13. the Chinese in Ethiopia
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GA ISIG Study Tour 2013 (Ethiopia) 13. The Chinese in Ethiopia Summary Curriculum Links-A level Paths to development There are two main areas of Chinese involvement in Africa – aid and Cultural diffusion trade. There have been dramatic changes over the past 20 years and this Successful regeneration involvement is having a significant impact on global patterns of both aid Social political tensions and trade. Changing places Emerging powers/Newly-Emerging According to the excellent AidData statistics, China had an estimated Economies – China 2622 aid projects in Africa in 2016, up from 1673 in 2014. The leading Changing relationships with super recipient of China’s aid was Tanzania with 260 projects, followed by powers Ghana with 242. Ethiopia had 135 projects. Not only has the quantity of Development aid and record of success projects increased but there has also been a change in the funding opportunities. New multilateral funding agencies such as the Asian Key Words Infrastructure Investment Bank (AIIB) and the New Development Bank Imports have been expanded to include African countries. These institutions are Exports now challenging the multitude of existing multilateral agencies such as Balance of trade the World Bank, The African Development Bank and the United Nations Foreign Direct Investment (FDI) Development Programme (UNDP). Natural resources Globalisation AidData research is also leading to a re-examination of the criticisms of China’s role in Africa. Work by Parks (2016) is demonstrating that many of the long-held beliefs are incorrect. They have resulted from a fear of Questions to consider competition rather than a close examination of the available data on the part of the Global North. Myths such as ‘China's aid to Africa is all about 1. Log onto the AidData web site at natural resources’ and ‘China favours authoritarian and corrupt African http://china.aiddata.org/ and open the regimes’, can no longer be supported. new Geospatial dashboard. Click on Ethiopia and examine selected projects. Since the turn of the 21st century, Chinese state-owned and private enterprises have poured into African countries, seeking natural 2. Interrogate Figure 3 and provide a resources, new markets, and other business opportunities. China’s trade brief explanation of the main changes with the continent has skyrocketed; in 2009, China surpassed the United that have taken place in China’s trading States to become Africa’s largest trading partner, and by 2014 flows relationship with sub Saharan Africa exceeded U.S. trade with the continent by more than $120 billion. since 1990. In 2014, export destinations such as Brazil, China, and India, accounted 3. The Addis Ababa-Djibouti railway for over 50 percent of sub-Saharan African exports, with China opened to traffic in late 2016. Examine accounting for about half of that. Fuel, metal and mineral products the economic, political and social represent 70 percent of sub-Saharan African exports to China whilst the implications of this new transport link. majority of sub-Saharan Africa’s imports from China are made of 4. Draw up a table that lists the main manufactured goods, followed by machinery. arguments for and against the Chinese Total exports are now running at around $450 billion compared to less involvement in Ethiopia. than $60 billion in 1990. Imports in 2014 were around $375 billion compared with $50 billion in 1990. The African balance of trade deficit has increased from around $10 billion to over $75 billion. 1 GA ISIG Study Tour 2013 (Ethiopia) Figure 1. Constructing a new road in Tigray with Chinese finance and supervision [August 2013] ©Dr Kevin Cook Background information provided by Study Tour participants Judith Mansell and Kevin Cook Introduction The global development aid landscape is changing with recipients becoming donors and they account for an increasing proportion of international development finance. Leading the way is China and its unique way of delivering its assistance is challenging the old ideas of aid donors as being from the Global North. China now has a flourishing bilateral aid programme and it has also helped to create alternative sources of multilateral funding such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank; institutions that are challenging the multitude of existing multilateral agencies such as the World Bank, The African Development Bank and the United Nations Development Programme (UNDP) In order to understand why China is behaving as it is, we need to understand the different economic motives for both multi-national companies and countries to invest overseas. One approach is to consider investment as being of two types. Those countries, such as India, have seen Africa as a source of markets for their products. Such trade has been encouraged by the neo-liberal policies set in place over the past 30 years. With the