According to Standard Bank, South Africa’s top export to its biggest trading partner, China, is its currency, the rand.
In its Africa Macro report released on Thursday Standard Bank noted that China has been purchasing an average of US$1.1 billion per month of physical rand (notes and coins) since November 2010. “China imported US$3.4 billion worth of ZAR in 2010 and another US$10.9 billion in the first three quarters of 2011,” said Standard Bank. Interestingly, the emerging super power has also been buying around US$1 billion worth of Swiss Francs every month.
China is desperately trying to wean itself off the dollar and in the rand it might see a currency it can more easily control. South Africa’s other big exports, which account for almost a fifth of all African exports to China, are commodities. I’m no economist, but demand for a country’s commodities normally pushes the value of its currency up – witness Australia – and by buying both, might China not be creating its own virtuous cycle?
The Chinese bank ICBC, which owns a 20 percent stake in South Africa’s Standard Bank, has opened an office in Cape Town. At the inauguration of the new office, Jiang Jianqing, Chairman and Executive Director of ICBC, said that the office reflects the depth of his company’s commitment to Africa. A report at 4-traders explains:
By the end of September 2011, the two banks had been involved in over 110 cooperative projects, covering multiple areas such as corporate business, settlement and cash management, IT, money market and risk management. The cooperation brought not only a good return on investment, but also a deeper understanding of the African market for ICBC. The total amount of financing agreements signed by ICBC was over USD7-billion, making ICBC one of the most influential Chinese financial institutions in Africa
China-Africa trade volume reached $122.2 billion in first three quarters of 2011, Ghana Business News has reported. It quotes Shen Danyang, spokesman for the Ministry of Commerce:
Shen said China has become Africa’s biggest trading partner, with bilateral trade growing at an annual rate of 28% over the past 10 years, adding that the level of trade in 2011 is expected to set a new annual record, as bilateral trade has already almost matched 2010. He said China invested $1.08 billion in non-financial sectors in Africa during the first three quarters of 2011, up 87% from one year earlier.
Simon Freemantle and African Boots contributor Jeremy Stevens, who are both economists at Standard Bank, write that China’s investment in African agriculture is set to intensify. The trend, they note, is not without its perils:
The continent suffers from an acute lack of skills and capital in unlocking its inherent potential. Yet, as has been evident in many of the land leasing deals signed in SSA [Sub-Saharan Africa] over the course of the past decade, too often investments are poorly structured, undervaluing the agricultural assets at stake. Managed well, partnerships with China can be meaningful. However, domestic food security must be placed first.
Meanwhile China Daily reports that Chinese construction companies, who had their fingers burnt in North Africa, are looking at investing in developed economies instead. It quotes Diao Chunhe, chairman of the China International Contractors Association:
Market risks are soaring because of political unrest…Accelerating expansion into high-end markets, such as the US and Europe, while stabilizing our traditional markets, is our main strategy during these turbulent times…The outbreak of the sub-prime crisis in the US, and the debt crisis in Europe, both of which resulted in a shortage of funds in developed economies, mean that we have opportunities to increase market share there.
The Financial Times thinks we should bid farewell to the BRICs, because the term corrals together incompatible political systems, ignores other players – like Indonesia and Turkey – and “now obscures more than it illuminates.”
The Brics caught a tide. The idea has brought deserved fame and fortune to its author Jim O’Neill at Goldman Sachs. But it defies the complexities of the shifts in power and interests in the international system. To lump together China and India, Brazil and Russia is to nourish a narrative that the new global order is best defined as a contest between the west and the rest.
The West seems to agree. In a report on the UN Convention on Climate Change in Durban happening later this month, titled COP17: Redefine rich and poor countries, the Mail & Guardian quotes Connie Hedegaard, the European commissioner on climate policies:
We need to discuss whether we can continue to divide the world in the traditional thinking of the North and the South, where the North has to commit to a binding form whereas the South will only have to commit in a voluntary form.
China is unlikely to be persuaded. Its chief negotiator on climate change, Xie Zhenhua, recently met with his BASIC (Brazil, South Africa, India, China) counterparts in Beijing, where they no doubt agreed on a common front: making life difficult for America. The US won’t sign the Kyoto Protocol until China agrees to; China won’t sign it until America agrees to. The Middle Kingdom recently edged ahead of the US as the world’s biggest polluter, but says it is still a developing country and as a result can’t afford to be held to the same standards as rich countries. Groupings like BRICS and BASIC help China make this and other arguments, so it will probably see life in the the appellations long after economic analysts declare their passing.
