China in Africa
Debunking pseudo-Marxist falsifications re: ‘Chinese Imperialism’
The frequent portrayal of China as a sinister threat to “national security” in the “Free World” popular media is an index of rising anxiety at the growing economic and political weight of the world’s largest collectivised economy. After decades of turning a blind eye to looting by the IMF and other imperialist financial agencies, America’s rulers have suddenly become concerned by China’s “predatory” lending to Africa and other neo-colonial regions:
“Just before his visit to Africa last month, former secretary of state Rex Tillerson accused China of using ‘predatory loan practices,’ undermining growth and creating ‘few if any jobs’ on the continent. In Ethiopia, Tillerson charged the Chinese with providing ‘opaque’ project loans that boost debt without providing significant training. As secretary of state, Hillary Clinton sang the same tune, warning Africans to beware of this ‘new colonialism.’ China, we are often told, is bringing in all its own workers or ‘grabbing’ African land to grow food to send back to feed China.”
—Washington Post, 12 April 2018
This cynical imperialist propaganda is unfortunately echoed by many on the supposedly “revolutionary” left. A particularly egregious example is the ostensibly Trotskyist International Marxist Tendency (IMT), which is concerned lest China’s “imperialist” rivalry with the US results in their own beloved British imperial homeland ending up “being ground between the twin millstones of American and Chinese imperialism”:
“This decision raises several questions about Britain’s fate in this ‘great power’ struggle. How will it avoid being ground between the twin millstones of American and Chinese imperialism?
For example, Britain’s new nuclear power stations are to be built with Chinese technology and investment. If Huawei represents a security threat—because China is a threat to British capitalism—then the same must apply to nuclear generators that supply all-important energy. But if Britain were to expel all Chinese investment and technology, it would be dooming itself to an even worse state of backwardness. Outside of the EU, outside of Chinese investment, Britain has no future under capitalism but as a pathetic pawn of the US.”
—socialist.net, 20 July 2020
This overt social-patriotism appeared in Socialist Appeal, the IMT’s flagship publication, shortly before the ejection of their supporters from the Labour Party terminating decades of deep-entrism by these adaptable reformists. The IMT’s concerns about the Chinese threat to British imperialism parallels the attitudes of both Labour’s “left” wing, represented by former leader Jeremy Corbyn, and Keir Starmer, his Blairite successor. It is also shared by Britain’s beleaguered Tory government which sent Britain’s shiny new aircraft carrier, HMS Queen Elizabeth, off to patrol the South China Sea last summer alongside various US warships.
Lenin described “imperialism” in the modern world as the operation of global finance capital in the exploitation of less developed economies:
“Colonial policy and imperialism existed before the latest stage of capitalism, and even before capitalism. Rome, founded on slavery, pursued a colonial policy and practised imperialism. But ‘general’ disquisitions on imperialism, which ignore, or put into the background, the fundamental difference between socio-economic formations, inevitably turn into the most vapid banality or bragging, like the comparison: ‘Greater Rome and Greater Britain.’ Even the capitalist colonial policy of previous stages of capitalism is essentially different from the colonial policy of finance capital.“
—Vladimir Lenin, Imperialism–The Highest Stage of Capitalism, 1916
Any ostensible Marxist who brands China as “imperialist” must demonstrate that it is pursuing a “colonial policy of finance capital”, i.e., engaging in large-scale net value extraction from less economically advanced countries. But a careful investigation of the reality of China’s activity reveals the opposite—on the whole African nations have benefited from Beijing’s outreach.
For Trotskyists the question of whether a country is imperialist has important programmatic implications. When two imperialists clash, revolutionaries are defeatist on both sides; but in the case of imperialist attack on a semi-colonial country or a deformed workers’ state, Marxists adopt a defencist position towards the latter.
During the past several years the Argentinian-based Trotskyist Fraction (TF) tendency has published a variety of views on the question of “Chinese imperialism.” One contributor, Esteban Mercatante, who does not regard China as “imperialist in the full sense of the term,” nonetheless favours a position of neutrality in any future conflict with the US:
“China cannot be characterized as imperialist in the full sense of the term. But when there is a clash between China and the United States, or any other imperialist power, we should not read this clash as code for ‘imperialist aggression against China,’ which would dictate automatic support for the latter. Although China is challenged by imperialism, the state led by the CCP does not represent a progressive alternative to imperialist domination by the U.S. and its allies, as made clear by the experiences of the Chinese proletariat and China’s oppressed nationalities. Of course, each conflict must be defined by its concrete circumstances. But it is clear that from such conflicts there will emerge neither an alternative nor a toehold for the oppressed to cut the chains of imperialism and capitalist exploitation. On the contrary, the ambition of Xi Jinping and the entire CCP leadership is to make the Chinese state another brick in the wall.”
—leftvoice.org, 29 November 2020
In “The Myth of Capitalist China”, we noted that the self-proclaimed Trotskyist groups which label China capitalist have a tendency to avoid identifying the moment at which capitalist counter-revolution triumphed. The Trotskyist Fraction’s Juan Chingo provides an example of this with the following evasive commentary:
“Moreover, although the Chinese state has been integrated into the capitalist world economy, capitalist restoration is not taking place in a colonial framework, as it did in the past, but under the arbitration of a state emerging from a revolution that achieved national unity. This gives the Beijing bureaucracy a margin of state autonomy incomparably greater than that of any other country on the capitalist periphery, a development that has essentially taken place outside the hegemonic relations of the United States.”
—leftvoice.org, 10 February 2021
Citing Trotsky’s observation in The Revolution Betrayed that the dramatic economic growth of the Soviet economy during the 1930s resulted from its collectivised, non-capitalist economy, Chingo observes:
“This does not mean that China will follow the same fate as the regimes of Eastern Europe and the USSR, since even during Xi Jinping’s presidency, unlike the Maoist period, he has guarded against any policy of leaving the world market. But it helps us understand the fundamental distance that separates China from the imperialist powers, despite all its achievements and strengths.”
The “fundamental distance that separates China from the imperialist powers” was created by the expropriation of domestic and foreign capital in the aftermath of the social revolution of 1949 which set the Middle Kingdom on the path to the creation of a bureaucratically planned economy modelled on the Soviet Union under Stalin. The success with which the Chinese Communist Party (CCP) has navigated the capitalist world market is attributable to the collectivised core of the Chinese economy—capitalist restoration, which inflicted so much suffering on working people in the former Soviet bloc, never took place in China. Chingo, perhaps constrained by the TF’s rules for public discussion of such questions, appears unable to see this and offers the following codification of his confusion:
“Taking the set of internal and external elements I have discussed, perhaps the most adequate provisional definition of China today is ‘dependent capitalist state, with imperialist features.’”
Who or what is China “dependent” upon? Clearly not the US, nor any of its imperial allies, all of whom are eager to dismantle the collectivised property system which has permitted Beijing to operate free from the control of global finance capital—a relationship which defines actual dependent or semi-colonial countries.
The social revolution of 1949, which freed China from a century of foreign exploitation, established an economy that did not operate according to the imperatives of profit maximisation characteristic of capitalism. Despite the far-reaching market reforms undertaken by the CCP since 1978, the core of China’s economy acts in accordance with the political priorities set by party bureaucrats:
“China’s ‘socialism with Chinese characteristics’ is a weird beast. Of course, it is not socialism by any Marxist definition or by any benchmark of democratic workers control. There has been a significant expansion of privately owned companies, both foreign and domestic over the past thirty years, with the establishment of a stock market and other financial institutions. But the vast majority of employment and investment is undertaken by publicly owned companies or institutions that are under the direction and control of the Communist Party. The biggest part of China’s world-beating industry is not foreign-owned multinationals, but state-owned enterprises.
“The major banks are state-owned, and their lending and deposit policies are directed by the government (much to the chagrin of China’s central bank and other procapitalist elements). There is no free flow of foreign capital into and out of the country. Capital controls are imposed and enforced, and the currency’s value is manipulated to set economic targets (much to the annoyance of the US Congress).”
—Michael Roberts, The Long Depression, 2016
China’s four big state-owned banks do not provide financing for companies based on projections of their profitability but rather in accordance with their role in fulfilling the CCP’s economic directives. State-owned enterprises (SOEs) receive preferential treatment even though loans to Chinese and foreign private capitalists generate much larger returns. In many instances, state-owned banks keep SOEs afloat that would go bankrupt in a genuine market environment. The SOE managers, who are appointed by the CCP, understand that the party is often willing to provide funding for companies to maintain high levels of employment in the interest of social stability—a policy bourgeois economists would designate as “over-employment”—even though it means reduced returns on investment.
The SOEs are the chief lever with which the CCP directs China’s economic development:
“Xi [Jinping] sees state-owned enterprises (SOEs) as essential instruments for management of economic cycles, and trusty agents of a national strategy to enhance China’s technological base and share of global markets. The main game therefore is to strengthen the Party’s control over the SOEs, and strengthen the position of SOEs so that they can more effectively execute Party policies. Embrace of the market means little more than imposing slightly more stringent financial discipline on firms that, because of their central policy role, can never be permitted to change ownership or go bankrupt.”
—China Economic Quarterly, June 2016, Vol. 20 No. 2
Beijing’s economic planning, while far less prescriptive than during the Mao era, still allows the party leadership to steer the economy in a direction that has dramatically reduced the impact of global economic downturns, while lifting hundreds of millions out of extreme poverty.
China’s foreign investment objectives
The economic reforms introduced under Deng Xiaoping in the late 1970s resulted in a burgeoning private capitalist sector—which the CCP has thus far successfully controlled— and vastly expanded China’s engagement in the world economy. But while capitalist multinational corporations generally venture abroad in pursuit of higher rates of profit, China’s foreign investment was driven by the need to modernise domestic industry, as Deng’s successor, Jiang Zemin, explained in 2001 at the CCP Party School:
“With our economic development, we must expedite the implementation of [the] China goes global strategy. Like the western development program, [the strategy] relates to our national modernization in the future. Going global and attracting inward investment are two aspects of our openness policy. One cannot be without the other. It is different from 20 years ago. We are ready to go global. Once we join the World Trade Organization, there will be more opportunities to go global. Our companies need to go on the international stage to test their ability.”
