Symbiosis School for Liberal Arts
This paper attempts to explore the question of whether China’s Belt and Road Initiative (BRI) acts as a multifaceted instrument of neo-colonialism, which has been adopted by the country to pursue its long-term economic, political and military interests in Africa and Asia. Since the launch of China’s signature foreign policy project is fairly recent, its impact on the collaborating countries in the context of neo-colonialism remains understudied. Although China is promoting the initiative by employing a compelling narrative of shared development, some international relations scholars fear that it is a neo-colonial enterprise that aims at exploiting partners through unequal exchange (Roy, 2018; Anderlini, 2018). China’s willingness to offer preferential loans to partner countries is being viewed as an attempt to ensnare them into a debt-trap, given the higher interest rates offered vis-à-vis other international financial institutions. In addition to allowing China to exert influence over the development path of other countries, BRI has helped it gain control over strategically situated ports and sea-lanes. Moreover, the industrial overcapacity in China in conjunction with the recent weakening of the domestic demand has forced Chinese firms to search for markets abroad to preserve their growth. Moreover, China’s energy import dependency poses an imminent challenge to its secondary sector. 82% of its oil and 30% of its natural gas are shipped through the Straits of Malacca (Hsu, 2016), making this Sea Lane of Communications (SLOC) its most critical vulnerability. Given the U.S. capability to interdict the present SLOC with its bases in the Persian Gulf and Diego Garcia, China has shifted its focus to developing new pipelines that bypass this route. Since this objective requires the access to overseas territories, China has undertaken investment projects under the aegis of BRI to establish its global presence. The researcher uses case study analysis to elucidate the self-serving economic motivations behind China’s engagement in Africa and Asia, which are accomplished by exhibiting the behaviour of an aspiring neo-colonial power. By identifying the strategies adopted by China to accomplish its goals in the developing world, the study seeks to help policymakers and stakeholders in the partner countries strengthen their capacity to negotiate mutually favourable deals.
Ever since China’s embracement of economic reforms in 1978, it has grown at an unprecedented average of 8.26% annually over the past decade (The World Bank, 2019). A substantial improvement in the country’s economic performance complemented by an atmosphere conducive to profitable foreign investment has made China the focal point of the world’s upcoming markets. The manufacturing and construction industries in China have played a pivotal role in increasing its participation in international trade.
Governments in the post-Mao period permitted several marginal actors, such as farmers and enterprising village collectives to introduce piecemeal pro-market reforms into the system. Further experimentation with market socialism came in the form of the state-led establishment of the Special Economic Zones (SEZ). Subsequently, the inflow of technology, the creation of new job opportunities and improvement in the managerial performance of companies added impetus to China’s economic growth. Reconnecting with West through the means of forging economic partnerships prompted a reversal of the impoverishment that the Chinese had suffered under Mao’s communist regime. The rise in economic welfare was evinced by an upsurge in the domestic demand for various consumer products, shown by an unprecedented 17.8% spike in the private consumption expenditure from 1977 to 1978, after adopting wide-ranging economic reforms (CEIC Data, 2019) which was mostly met by local producers.
Today, many economists have realised that this process induced an industrial overcapacity in the country (Tang, 2016, Cheng S. W., 2015). In an attempt to sustain its growth trend, China shifted its focus outwards to sell its deliverables by adopting an export-driven growth model. The immediacy of this situation manifested itself in the form of China’s proactive efforts to build durable relations with its neighbours, many of which are peripheral countries.
John F. Kennedy once said, “The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger—but recognize the opportunity” (“Remarks at the Convocation of the United Negro College Fund”, 1959) Within a year of President Xi Jinping’s election in 2012, China revealed its intention to repave the Silk Route, thereby launching the flagship One Belt, One Road initiative (PwC Growth Markets Centre, 2017). Although the project has been advertised as a strand of China’s multilateral diplomacy by President Xi Jinping (Khan, Sandano, Pratt, & Farid, 2009) that was conceptualised with the aim of restructuring global governance and advocating the views of the developing world in the international system, it has been criticised by international analysts for propagating China’s neo-colonialist behaviour in its neighbourhood (Blanchard, 2018).
In the Cold War era, China was able to forge Third World kinship (economically poor and non-industrialised nations) by underscoring their shared struggle to rebuild their respective economies, which had been left in shambles by their colonisers. By campaigning against the lopsided global economy that favoured the western nations, China was able to win the trust of its Asian and African counterparts. As per Kelly (2017), “the Chinese government and its people have warmly endorsed all rational proposals for reform made by developing countries, giving them an opening to sink their claws deeper into these economies.”
Several academicians have tried to navigate through the murky waters of China’s activities in these regions. William Overholt popularly compared China’s grand strategy towards the Indo-Pacific to the Marshall Plan adopted by the USA in the aftermath of the Second World War, which demanded various commitments from the European economies in exchange for its aid (Overholt, 2015). His views have been refuted by Cheng (2016), who argues that China recognises that the scope of its initiative is limited, given the number of countries in the BRI regions that are economic and political minefields and have been loyal U.S. allies.
Furthermore, Cheng (2016) notes:
The gap in overall military might between China and the U.S., it would be highly questionable that China has either the ambition or the capability to pursue a grand economic and geopolitical strategy in the BRI regions that is comparable to the above-mentioned U.S. global grand strategy in the post-WWII era (p. 2).
The recognition of these foreseeable risks and costs has led China to use the BRI for strengthening its political relations with the allies that it had formed prior to the conception of the transcontinental passage through the Forum on China-Africa Cooperation and its indirect participation in regional institutions like ASEAN.
