Chinese Do Good and Do Well in Developing World


The world's GDP in 2009 will shrink for the first time since WWII, according to the World Bank. Poor developing nations will be particularly hard hit with a shortfall of $270 billion to $700 billion, which will set them back by many years. Many of these nations are looking for help from the traditional donors in the West. But the West itself is preoccupied by its economic woes, with tent cities popping up all over the United States as home foreclosures rise.

According to the latest estimates of the World Bank, almost 40 percent of 107 developing countries are highly exposed to the poverty effects of the current economic crisis, less than 10 percent face little risk and the remainder are moderately exposed. Bangladesh, India, Nepal and Pakistan are ranked among the 43 countries most exposed to poverty risks, raising the horrible specter of further political instability and dangerous social strife in a very important region of the world.

As one of the developing nations facing a serious economic crisis, Pakistan has received International Monetary Fund's commitment of $7.6 billion rescue package. But it needs more help. China refused cash aid to Pakistan during last month's China visit by President Asif Ali Zardari to seek financial assistance. At the time, many press reports inaccurately said that Zardari returned empty handed.

Instead of cash aid, the Chinese offered $450 million to Pakistan as suppliers’ credit for Neelum Jhelum Hydroelectric Project during Zardari's visit. China and Pakistan also signed specific agreements to help Pakistan on a number of other water and power development projects. Prior to these agreements, China has been helping Pakistan in many infrastructure projects such the Gwadar port and a number of nuclear power plants. Looking at how the Chinese are working with many developing nations in Asia and Africa, it appears to be an unwritten Chinese policy to offer trade and investment in projects rather than direct cash aid. Given the rampant government corruption in many developing nations, including Pakistan, the Chinese policy is a sound one. It attempts to benefit the people and the nation more than the corrupt politicians and government officials who they must deal with.

The Chinese government recognizes the crucial role it must play to lead the world out of the current economic crisis. Not only has it announced significant stimulus spending, it is also continuing to lend to the United States to help in America's recovery back to health. Together, the US and China have become the twin locomotives pulling the global economy. The combined behemoth of China and America has been labeled by Harvard business school professor Niall Ferguson as "Chimerica". Ferguson believes "we are living through a challenge to a phenomenon Moritz Schularick and I christened “Chimerica.” In this view, the most important thing to understand about the world economy over the past decade has been the relationship between China and America. If you think of it as one economy called Chimerica, that relationship accounts for around 13 percent of the world’s land surface, a quarter of its population, about a third of its gross domestic product, and somewhere over half of the global economic growth of the past six years."

Along with helping the US economy recover, China has a unique position and policy to help the developing world at the same time. Not only does the West have the white man's colonial baggage to contend with, the western view of Africa is one of wasted aid and growing poverty. This view holds that, if Africa generates any kind of growth, it is in suffering—and in the overseas aid sent to address that, now a $40-billion-a-year industry, according to Time Magazine. Naturally, with a new appeal every year and a new disaster every other, some people are feeling donor fatigue. They have begun to wonder if all that money is doing any good. They argue that aid creates dependence, fuels corruption, undermines democracy and stifles development in Africa and some of the poor underdeveloped nations in Asia and Latin America.

Learning from the western experience, the Chinese have sought to avoid fueling the culture of corruption and dependence by staying away from cash hand-outs. Instead, the trade between Africa and China has grown an average of 30% in the past decade, topping $106 billion last year. Chinese engineers are working across the continent, mining copper in Zambia and cobalt in the Democratic Republic of Congo and tapping oil in Angola, according to Time. Nor is this merely exploitative. China bought its access by agreeing to create a new infrastructure for Africa, building roads, railways, hospitals and schools across the continent. The current economic crisis is not expected to affect China's march in Africa: on the contrary, with the West's plans in Africa on hold at best, Beijing views it as an opportunity to extend China's lead. "We will continue to have a vigorous aid program here, and Chinese companies will continue to invest as much as possible," Chinese Foreign Minister Yang Jiechi said in South Africa in January. "It is a win-win solution." Dambisa Moyo, who wrote Dead Aid, says those who need convincing about Africa should ask themselves if they are convinced about China, "because if you back China, you're backing Africa." Ecobank CEO Ekpe says part of the explanation for China's zeal for Africa is a new way of looking at Africans. "[The Chinese] are not setting out to do good," he says. "They are setting out to do business. It's actually much less demeaning."