—quoted in Min Ye, The Belt Road and Beyond, 2020
Mirroring the dominance of the state sector over private enterprises in the domestic economy, foreign investment has mostly been carried out by national or provincial SOEs:
“By value, about three-quarters of China’s outward investment is conducted by SOEs and is in these sectors [oil fields, copper mines, roads, and railways]. By number of deals, however, three-quarters is conducted by private firms who are much more interested in acquiring technology, distribution channels, and market access in rich countries.”
—Arthur Kroeber, China’s Economy, 2016
Many SOE managers have been reluctant to expand internationally:
“…SOEs face real vulnerabilities outside China, because the ‘game’ structures abroad are quite different from domestic ones. The players are more diverse, and the payoff structure tends to be transactional in nature. Coupled with politics at home and in the host country, the outcomes can be extremely unpredictable. Ultimately, SOE leadership consists of politicians who do not like risks and uncertainties.”
—Min Ye, Op. cit.
SOEs are able to pursue activities at home and abroad that private, profit-seeking enterprises could not consider because they are underwritten by the state. This is one of the inherent advantages of a collectivised economy, as the leading economist of Leon Trotsky’s Left Opposition pointed out in 1926:
“An individual state enterprise, detached from the whole and hurled into the arena of competition would probably not survive, but would be crushed. But the same enterprise forming part of the unified complex of state economy has behind it all the power of this complex, and for this reason it is now not at all an isolated enterprise or trust of the old capitalist type, even when it has ‘gone over to businesslike accounting’ and to the outward eye looks like an individual enterprise in a commodity economy, or a capitalist trust.”
—Evgeny Preobrazhensky, The New Economics, 1926
A senior manager of Non-Ferrous China Africa (NFCA), a Chinese mining SOE operating in Zambia, explained the importance of state support in his company’s decision to “go out”:
“Why did we start surface drilling in 2008? That’s when premier Wen Jiabao encouraged Chinese mining companies overseas to do more geological prospecting. The Ministry of Finance and Ministry of National Land and Resources [of China] set up a fund to bear the cost of risky exploration. Companies apply for it and do not have to repay. So we are using the state’s money for exploration. It’s a part of the government’s resource strategy, to find more resources.”
—Cited in: Ching Kwan Lee, The Specter of Global China, 2017
In addition to the carrot of financial support there is also a stick: SOE managers who resist CCP directives to “go global” can damage their careers:
“A top SOE executive judged unresponsive to the CCP policies risks not being promoted or even demoted, even if the SOE performs well. These dual criteria for evaluating SOE top executives—to deliver profits and serve the government’s interest—many times align. However, in the situation where an SOE’s financial interest and the State goal are in conflict, the incentives that SOE executives face will strongly encourage them to choose State interest over financial interests of the company and other non-state shareholders. Numerous researches have revealed that the goals of the state are dominant in SOE executives’ decision-making processes. For example, Yang and his colleagues found that winning political promotion is more important than financial compensation in shaping SOE executives’ behavior.”
—Ming Du, “When China’s National Champions Go Global: Nothing to Fear but Fear Itself?,” 2014
In some cases, bureaucrats have diverted funding earmarked for the ambitious international Belt and Road Initiative (BRI) into propping up failing local state enterprises:
“Zooming into projects in the localities, it became clear that the BRI had allowed some local governments to save loss-making SOEs as well. In Jiangxi, a province in central China, local government set up four funds to save energy chemical companies in the name of exploring overseas opportunities now unfolding with the BRI. Yulin city in inland China also injected funds to save unprofitable coal industry in the name of BRI. Despite overcapacity and pollution, local steelmakers saw the BRI as a ‘precious opportunity’ to stay afloat. In the western province of Gansu, a loss-making steelmaker received new loans ‘to go global, purchase raw materials, and establish new factors.’”
—Min Ye, Op. cit.
Of the CCP’s three principal criteria for state investment abroad, upgrading China’s technology and industrial capacity is the most important:
“As early as 2006 the Overseas Investment Industrial Guiding Policy had identified certain categories of ‘encouraged-type overseas investment projects;’ (1) investments that enable the acquisition of resources and raw materials that are in short supply domestically and which are ‘in urgent demand for national economic and social development;’ (2) investments that support the export of products, equipment, technology, and labor for which China has a comparative advantage; and, (3) investments that ‘are able to clearly enhance China’s technology research and development capacity, including an ability to use international leading technology and advanced management experience and professional talent.’ A recent State Council opinion clarifies and supplements this approach. In its Guiding Opinion on Further Guiding and Standardizing the Direction of Overseas Investment, issued in August 2017, the State Council reaffirmed the importance of ‘catalyzing the “Going Out” strategy for products, technologies and services.’ It also aims to expand the speed, scale, and efficacy of China’s outbound investment, so as to promote the ‘transformation and upgrading of the domestic economy’ and ‘international industrial capacity cooperation.’ In addition, the 2017 Investment Opinion redefines the broad categories of ‘encouraged’ investments. Technology acquisition and utilization is a key consideration in determining whether a sector is ‘encouraged.’ For instance, the opinion encourages investments that strengthen ‘investment cooperation’ with ‘overseas high and new technology and advanced manufacturing industry enterprises,’ as well as investments that promote the ‘sending out’ from China to the world ‘advantageous manufacturing capacity, advantageous equipment, and technology standards.’ The Made in China 2025 strategy calls for ‘supporting enterprises to make acquisitions, equity investments, and venture investments overseas, and to establish R&D centers and testing bases and global distribution and services networks overseas.’”
—Bruno Maçães, Belt and Road, 2020
The CCP has had considerable success upgrading China’s industrial capacity:
“The goals of China’s industrial policy have been to create a broad set of industries, with Chinese companies progressively producing goods of greater technological sophistication and higher value, and gradually becoming more globally competitive. These aims have largely been achieved. China has moved from being a producer of low-end textiles and cheap consumer goods in the 1980s to a country with successful and large-scale automotive, shipbuilding, machinery, electronics, chemicals, and precision instruments industries. The global competitiveness of Chinese production has steadily risen, as shown by its growing share of global manufactured exports. Studies have documented that the research-and-development intensity of Chinese exports—that is, their technological sophistication—has risen as well. Moreover, growing shares of exports and the trade surplus are generated by domestic firms. For most of the 2000s, foreign enterprises accounted for more than half of exports and as much as two-thirds of the trade surplus. By 2014 the foreign share of both was under half. The aggregate trade surplus of China’s nonstate enterprises is now twice as big as the foreign-enterprise surplus. (This is partly offset by SOEs, which run a large trade deficit …).”
—Kroeber, Op. cit.
China’s foreign direct investment (FDI) is comparable to that of the world’s major imperialists:
“China is an important, but rarely the lead investor in any region of the world. Chinese investment in Africa, for example, ranked third in the number of projects after the United Kingdom and United States, but first in monetary value (for the first time) since 2016. In Latin America, China also ranked fourth in FDI behind the Netherlands, the United States, and Spain. Even in its own backyard, Southeast Asia, China ranked fourth in non-ASEAN foreign direct investment inflows into ASEAN in 2015 after the European Union, Japan, and the United States.”
—Elizabeth Economy, The Third Revolution, 2018
In August 2017 the CCP introduced a Foreign Investment Law designed to tighten control over foreign activity and rein in anything potentially damaging to China’s international image:
“‘Some investments do not meet our industrial policy requirements for outward investment … they are not of great benefit to China and have led to complaints abroad,’ Zhou Xiaochuan, central bank governor, said in March. ‘Therefore we think a certain degree of policy guidance is necessary and effective.’”
—Financial Times, 3 August 2017
The Spanish bank BBVA characterised the legislation as intended to tighten control over private foreign investment and reduce capital flight:
“The private Chinese companies are still subject to the authorities’ higher scrutiny as China’s government clamped down illegal capital outflows. The restrictive measures adopted in August 2017 are mainly targeted at private enterprises, which required private firms to report their overseas investment plans to the government and seek approval if their investment involves sensitive countries or industries.”
—Betty Huang, Le Xia, “ODI from the Middle Kingdom: What’s next after the big turnaround?,” February 2018
The 2017 law succeeded; by 2021 outbound investment had fallen by half of the 2016 peak. One key objective was reducing private capital circumvention of CCP regulation via “round-tripping”:
“China’s total stock of direct investment abroad in 2017 was $1.81 trillion, including $1.14 trillion invested in Asia (63 percent), $43 billion invested in Africa (2.4 percent), $111 billion invested in Europe (6.1 percent), $387 billion invested in Latin America and the Caribbean (21 percent), $87 billion invested in North America (4.8 percent), and $42 billion invested in Australia and New Zealand (2.3 percent).
“Within Asia, about $1.04 trillion was invested in Hong Kong, Macao, and Singapore. Hong Kong and Macao are China’s special administrative regions and Singapore is an ethnic-Chinese city-state. About $9 billion was invested in Japan and South Korea. Within Latin America and the Caribbean, $372 billion was invested in the Cayman Islands and British Virgin Islands.
“China’s massive investments in Hong Kong, Macao, Singapore, Cayman Islands, and British Virgin Islands (altogether $1.41 trillion or 78 percent of China’s direct investment abroad) are obviously not intended to exploit abundant natural resources or labor in these cities or islands. Some of China’s investment in Hong Kong is the so-called ‘round trip investment’ to be recycled back to China in order to be registered as ‘foreign investment’ and receive preferential treatments. Much of the Chinese investment in these places may simply have to do with money laundering and capital flight.“
—Minqi Li, “China–Imperialism or Semi-Periphery”, Monthly Review, 1 July 2021
The 2008 global financial crisis hit exporters in China’s coastal provinces hard, as foreign demand evaporated. Many firms went bankrupt. Beijing responded with huge investments to upgrade China’s infrastructure while also providing employment for some 40 million workers who had lost their jobs. Much of the funding was spent expanding the construction sector and ramping up the production of building materials. As infrastructure projects neared completion, authorities sought to provide a soft landing for workers:
“Nearly $23 billion has been put aside by the government to cover layoffs in the coal and steel industry, although the overall figure looks certain to be much higher as closures and mergers spread across the whole state-owned enterprise landscape.
