Category Archives: China-Africa

Djibouti Bound

Chinese warships leaving Zhanjiang, Guangdong province, China on July 11, 2017 bound for China’s first overseas military base in Djibouti. Photo credit: Xinhua/Wu Dengfeng.

CHINESE MILITARY PERSONNEL are now en route for Djibouti where they will garrison China’s first overseas military base, which it started building last year at a cost of $590 million.

The photo above shows the departure from Zhanjiang in Guangdong province of the South Sea Fleet’s Jinggang Shan, a Yuzhao class Type 071 amphibious transport dock that had previously been deployed in the search for the missing Malaysia Airlines Flight 370,  along with a second PLA-Navy ship, China’s sole semi-submersible Donghai Island class naval auxiliary ship.

The Horn of Africa country, only half as big again as municipal Beijing, is already home to US, French and Japanese military bases with a Saudi Arabian one, like China’s, under construction.

China’s base will be used for supporting peacekeeping (Beijing has deployed its first UN peacekeeping combat troops in South Sudan), international anti-piracy operations off the Somali coast and in the Gulf of Aden (in which China has taken part since 2008) and humanitarian aid.

It will also provide advanced support, should it be needed, for the more than 250,000 Chinese now working in Africa — and the Chinese investments where they work. Evacuations of nationals have already been needed in Libya and Yemen.

China stresses that Djibouti will be a logistics or support, not military base. The question is, however it is described, whether it is the first of one, several or many such overseas beachheads.

The US defence department’s recent annual report to the US Congress on China’s military prowess took this definitive view:

As China’s global footprint and international interests have gown, its military modernization program and become more focused on supporting missions beyond China’s periphery, including power projection, sea land security, counterpiracy, peacekeeping and humanitarian assistance/disaster relief (HA/DR). In February 2016, China began constitution of a military base in Djibouti that could be complete within the next year. China likely will seek to establish additional military based in countries with which it has long-standing, friendly relationships.

The US defence department pinpoints Pakistan as best fitting that bill. Given the growing economic interests at stake in the China-Pakistan Economic Corridor, which runs through both some insecure but strategically important territory, and China’s extensive role in building a deep-water port at Gwadar on the Arabian Sea coast, that seems a logical deduction.

However, many other countries will not be receptive to the notion of hosting PLA bases, and Chinese military doctrine sees prowess in cyber, space and information warfare as more potent than building a traditional network of military allies.

Indeed, current doctrine sees power projection assets as a vulnerability in modern warfare. That alone will be cause for China to move cautiously on establishing further bases.

At the same time, Beijing will use China’s economic linkages to cement support among those with similar security interests and to deter adversary power projection in third countries, particularly that by the United States.

For now, gaining access to foreign commercial ports for as a logistics base and for pre-positioning of support of “far seas” deployments by the PLA-Navy is likely to be the order of the day. That, anyway, is what would be needed for the HA/DR operations that Beijing is likely to concentrate on while its military learns to find its way around the world.

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A Kenyan One-China Lesson

WORD REACHES US from Nairobi of two curious incidents involving Kenyan authorities deporting groups of Taiwanese to China.

Last Friday, eight Taiwanese were forcibly sent to China in what Taiwan’s foreign ministry called an ‘extrajudicial abduction’. Although the eight had been on trial in Nairobi on fraud charges, they had all been acquitted and told to leave the country under their own steam within 21 days. However, police handed them over to Chinese officials who put them on a flight to Guangzhou.

Today, at least a further 15 and possibly as many as 37 Taiwanese, who appear to have been involved in the fraud case but details are confused, were also forcibly enplaned by police following a scuffle involving tear gas and flown to China. Kenya does not recognize Taiwan diplomatically so can argue that it was deporting Chinese nationals to China.

Beijing has, not surprisingly, praised Nairobi’s adherence to its ‘One China’ policy.

We have no idea of the details of the individual cases, said to involve a telemarketing scam of people in China perpetrated by a ring comprising nationals from both the mainland and Taiwan. (Update: The Ministry of Public Security said in a statement that China had legal rights of jurisdiction over 77 telecom fraud suspects being ‘repatriated’ from Kenya, including 45 Taiwanese.)

This may also be a case of Beijing throwing its weight about less than a month before a new, less-China-friendly government takes office in Taipei. The question is whether this is a warning shot at President Tsai Ing-wen and her pro-Taiwan independence party, or a harbinger of a more lasting chill in cross-strait relations.

Meanwhile, we understand that a further 31 people are awaiting verdicts in connection with the alleged telecoms scam that are not expected to be handed down until June. At least five are Taiwanese and the rest from the mainland.

One report says China has been talking to Kenya since the start of the year about extraditing all the suspects in the case to face charges in China. However, China and Taiwan have an agreement not to extradite each other’s citizens, so there may well be much more to come in this story.

