China and Africa: What the U.S. doesn't understand

July 2, 2013: 2:11 PM ET

Dogged by criticism that Beijing is eating Africa's lunch, China's relationship with Africa is complex and too often distorted by myth.

By Keith Proctor

130702133634-china-africa-614xa

FORTUNE -- Over the weekend U.S. President Barack Obama, on a three-country visit to Africa that concludes tomorrow, denied that America felt threatened by China's rising influence on the continent.

Cue the eye-rolling.

Recent stories published by CNN ("Obama's Goal in Africa: Counter China"), the Financial Times ("Obama's trip to Africa is too little – and very late"), and the GlobalPost ("Obama in Africa: China 1, US 0") share a theme: While American administrations dithered, or were tied up in Iraq and Afghanistan, the Chinese have been setting up shop in the 21st Century's next great growth region.

Seven out of the world's 10 fastest growing economies are African. According to a 2010 report by consulting firm McKinsey & Company, the rate of return on foreign investments in Africa was, in the first decade of this century, higher than in any other region. The International Monetary Fund (IMF) projected that Africa is now growing faster than Asia.

MORE: Why President Obama is skipping Kenya

Sino-African trade volumes have grown accordingly. Negligible in 2000, trade hit $198.5 billion in 2012. By comparison, U.S.-Africa trade volume was $108.9 billon, and is slated to fall further behind: Research from Standard Chartered estimates that trade between China and Africa will hit $385 billion by 2015.

Dogged by criticism that Beijing is eating Africa's lunch, China's relationship with Africa is complex and too often distorted by myth. Here are five examples of how we tend to get it wrong.

"It's all about oil"

Yes, Africa's natural resources are important to Beijing. According to the Council on Foreign Relations, roughly a third of China's crude oil imports come from sub-Saharan Africa. However, Chinese investment in Africa is far more diverse than some of the rhetoric suggests.

According to the Carnegie Endowment for International Peace, in 2009 only about 29% of China's foreign direct investment (FDI) went to the extractive industries. By contrast, in the same year, mining accounted for about 60% of U.S. FDI to Africa. Meanwhile, China -- which was called out last weekend by President Obama for not building enough plants in Africa -- invested more in manufacturing, and in African jobs, than the U.S.

"The new kid in town"

While the past decade has witnessed dramatic growth in Sino-African trade, Beijing's engagement in Africa is nothing new. The modern association between China and Africa stretches back to the 1950s, when the People's Republic of China competed with Taiwan for recognition as the "real" China. As African states won independence -- and would come to populate about a quarter of the UN's membership seats -- Beijing was anxious to isolate Taipei while building development relationships.

Deborah Brautigam, a Johns Hopkins China scholar, contends that Beijing's "one-China" policy continues to shape its African investments. Aid is primarily a diplomatic tool. As a consequence, Beijing offers development aid of some sort to every country with which it maintains relations (oddly including countries, like South Africa, which has a higher per capita GDP than China). Aid is part of a historical and diplomatic narrative, not simply a stratagem for snapping up Africa's resources.

"Africa for sale? Sold, to Beijing."

One might have the impression of Beijing as evil mastermind: marshaling state resources for the colonization of Africa. From reading some reports, one might think that's already happened. There are two points to make.

First, the scope of Beijing's investments in Africa are often grossly embellished. Good numbers simply aren't available. Beijing does not release aid figures, and China Exim Bank and China Development bank, the main lenders, publish no data. Most estimates are exaggerations, resulting from double counting and over-broad definitions that count all state-sponsored economic activity as "aid." According to Brautigam, the AidData estimate that Chinese aid to Africa is around $75 billion -- widely reported -- is rubbish.

MORE: Solar energy: African economies' secret weapon

While China's African aid data may be exaggerated, Brautigam writes that in 2010 the U.S. disbursed more in official finance to Africa than China. Furthermore, according to U.S. Government Accountability Office (GAO) data for 2007-2011, American FDI to the continent was bigger than Beijing's.

Second, Chinese aid and investment actors are organizationally stove-piped. Often the left hand doesn't know what the right hand is doing. Rather than acting in a unitary fashion, China in Africa is made up of many little actors. And those actors don't coordinate aid-investment policy. In other words, China doesn't build a hospital to win a mining concession.

This is not to say that Chinese dealings in Africa should be generalized as benign -- only that it's hard to generalize at all. The spectrum of Sino-African interactions is broad. It ranges from a Chinese commitment to build dozens of malaria clinics across the continent, to Chinese managers opening fire on protesting miners in Zambia. In Africa, China has many faces.

"Patron of pariah states"

One of those faces: patron of authoritarian regimes. Beijing has a reputation for supporting tyrants much of the West wouldn't touch. For its part, Beijing invokes a "non-interference" policy to excuse itself from domestic entanglements. Non-interference is a fiction -- while one may claim neutrality, investment always props up, insulates, and enriches the elites.

Yet the West should be careful of invoking a double standard. As documented by the Human Rights Watch, Ethiopia -- an autocratic, one-party state -- has not only been supported by Western aid, but used that aid as a tool of oppression: by withholding it from dissenters and non-party members.

Even where Western donors, like the World Bank or IMF, make loans conditional on good governance, Western trade and investment actors are more freewheeling. Unless official sanctions prevent them from doing so, American and European commercial banks extend loans where they see an opportunity for profit. Such loans do not hinge on good behavior.

"Those poor, helpless Africans"

Africans are not passive victims. Often they are savvy brokers and, in their dealings with Beijing, secure good deals. When they can, they shrewdly play outsiders against one another. For example, there is abundant international competition in resource-rich Angola, whose president famously warned his Chinese counterpart, "You are not our only friends."

Occasionally, perhaps, African states get the short end of the stick -- yet more often it seems they are simply overwhelmed by the volume of new business. As the Economist recently reported, rules in African countries may exist to protect workers and the environment, but institutions are often too weak to enforce them. Undoubtedly, some Chinese entrepreneurs take advantage, and occasionally that results in violent flare-ups, as it did last year over illegal mining in Ghana.

MORE: Welcome to the Great, Global Business Revolution

Yet despite concerns that Beijing antagonizes locals, there is no data to suggest xenophobia in Africa is on the rise. Reports that Chinese firms don't hire African workers appear to be unfounded. And while extensive polls are not regularly conducted, a 2007 Pew Center Research survey found that in a range of African countries -- Ivory Coast, Mali, Kenya, Senegal, Ghana, Nigeria, Tanzania, and Ethiopia -- between 67% and 92% of respondents held a favorable view of Beijing.

Africa: Prepped for Takeoff

This one isn't a myth. By many estimates, including a recent study by the World Bank, Africa is primed for impressive economic growth. After decades of poor health, epidemic underdevelopment, and political instability, the continent may finally be positioned to join the global economy. This would be cause for celebration. And regardless of the U.S.'s role in Africa's rise, we can surmise this: Beijing is committed to be more than a spectator.

Join the Conversation
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.