Both authors, however, concur on the fact that cultivating people-to-people bonds and raising public support has been central to BRI’s operations in different countries. The conception of BRI as a regional policy framework that supposedly espouses the principles of inclusiveness and mutual learning is merely five years old. Therefore, its possible role in propagating Chinese neo-colonialism in Africa and Asia remains understudied. In the past, China’s relations with the developing world have mainly been studied through the lens of the trade-dependency theory. An empirical study by Maswana (2015) concluded that “ten African countries (Angola, the Sudan, the D.R. Congo, the Republic of the Congo, Gabon, Chad, Zambia, Mauritania, the Central African Republic, and Equatorial Guinea) have a high relative trade intensity index with China, implying that they are locked into a relationship of dependency on China” (p. 95). In other words, the economic well-being of these African countries can be jeopardised, if the global climate impels China to impose new barriers to trade. Moreover, the composition of trade flows shows that the resource curse continues to plague much of Africa, because of which it is still relegated to the status of the supplier of unprocessed commodities (Zweig & Jianhai, 2005). However, China’s vision for a new Silk Road has helped it shift to a more long-term investment-driven model in Africa (Johnston, 2018). Despite China’s questionable activities in Africa, certain scholars maintain that it is unlikely to employ neo-colonial tools that perpetuate exploitative and unequal power relations. For example, Athreya (1989) argues that
Unfair trade practices, establishment of military bases and blocs, various types of intervention in the internal affairs of the developing countries, the fanning of armed conflicts and ‘local’ wars, and attempts to use international and regional organizations in the interests of the metropole (p. 29; also see Brautigam, 2018),
This claim is challenged in this paper. Case studies iterating China’s scramble for resources in Africa have continued to overshadow its neo-colonial behaviour in other parts of its immediate neighbourhood. China has historically shared close, but unequal, economic ties with its Asian neighbours (Lee, 2017). On the one hand the high-income countries (Singapore, South Korea and Malaysia) have aided the expansion of China’s manufacturing industries by providing inputs and technology, while on the other, Chinese producers have been able to increase their profits by outsourcing low-valued added processes to economies with an abundant supply of cheap labour (Cambodia and Laos) (CIMB ASEAN Research Institute [CARI], 2018). In addition to intensifying these existing relations, BRI uses the narrative of infrastructure development to “bind regional economies to the Chinese market via transportation corridors that will give China’s exports a competitive edge” and “helps China diversify its energy import sources by creating alternative land and sea transport corridors” (as cited in Smith, 2018). In order to pursue this agenda, China has adopted a gradual strategy of significant land acquisition across Asia, unseen before the BRI.
The fear of the loss of territorial integrity is slowly surfacing in the continent. For instance, in 2018, nation-wide demonstrations were held in Vietnam to oppose a “draft law that would allow foreign investors 99-year leases” (“Vietnam : Fears of China-takeover fuel second week of protests”, 2018). Similar concerns about the BRI have been voiced by Malaysian PM, Mahathir Mohamad, who stated, “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries…” (McGregor, 2018). Rowley (2018) notes that China’s bold attempt at closing the infrastructure gap in the developing world is unsustainable in the long-run because of the economic slowdown it faces at home. He further contends that because China-funded projects are often “associated with trading off quality, safety and social equity, and the environment” (as cited in Rowley, 2018), it doesn’t always help countries advance towards their development goals. Hence, the consequent lack of proper repayment mechanisms is likely to financially burden Asian economies and hinder their opportunities for gaining a better positioning in the world market, in the event of a retrenchment in Chinese lending. Prior to the launch of the BRI, China’s relations with its Asian neighbours was viewed as mutualistic (LaRocco, 2011). However, the initiative has revealed China’s less benevolent side, which holds the potential to subvert the economic growth of the target countries. Due to the recency of the change in how Chinese assistance is perceived by its neighbours, its presence in Asia is yet to be explored within the context of neo-colonialsm.
To address the gaps identified above, the researcher strives to –
- Analyse the strategies undertaken by China to embed its neo-colonial footprint in Africa and Asia.
- Trace the ways in which BRI has evolved as a means to extend China’s economic, cultural and political engagement in Asian and African countries.
The study seeks to shine light on the strategies used by China to sustain unequal partnerships, thereby drawing the attention of policymakers and other stakeholders in the host countries to issues that will enable them to create a mutually beneficial scenario. The current projects have afforded scant roles to the domestic producers and failed to contribute to employment opportunities in Africa and Asia. Furthermore, by neglecting infrastructure development in sectors necessary for the growth of the host countries, China has thwarted efforts to diversify their economies. The lack of emphasis by host countries on research-backed investments have allowed China to pursue projects that aid transfer of resources to its own economy. By bringing to the fore such patterns, this research aims to highlight that by withdrawing from short-sighted projects, developing countries can avoid an increase in their debt burden. Additionally, to reap the long-term benefits of Chinese investment, they should strive to improve their absorptive capacity by mandating China to assist with human capital development. They can only put forth these demands when they collectively realise their centrality to China’s energy security strategy, a position that they can leverage to “enhance the capacities of their firms and workers to maximise employment, technology transfer and partnership opportunities” (Blanchard, 2018).
The Belt and Road Initiative
BRI is a China-led effort, started in 2013, to foster transnational cooperation 2013. This million-dollar project that seeks to revive the Silk Road combines “a belt of overland corridors with a maritime road of shipping lanes” (Kuo & Kommenda, 2018).
Figure 1: China’s vision for the belt and road initiative. Reprinted from Kuo & Kommenda (2018).
BRI architecture comprises of the ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Silk Road’, which are being developed as under-
- Silk Road Economic Belt ( SERB) : The land corridor connects the thriving markets of China and Europe and traverses many Central Asian countries that are abundant with resources and offer ground-breaking energy and mining opportunities (Baker Mckenzie, 2017) The circuit leads off from China, before heading towards Central Asia, which is then connected to the rival neighbours of Iran and Iraq. It further passes through Syria and Turkey to Bulgaria, Romania, Czech Republic and Germany, and then reaches Greece to meet the maritime road.
