China Flexes Economic Muscle Throughout Africa
- Staking a Claim: China Flexes Economic Muscle
Throughout Burgeoning Africa --- Beijing Forges Deep
Alliances With War-Torn Nations, Countering U.S.
Influence --- A Dam Gets Built on the Nile
By Karby Leggett
29 March 2005
The Wall Street Journal
(Copyright (c) 2005, Dow Jones & Company, Inc.)
ADDIS ABABA, Ethiopia -- When this east African
country went to war against neighboring Eritrea in the
late 1990s, the U.S. responded by evacuating its Peace
Corps volunteers, scaling back military aid and
issuing a security warning to U.S. citizens and
The Chinese government had a different reaction.
Beijing saw the war -- and the reduced U.S. presence
-- as an opportunity to expand its influence. It
dispatched even more diplomats, engineers, businessmen
and teachers to Ethiopia. New aid grants soon rolled
in, followed by bank credits for Chinese companies
Today, China's influence in Ethiopia is overwhelming.
Its embassy is among the largest in the country and
hosts more high-level visits than any Western mission.
Chinese companies have become a dominant force,
building highways and bridges, power stations,
mobile-phone networks, schools and pharmaceutical
plants. More recently, they have begun exploring for
oil and building at least one Ethiopian military
It's all part of Beijing's broad push into Africa.
Aiming to secure access to the continent's vast
natural resources, China is forging deep economic,
political and military ties with most of Africa's 54
countries. There's more at stake than just fuel for an
economic juggernaut, however, say senior Chinese
officials, executives and Western diplomats. In
Africa, as in many other parts of the developing
world, China is redrawing geopolitical alliances in
ways that help propel China's rise as a global
superpower. China is courting other countries to
support its plan to reassert political authority over
Taiwan and seeking a counterweight against U.S. power
in global bodies such as the United Nations. It's also
thinking long-term, cultivating desperately poor
nations to serve as markets for its products decades
down the road.
For the U.S., China's Africa initiative poses new
challenges. Despite a landmark trade pact signed with
Africa in 2000, U.S. influence has leveled off in many
African countries and in some cases declined. Now, as
Washington focuses its attention on the Middle East,
it faces a formidable player in a region key to future
U.S. economic and security interests.
In oil-rich Nigeria, China is rebuilding the railroad
network. In Rwanda, Chinese companies have paved more
than 80% of the main roads. In more than a dozen
African countries, Chinese firms are searching for oil
and gas and rebuilding electricity grids and telephone
networks. Chinese companies own one of Zambia's
largest copper mines and run a major timber operation
in Equatorial Guinea. In tiny Lesotho, Chinese
businessmen own and operate nearly half of all the
supermarkets and a handful of textile companies.
Though these interests stretch from massive
state-funded projects to small private ventures, they
all share a common thread: Beijing's policy of
actively encouraging its companies and citizens to set
up shop in Africa at a record pace.
"China has simply exploded into Africa, as in
`Katie-bar-the-door stuff,' " says Walter Kansteiner,
a former U.S. assistant secretary of state for African
affairs. Adds Rep. Ed Royce, a California Republican
and vice chairman of a House subcommittee that deals
with Africa: "China's increasing engagement in Africa
is a concern and we need to focus on it before Beijing
becomes fully established."
Last year, Africa supplied more than 15% of U.S. oil
imports, and the figure is forecast to rise sharply in
the decade ahead. Africa is also becoming a major
global supplier for metals, timber and other natural
Yet in some of Africa's most promising commodities
markets, China is now challenging U.S. and other
Western firms for access to these goods. Since 2000,
China's trade with Africa has nearly tripled to almost
$30 billion. Last year, China spent almost $10 billion
on African oil, accounting for nearly one-third of its
total crude imports. That's twice as much as it
imported from Saudi Arabia, traditionally one of
Beijing's biggest suppliers. In oil-rich Angola, where
ChevronTexaco Corp. and Exxon Mobil Corp. have large
operations, China has become a major buyer and an
increasingly active investor.
Unlike the U.S., which bars U.S. companies from doing
business with some outlaw regimes, Beijing expresses
no qualms about dealing with the continent's most
brutal and corrupt leaders. Instead, Chinese leaders
prefer to view their relationship through a
North-South prism, emphasizing the need for developing
nations to band together against the industrialized
West. "China is ready to coordinate its positions with
African countries . . . with a view to safeguarding
the legitimate rights and interests of developing
countries," said Chinese Premier Wen Jiabao during a
2003 speech in Ethiopia.
What's more, many Chinese companies operating in
Africa are government-owned and less concerned with
near-term profits. Indeed, by reaching out to African
leaders who are shunned by Western nations, and
throwing money at projects Western companies avoid,
Chinese officials and businessmen say they are able to
secure more business deals and build political
influence at a far more rapid pace.