The BRICS are, for example, still opposing foreign intervention in Syria. They released a joint statement on Thursday, saying that “the only acceptable scenario for resolving the internal crisis in Syria is the immediate start of peaceful talks with the participation of all sides.”
In a Daily Telegraph editorial, Damian Thompson, who delights in having been called a “blood-crazed ferret”, has called China’s relationship with Africa not just an example of neo-colonialism, but neo-slavery too:
From a moral point of view, China’s policy towards Africa is despicable. But it’s ingenious, too. Beijing has worked out that, by virtue of being a non-Western power, it can pose as a “developing country” while creating its sub-Saharan satrapies. The anti-racism lobby in the United Nations makes sure that the finger of guilt is pointed firmly at the former colonial powers, who are always happy to put on a display of breast-beating by, say, the Archbishop of Canterbury. Meanwhile, something close to slavery is being quietly reintroduced to the dark continent (which is how China thinks of it).
There are many problems with his narrative, and all narratives like it, but foremost among them is that African people are reduced to a passive, pliable, homogeneous whole. African countries might sometimes get a raw deal from China, but they should take the blame for that too.
You might think Africans would disagree with Thompson, but in a speech yesterday, Zwelinzima Vavi, general secretary of the ANC’s alliance partner COSATU, had this to say:
The scale of the sham of independence of our continent needs to be exposed. Either we export our minerals to our colonial masters, or they control our finances, or both. In some countries, foreign exchange earnings and the operations of their central banks reside with the colonial masters while in others, the mines and strategic industries are owned by colonial masters. In some countries even the land is owned by colonial masters, the very land question that triggered the anti-colonial struggles is now back with a vengeance, threatening livelihoods of many small farmers.
Vavi shrouds who exactly he is referring to in Marxist rhetoric, but this looks like just one item to add to the long list of things on which COSATU and the ANC, which sends its party leaders to Beijing for political education, disagree.
The Lowy Institute is taking your questions about China’s involvement in Africa to He Wenping, Director of African Studies at the Chinese Academy of Social Sciences. It’s a three part interview. Parts one and two have already been published – here and here – with part three scheduled for next week. He Wenping has so far talked about the nature of Chinese aid in Africa and whether India and China are co-operative or competitive powers on the continent.
From Part I:
China’s aid to Africa is based on projects, not budget support. Traditional donors usually put their money into the recipient’s budget, so maybe it’s easier for corruption to happen. So if there’s a plan to build a hospital in a country, the money will not go through that country’s financial system. It will be delivered directly to the company that’s building the project.
And Part II:
India is a democracy, and of course they are also a very heterogeneous society, so how they maintain stability for a long time, how they can balance rich and poor — I think that experience is very attractive to African countries. But I think China’s experience is also unique, because we have made such economic progress in a single generation. There are now seven Special Economic Zones in Africa receiving Chinese aid. We originally planned to set up five, but then Africa countries were quite enthusiastic, so now the total number is seven.
If you have a question for He, send it to blogeditor@lowyinstitute.org.
Finally, Horace Campbell, who is Professor of African American Studies and Political Science at Syracuse University, has visited Shaoshan, the birthplace of Chairman Mao. His paean to the Great Helmsman is convoluted, but I can’t help thinking that Comrade Vavi would enjoy it. Here’s his conclusion, in which Campbell informs us, with great insight, that “Mao Zedong was a leader who had embarked on a socialist project.”
Africans can learn a lot not only from China, but also from the rest of East Asia. The principal lesson is that none of these societies have been able to lift the standard of living of the people without clear and strong intervention by the state to direct resources. These Asian societies eschewed the crude and vulgar ideas of neoliberal capitalism, and even if they followed a capitalist path, insisted on following paths consistent with their cultural realities. Mao Zedong was a leader who had embarked on a socialist project. Those sections of the political leadership who opened up to the West so that China became a reservoir of cheap labour are now faced with the daily information of the deepening depression and the rise of conservative and semi-fascist individuals and parties all over Europe. There is still a left section of Chinese society and it is my view that the trip to the birthplace of Mao was embedded in that ongoing debate on the paths for China in the 21st century.
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