- 21st Century Maritime Silk Road (MSR): The MSR connects the Chinese Ports of Quanzhou, Guangzhou, Beihai and Haikou to the Kuala Lumpur through the Malacca Straits. It then makes its way towards Colombo and Kolkata, and crosses the Indian Ocean to link Tanzania and Mombasa. The route further reaches Piraeus (Greece) through the Suez Canal. (Joshi, 2018, p. 9).
Theory of Neo-colonialism
This paper locates the discussion of China’s relations with Africa and Asia under BRI within the context of neo-colonialism. Some of the earliest critique of “international capitalistic exploitation” was put forth by Karl Marx, who wrote that the “imminent necessity for capitalists to produce on an ever-enlarged scale tends to extend the world market continually as capitalists strive to offset the general tendency toward declining profit rates by seeking higher returns overseas” ( as cited in Charle, 1966, p. 330). As a newly emerging industrialised economy, China has had to pursue international expansion to preserve the growth of its manufacturing sector and resolve other domestic challenges, such as rising unemployment rates ( The World Bank, 2019). Furthemore, China’s espousal of market reforms significantly increased its wealth gap. According to estimates published by the International Monetary Fund (IMF), “the net Gini coefficient for China at 50 points in 2013 was …among the highest in the world” (Jain-Chandra, Khor, Mano, Schauer, Wingender, & Zhuang, 2018). In Lenin’s critique of neocolonialsm, he argued that the export of financial capital allowed capitalist economies to assert their influence over weaker nations and perpetuate international inequality. It also served their intention of finding new markets for their products, since “inequality of income distribution limited the capacity of their domestic markets” (Charle, 1966, p. 330). He reasoned that the exhaustion of natural and human resources would compel industrialised countries to fulfil their commercial interests through the plunder of raw materials from developing countries.
Until the first decade of this century, in China’s case, domestic demand was artificially suppressed through strong structural restrictions and low wages to boost exports. However, the financial crisis and the resulting contraction in exports forced China to revitalise domestic consumption as a key to maintaining high growth rates (Ningning, 2010). Despite its initial success, the consumption upgrade is projected to fall in the coming years, signalling the Chinese enterprises to secure their positions in foreign markets. This has resulted in expansion of China’s economic, military and cultural footprint in Africa and Asia.
This paper borrows Loomba’s (1998) definition of colonialism – “the takeover of territory, appropriation of material resources, exploitation of labour and Interference with political and cultural structures of another territory or nation” (p. 11) – to explain neo-colonialism. Since the principle of national sovereignity is given utmost importance in the contemporary international system, colonialism can be only covertly practiced by modern great powers through the extension of their economic influence over developing countries without military interventions or directly asserting political control. Thus, while the means through which colonialism and neo-colonialism are propogated vary, both situations ultimately amount to the transfer of control over resources fom the dominated population to the metropole.
In relation to Africa’s dependence on its former colonial masters to source its socio-economic development, Ghana’s first President, Kwame Nkrumah, contended in his book Neo-colonialism: The Last Stage of Imperialism that although African countries had “all outwards trappings of international sovereignty” (Nkrumah, 1965, p. ix), their economic and political behaviour was indirectly controlled by external actors through imbalanced trade flows and predatory lending practices. Unlike colonialism that mandated territorial conquest and political control, neo-colonialism enables stronger countries to capitalise on fragile economic and social institutions in the developing countries to extend their influence over their area and people. Accordingly, through the utilisation of new instruments of exploitation, such as foreign aid, military assistance and cultural exchanges, neo-colonialism acts as a “form of asymmetric power relation which is used by the metropole for purposes of economic advantage” (as cited in Maswana, 2015) and to reinstate post-colonial inequality. For this reason, neo-colonialism can be understood as the phenomenon through which a developed, powerful country or its agents such as multinational corporations undermine the potential of a structurally weaker country to function independently, devoid of external assistance. Thus, Vengroff(1975) argues that in neo-colonialism, the overt display of national power for imperialist exploitation is replaced with a more depersonalised approach that empowers large multinational cooperations and their subsidaries to continue the extraction of resources from the target countries for their benefit. These conditions are further “exacerbated by the inability of a given state to know the rules of the games and the absence of the institutions to apply those rules and bargain from a comparative advantage theory” (Lumumba-Kasongo, 2011, p. 245). The following sections analyse patterns of China’s operations in Africa and Asia, which have entangled other developing countries in debt-based relations, led to territorial acquisitions and provided China with the opportunity to possibly create a monopolist ruling class in its target countries.
Despite China’s alleged commitment to debt-trap diplomacy (Dahir, 2019), a practice through which the Chinese government and firms maximise their economic and geostrategic gains in developing countries, its partners view its loan conditions as less onerous than those of other international organisations (Moore, 2018; Ekott, 2017). In addition to providing loans at flexible terms, China’s assistance has especially helped Africa reinitiate old infrastructure plans and undertake new projects. Africa’s march towards development had been interrupted by the IMF’s refusal to extend large-size commercial loans untill certain neoliberal reforms, such as privatisation and deregulation of some key industries were implemented (Ekott, 2017). Furthermore, unlike other borrowing platforms, China has historically shown no hesitance in lending to regimes that have violated international humanitarian law. Thus, China’s apparent noninterference in the borrowing country’s political sphere permits leaders and governments to continue their operations uninterrupted. Moreover, these factors have contributed to China’s appeal in Africa and Asia, allowing it to use non-coercive persuasion to assert its power over the government and people of other countries. Unfortunately, China’s neocolonial intent has driven it to break many of these promises, which have adversely impacted the development goals of the partnering countries.