Consider Sudan, a war-torn nation set across from
Saudi Arabia on the coast of the Red Sea. In 1997, the
U.S. passed a law barring U.S. oil companies from
investing there, saying Sudanese leaders had engaged
in human-rights abuses and sponsored terrorism. In the
years that followed, China invested more than $2
billion in Sudan's oil industry. Today, Sudan provides
China with nearly 5% of its annual oil imports.
Beijing, meantime, has become one of Sudan's largest
arms suppliers, according to foreign diplomats and aid
workers in the region. China's foreign affairs
ministry declined to comment.
More recently, the U.S. sought to impose United
Nations sanctions on Sudan amid continuing violence in
the Darfur region, where pro-government militiamen
have raped and murdered civilians while suppressing a
rebel uprising. Beijing deflated these sanction
efforts by threatening to use its veto power in the
U.N. Security Council. Yet far from seeing itself as
complicit in Sudanese violence, Beijing sees the oil
project as a symbol of China's reliability when others
have left. "It's part of our policy of long-term
cooperation that helps both sides," says Li Xiaobing,
a senior Africa official at China's Ministry of
A similar dynamic is now playing out in Zimbabwe. Over
the past three years, the U.S. and European Union
imposed sanctions on Zimbabwe President Robert Mugabe
and dozens of his closest government officials. In
power for 25 years, Mr. Mugabe presides over what is
widely regarded as one of Africa's most corrupt and
ruthless regimes. Human-rights organizations and
Western governments regularly cite his regime for its
use of arbitrary arrests, torture and murder to
suppress political dissent.
By sanctioning Zimbabwe, the U.S. and EU hoped to
isolate and ultimately unseat Mr. Mugabe. China, as a
matter of policy, has worked to blunt the impact,
boosting aid and investment. Last year, it opened
direct flights between the two countries. Chinese
leaders still afford Mr. Mugabe huge respect. Since
1980, Beijing has invited the president to China seven
times, feting him at banquets. Dozens of Chinese
leaders, including former Communist part boss Jiang
Zemin, have visited him.
The close ties are now paying dividends for such
companies as China National Aero-Technology Import and
Export Corp., or Catic. A trading company jointly
owned by two large Chinese aerospace concerns, Catic
between 2003 and 2004 signed a series of contracts
valued at $300 million to rebuild Zimbabwe's
electricity grid. It has a raft of other deals in the
pipeline -- including possible military aircraft
sales, company officials say. "We see Zimbabwe as a
great opportunity, a great place to make money," says
Wang Dawei, the company's vice president.
A spokesman for China's Ministry of Foreign Affairs
declined to discuss Mr. Mugabe's human-rights record,
saying "China and Zimbabwe have a traditional
friendship and a relationship based on cooperation."
There is also a softer side to China's pursuit of
Africa, one that could help Beijing if regimes that
it's closely associated with, such as Sudan and
Zimbabwe, are toppled. In 2000, Beijing voluntarily
waived $1.2 billion in sovereign African debt and it
recently agreed to bring some 10,000 African students
to China on scholarships. Across Africa, it has
dispatched hundreds of doctors and teachers in recent
China's ties to Africa date back to the 1950s, when
Beijing threw its support behind African independence
movements as a way to counter U.S. and Soviet
influence in the region. These days, Beijing's
emissaries to Africa have swapped their uniforms and
weapons for business suits and name cards. In 2000,
China established the pro-business China-Africa
Cooperation Forum with 44 African nations, paving the
way for a free-trade and investment pact with the
Few countries have felt China's influence as much as
Ethiopia. Though China established relations with
Ethiopia in 1970, ties were limited until the
mid-1990s. That's when Beijing initiated a broader
push across Africa in an effort to secure natural
resources and political influence on the continent.
A decade later, Ethiopia has become a reflection of
China's wider ambitions in Africa and the changes it
portends for the region. A poor, landlocked nation of
68 million people, Ethiopia lacks the vast natural
resources that have drawn China's interest in other
countries. But it has something else Beijing craves:
geopolitical clout in the region. Ethiopia is the
source of the Blue Nile, the river that slakes Egypt's
thirst. It is the meeting ground between largely
Muslim north Africa and the Christian south. And it's
the seat of the African Union, the political body that
represents the continent.
Wu Ping, a tall man in his mid-40s, was one of
Beijing's pioneers in Africa. In 1993, he was
dispatched to Ethiopia by Catic, the state firm
rebuilding Zimbabwe's electricity grid. His simple
orders: open a trade company and develop political
relationships. Mr. Wu began by selling things like
milling equipment for sugar cane. Later he branched
into tractors. Though he made little money, he forged
close relations with Ethiopian officials, partially,
he says, by paying the occasional bribe. "Sometimes
it's the only way to get things done in Africa," he
says. A Catic spokesman in Beijing says the company
has a strict internal policy against paying bribes and
denies it's a widespread problem.
Today, Mr. Wu cruises around Addis Ababa in a Toyota
Land Cruiser and presides over a growing business
empire. His latest project: an $11 million airport
hanger that, when complete later this year, will be
able to house the world's largest aircraft.