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China’s Cautious $60 Billion For Africa

Chinese President Xi Jinping speaking at Forum on China-Africa Cooperation in Johannesburg, South Africa, Dec. 4, 2015. Photo credit: Xinhua/Lan Hongguang.

The Africa growth story may be overhyped — rising worries about debt and public finances in many African countries in the face of low global prices for natural resources are making the continent’s growth prospects less rosy — but that is not stopping Beijing pledging billions more dollars in development aid.

President Xi Jinping announced at the triennial Forum on China-Africa Cooperation (Focac) in South Africa that a larger-than-expected $60 billion worth of assistance and loans would be made available to Sub-Saharan African nations over an unspecified period. We shall return later to whether that is a lot or a little.

The newly pledged money is a mix of:

  • free aid and interest-free loans ($5 billion),
  • preferential loans and export credits ($35 billion);
  • additional capital for the China-Africa Development Fund ($5 billion);
  • additional capital for the Special Loan for the Development of African Small- and Medium-sized Enterprises ($5 billion); and
  • initial capital for a China-Africa production capacity cooperation fund ($10 billion).

The funding is probably a mix of old and new promises. Some will underwrite expanding trade. As of October, Africa’s exports to China, dominated by oil and minerals (85%), had slumped in value by 32% year-on-year, though they are virtually unchanged in volume.

Angola, South Africa, the Democratic Republic of Congo, Equatorial Guinea and Zambia — natural resources-rich all — are China’s main trading partners in Africa. Together, they account for more than 70% of all that China buys from Africa.

The slump in export values together with the steady rise in exports from China to Africa has turned Africa’s overall trade surplus with China into deficit for the first time since the early 2000s.

Stock of /China foreign direct investment in Africa, 2005-14. $ bn

The inflow of Chinese direct foreign investment to Africa fell by 40% in the first half of the year from the same period a year earlier, after having shrunk 5% last year over 2013.  Nonetheless, much of the newly pledged money will end up funding much-needed infrastructure projects that will also provide lucrative contracts for China’s road, rail, port, power-station and dam builders.

China’s investment in Africa has hitherto focused on natural resources and to a lesser extent farmland. The global slump in commodity prices, driven in part by China’s own slumping demand as its  economy slows, means that Chinese investors are looking to put their money elsewhere, at least for as long as it takes for this turn of the commodity cycle to pass.

Contrary to popular perception, most of the more than 2,300 Chinese companies doing business in Africa are privately owned, though the big state-owned ones dominate the big-ticket investment flows. China is still the largest lending country to infrastructure projects in Africa but in 2014 it accounted for only 4% of total commitments, compared with about 50% the previous year, a reflection of both the slowing economy at home and a more realistic eye being taken to the potential return on investments being made, as Chinese investors are also doing in Latin America.

All of which provides some background to whether $60 billion is a lot or a little — to which the answer is it is difficult to say.

Untangling the true level of Chinese investment in Africa is tricky. Official statistics put the stock of Chinese foreign direct investment in Africa at $32.4 billion as of last year (up from $1.6 billion in 2005). If all of the Xi’s pledged $60 billion went into FDI, it would triple the stock, which sounds impressive, but if that took, say, five years to happen, the rate of annual growth would decline by a quarter.

However, as noted above, not all the $60 billion will take the form of FDI — and FDI is a rough and ready reckoner of true investment levels anyway (for any country, not particularly China, which uses the standard OECD/IMF definitions of FDI). The numbers won’t include loan financing of capital investments, any investment that comes via third countries, usually tax havens and acquisitions of non-African companies that have assets in Africa. They will also undercount smaller investments, which tends to mean mom-and-pop scale retailing and manufacturing businesses (who also tend to get missed from the count of Chinese businesses in Africa).

Comparative annual inward flows of China FDI to Africa, 2005-14, $bn

Independent tracking under the aegis of the American Enterprise Institute and the Heritage Foundation that aims to get round this undercounting puts the flow of new Chinese FDI into Sub-Saharan Africa in 2013 at $15.25 billion against the official number of $3.37 billion, although we caution that that is commitments rather than actual flows. Between 2005 and now, the AEI estimates, Chinese firms have signed $197.2 billion in investments and contracts since 2005.

Sixty billion dollars would be a substantial but not transformative addition to that. We also note that Xi’s figure includes aid, about which China is far more secretive than FDI.

China is clearly not backing off its interest in Africa; a first military base on the continent, in Djibouti, is in prospect as sign of the magnitude of both of its national interests and assets in the content. But Xi’s latest assistance package indicates that Beijing is also maintaining a realistic view of what it can get for its money.

Update: According to a Foreign Ministry spokeswoman, China has helped Africa build 5,675 kilometers of railway, 4,507 kilometers of highway, 18 bridges, 12 ports, 14 airports and terminals, 64 power stations, 76 sports facilities, 68 hospitals, over 200 schools and 23 agricultural demonstration centers.