“‘We hope there will be more restructuring and less bankruptcy…to let employees have more sense of gain—to have more job reallocation and fewer layoffs,’ Xiao, of the State-owned Assets Supervision and Administration Commission, said during the National Congress of the Communist Party of China last October.
“Still, the government is mindful of ‘social unrest,’ two words which are rarely muttered in the corridors of power in Beijing but are at the forefront of the majority of policy decisions.
To ease the impact, the world’s second-largest economy has used the massive Belt and Road Initiative to solve overcapacity issues in heavy industry such as steel and aluminum production.”
—Asia Times, 19 July 2018
Millions of Chinese workers found employment through the expansion of the Belt and Road project:
“As He Yafei, vice minister of the Overseas Chinese Affairs Office of the State Council, pointed out in 2014, ‘one country’s overcapacity can meet another country’s needs.’ Huang Libin, an official with the Ministry of Industry and Information Technology, explained: ‘For us there is overcapacity, but for the countries along the Belt and Road, or for other BRIC nations, they don’t have enough and if we shift it out, it will be a win-win situation.’”
—Maçães, Op. cit.
Some ostensibly Trotskyist organisations, including the Committee for a Workers’ International (CWI) characterise the BRI as “imperialist predation”, driven by a thirst for imperialist super-profits:
“Neo-colonial countries are now frequently susceptible to imperialist predation by more than one power, with China joining the new ‘scramble for Africa’ with its Belt and Road Initiative (BRI) trade inducements.
“This involves infrastructural development and investment in 152 countries and international organisations in Africa, Asia, the Middle East and the Americas. It therefore poses a stark threat to US imperialism. China needs to find new ways to deal with its surplus production and over-capacity.”
—Socialism Today No. 231, September 2019
China’s “going global” project has been carried out in accordance with the overall economic plan. BRI construction activity is not driven by declining profitability at home, but by a conscious attempt to provide employment for millions of workers in China’s construction sector who had earlier been made redundant by fluctuations in the capitalist world market. Many capitalist analysts complain that Chinese enterprises are free from the imperatives of short-term profitability, which in turn tends to “distort global competition”:
“In 2004, the world’s top 10 steel producers included only one Chinese company, Shanghai Baosteel; the other top firms were American, European, Indian, and South Korean. Back then, just 25.8 percent of the world’s steel was made in China. In 2018 (the latest year with data available), six of the world’s largest steel companies were Chinese, some of them government-owned, and China accounted for 51.3 percent of global steel production—a figure that doesn’t capture production by Chinese companies in other countries).
* * *
“In a 2016 report, a group of U.S. steel industry associations wrote that Chinese firms receive ‘loans [that] are granted based on alignment with central or provincial governments’ policy directives, rather than creditworthiness or other market-based factors.’
“In a 2019 report, the Mercator Institute for China Studies, a German think tank, documented how Beijing’s financing practices vastly distort global competition: The ‘panoply of financing benefits empowers Chinese companies with advantages over foreign competitors not only at home but also when they engage in foreign takeovers, with relative disregard for commercial risks, allowing them to offer premiums for foreign assets if necessary. These practices disfavor European companies as acquirers of firms and assets,’ the authors wrote.”
—Foreign Policy, 19 May 2020
Value flows under imperialism
The formation of a global market resulted from the expansion of enterprises from more advanced capitalist countries into virtually every inhabited territory in search of markets and raw materials. Karl Marx outlined how the law of value pushed the largest and most successful capitalist enterprises to constantly expand their activity abroad:
“Capital invested in foreign trade can yield a higher rate of profit, firstly, because it competes with commodities produced by other countries with less developed production facilities, so that the more advanced country sells its goods above their value, even though more cheaply than its competitors. In so far as labour of the more advanced country is valorized here as labour of a higher specific weight, the profit rate rises, since labour that is not paid as qualitatively higher is nevertheless sold as such. The same relationship may hold towards the country to which goods are exported and from which goods are imported: i.e., such a country gives more objectified labour in kind than it receives, even though it still receives the goods in question more cheaply than it could produce them itself. In the same way, a manufacturer who makes use of a new discovery before this has become general sells more cheaply than his competitors and yet still sells above the individual value of his commodity, valorizing the specifically higher productivity of his labour he employs as surplus labour. He thus realizes a surplus profit. As far as capital invested in the colonies, etc., is concerned, however, the reason why this can yield higher rates of profit is that the profit rate is generally higher there on account of the lower degree of development, and so too is the exploitation of labour…”
—Karl Marx, Capital Vol. III, 1894
Many individual capitalists sought to take advantage of the higher rates of return on investments in colonial territories than could be obtained at home. Foreign domination severely deformed the course of economic development in these pre-capitalist societies:
“The colonial domination of Africa was an integral system whose central purpose was the transfer of a massive surplus from Africa to European capitalism, which was thereby given a new lease of life. This system’s overall effect on Africa was to distort still further the continent’s economy, to continue and intensify the underdevelopment that had resulted from the unequal trading relations of the pre-colonial era. In particular, colonial domination prevented the industrialization of Africa.”
—Peter Fryer, Black People in the British Empire: An Introduction, 1988
The “anti-colonial” posture of the American ruling class following World War II was aimed at divesting France and Britain of their colonial holdings. Under the US hegemon, indigenous rulers presiding over nominally independent neo-colonies opened their economies to “free-market” foreign investment. The flow of wealth from poor countries to rich ones continued, but the market mechanisms employed were somewhat less obvious than those characteristic of overt colonialism. Marxist economist Murray E.G. Smith observed:
“An imperialist power, then, is a mature capitalist country seeking to resolve ‘the internal contradiction through an extension of the external field of production and consumption’ (to paraphrase Marx)—and, to some extent at least, one that is able to mitigate its own economic problems at the expense of other components of the capitalist world economy (for example, by accessing primary commodities at low cost in order to ‘cheapen the elements of constant capital’– one of Marx’s ‘counter-tendencies’ to the rate of profit to fall).
* * *
“In the last analysis what distinguishes a semi-colony from an imperialist country (of whatever rank) is the fact that, over the long term, the former suffers a net outflow of ‘value’ while the latter experiences a net inflow. These flows of value are mediated by several mechanisms—direct investment, portfolio investment, unequal exchange in world markets—that systematically favor more advanced capitalist countries, evincing high productivity, over more backward ones.”
—quoted in “Why Things Fell Apart”
During the 1970s western banks pushed commercial loans on many neo-colonial countries, ostensibly to promote economic development. In fact, most of the money was either siphoned off by corrupt officials or invested in projects that primarily benefited foreign capitalists. During the 1980s, rising interest rates on these hard currency loans triggered a “debt crisis” as countries were unable to continue repaying at the extortionate rates. The IMF responded with “rescue” packages contingent on the imposition of “structural adjustments” to reduce tariffs, privatise publicly-owned utilities and slash subsidies for farmers, small producers and consumers.
This neo-liberal prescription, cynically portrayed as a way to promote economic growth in the neo-colonial world, was dubbed the “Washington Consensus.” In fact it was a mechanism for accelerating the looting of poor countries by rich ones by opening up new fields for imperialist exploitation while lowering living standards, slashing public services and bankrupting small farmers and local manufacturers.
China’s foreign investment—State-directed not market-driven
The disastrous failure of twenty years of American military adventures in Afghanistan and Iraq corresponded to a continuing decline in the US share of global production. During the same period China’s economy grew at a rate unprecedented in human history. This is chiefly because the Chinese development model at the macro level, is shaped by priorities determined by state planners. Private capitalist activity has been an important, but essentially subordinate, element in the saga of China’s explosive economic ascent. Foreign capital does predominate in the export sector:
“…nearly half of China’s exports, and around 70 percent of its ‘high-tech’ exports, are produced by foreign firms. This is not the case—not even close—in the United States, Germany, and Japan, where the vast majority of exports are produced by domestic firms. China’s role in global production chains remains principally as the final assembly point for products put together out of components made elsewhere or made by other foreign firms in China. China gets to book the full export value of the finished product, but this tells us nothing about China’s technological contribution. In many cases, this is small.”
—Kroeber, Op. cit.
As Sam King, an Australian Marxist, observes, the vast majority of profits from Chinese exports flow back to foreign investors:
“Starrs observes, ‘China has been the world’s biggest exporter of electronics since 2004, including computer hardware. Yet its profit share in the electronics sector is just 3 per cent— no match for Taiwan’s 25 per cent, let alone the 33 per cent accruing to US companies.’”
—Sam King, Imperialism and the development myth, 2021
Chinese foreign investment is not shaped by profit-seeking but rather the need to gain access to modern technology, which is why North America and Europe accounted for over 50 percent of China’s capital outflow between 2005 and 2017:
“President Xi has called for Chinese companies to ‘go out’ not in search of natural resources but for service and technology firms that will support China’s rise as a competitive advanced economy. Chinese investment in the United States during 2000-2015, for example, totaled $62.9 billion, with the largest sectors being Internet and telecommunications, real estate and hospitality, and energy. Chinese investment in Europe, which is also rising rapidly, mirrors that in the United States: real estate and hospitality, information and telecommunication technology, and financial services (although in 2015, investment in the automotive sector dominated as a result of ChemChina’s purchase of Italian tire maker Pirelli).”
—Economy, Op. cit.
King notes that there is still a significant gap between Chinese industry and that of the imperialist world:
“…there are a small number of internationally competitive companies, each expressing the various competitive attributes of the largest Third World states. From Mexico, there are two beverage companies and an international telecom, from India software and IT services, from Brazil mining and meat packing, from Russia gas, metals and defence, and from China manufacturing companies in home appliances and consumer electronics.
