapbox section of the Financial Times, on 1 October,  2012. NB. the author’s fifth appearance in the FT in a year.

Mike Bastin is a PhD student at the School of Contemporary Chinese Studies

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.

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