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China Breaks New Ground By Putting Boots On The Ground In South Sudan

IT HAS LONG been expected that China would deploy troops in Africa, even though doing so would mark a shift away from Beijing’s long-held policy of keeping itself, in public at least, at arm’s length from involvement in African conflicts.

State media said last year that Beijing would send 700 infantrymen to take part in the UN peacekeeping mission in South Sudan, UNMISS. The first of those boots are now on the ground. The rest — including a small contingent of female soldiers — will be there by March, complete with other staples of ‘self-defense’ — armored personnel carriers, drones, anti-tank missiles and other weapons.

China already contributes more personnel to UN peacekeeping missions than any other permanent member of the Security Council. But most of its some 2,000 blue hats, mainly sent to Africa, are engineers, medical staff and other civilian workers, not, as in the case of South Sudan, a battalion of combat troops.

China has invested heavily in South Sudan’ oil, which accounted for 5% of China’s total crude oil imports as recently as December 2013. However, renewed civil war has since cut production by a third to some 160,000 barrels a day.

The troubled situation in the country, which separated from Sudan in 2011, has worsened since last December when the president accused his sacked deputy of attempting to orchestrate a coup. A potential humanitarian disaster threatens to make it worse still. Some 2.5 million people are facing famine; that is on top of 1.9 million already displaced by the conflict, in which at least 50,000 have been killed.

Oil-producing regions have seen some of the worst of the most recent violence, but Chinese oil workers in South Sudan and Sudan have been particular targets of kidnappings for several years. State-owned China National Petroleum Corp. (CNPC) owns 40% of the consortium that dominates South Sudan’s oil industry. Late last year, it signed a deal with Juba to stabilize then increase oil output.

Putting troops in the country will stiffen Beijing’s ability to push for a diplomatic end to the conflict, which, in a rare example of cooperation, it has agreed to work closely with the West towards resolving.  In this sense, the arrival of Chinese combat troops, even if they are wearing blue hats, underscores not just an international power willing to protect its overseas interests but also one willing to shoulder more international responsibility — for which, it should be said, the U.S. and others have been calling for some time.

This foreshadows, though, what will be a gradually increasing shift towards Beijing being far more of a global actor, albeit taking on a role it will want to play to its own script. As President Xi Jinping said in late November, “We should conduct diplomacy with a salient Chinese feature and a Chinese vision.”

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More Chinese Caught In Ghana Crackdown On Illegal Gold Mining

More trouble in Ghana for Chinese miners working the country’s small and usually illegal gold mines. Police are holding 124 Chinese after a series of raids on workers suspected of illegal working. The high price of gold has brought an influx of pick-and-shovel wielding Chinese to Ghana, even though foreigners are banned from small scale mining in the country, which is the continent’s second largest gold producer after South Africa.

Last October, a 16-year old Chinese boy was killed and more than 100 other Chinese arrested in a joint raid by police and immigration authorities on  suspected illegal gold mining in the Ashanti region. Now as then, the incident is awkward for Beijing which is caught between assuring a domestic audience that it can look after the interests of its citizens abroad while reassuring skeptical African countries that the increasing legions of Chinese working in Africa will be good local citizens.

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Jinchuan Goes Platinum In South Africa

Four-fifths of the world’s known platinum lies under South Africa. The country’s platinum mines were at the center of last year’s strikes by mine workers, and its broader mining industry is going through some turmoil. Anglo American Platinum, more usually known as Amplats, the world’s top platinum producer, is planning to mothball two unprofitable shafts and sell off another mine.

Yet China Development Bank is backing one of the few new platinum mines there, extending a cheap $650 million loan late last month to Wesizwe Platinum’s Bakubung mine which is due to start production in 2018. In what is thought to have been the first Chinese investment in the sector, the mining group Jinchuan has taken a 45% stake in Wesizwe.

Jinchuan is best known as a nickel, copper and cobalt producer though it is also China’s leading platinum producer. However, it has taken a different tack with Wesizwe than it did with its acquisition of South African copper and cobalt miner Metorex. That it bought outright and delisted. With Wesizwe, it has gone the route of being a minority partner. Platinum mining is such a specialized business. There is not much expertise outside South Africa. Jinchuan has a slogan, “We gather the Valuables, The Country and People will Prosper.” The valuables here are platinum mining engineers as much as the metal itself.

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Sinopec Buys Oil Reserves in Nigeria

China Petroleum & Chemical Corp. the state-owned oil company usually known as Sinopec, has reportedly signed a preliminary deal to buy onshore oil blocks in Nigeria from France’s Total. The price is said to be $2.4 billion. Sinopec is seeking to bolster its diminishing reserves of crude, which declined to 2.8 billion barrels at the end of last year from 3.3. billion barrels in 2007. In 2009, it acquired reserves in Nigeria, Cameroon and Gabon when it bought Addax Petroleum. Sinopec’s parent, China Petrochemical, said at the start of this year that Sinopec aims to raise overseas production to 50 million metric tons (366 million barrels) of crude a year. Production was running at 23 million tons last year.

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