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China and Africa: Things fall apart

Changing economic realities might force China to alter its foreign policy

Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

“Love has no ending. I’ll love you, dear, I’ll love you till China and Africa meet. And the river jumps over the mountain.” In 1937, when the English poet W.H. Auden wrote these lines in As I Walked Out One Evening, he probably thought the possibility of China and Africa ever meeting was so remote that it presented to him a good metric to describe undying love. Auden, who died in 1973, didn’t live to see China and Africa meet economically and politically.

Starting from the late 70s, China’s pursuit of high-speed growth, driven by exports and investments, has taken it across continents to Africa, where it can find every natural resource it needs for its economic quest. While global growth remained stuck at around 3% last year, China continued to race at 7.7%. Even in 2012, the year China began talking about rebalancing—shifting from growth dominated by investment to consumption—investment rate as a percentage of gross domestic product (GDP) was close to 50%, a feat with few parallels in history.

But in a slow-growth world, is this model sustainable?

China’s involvement in Africa has political and economic costs. Till now, China remained largely unaffected by international criticism of the support it lends to African leaders. As long as it grew at a rapid pace, the political cost of doing business with dictators and authoritarian rulers was amply justified with returns from exports and domestic growth. With slower growth, those costs may rise.

As its economic wellbeing comes under threat, the country will have little incentive to consistently justify its friendship with autocratic leaders.

The story so far has been natural resources in return for political support. Iron ore, crude oil, natural gas, minerals and timber—all essential raw materials are found in abundance in Africa and the Middle East. All China has had to do to ensure the uninterrupted flow of natural resources to the country is to back unsavoury regimes in some of the most difficult regions of the world: Iran and Saudi Arabia in the Middle East, and Nigeria, Sudan, South Sudan and Zimbabwe among others in Africa. For other requirements, too, it has had to support dictators and authoritarian rulers.

Till now, China’s foreign policy in Africa has seamlessly merged with its economic policy in the continent. For the purists, it is ideological support for Third World leaders who have been unfairly targeted by western countries. For China, increased influence in the continent lends legitimacy to their own non-democratic form of government, hence proving that Western democratic ideals are not universal. For both regions, reciprocal political support in international institutions such as the UN comes handy when it comes to issues such as human rights abuses by African dictators or Tibet. China is also an important power behind the failed bid to bring Sudan’s Omar al Bashirbefore the International Court of Justice.

The two pegs join well.

But all this will change when immediate economic concerns trump distant political motives.

For starters, China’s export-led growth has increasingly run out of favour. The world has slowed and so have China’s exports. Its current account surplus fell from a huge 10.6% of GDP in 2007 to 2.6% of GDP in 2012. It had a steel output capacity of one billion tonnes in 2012 but a utilization of only 72% and worse profitability of just 0.04%. Its real estate sector now resembles a bubble that everyone fears.

Against this background, China’s drive for securing these resources appears out of sync with economic realities. The costs of business as usual garnering of resources in Africa will be increasingly high. There, resentment against China importing labourers for projects from home has risen in recent years. Similarly, there is criticism about China’s resource colonialism in western and southern Africa. These issues were not problems as long as China was growing fast; now they may be reckoned as an American-style blowback, although China has not reached that stage.

This can be to India’s advantage in the continent. So far, success on a Chinese scale has eluded Indian businesses in Africa.

The reasons for it are complex. But one reason is India’s inability to counter China. By ensuring it does not engage in reckless exploitation of African resources, investing in infrastructure projects without taking away jobs from the region (a major grouse against China), India could strengthen its position.

The African-Chinese relationship has been working till now because the leadership in both places has colluded in human rights violation or exploiting the local population. For the African masses though, a sympathetic India which treats them as equals would be a better alternative than an abusive China.

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