China in Africa
Aid and Investment
Despite China ranking lower than most countries of the world’s poorest continent in terms of per capita income, there was a surge in Chinese aid flowing into Africa during the Cold War era. Pere and Shelton (2007) note that China extended approximately “$ 2.5 billion to 36 underdeveloped African countries between the mid-1950s and mid-1970s” (p. 556). This was a period during which China was recovering from the horrors of the Great Leap Forward (1958-61) and the Great Proletarian Cultural Revolution (1966-76). Thus, aid was adopted as a pragmatic policy instrument by China to win diplomatic recognition at the world stage. China further built goodwill in Africa through the continued export of technical assistance and skilled workers for the completion of a series of infrastructure projects, such as the celebrated Zambia- Tanzania railway line completed in 1975 (“China’s Assistance in the Construction of the Tanzania-Zambia Railway”, 2014). These programs enabled China to win the support of most African countries, who in 1971 voted in favour of a U.N. General Assembly Resolution that stripped the Republic of China (Taiwan) of its seat in the organisation, affirming the legitimacy of the People’s Republic of China’s (PRC) claim over the mainland territory.
China claims to have diversified its unconditional aid package over the years to include technical cooperation, healthcare and medical assistance, human capital development and debt relief (Yun, 2014), which is primarily utilised for the provision of an array of socio-economic overheads in Africa.
In addition to growth in China’s total foreign aid to the African countries, the pressure to repay earlier aid-related loans has waxed exponentially in the past decade (Johnston, 2018). Since China refuses to divulge details of its financial assistance, it has succeeded in covertly classifying concessional soft loans as “unconditional aid”. Contrary to the picture that Chinese authorities and official reports seek to paint by “constantly blurring the distinction between grants and development aid, a significant volume of the money that China commits to its African partners are repayable, long-term loans” (Sun, 2014). This trend is visible in Africa’s share of the unbridled Chinese lending programme. Through this programme China provides loans at a below-market rate of interest but includes clauses that oblige the target country to purchase goods and services from Chinese vendors (Hatton, 2017; Brautigam, Diao, McMillian, & Silver, 2017).Moreover, the protracted repayment schedules encourage countries to borrow relentlessly from China, trapping them in an infinite web of debt. On failing to repay their mounting debts, China’s borrowers have found themselves under duress to cede control of strategically important areas to Beijing-linked firms. An example of China leveraging “opaque contracts and predatory loan practices to undercut the sovereignty of certain African states” (Fernholz, 2018) and acquire assets abroad comes from Djibouti, a small country in the Horn of Africa. Having provided “$1.4 billion of funding for Djibouti’s future projects that reportedly include at least two new airports, a new port at Ghoubet, and oil terminal and toll road” (Hurley, Scott, & Portelance, 2018, p.16), China enjoys a lion’s share of its public debt. With the concurrent inauguration of the first phase of the Djibouti International Free Trade Zone (DIFTZ) in 2018, the African nation hopes to be catapulted the position of a leading trade and logistics hub. Additionally, President Guelleh has called it “the zone of hope”, considering the new job opportunities that the DIFTZ is expected to usher, especially for the youth (Dahir, 2018).
While Chinese efforts have been lauded for infrastructural development in Djibouti, which include the Doraleh Port and its Container Terminal and an Industrial Park with a large manufacturing hub (Manek, 2019), and this can transform the Red Sea state into the transhipment hub of East Africa, the IMF has released a report cautioning the country to limit its mounting public external debt, which have risen from 50% of GDP at the end of 2014 to 85% of GDP by end 2016 (as cited in Zhou, 2017). Ironically, Djibouti’s possible transformation from a rent-based economy (rent from military bases, grants and assistance) into a logistics and commercial hub relies heavily on Chinese largesse, with 77% of its debt owed to the Asian Giant as of 2017 (World Bank, 2005; “Reality Check” , 2018). The finance minister of Djibouti, Moussa Dawaleh, revealed that he was under talks with Chinese officials for the refinancing of two important loans – the Ethiopia- Djibouti Railway which is seeking $ 4 billion in funding from EXIM Bank and the Ethiopia-Djibouti Water Pipeline which has obtained $329 million in funding from EXIM Bank (Manek, 2019).
Djibouti’s loan negotiations with China were premised on the belief that the economic benefits reaped from these joint projects would enable it to adhere to its repayment schedule. Several problems have prevented these projects from providing results to their full capacity. In addition to the commencement of the railway operations being delayed by one and a half years, the project is yet to reach its promised potential. Currently, only one cargo train runs between Ethiopia and Djibouti, instead of three as planned. Moreover, the operations of the pipeline have stalled due to power supply shortage (Manek, 2019). However, the interruptions in these recent undertakings have put Djibouti under high risk of debt distress, with the IMF (2018) projecting the “public and publicly guaranteed debt to reach 104% of its GDP at end-2018.” Djibouti’s economic growth plummeted from “9.5% in 2014-16 to around 6.5% in 2018” (IMF, 2018), due to “lower investments and weaker pickup in net exports” (The World Bank, 2018). In addition to fostering Djibouti’s dependence on Chinese financing to bolster its economic performance, the recent fall in the GDP growth rate also highlights another serious concern – China’s unilateral investment projects have withheld Djibouti from diversifying beyond the port services sector (News Business Ethiopia, 2018). In its quest for economic prowess, Djibouti has contracted unsustainable debt levels that amounted to 86% of its GDP in 2016. As a country where “41% of the population is poor, 23% live in extreme poverty, and the unemployment rate is 39%” (IMF, 2017), Djibouti’s preoccupation with meeting its debt service obligations has compelled its government to deprioritise social spending (IMF, 2018).
China’s first overseas naval facility was established in Djibouti in 2017, locating itself in the proximity of the only permanent U.S. military base in Africa. While China maintains that humanitarian motives strictly drive its emergent military presence in Africa, the base is more likely to be used for supervising global trade traversing the Bab-el-Mandeb Strait (Economy, 2018). The “logistics and support facility” (Headley, 2018), as the outpost has been referred to by China, enables the People’s Liberation Army Navy to monitor the passage of ships through the Gulf of Aden, a maritime chokepoint through which one-sixth of the world’s seaborne trade passes every year (Economy, 2018).