“In almost all such cases, the sector as a whole remains dominated by numerous First World firms that are equally or more profitable. For example, in ‘heavy equipment’ production, the largest firm, CRRC, is Chinese, and six of the total twenty-two firms are from the Third World. Yet eight of the top nine makers are from imperialist states. The combined $2.3 billion profit for all six Third World companies (including CRRC) was just one-third of the $7 billion profits for the top six imperialist-domiciled companies.
“The only sector statistically dominated by Third World companies was ‘regional banks’, which appears to indicate domestic, not international monopoly. The only sector dominated by Third World capital that is the site of significant international competition is ‘home appliances’. This may give consumers the impression that China is ‘catching up’, yet the entire sector had tiny profits.”
—Sam King, Op. cit.
Comparing the rate of return on Chinese investments abroad and what foreign investors earn in China demonstrates that the People’s Republic remains an exploited country, i.e., a net exporter of value:
“From 2010 to 2018, the rates of return on China’s overseas assets averaged about 3 percent and the rates of return on total foreign investment in China varied mostly in the range of 5 to 6 percent. An average rate of return of about 3 percent on China’s overseas investment obviously does not constitute ‘superprofits.’ Moreover, foreign capitalists in China are able to make about twice as much profit as Chinese capital can make in the rest of the world on a given amount of investment.
* * *
“…China’s total investment income received in 2018 was $215 billion or 1.6 percent of China’s gross domestic product (GDP) and China’s net investment income from abroad is negative.”
—Li, Op. cit.
In some telecommunications sub-sectors, (5G networks, mobile phones and solar panels) Huawei competes successfully with western firms, but that is not typical. Despite the proliferation of “Made in China” stickers on retail commodities in the West, most Chinese companies are not competitive with corporations based in the advanced capitalist countries:
“This important point was underlined by Richard Herd, head of the China division at the Organisation for Economic Co-operation and Development (OECD), who noted that ‘at the moment, China is not a threat to Japan’s core industries’; on the contrary, outsourcing labor-intensive production tasks to China has given many Japanese firms ‘a second lease on life … if you look at Chinese exports and Japanese exports they are not competing, they are complementary.’
* * *
As Ari Van Assche, Chang Hong, and Veerle Slootmaekers explain in a study of EU-Chinese trade, ‘Europe’s importers and retailers … increasingly rely on cheap inputs and goods from Asia. … EU companies are now also producing in low-cost countries, and not simply importing inputs.’ Far from being locked in competition with China, ‘the possibility of offshoring the more labor-intensive production and assembly activities to China provides an opportunity to our own companies to survive and grow in an increasingly competitive environment,’ and they conclude, ‘Our direct competitors in the tasks in which we have a comparative advantage are not located in China, but continue to be the usual suspects: the United States, Western Europe and a handful of High-Income East Asian economies.”
—John Smith, Imperialism in the 21st Century, 2015
The US and its allies are doing what they can—largely through extra-economic measures—to impede China’s attempts to continue reducing the technology gap. Washington successfully pressured its allies and vassals into preventing Huawei from bidding on the provision of 5G networks and has sought to block Chinese investments to restrict access to advanced technology. Tiktok, a Chinese social media company, was forced to sell a majority stake in its US operations to American companies. The right-wing American Enterprise Institute (AEI) noted that, for Beijing, “the Belt and Road Initiative is becoming more important, primarily because rich countries are more hostile to Chinese entities.”
In August 2020 Washington cut off the supply of state-of-the-art microchips to Chinese firms. This compelled the CCP to dramatically increase funding for research and development to ensure the survival of its high-tech sector:
“Now, to meet increased demand for high-end chips caused by the sanctions, SMIC [Semiconductor Manufacturer International Corporation—China’s only semi-conductor producer] is forced to try to rapidly upgrade its facilities while simultaneously trying to replace foreign equipment and services that it has lost access to due to sanctions. It is also trying to upgrade from a low starting base. Bloomberg Intelligence analyst Charles Shum reports that SMIC would need to double its R & D [research and development] spend over the coming years to prevent the technological gap between it and Taiwan Semiconductor and Samsung from widening.”
—King, Op. cit.
Most observers agree that the US sanctions have created a serious problem for Chinese producers, at least in the short term:
“Without US supplied logic chips, Huawei may still be able [to] supply 5G network equipment to Chinese and other Third World markets, but these systems will deliver second-rate performance and require more labour to service. Such equipment is hardly likely to penetrate far into the most lucrative First World markets—unless massively subsidised.”
Derek Scissors, who wrote the 2020 AEI report quoted above, is concerned that unpatriotic finance capitalists may help Beijing get around some of the restrictions:
“Portfolio investment that immediately or eventually reaches the PRC may support Chinese enterprises benefiting from stolen or coerced intellectual property. It may support Chinese enterprises developing technology we wish to keep in the US….It may end up supporting the People’s Liberation Army. The financial community acts as if profitability is the highest national interest. It’s not, and transparency in the final recipients of American portfolio investment is badly needed.”
This recalls the apocryphal observation attributed to Lenin that, “The capitalists will sell us the rope with which we will hang them.” If indeed one or more capitalist financiers do end up helping China gain access to critical semi-conductor technology, it will be one of the rare occasions when the heedless pursuit of profit actually ends up making the world a better place.
China’s current technological level is generally estimated by bourgeois economists to be roughly equivalent to other BRIC countries (Brazil, Russia, India, China and South Africa) as well as those at the bottom of the Eurozone:
“Also notable is the lowly position of Greece and Portugal, the two countries most battered by the Eurozone crisis, indicating that these nations directly compete not with core Eurozone countries, but with China and other low-wage nations.”
—Smith, Op. cit.
The wave of austerity that swept across Europe following the 2010 financial crisis resulted in the sale of public assets in Portugal, Greece, Ireland and elsewhere to service debts to imperialist banks and the International Monetary Fund (IMF). Beijing used this as an opening for extending the BRI via a series of mergers and acquisitions in which Chinese SOEs became shareholders in utility companies, energy suppliers and major infrastructure. French Marxist François Chesnais noted:
“In the case of Europe, the data collected since 2009 shows a trend towards an increase in Chinese FDI to companies struggling with government debt or corporate insolvencies. The acquisition of part of the harbour of Piraeus in Greece is a spectacular expression of this. Chinese capital will handle Chinese exports into Europe right down the line. China is also investing in the construction of the Southern Gas Corridor in the Balkans. For China, Portugal is still more strategic. Since the start of the Eurozone crisis, Chinese SOEs acquired major shares in strategic sectors of the Portuguese economy such as the water, electricity, and communications industries. One example of such a purchase occurred in late 2011, when the Three Gorges Corporation acquired 22 percent of Energias de Portugal (EDP) for US $3.5 billion (nearly twice EDP’s actual market value). In 2012, China State Grid bought 25 percent of Redes Energéticas Nacionais (REN) at 40 percent over the value of the stock at the time of the agreement. In 2013, Beijing Enterprise Water Group acquired Veolia Water Portugal from its French parent company for US$123 million. China Mobile also announced that it was considering acquiring a stake in Portugal Telecom. The picture must be completed by the massive amount of Chinese capital pouring into real estate.”
—François Chesnais, Finance Capital Today, 2016
In most cases Chinese SOEs paid well over market value, which is consistent with the pattern of moving forward in the development of the Belt and Road Initiative without regard for considerations of short-term profitability.
BRI—Market integration with Chinese characteristics
This enormously ambitious economic integration project is taking place in a period when global capitalism is in a precarious condition. The BRI’s projected expansion across Central Asia, Russia, the Middle East and Western Europe, and into Africa and Latin America, has enormous implications for the future of the global economy:
“A new railway from Urumqi passes through Khorgos, where rows of cranes transfer containers from China’s standard gauge wagons to the broad gauge used across the former Soviet states. The line then loops into the old Soviet network at Almaty, while a new line will serve the Caspian seaport and oil town of Aktau. The first transcontinental services to Germany began in 2012 and take fifteen days to make the 10,000-km journey, thirty days quicker than by sea. HP, Acer and Foxconn use the route to export computers from their manufacturing bases in Chongqing; Volkswagen, Audi and BMW use it to ship parts from Germany to their factories in inland China. … Other services to Europe run from the inland cities of Wuhan, Changsha, Chengdu, Xi’an and Zhengzhou.
“The railway is also opening up emerging Asian markets. Since 2016, a service to Tehran has delivered Chinese-made clothes, bags and shoes via Kazakhstan and Turkmenistan. In addition, an intermodal freight centre at the port of Lianyungang, 200 km south of Qingdao, in theory provides land access to Central Asia and Europe from South Korea and Japan.”
—Tom Miller, China’s Asian Dream, 2017
The core of the BRI project is the creation of an overland network for importing raw materials and energy and exporting Chinese goods, particularly in Europe. Its geo-strategic objective is to radically reduce China’s dependence on access to the Indian Ocean and the Pacific:
“Most of this [oil] comes from Africa and the Persian Gulf through the Indian Ocean and Malacca Straits, creating what President Hu Jintao reportedly described as China’s ‘Malacca Dilemma’ (the potential for supplies to be disrupted at this key strategic chokepoint in time of conflict). Moreover, China depends on maritime transportation for fully 90 percent of its imports and exports. As such, it will increasingly need to develop a naval doctrine focused on patrolling SLOCs [sea lanes of communication] and the transit waterways. This SLOC-based naval mission might be termed a ‘commercial and resource’ mission.”
—David Shambaugh, China Goes Global, 2013
In 2020 Joe Biden declared:
“The United States does need to get tough with China. If China has its way, it will keep robbing the United States and American companies of their technology and intellectual property. It will also keep using subsidies to give its state-owned enterprises an unfair advantage—and a leg up on dominating the technologies and industries of the future.”
Biden proposed that the US “fortify our collective capabilities with democratic friends beyond North America and Europe by reinvesting in our treaty alliances with Australia, Japan, and South Korea and deepening partnerships from India to Indonesia to advance shared values in a region that will determine the United States’ future.”