To secure the contract, Mr. Wu beat out an Australian
company by deliberately underbidding the contract.
Though he will lose money on the deal, he says it's
all part of Catic's strategy. "Almost every African
leader passes through this airport to attend meetings
at the African Union," he says, standing a short
distance from dozens of Chinese and African workers
working at the construction site. "So they will all
see our hangar."
Even more important, Mr. Wu says the owner of the
hangar, Ethiopia Air, is mulling a large order of
propeller aircraft, and the hangar contract has opened
the door with officials who will play a role in that
decision. "That's my company's real goal in Africa --
to sell airplanes, both commercial and military," he
Unlike Mr. Wu, Deng Guoping, general manager of China
Road and Bridge Corp. in Ethiopia, says he's not sure
his company will ever make money here. In the past six
years, Mr. Guo has paved five highways stretching more
than 300 miles. Three more roads are under
construction and he's bidding on another three.
In all, Chinese contractors have stitched together a
road network that reaches Ethiopia's northern border
with Sudan to the eastern seaport of Djibouti to the
southern border area with Kenya. China Road secured
most of its contracts through public tenders. Yet Mr.
Deng says he is instructed to slice projected profit
margins so thin -- about 3% -- that losses are
inevitable, given perennial cost overruns in Africa.
Western businesses, by contrast, typically pad bids
with projected profits of 15% and more. Even so, Mr.
Deng has his eye on a range of new projects, including
water reservoirs, airport facilities and a railway
project. "We're a government company and the Chinese
government wants us here building things," he says.
The U.S. provided Ethiopia with nearly $500 million in
aid last year. But for U.S. companies, Ethiopia's
small market, uncertain legal system and sometimes
fast-changing political currents make the country a
risky place to do business. One of the only U.S.
companies with substantial business in Ethiopia is
Boeing Co., which supplies Ethiopia Air with the
passenger jets for its international routes.
In contrast, Chinese companies say these factors
sometimes helps advance Beijing's wider goals. The
story of Jiangxi International Economic and Technical
Cooperation Co., another state firm active in
Ethiopia, explains how. A few years ago, a flood in
Ethiopia left a few hundred people homeless. Not long
after, Beijing pledged about $4 million to build them
new homes. It hired Jiangxi International as
contractor. At a ground breaking ceremony, China's
ambassador and Ethiopia officials shook hands and
smiled for photographers.
About a year later, eight modern apartment buildings,
each five floors with pink walls and blue-trim
windows, were completed. But the homeless families
never moved in. Instead, the complex was handed to
Ethiopia's Ministry of Defense, which used them to
house its own personnel. Today, a corrugated metal
fence rings the complex, with a small group of guards
stationed at one corner. "We don't really care who
uses it," says a senior executive at Jiangxi
International, requesting his name not be used. "It
was a political task for us and so long as Ethiopia
officials are happy, our goal is fulfilled."
A spokesman for Ethiopia's Ministry of Defense said
the flood victims didn't like the apartments and were
relocated to another neighborhood, and that the
Ministry later purchased the apartment block.
Lately, Beijing has begun winning projects that have
geopolitical relevance, such as Ethiopia's Takazee Dam
-- a massive, $300 million hydro-power station that is
rising on the headwaters of the Blue Nile River. Set
deep in a mountainous region near the border with
Sudan and Eritrea, the Takazee Dam has been on
Ethiopia's drawing board for over a decade. But
getting it off the ground hasn't been easy, thanks to
Egypt. Cairo has long feared any project that could
affect the flow of the Nile, viewing its own access to
those waters as a matter of national security. Indeed,
so great was its concern over Takazee that Egyptian
officials have made clear that any attempt to divert
Nile water could result in military action, according
to senior Chinese and Egyptian officials.
That warning scared off the World Bank and other
international financial organizations, and also raised
concern among potential foreign contractors. Several
years ago, Ethiopia announced it would finance the
project on its own. Though a handful of Western
contractors submitted bids, the Ethiopian government
awarded the project to Chinese companies. Since then,
Egypt has taken a more low-key attitude toward the
dam. Chinese engineers say there are no immediate
plans to divert the dam's waters for other uses, such
Today, the Takazee Dam is inching toward completion.
Already, hundreds of Chinese engineers have carved out
a vast administrative camp, an underground tunnel
nearly a mile long and deep caves that will hold
massive power turbines. Later this year, they will
begin pouring the 600-foot-high cement dam. Once
complete, the Takazee dam will stand as one of
Africa's largest, and will help change the lives of
those who live in northern Ethiopia, where electricity
is often nonexistent. Ultimately, some of the power
could be pooled into a regional power grid.
That would allow neighboring countries to tap into the
power. And it would also further China's ambition of
expanding oil and mineral exploration in the region,
particularly in southern Sudan. Says Girma Biru,
Ethiopia's Minister of Trade: "China has become our
most reliable partner and there is a lot we can learn
from Beijing, not just in economics but politics as well."
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