Scholars Alden, Large and de Oliveira (2008) note that “the overarching driver [ for the infrastructure investments in…] has been the Chinese government’s strategic pursuit of resources and attempts to ensure raw material supplies for growing energy needs within China” (p. 4). The installation of new roads and railways as well as the advancement of Africa’s port facilities under the aegis of the BRI make it easier for China to reach areas which are ripe for exploitation and gives impetus to its commercial interests in the continent. Nonetheless, there are others who believe that the cross-country infrastructure projects are bound to promote intra-Africa trade and regional cooperation. The inauguration of the first electrified railway line of East Africa in 2016 was accredited as one such attempt to overcome the infrastructure deficiencies that limit trade among African nations, by connecting landlocked Ethiopia to the Red Sea port of Djibouti (Golubski, 2017). Ethiopia views the rail line as the backbone of its future national growth plans, thereby justifying the need to proceed with this project. However, by 2018, the Ethiopian government owed $29.4 to China for infrastructure loans (Olingo, 2018), which is equivalent to 35% of GDP. With its light industries and the agro-processing sector raking international attention, the country is predicted to join the league of the leading manufacturing hubs of Africa by 2025. Accordingly, the railway line was envisaged to help “provide a fast, efficient and cheap freight and passenger transportation from the capital city to the port of Djibouti, where most of Ethiopia’s export and import items transit” (The Ethiopian Embassy, 2017). However, this ensnaring project has only benefited the Chinese companies like China Railway Group (CREC) and the China Civil Engineering Construction Corporation (CRCC), since they both built and operate this railway. The Chinese are also charging an undisclosed fee to train the local workers in operating the systems and providing management experience. The operational freight trains, built to move up to 3500 tons of cargo, will take years to recognise their intended potential (Yohannes, 2017). As Ethiopia struggles to repay its debt, these unanticipated hurdles have caused Chinese firms to scale back their investment in Ethiopia.
Ethiopia’s case is indicative of the new growth model of China that aggressively focuses on increasing its outbound investment in physical capital. “The ‘Going Out’ policy provides incentives to Chinese firms to invest abroad in the acquisition of natural resources, to offshore certain industries, and to build global Chinese brand names” (Johnston, 2018,p. 259). China is home to the largest savings pool in the world, which has added to its capacity and eagerness to invest in building a long-lasting commercial relationship with Africa. There has been a marked shift in the attitude of the private Chinese firms that initially refrained from getting involved in mega-deals. To compensate for the trimming of profit margins under development-oriented projects, Chinese companies have begun treating the concerns put forth by African states as secondary to their own needs. This statement is exemplified by the three-way partnership deal signed between Oman, China and Tanzania in 2013 for the construction of the Bagamoyo SEZ. Located at a coastal site along the trunk road between Dar es Salaam and Bagamoyo Town, the establishment of a new harbour has been tagged essential to sustain Tanzania’s recent growth (Mchome, et al., 2013).The inclusion of a port within the SEZ will expand Tanzania’s access to China’s Jiangsu Province and integrate the former’s firms with global value chains. Further, the industrial park has already gained traction among China’s renowned agribusiness circuit, which is expected to help lift the country’s agriculture sector. In the past, the project was abruptly stopped due to disagreements between China Merchants Holdings International (CMHI) and the Tanzanian government. Given that the SEZ would displace five villages, the original deal mandated Tanzania to raise funds to the tune of $28 million for compensating residents. When the government fell short of meeting this goal, it decided to “forego an equity stake in the project and only benefit from taxes on the land and occupancy by the investors” (Machira, 2018). In return for assuming the task of compensating the displaced citizens, CMHI has asked for majority ownership over the Bagamoyo port.Many of China’s high-grade projects have failed to deliver the projected results, making them costly for the host countries in the long-run. China’s willingness to swap the ballooning debts with in-kind payments suggests neo-colonialism.
Rapid infrastructure development acts as a double-edged sword. Despite its indisputable power to spur economic growth and spatial agglomeration, injudicious allocation of resources to infrastructure development gives rise to monstrous debts. To tap into Africa’s fastest growing markets, over 10,000 Chinese firms were operating in Africa, as of 2016-17 (Jayaram, Kassiri, & Sun, 2017). The benefits of the “expanded commerce” accrue to the Chinese businesses and lenders, while failing to provide any comparable gains for the population of the target countries, especially the poorer sections. Chinese investors have shown an observable reluctance to focus on low-commitment industries such as trade. Over half the Chinese firms operating in Africa are engaged in the manufacturing and service sectors that reported whopping profit margins of more than 20% in 2015 (Jayaram, Kassiri, & Sun, 2017). China’s partnership model allows its firms to entrench themselves in Africa, creating an interminable cycle of dependency. Thus, by forging unequal friendships and reducing the bargaining power of African countries, China has been able to abuse the labour and resources of the continent to feed its own growth. For instance, in dealing with oil-rich countries like Angola, China offers loans and credit lines to the African country in exchange for access to its energy reserves. This enables China to secure its growing energy demands at home, while Angola struggles to handle the escalating debt problem and secure new loans for economic diversification. The Angolan population has voiced their dissent against their government’s endeavours to strengthen ties with China, since oil repayments for loans have deprived the producers of crude to sell in world markets. Chazan( 2018) contends that curbing Angola’s ability to generate revenue from oil at international market rates, China has worsened the liquidity crisis in the African country.
Further, the refusal of Chinese firms to ensure proper working condition has raised concerns among African labourers. In Zambia, copper miners claim that Chinese companies are defying international labour standards by forcing them to toil in an environment disposed to health and safety hazards. They are expected to work 12-hour shifts, as opposed to 8-hour long work timings allowed by the Zambian law, without any provision for weekly rest (Smith, 2011). Furthermore, as suggested by a report issued by the Human Rights Watch (2011), “the curtailment of union activity hampers the ability to address these and other issues of concern to workers, particularly the low pay” (p. 10). Even in the celebrated Nairobi- Mombasa railroad project, China has denied Kenyan engineers and station-masters opportunities to run the services, barring the situations where the media was present. It is also well documented that the African recruits bemoan the struggles they have to encounter to rise to the leadership positions that are otherwise reserved for the Chinese migrants (Okoth, 2018). As mentioned, the China-led urban renaissance in Africa is partly enthused by its endeavour to procure natural resources from other countries to feed its development. In Ethiopia, the construction of the Addis Ababa- Djibouti railway has embittered the state’s relationship with its largest ethnic group, the Oromo, who reside along the railway line (Gardner, 2018). Since land is publicly owned in Ethiopia, properties were wrested from the people with meagre compensations. The project is symptomatic of China’s operations in Africa – they fail to create new jobs for the Africans, instead inviting Chinese personnel to operate and manage the railways. Thus, people who have lost their farmlands face employment problems (Gardner, 2018).