Beijing has responded to the threating US “pivot to Asia” by upgrading its naval forces and constructing a series of military outposts on islets across the South China Sea. The Chinese military, anxious to deter imperialist aggression, has deployed several weapons systems, including Dongfeng anti-ship missiles, which pose a credible threat to American naval vessels, particularly aircraft carriers.
“All in all, the PLAN [Peoples’ Liberation Army Navy] is making some significant advances and China’s shipbuilding industry has demonstrated the capacity to build at a rapid rate in recent years. Construction and deployments at this pace will give the PLAN expanded reach and presence in the western Pacific and beyond over the decades to come. To the extent that China’s military ‘goes global’ in the future, it will be the navy that does so. But to do so requires not only a full blue water capable oceangoing fleet, but a number of other key factors: access to neutral ports and airfields, perhaps naval bases on foreign soil, prepositioned equipment, long logistics supply chains and communications, underway replenishment, extended deployments, access to medical facilities and care, satellite communications, supply ships, and long-range air replenishment supply.
“This list of necessary capabilities for any navy operating out-of-area (away from immediate littoral) is daunting, and a good reminder of just how much would be required of China and the PLAN if it truly wanted to establish global projection capability.”
—David Shambaugh, Op. cit.
China’s navy and air force are chiefly focused on homeland defence, not power projection abroad. To counter the threat of strangulation by a US-led naval blockade, China has been establishing new routes to ports in friendly countries to reduce dependence on the Strait of Malacca which connects the Indian Ocean and the South China Sea. The 15 million barrels a day shipped through that narrow passage supplies China with most of its oil. Chinese investment in constructing new facilities along the Maritime Silk Road is designed to reduce vulnerability to a blockade of that traditional trade route:
“Since the turn of the century Chinese companies have been involved in the construction, management, and expansion of numerous port facilities, from Hambantota in Sri Lanka, to Gwadar in Pakistan, Kyaukpyu in Myanmar and Doraleh in Djibouti. A principal category covers hub ports, servicing huge container ships and transshipping them onto smaller vessels to connect with regional ports. A second category, as David Brewster describes it, should not be overlooked and is perhaps more significant: ports such as Gwadar and Kyaukpyu are meant to connect the Indian Ocean with China via overland transport corridors. Pakistan and Myanmar may become China’s California, granting it access to a second ocean and resolving the Malacca dilemma. Access to the offshore gas fields in the Bay of Bengal was always central to the Kyaukpyu project. The gas pipeline will carry up to 12 billion cubic meters of gas annually. The oil pipeline—running in parallel and with a capacity of 22 million barrels of oil per year, about 6 per cent of China’s 2016 oil imports—was built to transport oil from the Middle East and Africa directly to China, avoiding the Malacca Strait and cutting shipping distances by 1200 km. Even more dramatically, using overland pipelines connected to Gwadar will reduce the distance from the Persian Gulf to just 2,500 km—but the pipeline will depend on ultra high-power pumping stations as it has to pass through the Karakoram Pass, at an altitude of 5,000 to 6,000 meters above Gwadar or Kashgar. On existing routes via the Malacca Strait, oil tankers need to travel more than 10,000 km for two to three months to reach China. While other ports such as Hambantota are close to existing shipping lines, others such as Gwadar presuppose a significant redrawing of those lines in the future.”
—Maçães, Op. cit.
China’s collectivised property system permits it to make significant investments in projects that will never turn a profit but offer long-term geopolitical benefits:
“For China, the economic corridor has two aims: to open up an alternative route for oil imports from the Middle East, and to persuade Pakistan to do more to combat violent extremism seeping over its border. This vision is driven by strategic factors, not commercial logic. Even before the landslide in 2010, less than 10% of China’s trade with Pakistan came over the land border with Xinjiang. … Government officials working on the Belt and Road project privately admit they expect to lose 80% of their investment in Pakistan. They have made similar strategic calculations elsewhere: in Myanmar they expect to lose 50%, in Central Asia 30%.”
—Tom Miller, Op. cit.
John Ross, an ardent CCP booster, described China’s strategic interest in cultivating good relations with a wide range of semi-colonial countries:
“China possesses allies in the Global South not only among the governments but among the people of these countries—although the US is, of course, making sustained efforts to undermine this diplomatically and by every available means. The US is attempting to compensate for its limited ability to offer any real economic gains to developing countries by spending literally billions of dollars in a public relations offensive against China. This has to be very actively countered—China’s diplomacy and numerous forms of media and public relations therefore has a crucial role to play. Steps such as that the first international visit each year by China’s foreign minister being to Africa of course is a symbol of such understanding. China must not only aid the population of developing countries, and to offer win-win perspectives, but these need to be clearly understood internationally.”
—China’s Great Road, 2021
China in Africa—from Mao to Xi
Following the Sino-Soviet split in the early 1960s, Beijing sought to deepen connections with countries not aligned with either Moscow or Washington. At the 1955 Bandung Asian-African conference Zhou Enlai, Mao Zedong’s right-hand man:
“convinced the participants to incorporate the PRC’s Five Principles of Peaceful Coexistence into the Ten Principles of Bandung. The original five principles remain essential to China’s foreign policy. They include mutual respect for sovereignty and territorial integrity, mutual nonaggression, non-interference in each other’s internal affairs, equality and mutual benefit, and peaceful coexistence.”
—David H. Shinn, China-Africa Ties in Historical Context, in: Akebe Oqubay, Justin Yifu Lin (edt.), China-Africa and an Economic Transformation, 2019
In 1956 China sided with Egypt in its confrontation with Britain and France over the nationalisation of the Suez Canal, extending a $5 million dollar loan to Gamal Nasser’s government and opening a trade office in Cairo. Seven years later, in December 1963, Zhou Enlai toured post-colonial Africa:
“In Ghana Zhou Enlai announced eight principles of Chinese foreign aid. It would be based on equality, mutual benefit, and respect for the sovereignty of the host (the principles of peaceful coexistence). Loans would be non-conditional, interest-free, or low-interest, and easily rescheduled. Projects would use high-quality materials, have quick results, and boost self-reliance. Chinese experts would transfer their expertise ‘fully’ and live at the standard of their local counterparts. In the wake of the tour, China committed nearly $120 million in aid to Congo-Brazzaville, Ghana, Kenya, Mali, and Tanzania. Chinese diplomats gradually began to succeed in their courtship of more conservative countries such as Kenya and Nigeria.
“While the West had an image of the future that aid ought to create, China became the first developing country to establish an aid program.”
—Deborah Brautigam, The Dragon’s Gift, 2009
China helped set up some small manufacturing enterprises and initiated a few high-profile projects, including the Tazara railway line to connect Zambia to Tanzania’s port at Dar es Salaam. Previously Zambian copper could only reach world markets by being shipped through white supremacist Rhodesia to a port in South Africa:
“From the outset, the Chinese government provided virtually all the finance, management, labour, technical assistance, training, and materials to build the 1,060-mile-long Tazara railway from Ndola on the Zambian copper belt to the Tanzanian port of Dar es Salaam (Liu and Monson, 2011; Monson, 2009: 3). Completed a decade later in 1976, the US$400 million project was China’s largest and most comprehensive at the time. The Tazara railway was immediately hailed as a success by African governments (Monson, 2009: 3–4; Katzenellenbogen, 1974). Interestingly, in many respects the key features of China’s more contemporary economic engagement with the continent were already on display in this project: the African request for Chinese assistance in pursuing a development project spurned by Western governments; the Chinese role in designing, managing, and financing that project; the use of Chinese labour and supplies in constructing the project; and finally the post project debate on handing over management to the host government and addressing the issue of recurrent costs.”
—Chris Alden, Evolving Debates and Outlooks on China-Africa Economic Ties, in: Oqubay, Lin, Op. cit.
The Tazara railway line provided a template for other African projects undertaken by Chinese SOEs which have burnished Beijing’s image in the region. During the 1970s China was competing with the Soviets as well the US and Africa’s former colonial powers:
“By 1973, the Soviet Union was giving aid to twenty African countries, with most of it concentrated on eight countries in strategic regions (the Horn of Africa, the Mediterranean). China spread its aid across thirty African countries, a policy it retains to this day. In all but the same eight Soviet allies above, China gave more aid than the USSR. The rapid expansion of aid reflected China’s success in winning over Africa’s newly independent African countries. Between 1964 and 1971, when votes in the United Nations (organized skillfully by the permanent representative of Tanzania) finally gave Beijing back the seat occupied by Taiwan, China started aid programs in thirteen additional African countries.”
—Brautigam, Op. cit.
Mao’s hostility to the “Soviet revisionists” paved the way for a counterrevolutionary alliance with US imperialism. In the mid-1970s Beijing was in a de facto bloc with Portuguese colonialists and the US against the MPLA (People’s Movement for the Liberation of Angola) which was supported by the USSR and Cuba. The CCP scandalously attempted to blame the Soviets for the failed military intervention of the South African apartheid regime in Angola:
“It is obviously futile for the Soviet revisionists to justify their armed intervention in Angola by so-called opposition to South African intrusion. It is well-known that the Soviet social-imperialist intervention antedated South African authorities’ meddling. It is the truculent Soviet intervention that provided South Africa the opportunity to stir up trouble in Angola.”
—Beijing Review, 6 February 1976
During the late 1970s under Deng Xiaoping’s influence, Beijing’s assistance to Africa became increasingly market-oriented:
“During Premier Zhao Ziyang’s tour of the continent in 1982, he informed African counterparts that China’s solidarity-based support for African development would henceforth be reoriented towards market-based criteria that would assess projects in terms of their commercial value to both parties rather than solidarity ties (Shinn and Eisenmann, 2012: 130). Beijing’s ‘Four Principles for Sino-African Economic and Technical Cooperation’ that would guide its future cooperation with the continent, re-affirmed the commitment to mutual benefit, the maintenance of cost efficiency in delivery of its projects, and equivalency with African standards of living. This policy shift towards Africa, initially framed in terms of the familiar language of ‘mutual benefit’ but later rephrased as ‘win–win’, refracted the ongoing market-led reforms in China’s domestic productive sectors and the growing confidence in that approach felt by policymakers in Beijing. Extended negotiations with the World Trade Organization (WTO) culminated in China’s membership in 2001 which spurred on deeper integration into global markets and, concurrently, an unprecedented drive by Beijing to encourage its newly consolidated state-owned enterprises (SOEs) to expand their activities abroad.”