Clearly, the Chinese objectives are not entirely altruistic. Their strategy is driven by enlightened self-interest in the developing world, which they see as source of commodities that their industries need as well as growing export market for their products and services. But the Chinese want to do good and do well at the same time by helping to lift people out of poverty in the developing world. By doing so, they want to be seen as friends and partners by the people in Asia, Africa and Latin America. The strategy enhances China's status as the new superpower that takes its global leadership role seriously.

Comments

Riaz Haq said…
Dambisa Moyo, a former economist at Goldman Sachs, and the author of "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa.", recently argued in a Wall Street Journal OpEd that "money from rich countries has trapped many African nations in a cycle of corruption, slower economic growth and poverty. Cutting off the flow would be far more beneficial."

He goes on to say, "Giving alms to Africa remains one of the biggest ideas of our time -- millions march for it, governments are judged by it, celebrities proselytize the need for it. Calls for more aid to Africa are growing louder, with advocates pushing for doubling the roughly $50 billion of international assistance that already goes to Africa each year.

Yet evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and the growth slower. The insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. It's increased the risk of civil conflict and unrest (the fact that over 60% of sub-Saharan Africa's population is under the age of 24 with few economic prospects is a cause for worry). Aid is an unmitigated political, economic and humanitarian disaster."
Riaz Haq said…
#Africa-#China Ties 2021: “China still addresses Africa’s hunger for structural transformation in a way that the West does not....Any African country with urgent need for new roads, bridges or ports, then Chinese finance and firms are the obvious option" https://www.economist.com/the-world-ahead/2020/11/17/african-countries-will-remain-best-friends-with-china

VERY THREE years African and Chinese politicians gather at a diplomatic jamboree known as the Forum on China-Africa Co-operation (FOCAC). The summits, which attract more African heads of state than annual UN gatherings, are waypoints in China’s long journey on the continent. Over the past three decades it has become the pre-eminent partner for many African countries. Its importance will be apparent again in 2021 at the next FOCAC meeting, the eighth, which is due to take place in Dakar, the capital of Senegal.

Yet the context for this summit is different from that of the previous seven. During the Trump presidency China’s role in Africa came in for increasing American criticism. In 2020 the secretary of state, Mike Pompeo, accused China of offering African countries little but “empty promises and tired platitudes”. Though the Biden administration is less likely to use provocative rhetoric, scepticism of Chinese intentions on the continent will nevertheless endure. So the coming year could prove a tricky one for African policymakers, who are already grappling with the fallout from the pandemic.

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China’s image in Africa was tarnished last year by the ill-treatment of African migrants in Guangzhou, a port city. That brought condemnation on social media and by African politicians. But, broadly speaking, African views of China are nuanced and resilient. Polling of 18 countries by Afrobarometer, a pan-African research group, released in September 2020, found that an average of 59% of respondents had a favourable view of China—marginally higher than of America (58%). No wonder African politicians are careful not to take sides.

Nor will they see much benefit in speaking out against China over issues such as Xinjiang, Hong Kong or Taiwan. China places great value on the 54 African countries’ votes at the UN and other international organisations. (In 1971 African votes ensured that the People’s Republic of China was admitted to the UN and that Taiwan was expelled.) It will reward those who vote with it and punish those who do not. Officials in Kenya are known to have studied China’s punitive response to Australian criticism of its human-rights records—and fear what would happen if their country did anything similar.

Even if African politicians wanted to speak out against China, few believe Western governments would support them if they did. “The West is unwilling to underwrite the cost of antagonising China,” says W. Gyude Moore, a former cabinet minister in Liberia, now at the Centre for Global Development, a think-tank. “The continent is best served by charting its own course.”

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