reduction in tariffs and the growth of globalisation, countries able to expand their overseas markets have generally flourished. On the other hand China held up as a perfect example of a country investing overseas mainly for resource reasons. It is not looking for major markets at the moment. “Resource-seeking” includes making use of cheap labour as well as gaining access to resources such as minerals and agricultural products. As a result, China’s foreign aid has been labelled as “rogue aid”, that is aid that is unrelated to recipient need and is determined by the donor’s natural resource needs and a wish to forge international alliances. It must be noted, however, that not all commentators accept this view. Thus while political considerations may well shape its aid allocations, China does not pay substantially more attention to politics compared to Western donors. What is more, China's aid allocation seems to be widely independent of recipients' natural resource endowments and overall, denoting Chinese aid as “rogue aid” seems unjustified. Why, then, is China investing so heavily in other countries and especially in Africa and Ethiopia? 2 GA ISIG Study Tour 2013 (Ethiopia) The Chinese in Africa There is no doubt, despite the difficulties of obtaining up to date accurate information, that China is investing considerable sums of money in Africa’s development. Over the period 2003-2013 China committed $75bn (£48bn) to aid and development projects in Africa. This is less, however, than the $90bn US invested over the same period. Data collected by researchers at AidData in the US challenge the dominant ‘resource-seeking’ view to explain China’s actions. AidData’s database is based on a wide set of sources and includes few mining projects and, while transport and energy projects account for the largest investments, hundreds of millions of dollars have been invested in health, education and cultural projects. Figure 2. Screen dump from AidData Tracking Chinese Development Finance Figure 2 is a screen dump taken from AidData’s interactive map of China’s December 2016 projects in Africa’s as of December 30th 2016. It provides information on 2622 projects, up from 1673 in 2014. The leading recipient of China’s aid is Tanzania with 260 projects, followed by Ghana with 242. Ethiopia has 135 projects. In 2015, an Aid Data researcher Brad Parks argued that a range of commonly stated criticisms about China’s aid to Africa were incorrect. Five of these were: China now provides more aid to Africa than the US. Using the OECD definition of aid, China provided approximately $31.5 billion of aid to Africa between 2000 and 2013 whilst the US gave $92.7 billion. Chinese development finance is all about the “hardware of development” (e.g., roads, ports, railways, refineries and electrical grids). AidData suggest that whilst China has focused its efforts in these sectors, it has also invested in Africa’s agricultural, educational, and health sectors. The only major difference to western aid efforts lies in the lack of investment by China in environmental projects. China's aid to Africa is all about natural resources. It is the less concessional and more commercially oriented forms of state financing known as ‘other-official flow’s or OOF and not strictly aid, that China tends to lend to countries rich in natural resources with higher levels of corruption. China gains friends who vote for them at the United Nations. This is one of the few myths that is true. But a similar relationship exists between recipients of US aid and positive voting patterns at the UN Security Council. China favours authoritarian and corrupt African regimes. This myth is not upheld by the AidData analysis. Instead it appears that China makes its aid allocation decisions on humanitarian and socioeconomic need; in common with the US. China’s trade with Africa Since the turn of the 21st century, Chinese state-owned and private enterprises have poured into African countries, seeking natural resources, new markets, and other business opportunities. China’s trade with the continent has skyrocketed; in 2009, China surpassed the United States to become Africa’s largest trading partner, and by 2014 flows exceeded U.S. trade with the continent by more than $120 billion. These trends coincided with an explosion in optimism about Africa’s economic growth prospects. However, with the recent slowdown in the Chinese economy (+6.9% in 2015 compared to +7.3% in 2014) the 2000-2014 expansion of trade has been interrupted. In 2015 Chinese exports to Africa fell by 38%. This recent dramatic and rapid explosion of China’s interest in Africa as a trading partner represents a major move away from the 1990s when 90% of Africa’s trade was with the Global North. In 2014, export destinations such as 3 GA ISIG Study Tour 2013 (Ethiopia) Brazil, China, and India, accounted for over 50 percent of sub-Saharan African exports, with China accounting for about half of that.