—Shinn, Op. cit.
The destruction of the Soviet Union in 1991 and a cutback in Chinese overseas aid left Africa to the tender mercy of the IMF and its “structural adjustment” programme. All attempts to promote industrial development via import substitution were abandoned, subsidies for agriculture and domestic producers were slashed and state assets privatised. Ostensibly designed to spur economic development, the real purpose was to open Africa to penetration by multinational monopolies and the domination of imperialist finance capital.
As China’s steady economic ascent increased demand for foreign inputs (by 1993 it had become a net energy importer) Africa became an increasingly important source of raw materials. Today Africa (primarily Angola) accounts for approximately 22 percent of China’s energy imports which is roughly comparable to the Middle East which supplies about 25 percent. During the past two decades trade between Africa and China has exploded:
“One of the most impressive developments under Hu Jintao [Xi Jinping’s predecessor] was the growth in China–Africa trade. It increased from about US$10 billion in 2002 to US$180 billion in 2012 and was largely in balance throughout this period. In 2009, China overtook the United States as Africa’s largest trading partner. However, most of Africa’s exports to China were natural resources, especially oil and minerals, while China’s exports to Africa were manufactured and finished goods. The continent-wide trade balance also masked trade deficits that poorer African countries had with China.”
—Shinn, Op. cit.
Chinese manufacturers price their products attractively enough to compensate for the fact that they are often a step or two behind the current state-of-the-art:
“Huawei and Xiaomi exemplify a business model that can be described as ’80 percent of the quality for 60 percent of the price.’ Firms like this produce reliable equipment with functionality that is behind the leading edge, but still good enough for most buyers—and at an unbeatable price. This makes their products very attractive to a large number of consumers that want to keep up with technological trends but cannot afford the latest and greatest: poor countries that want decent cell-phone networks, or lower-middle income Chinese who want a smartphone but cannot shell out $700 for an iPhone. Most successful Chinese industrial firms employ a variant of this business model, exploiting China’s low production costs and economies of scale to offer solid products at a low price. This enables them to generate large sales volumes; but their profit margins are low. They are essentially technology followers, not technology leaders.”
—Kroeber, Op. cit.
The “80 percent quality for 60 percent price” model has helped China carve out a large share of the global market. In 2015 the Trotskyist Fraction observed that cheap Chinese commodities had cut into local manufacturing in Argentina:
“Argentina’s exports are concentrated in very few products with low added value. Between 2003 and 2013, almost 85 % of exports were concentrated in three products: soya beans (55.46 %), soya oil (19.27 %) and crude oil (10.04 %). Currently, 96% of Argentina’s export basket to China is made up of primary products or manufactures based on natural resources, while imports from that country are diversified into various manufactures of low, medium and high technological content, in many cases displacing the generation of local employment. For these reasons, we can affirm that the type of trade link between Argentina and China redirects the factors of production towards activities with a lower value-added content and job creation.”
—La Izquierda Diario, 12 April 2015
South Africa has lost an estimated 75,000 jobs, particularly in the steel industry, as a result of Chinese competition. Elsewhere in Africa results are mixed:
“Concerns about Chinese exports crushing African manufacturing are very real. Although Africa still represents only 4 percent of China’s overall trade, this is 4 percent of an economic juggernaut. African wax print fabric industries in Nigeria, many based on an import substitution model with outmoded equipment and hampered by poor roads and ‘epileptic’ electricity supplies, are rapidly going out of business. Yet some industries in some countries— leather, shoes and plastics, consumer appliances, for example—seem to be competing with Chinese imports. Indeed, these are the industries now attracting investment from China, even in Nigeria.”
—Deborah Brautigam, Op. cit.
The Trotskyist Fraction’s concern about Chinese exports stunting Argentina’s industrial development, is echoed by critics of China’s role in Africa:
“China has been the main source of imports for African countries from as early as 2007, and in 2012 it became the main export market for the African continent. China-Africa trade relations are unbalanced in terms of volumes, composition and origin. African countries have run a trade deficit with China since 2012. Of African exports to China, 90% are fuels, minerals and metals, while imports cover a wide variety of goods. In 2017, the top four African exporters to China (Angola, South Africa, Republic of Congo and Ghana) were providing over 80% of the total exports, according to UN Comtrade data (UN, n.d.). This unbalanced trade relationship is potentially damaging for Africa’s diversification and industrialisation prospects (Qobo and le Pere, 2018).”
—Linda Calabrese, Xiaoyang Tang, Africa’s economic transformation: the role of Chinese investment, June 2020
Trade imbalances do not automatically signify a semi-colonial relationship and some studies suggest that by increasing demand for primary resources, China has positively impacted overall African economic development:
“reduced scope for export-led industrialization does not necessarily imply a reduction in export earnings. On the contrary, for some countries, Chinese demand for raw materials has a positive effect on their balance of payment position and capacity to import capital goods. Bagnai, Rieber, and Tran (2012), for instance, find that, on average, the balance of payment-consistent growth rate in SSA [Sub-Saharan African] countries has increased from 2.2% in the period 1990–99 to 5.4% in the period 2000–2008. About a third of this relaxation was due to the expansion of export markets in ‘developing Asia’ (an aggregate of China and 13 other countries in low and lower-middle-income countries in South and Southeast Asia; Bagnai, Rieber, and Tran 2012). China has an indirect impact on the external demand constraint through changes in world market prices for primary commodities and manufacturing products. China’s demand for raw materials had spurred world market prices for hard and energy commodities. At the same time, Chinese manufacturing also puts a downward pressure on world market prices for manufactures (Kaplinsky and Farooki 2012). As a result, SSA countries producing mineral and energy commodities benefit—at least temporarily—from an improvement in their terms of trade.”
—Christina Wolf, World Review of Political Economy Vol. 7 No. 2, Summer 2016
Despite the negative impact of Chinese competition on industry in “medium-income” countries like Argentina and South Africa, on the whole semi-colonial countries have seen significant improvement in their terms of trade:
“China’s trade with the rest of the developing world has grown especially fast. Between 2000 and 2017, the average nominal rate of growth in its total merchandise trade with developing economies registered 18% per annum, compared to that with developed economies (‘high-income economies’) of 12%. Moreover, whilst China has been running surpluses with developed economies, its trade with developing economies has been in most years in sizeable deficits. During this period, China also experienced continuous worsening of its international terms of trade, whereas the opposite was true for the developing world as a whole.
Between 1998 and 2018, China’s net barter terms of trade decreased by a magnitude of 24%. This stood in contrast to the modest decrease (3%) for developed economies, and the massive increase (53%) for all developing economies excluding China.” —Dic Lo, Third World Quarterly Vo. 41 No. 5, 9 March 2020
This shift refutes assertions by many commentators, both leftist and bourgeois, that China’s international expansion has closely paralleled that of the “free world” imperialists. The rapid expansion of Chinese exports which by 2018 had turned it into the world’s largest trading country, was, at least until 2012, paralleled by a growth in manufacturing exports by dependent capitalist countries:
“Outside China, industrialisation in the rest of the developing world since the turn of the century is not plainly a record of failure. The world share of manufactures exports from developing economies excluding China actually increased, from 12.5% in 1999 to 15.3% in 2012, before falling back to 13.5% in 2017…. The same pattern is observable regarding the world shares of manufacturing value added: all developing economies excluding China increased their share, from 12.9% in 1999 to 21.0% in 2012, before falling back to 19.3% in 2017…. Displacement effects in the absolute sense of directly suffocating industrialisation in the rest of the developing world, though found to be present in the case studies of various particular economies, do not seem to be true for characterising the overall picture of the impact of China’s export expansion.”
—Lo, Op. cit.
Many semi-colonial countries generated a net surplus from their trade with China. Some countries reinvested in economic development, while elsewhere corrupt leaders siphoned off earnings. But the evidence shows a positive correlation between Chinese economic activity and manufacturing output in many African countries:
“…on average, countries with high shares of Chinese export demand and strong Chinese [construction] project presence experienced the strongest growth in manufacturing output per capita (on average, 129% relative to the 1996–2000 average). They are followed by the group of countries with little exports to China, but many Chinese construction projects. In this group, manufacturing output per capita has increased on average by 53% over the past 10 years. These two groups perform better than both the low impact and medium project groups. The group of countries which performs worst is indeed the group where Chinese consumer goods imports make up for a large share of GDP.”
—Wolf, Op. cit.
In Angola and Ethiopia, major Chinese construction projects typically required substantial quantities of building materials from the People’s Republic, but over time domestic production ramped up in several sectors:
“… Chinese firms source large amounts of supplies and equipment through imports from China given the lack of (almost any) supply in the African host countries. Yet, this situation is beginning to change. Case study findings from the SGR project in Kenya suggest that all cement is purchased from Kenyan industries. Railway cars are produced in Kenya, while construction machines, railway engines and steel rails were imported from China.”
* * *
“But both countries gradually developed a cement supply base causing both imports and prices of cement to fall. In Angola, cement imports decreased at an average annual rate of 30% between 2010 and 2014 (to USD 77 million in 2014). An average of 51.5% of all cement imports between 2002 and 2014 was sourced from China, with a peak of 77.6% in 2011. In Angola, investments by various companies have redressed this balance, with production levels reaching 5.7 million tons in 2014 (against 6.6 million tons consumption) …. In terms of installed capacity, Angola was self-sufficient in 2014, with installed capacity surpassing 8.5mta across five producers). Given the slowdown of the construction sector in Angola post 2015, as a result of the sharp decline in oil revenues, demand for building materials declined and companies started considering exports to the region, according to field interviews. Meanwhile, Ethiopian imports of cement dropped to just USD 535 thousand in 2014 as a result of substantial expansion in domestic production. To this add USD 865 thousand in concrete products. In Ethiopia, a total of 20 plants have an installed capacity of 12.6 Mta producing 6.05 million tons in 2014.”