An improvement in the economic status of the Chinese population in the 1990s expanded their demand for commodities, compelling the producers to turn to the resource-abundant Africa for raw materials. As of 2012, approximately eighteen African countries had unprocessed primary products comprising over 90% of the total exports to China (as cited in Johnston, 2018, p. 587). The Chinese industries then scout for new customers far away from their home once domestic demand is met, causing an influx of value-added manufactured goods in the African markets, with “even little things like matches and tea bags coming from China” (Ighobor, 2013). As a mass exporter of cheap processed goods, China has been attempting to exert downward pressure on industrial prices through oversupply, doing so to good effect. Therefore, this dependency has adversely affected many livelihoods, from that of the semi-skilled textile worker to the high-technology manufacturers. Additionally, Africa’s dependence on primary commodity exports is viewed as a curse for development, which was first articulated in the famous Prebisch-Singer thesis in the 1950s. They hypothesized that the real commodity prices of primary products exhibited a declining trend in the long run, causing deterioration in the terms of trade of countries that were reliant on the sale of their natural resources to manufacturing countries (Brahmbhatt, Canuto, & Vostroknutova, 2010). Since the gains from trade continue to be unequally distributed, developing countries with high commodity exports undergo rapid industrialisation and embrace structural changes. However, by reaffirming Africa’s position as a repository of raw materials, China is hindering this transition. The theory has continued to steadily gain ground in economic circles, with Johnston (2018) reiterating that the “due to inability of raw commodity trade to increase job generation, the abundance of natural resources has impeded long-run development in Africa” (p. 587).
After having outstripped America to become Africa’s largest trading partner in 2009 (Ighobor, 2013), China was keen to expand the scope of its relations with the continent. The impermanence of their existing relations, which were chiefly rooted in China treating Africa as a resource pool, led China to adopt an investment-driven model to concretise its presence in the continent. The changes remain unpopular among the continent’s resource exporters, whose dependency on China has put them under economic distress. The reduction in China’s growth rates ensuing from the Global Financial Crisis has severely affected Africa, where growth rates have declined from “double digits to near-zero values” (as cited in Johnston, 2018, p.592) because of a decline in China’s immediate resource and energy requirements. Thus, Africa and China need to extend their channels of engagement beyond imbalanced trade. The exchange of raw materials and manufactured goods between Africa and China has not been supplemented by the inflow of adequate foreign direct investment (FDI) into the continent, which comprised a measly 5% of China’s flow in 2015 (Chen & Nord, 2018). By focusing on attracting higher and quality FDI from China, Africa governments can expedite industrialisation and reduce their detrimental dependence on the export of primary products.
Arms Sales and Military Bases
In July 2018, the highest ranking personnel from the armed forces of 50 African states were invited to the first China-Africa Defence and Security Forum. Since Africa’s political landscape in periled with ruptures that can instigate unforeseen skirmishes, China has expressed an interest in expanding its military footprint in the continent as a precautionary measure. Experts observe that China has other latent interests in the region, such as tightening its control over the trade routes encompassed in its planned maritime silk road. In addition to the construction of a base in Djibouti, there are speculations about establishing a “new massive dock, which can accommodate Chinese destroyers and supply ships” (Okoye, 2018).
. China’s illegal sale of small arms has perpetuated the brutal subdual of democratic movements in Africa, allowing it to propagate its authoritarian worldview. In places such as the Democratic Republic of Congo and Central African Republics, where the weapons have ended up in the hands of the rebels and mercenaries, China has enabled ethnic violence and crimes against humanity, among many other organised attacks to harm the civilian targets. At the peak of the Sudanese war between 2003 and 2004, China funded the establishment of an arms factory in Khartoum to buttress the muscular activities of the central Sudanese government (Human Rights First, 2008). Similarly, to consolidate his political power in Zimbabwe, Robert Mugabe purchased military hardware from China in 2004 (Enuka, 2011, p.97). Under the façade of paving a future for economic cooperation, China has embedded itself in the internal affairs of African states by abolishing the requirement of strict adherence to human rights principles for the purchase of arms. It has also used the narrative of post-war assistance to enter resource- financed infrastructure agreements such as the Sicomines deal with the Congolese government in 2007 that was akin to its strategy under the BRI. Given the lure of profits and the added benefit of creating job opportunities, China became the second largest arms provider to sub-Saharan Africa in 2000-2003 (Enuka, 2011). The proliferation of Chinese weapons can be attributed to its affordability; small rebel groups as well as rich authoritarian states can purchase these weapons. China’s arms trafficking frustrated the United Nation’s (UN) peacekeeping efforts in the Ethiopian-Eritrean conflict, where Chinese manufactured artillery pieces were found with both warring factions (Shinn, 2009). Moreover, Chinese armaments also made inroads in the aftermath of the Darfur uprising in 2003, which the Sudanese government responded to by launching an ethnic cleansing campaign against the region’s non-Arab population (Amnesty International, 2012). These suspicions have been reaffirmed by the findings of independent aid groups, which show that the Sudanese army and rebels were given access to Chinese oil company airstrips inflict atrocities on local villagers( Enuka, 2011, p. 108). In a pitiable cycle of events, China then disburses concessional loans deceptively cloaked as an interest-free donation to help with the reconstruction of the disarrayed African economies. Further, the prolongation of instability in African states enables China to “negotiate unfair deals that take advantage of African government’s relative weaknesses and that foster corruption and wasteful decision making” (Hanauer & Morris, 2014)
While China views itself as a messiah for favouring Africa’s long-run development, the bargaining power of the African governments in their interactions with the Chinese leadership has dwindled in the recent past. This has raised the spectre of Africa being used as a pawn to help the emerging great power accomplish its economic agendas and burnish its image in the international.
China in Asia
Aid and Investment
Asia has been recognised as the fulcrum of the BRI project. As established previously, aid functions as a critical tool in China’s foreign policy framework. China’s conception of aid is rather flexible, subsuming trade, investment and finance under its wing, mirroring its economic approach in Africa. The suggestion that BRI projects and its ‘unconditional’ aid comprise mutual gain has been contested by sceptics, who view China’s activities as being opportunistic. A study undertaken by the Centre for Global Development reckons that of the eight countries that are likely to face future troubles in servicing their debt to China, six are located in Asia (Kyrgyzstan, Laos, the Maldives, Mongolia, Pakistan, and Tajikistan) (Fernholz, 2018). These disclosures have prodded countries to reconsider their participation in China’s multi-billion dollar initiative. Following a thorough cost-benefit analysis, the Mahathir Mohamad administration in Malaysia declared that it would be withdrawing its participation from the Kuala Lumpur-Singapore high-speed rail project because it adds redundancy to the existing routes and the nation stands to make no profit from the arrangement (Lee & Geddie, 2018). A similar realisation dawned upon Sri Lanka and Laos too, compelling them to make territorial compromises in return for China agreeing to write off a portion of their unpaid debts. Sri Lanka took financial aid from China to undertake new economic projects like the construction of the Hambantota Port. Despite its policy of non-inference in domestic politics, the 2015 Sri Lankan elections saw “large payments from the Chinese port construction fund flowing directly to campaign aides and activities for Mr Rajapaksa, who had agreed to Chinese terms at every turn and was seen as an important ally in China’s efforts to tilt influence away from India in South Asia” (Abi-Habib, 2018). Sri Lanka’s decision to lease the port to China for 99 years to repay a daunting debt of $8 billion has established a precedent for China to demand strategic territorial sites in return for loan forgiveness.
China makes for an attractive creditor due to the leeway it offers the recipients of its loans, who are not required to observe a prefixed standard of governance and implement political reforms. Chinese Premier Li Keqiang’s success in securing robust links with the Maldives has resulted in cooperation between the two countries on multiple fronts, including pooling resources for developing their defence sectors and launching combined efforts to advance space research. In December 2017, Maldivian President Abdulla Yameen formalised the country’s first Free Trade Agreement with China in the absence of support from the opposition parties and voiced his support for China’s endeavour to carve an economic corridor. As the Maldives finds itself in the midst of a large-scale program to uphaul the nation’s urban infrastructure, it is facing difficulties in securing loans from the IMF and the World Bank. These international institutions have cited Maldives’ economic dependency on its tourism sector, which makes its growth highly cyclical and vulnerable to external shocks, as a limitation in its capacity to raise ample revenue to meet their debt service requirements (Asian Development Bank, 2015). China, on the other hand, has shown willingness to negotiate loan agreements with the archipelago nation. The IMF Article IV Consultation report for the Maldives indicate a high risk of debt distress due to China’s involvement in three major projects – a $830 million renovation of the airport, construction of a population centre in proximity to the airport and the shifting of an important seaport (Hurley, Scott, & Portelance, 2018, p. 17). According to the Finance Ministry of Maldives, the sum of the sovereign guarantees on Chinese loans to companies and the amount owed by the government to Beijing is as high $1,535 million, which was nearly 32% of Maldives’ GDP in 2017 (as cited in Panda, 2019; World Bank, 2019).
The Republics of Tajikistan and Kyrgyzstan have also found themselves mired in China’s debt trap diplomacy. Being landlocked nations that act as intermediary links in the BRI’s transportation network, both countries have seen a rise in infrastructural investments that contribute to the initiative’s overland corridors. Besides this, a portion (Line D) of the Central Asia-China gas pipeline that provides China access to Turkmenistan’s energy exports passes through Tajikistan. Although a significant share of the financing is borne by China, Tajik government’s contribution to the project is expected to burden its national exchequer. For a decade until 2016, 80% of Tajikistan’s total external debt was owed to China (Hurley, Scott, & Portelance, 2018). To placate its single largest creditor, Tajikistan relinquished control of a disputed piece of land in the Pamir range in 2011, which had been claimed by China for over a century (“Tajikistan cedes land to China”, 2011).
The China-Pakistan Economic Corridor (CPEC) is a $62 billion flagship development scheme that improves connectivity across Pakistan through an elaborate network of highways and railways, accompanied with pipelines that will help diversify Pakistan’s energy basket (Rafiq, 2017). As of 2016, Pakistan’s debt to China was $ 6,329 million. To further exacerbate Pakistan’s situation, its loans from the EXIM Bank reflect interest rates (5%) that are higher than the subsidised rates offered to other countries (2-3%). Resultantly, the forecast that Pakistan’s public debt ratio will soon exceed the 70% mark it has historically restricted itself to places it at a high default risk (Hurley, Scott, & Portelance, 2018, p. 19).