—Christina Wolf, Sam-Kee Cheng, Chinese Overseas Contracted Projects and Economic Diversification in Angola and Ethiopia 2000-2017, November 2018
There is considerable evidence that African countries doing business with Chinese firms tend to derive more benefits than those dealing with corporations based in the advanced capitalist countries:
“In comparison to trading with the OECD economies, Fu et al. (2015) found that trade with China yielded greater productivity effects on manufacturing firms in Ghana. The authors argue that internationalisation via trade opens up effective channels for firms in African countries to achieve productivity progress. By engaging in the global production chain, local firms can better access advanced technologies, for example applying the imported machinery and equipment into local production, bringing technology embedded goods and services, getting technological assistance from foreign suppliers, as well as learning through disassembling the imported products. Therefore, high intensities of exports and imports between China and Ghana greatly contribute to the productivity increase of Ghanaian companies (Fu et al., 2015). Moreover, Fu et al. (2015) prove that trading with countries that share similar production capabilities stimulates stronger productivity effects because of the closer technological distance. Firm-level and trade-based industry-level datasets from Ghana show that China and other emerging economies are likely to provide goods and services that are more accessible to local companies and thus allow them to upgrade their technological capability. Similar findings are highlighted by Darko et al. (2018).”
—Calabrese, Tang, Op. cit.
Most Chinese activity in Africa is profit-oriented and therefore ultimately shaped by the law of value, but state support gives Chinese firms more latitude and a longer timeframe than their North American or European rivals are willing to contemplate:
“In trade relations, China and most of its African trade partners operate within the multilateral trading system of the GATT/WTO legal regime, sharing not only the fundamental substantive rules and principles but also the mechanisms of dispute settlement under the Dispute Settlement Understanding. More importantly, however, it is fair to assume that China’s bilateral trade agreements with more than forty African states provide more favourable trade terms and concessions than required under the WTO on reciprocal terms. It also appears that China routinely offers unilateral trade concessions to many African states beyond the bilateral treaties. The current flexible institutional arrangement can potentially facilitate manufactured exports from Africa to China in the future.”
—Arkebe Oqubay, Justin Yifu Lin, Introduction to China-Africa and an Economic Transformation, in: Oqubay, Lin, Op. cit.
Rwanda has found China to be a far better trade partner than the US:
“Rwandan leaders have long looked to China for inspiration. Rwanda’s high population density makes a labour-intensive strategy appealing. Two decades after a devastating genocide, Rwandans now produce paper goods, uniforms and polo shirts in Chinese factories in a special economic zone in the capital, Kigali.
“In contrast, Rwanda imposed tariffs on used clothing and shoes from the United States in order to boost local manufacturing in early 2018. The US Trade Representative’s Office threatened to start a trade war and imposed sanctions on Rwanda’s US exports.”
—Eastasiaforum.org, 1 August 2018
The self-proclaimed Trotskyists of the CWI who assert that China’s “BRI allows it to dump billions of manufactured commodities into Africa, forcing sovereign states to open up their markets to trade” do not appear to be familiar with China’s actual record in Africa. Like many other groups which make similarly unsubstantiated allegations the CWI comrades do not appear to have undertaken any serious investigation of the facts. The theoreticians of the CWI (like those of the Trotskyist Fraction [TF], the International Socialist Tendency and all the other “Trotskyist” groups peddling similar twaddle) seem disinclined to either make a serious attempt to substantiate their claims or reassess their position. It is of course far easier to operate in social-democratic and “progressive” liberal milieus by echoing, rather than combatting, imperialist propaganda about China ravaging less “developed” countries. Revolutionaries, by contrast, are guided by Trotsky’s injunction to “say what is.”
Chinese banks in Africa: playing a long game
In 2000 the CCP set up the Forum on China-Africa Cooperation (FOCAC) to coordinate trade, aid, infrastructure projects, investment and financing. It has since been folded into the state-directed Belt & Road Initiative (BRI):
“The prospect that FOCAC initiatives would be aligned to the BRI, as indicated at FOCAC VII, holds out the possibilities of further infrastructure financing that could ultimately contribute to Africa’s integration into global value chains (China Ministry of Foreign Affairs, 2018). Chinese financial resources based within the BRI framework, such as the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank, can now be leveraged alongside the China–Africa Development Fund, the newly formed China–Africa Fund for Industrial Cooperation, and the Special Loan Facility for African SMEs. Beyond the attention given over to development financing, it is notable that FOCAC VII builds on the inclusion of environmental and socio-cultural considerations, once remote from China’s economic engagement with the continent, and signalling again the alignment with parallel concerns in China.”
—Alden, Op. cit.
Two big state banks, the China Import Export Bank (also known as Eximbank) and the China Development Bank (CDB) provide financing for most overseas projects:
“The importance of policy banks like Eximbank and China Development Bank in China’s development model and its international economic relations cannot be emphasized too strongly. … It [China] acts to accelerate development through the deliberate use of state policies. The central characteristic of a developmental state is its control over finance. This control need not be exclusive—but it must be important at the margin in order to influence the behavior of firms in directions determined by political leaders.”
—Brautigam, 2009, Op. cit.
The CDB helped many neo-colonial countries during the 2008 financial crash by funding domestic infrastructure projects:
“A massive expansion of lending to local governments and their SOEs, spearheaded by the CDB, generated new momentum to China’s growth, with global impact, particularly via global commodity markets, cushioning the impact of the 2008 Great Recession on developing countries. CDB lending to support local authority infrastructure investment continues to be an instrument of China’s fiscal policy even as the central authorities work to rebalance the Chinese economy from investment to consumption and to deleverage the financial system, including through reforming local authority finances.”
—Jing Gu, Richard Carey, China’s Development Finance and African Infrastructure Development, in: Oqubay, Lin, Op. cit.
Together, Eximbank and the CDB have more than $100 billion in outstanding African loans. Chinese lenders who in 2017 accounted for 23 percent of sub-Saharan Africa’s total debt, provided many “concessional” loans, i.e. issued below market interest rates, and in almost all cases offered better terms than the IMF or World Bank. The China-Africa Research Institute at John Hopkins University recently estimated that 63.7 percent of the $148 billion in Chinese loans to Africa between 2000 and 2017, were concessional, and an additional five percent entirely interest-free (see: Alden, 2019, Op. cit.):
“The Exim Bank was set up in 1994 and in 1995 started distributing concessional loans as Beijing’s solitary lender. It reports to the State Council. Dependable statistics on Exim Bank’s concessional loans are unavailable and most studies on the bank can only arrive at estimates (such as the China Global Energy Finance database). The most reliable estimate, given by the China–Africa Research Initiative (2018) is that between 2000 and 2015, the Chinese government, banks, and contractors gave US$94.4 billion in loans to African states and state-owned enterprises (SOEs).”
—Ian Taylor, The Institutional Framework of Sino-African Relations, in: Oqubay, Lin, Op. cit.
Another study, which disputed assertions that most Chinese loans are concessional, acknowledged that they usually came with “more attractive terms than [offered by] Western financial institutions”:
“The vast majority of Chinese lending is not concessional; while it may be cheaper than finance from other sources, it is almost always made above market interest rates. For example, one $2 bn line of credit for Angola was made at LIBOR plus 1.5 percent with a grace period while a consortium led by Standard Chartered group offered to provide the financing at LIBOR plus 2.5 percent. While these are likely better terms than Angola would have been able to access from other financial institutions, they involved no government subsidy and are thus not concessional from China’s point of view. In fact, Angola has received a total of 48 oil-backed loans since 1979, including over $ 3.5 billion from Western banks in 2000 and 2001 and what was reported as ‘the largest oil-backed transaction in the entire history of the structured trade finance market’ from Barclays and RBS shortly after the Chinese infrastructure loan was made (Brautigam 2009). While the sustainability of commodity-backed loans, especially given the recent downturn in oil prices, deserves scrutiny, China appears to only be a small part of a larger trend in the country most cited as an example of China’s economic imperialism and is doing so with more attractive terms than Western financial institutions.”
—Deborah Brautigam, Xinshen Diao, Margaret McMillan, Jed Silver, Chinese Investment in Africa: How much do we know?, October 2017
In 2010, South African Trade Minister Rob Davies commented that China’s willingness to provide financing meant “We don’t have to sign on the dotted line whatever is shoved under our noses any longer….We now have alternatives and that is to our benefit.” China, unlike the IMF, does not usually require borrowers who fall behind in payments to impose brutal austerity “reforms.”
Zimbabwe’s experience in the 1990s provided an object lesson in the perils of IMF-imposed “structural reform”: while taxes were lowered for the wealthy, funding for education, healthcare and other social services was reduced. Focusing on producing commodities for export translated into lower real wages, falling living standards and rising social inequality:
“The major factors in lowering real wages were soaring inflation and rising unemployment. Inflation ravaged workers, with the Zimbabwe Congress of Trade Unions reporting in 1996 that their members found themselves on average 38% poorer than in 1980 and 40% poorer than in 1990….Adding this to the falling ‘social wage’—thanks largely to new cost recovery policies for health, education and many other social services, as well as the unprecedented interest rates on consumer credit—workers and poor people faced an unprecedented financial crisis during the early 1990s.
“But dramatically lower wages did not, as orthodox theory would suggest, translate into more jobs. Unemployment remained rampant….”