In the Sino-centric world order ideated by China, the Asia-Pacific commands special attention for countering military opposition and ensuring stability around China’s periphery. Nathan and Scobell (2012) offer a geostrategic model that explains China’s fight to have an unobstructed naval access to the South China Sea. They posit that China has reimagined the international system as four concentric circles with China at the centre. Figure 2 summarises China’s goal in each of these rings, with minor alterations to account for the recent developments since the model was first formulated
China’s strategic outreach in its immediate neighbourhood is clearly visible through CPEC that has consolidated the economic exchanges between the two countries. The CPEC entails the construction of a port at Gwadar, which sits 600 km away from the Strait of Hormuz from where 65% of India’s oil imports pass. The Chinese claim that the port was built to relieve the overstrained ports in Karachi and Qasim, which handles “95% of Pakistan’s seaborne trade” (Kanwal, 2018). Reports show that the lack of adequate depth of water and the persistence of the long-standing insurgency directed against Pakistani military in the Balochistan province make it unpropitious to convert Gwadar into a trade hub and carry out economic activity in the region (as cited in Bhandari & Agarwal, 2018). On the other hand, with a depth of 11.5 metres, the port holds the potential to house nuclear-powered submarines and aircraft carriers. It can function as a station for projecting China’s armed might and monitoring naval activity in the Indian Ocean Region. In 2017, the Gwadar port was handed over to the China Overseas Port Holding Company on a lease of 40 years, presenting it with an opportunity to collect “91% share of revenue collection from gross revenue of terminal and marine operations and 85% share from gross revenue of free zone operation” (“Pakistan’s Gwadar port leased to Chinese company for 40 years”, 2017). These lopsided deals have made it difficult to allay the resentment against CPEC in Balochistan — the heartland of the initiative. Due to a minuscule stake in the CPEC portfolio, the Baloch people fear that the Chinese projects will be unaccommodating of their needs (Shakil, 2018). Suspicions about Chinese intent in Pakistan and the fear of loss of autonomy are reinforced by China’s acquisition of ports in Hambantota and Djibouti, which stand astride its maritime Silk Route. Similar geo-economic interests have led to military collaborations between China and Pakistan. Pakistan has also become the only country to gain access to China’s satellite navigation system that helps improve missile targeting accuracy. These combined efforts have increased insecurities about China’s looming presence in South Asia, thus creating ripples in the otherwise stable political and security environment of the region.
Through BRI driven friendships, China has made amends for its controversial military operations in disputed areas of the South China Sea (SCS). The recent events at the Scarborough Shoal, which both China and the Philippines lay claim to, provide a likely template of the non-coercive tactics adopted by China to defend its bridgehead in SCS. In 2016, Philippine President Rodrigo Duterte was offered $24 million to catalyse his country’s development process (Jennings, 2017). The economic favours extended by China set the ground for the two countries to jointly explore the contested territories for “potentially lucrative maritime natural resources, such as fisheries and hydrocarbon deposits” (Bitzinger, 2018) in SCS. However, this decision has welcomed an eventual militarisation of the shoal. The information amassed by China about the water pressure, temperature gradient and underwater terrain under the façade of cooperation can be utilised to “operationalise a submarine fleet that can manoeuvre freely with complete domain awareness” (Nagy, 2018).
China’s forward-leaning economic and military engagements across Africa and Asia, although seemingly beneficial for its partner countries, have been tailored to secure its national interests. China’s foreign policy presents duality. It is in a race to project an image of being in the same league as the world’s great powers, while at the same time declaring itself a Third World country to forge stronger ties within its neighbourhood. Despite adopting predatory lending practices, China has been thriving as an alternative creditor for developing countries. It has also of providing loans to countries that suffer from a solvency crisis. In addition, China’s aid and investment are not always directed towards productive activities. As per researchers at the University of Oxford, “only 28% of the infrastructure projects handled by China from 1984-2008 were genuinely economically productive” (Wang, 2017). In most cases, the cost overrun outweighs the benefits derived from construction projects. Unproductive projects lead to debt accumulation in the borrowing countries, permitting China to take possession of strategically important locations for loan waivers.
In both continents, there is a clear interplay between China’s economic and military interests. Besides acquiring military assets under the garb of setting up trade hubs, China has engaged in extensive arms sales in Africa and Asia. It has supplied weapons to democratic governments, autocratic leaders and militant groups alike in Africa. China has greater security interests in Asia than Africa. Consequently, it can be argued that its military engagement in Africa is primarily to increase profits for Chinese arms industry. In contrast to this, in Asia, it aims to expel foreign powers by asserting a greater political influence. Tian (2018) observes that in addition to the sale of weapons, China’s military transactions in Asia include training, maintenance and exchange of information on the capability of the weapons.” Interestingly, it only sells light-arms in Africa; its engagement is “akin to one-time transactions, with limited commitments to boost future military collaborations” (Tian, 2018). Motivated by economic goals, China does not require that the recipient parties observe principles of international human rights. Thus, China has been striving to repackage its outreach such that it shapes the preferences of other countries through non-coercive means. However, its ultimate goal entails securing its own economic growth, mitigating security risks in its neighbourhood and garnering support for its political expansion at intergovernmental platforms.
Although China’s two-pronged engagement in the two continents has placed it on the trajectory of becoming a great power, many pro-China scholars argue that its assistance should not be cast in a negative light. China has lent money for infrastructure projects that the private sector companies were hesitant to undertake due to long gestation periods and low returns. The Chinese authorities have also taken many debt relief actions in the developing world, writing off billions of dollars of debt since the early 2000s (Moore, 2018). However, its outward investment is tailored to ensure that the capital is being redirected back home, thus making its assistance costly for the partner nations. Considering the unequal partnerships forged under the BRI, it is time for these African and Asian countries to rebalance the share of powers by signing deals that are mutually beneficial. This requires thorough research on the part of the collaborating governments to identify the sectors that are in need of Chinese, thereby checking the accumulation of unproductive debt. To avoid unscrupulous actions on China’s part, the governments of the African and Asian nations should make it mandatory for China to boost lending transparency and publish records of its assistance in a timely manner. This informs the public of the partnering countries of the transactions their respective governments are partaking in, thereby soliciting widespread feedback and increasing oversight by civil society networks. The citizens can also voice their preferences, allowing the government to direct resources towards projects that will maximise social welfare.
The author gratefully acknowledges R A Maslekar and Vaidyanatha Gundlupet for their mentorship and guidance during the course of this research.
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