—Patrick Bond, Uneven Zimbabwe, 1998, [cited in 1917 No. 23]
The World Bank and IMF often impose conditions which impoverish the mass of the population and rarely involve funding the construction of infrastructure to support future development. By contrast “Chinese funding bodies were financing critical infrastructure that other funding bodies were reluctant to finance” (Calabrese, Tang, Op. Cit.). Bankers from the People’s Republic are far more willing to extend credit to countries that currently have difficulty servicing short-term debt, because Beijing employs a longer time frame on debt sustainability:
“…a country in debt distress can still take up loans from China if the individual loan-backed project is commercially viable and if the borrower is able to service its debts. This statement represents a sharp contrast to the approach of the IMF, which states that non-concessional borrowing to countries in debt distress “would be allowed only under exceptional circumstances … China considers the relationship between debt and growth explicitly in its debt sustainability framework. It states: “Productive investment, while increasing debt ratios in the short run, can generate higher economic growth […] leading to lower debt ratios over time”. This indicates that China sees lending as a catalyst for economic growth, as opposed to the IMF’s debt limit policy, for which growth is enhanced if the loans are concessional.”
—The China-Africa Research Initiative Blog, 27 August 2019
The scale of Chinese financing has forced the IMF to soften its conditions on loans to “developing” countries:
“Since the end of World War II, the IMF has been the most influential institution in setting public debt management norms for developing countries. China began to challenge the IMF’s position when it started to increase its overseas lending at the turn of the 21st century. As I have shown in previous research (see here and here), the IMF had no choice but to adapt its own debt sustainability framework in 2013 to allow for developing countries to take up loans on commercial terms from China. This policy change was born of the political impossibility of the IMF to prevent developing countries from taking up Chinese loans. However, this shift in the IMF’s position was not widely publicized, and the Fund still hopes to get China to conform to its own ideas of debt sustainability.”
Deborah Brautigam points out that one element of the CCP’s approach to “debt sustainability” is to steer neo-colonial borrowers in the direction of undertaking socially useful projects:
“The Chinese are experimenting, hoping that the profit motive will make these efforts sustainable, releasing the Chinese government from having to return again and again to resuscitate its aid projects.”
—Brautigam 2009, Op. cit.
While Beijing seeks to turn a profit from its financial activity, in many cases it puts a higher priority on completing projects.
The various pseudo-Trotskyist impressionists who denounce “Chinese creditor imperialism” generally offer little to substantiate their allegations. The one case which is often cited is China’s involvement in the port of Hambantota in Sri Lanka. The CWI (which apparently views India as a “rival Asian imperialist power”) described the Hambantota port deal as evidence of “China’s state-financed imperialism”:
“The Economic Times, admittedly reflecting the view of India, a rival Asian imperialist power, gave a succinct description of how China’s state-financed imperialism works: ‘China’s strategy to grab land and assets in smaller, less-developed countries is simple: it gives them loans on high rates for infrastructural projects, gets equity into projects, and when the country is unable to repay the loan, it gets ownership of the project.’
“Not inaccurately, China’s actions are described as ‘creditor imperialism’ by Brahma Chellaney, an advisor to the New Delhi government. A clear example is what has just happened in Sri Lanka, where China has secured ownership on a 99-year lease of the Hambantota port, which was built with Chinese loans.”
—Socialistworld.net, 23 February 2018
But anyone who seriously investigates the Hambantota case could only conclude that it is not an example of “Chinese imperialism”:
“Sri Lanka did (and still does) face a debt crisis. It has borrowed large amounts from China in recent years. And it did agree in 2017 to grant a 99-year lease of the strategically important Hambantota port to China on a debt-equity swap, though with the proviso that it cannot be used for military purposes.
“But it is a myth that the port was ceded to China because Sri Lanka faced problems paying back Chinese loans.
“Sri Lanka’s debt repayment problems had very little to do with Chinese loans. Chinese loans comprise about 10 per cent of Sri Lanka’s total foreign debt. Of this debt, over 60 per cent was lent to Sri Lanka on concessional terms that, while not as generous as those from Japan—Sri Lanka’s largest bilateral source of loans—were not really excessive (typically at fixed rates of 2 per cent, with other fees of 0.5 per cent and average maturity of 15–20 years).
“The remaining 40 per cent of non-concessionary loans from China comprise only 20 per cent of Sri Lanka’s total debt from such borrowings. The rest (80 per cent) was borrowed from international capital markets in the form of sovereign bonds, term financing facilities and foreign holdings of gilt-edged securities.
“From an initial US$500 million international sovereign bond (ISB) issue in 2007, Sri Lanka went on to amass US$15.3 billion in debt from subsequent ISB issues and foreign currency term financing facilities from 2007–18.”
—East Asia Forum, 28 February 2019
China offered better terms to Sri Lanka than the Western banks:
“By late 2015, facing falling foreign exchange reserves and a balance of payments crunch, it [the Sri Lankan government] sought an emergency loan from the IMF. It also turned, once again, to Beijing. Having announced that work on Colombo Port City would restart, it began to discuss a plan for Chinese investors to build a special economic zone in Hambantota, alongside the Chinese-built seaport and airport. China is considering a plan to build ships there, which would certainly fuel Indian concern, especially since a Sri Lankan defence official said the suspension of Chinese naval ships docking in Sri Lanka might also be reconsidered. ‘The stance on China has completely changed,’ cabinet spokesman Rajitha Senaratne told Reuters. ‘Who else is going to bring us money, given tight conditions in the West?’”
—Miller, Op. cit.
Deborah Brautigam rejects complaints about Chinese debt traps:
“We saw no evidence of asset seizures in Africa, or indeed, anywhere among Chinese borrowers in debt difficulties. In the much misunderstood case of Hambantota port in Sri Lanka, a newly elected government facing a balance of payments crisis that was not Chinese in origin privatized its Chinese-financed port to a Chinese investor in 2017. This brought in over $1 billion in foreign exchange. Similarly, debt-distressed Republic of Congo concessioned its 535-kilometer Chinese-financed highway to a Congolese-Sino-French consortium, which now operates it as a toll road.
“The Trump administration has stoked fears about countries losing their sovereignty through public-private partnerships like these. Instead, we should be encouraging more of them. Equity investments are a smart way for countries to finance the operation of badly needed infrastructure, while also helping repay loans.”
—The Diplomat, 15 April 2020
Most Chinese loans to Africa between 2005 and 2011 were long-term “commodity-for-infrastructure financing” arrangements:
“Another key dimension of the resource-seeking motive is its association with the development of infrastructure in SSA [Sub-Saharan Africa]. A well-known mode of Chinese investment refers to the so-called ‘Angola mode’: this type of contract links trade, investment and aid, and is a ‘packaged’ contract of ‘commodity-for-infrastructure financing’, where a SSA country exports a commodity to China in exchange for the financing of an infrastructure project. SSA infrastructure is very poor, which has made such contracts particularly attractive for SSA governments. The natural resource part is equity-financed by Chinese entities as FDI and the infrastructure part is debt-financed usually by China’s ExIm Bank on concessional terms (Mlachila and Takebe, 2011; Christensen, 2010). Such contracts, which aim at securing the long-term supply of a natural resource and accessing exploration rights, appear to be more effective in Africa than in South America (Alves, 2013a).”
—Christian Milelli, Alice Sindzingre, Chinese Outward Foreign Direct Investment in Developed and Developing Countries: Converging Characteristics?, 2013
Beijing’s financing resulted in upgraded roads, rail, energy, communications and water infrastructure. Much of this work was carried out by Chinese companies on very generous terms:
“For example, the state-owned Indian oil company the Oil and Natural Gas Corporation (ONGC) thought it had secured a deal with Shell to assume the lease for Angola’s Block 18, but a last-minute decision by Sonangol gave the rights to Sinopec. Crucial to the turnaround was the Chinese government’s willingness to provide a US$2 billion loan to the Angolan government, freeing it from its reliance upon IMF sources (and the accompanying conditionalities sought by the international financial lending agency). Moreover, Beijing has gone on to provide billions of dollars’ worth of finance, expertise and even its own labour force in reconstructing Angola’s shattered infrastructure, including US$300,000 towards the refurbishment of the Benguela railway, US$2 billion aimed at rehabilitating the railway linking the port of Namibe with the city of Menogue, US$450 million towards the construction of a new airport in Luanda, and US$3 billion for the building of a refinery in Lobito.”
—Chris Alden, China in Africa, 2009
Chinese investment not only comes with fewer strings, it tends to be far more closely tailored to the priorities of the recipients than that provided by the IMF. This is because China considers African economic development to be in its own long-term national interest, while Western lenders usually prioritise short-term profit-seeking:
“The developing world has preferred China’s loans because it has financed what these countries want—big infrastructure and energy projects with no strings attached—not what the West says they need. Western institutions and states tend to make loans conditional on a country’s commitment to controversial policy reform, such as deregulating financial markets and privatizing public utilities.
“Reasonable questions are being raised about China’s lending. Like those from Western-backed development banks in earlier years, Chinese loans now face default by countries that have long been branded ‘serial defaulters.’ China has provided massive loans to Pakistan, Sri Lanka and Venezuela, and it is not clear the Chinese will be paid back in full. Most of the countries that have received Chinese development finance won’t go off a default cliff.”
—Npr.org, 11 October 2018
The reason that China’s delinquent debtors “won’t go off a default cliff” is because Beijing’s record of debt forgiveness contrasts sharply with that of the imperialist world. Even Willy Wo-Lop Lam, a pro-American academic, admitted “…through the 2000s China forgave $3 billion worth of loans to African countries, more than the entire Western world” (Chinese Politics in the Era of Xi Jinping). Today that figure stands at more than US$4 billion.
Esteban Mercatante, a Trotskyist Fraction leader who advocates neutrality in any conflict between Beijing and Washington, recognises that China’s rise has given Latin American countries more “room for manoeuvre”:
“China has become a concern for the rest of the imperialist powers, not only because it is a commercial competitor, but also because it is gaining influence in regional geopolitics, and contributes to giving room for manoeuvre to several Latin American countries. In the case of Argentina, for example, short-term Chinese financing played a central role in preventing a run against the peso, although by itself it is not enough to deal with the lack of foreign currency in the medium term.
“It has also made it possible to negotiate infrastructure projects without having to comply with the conditions associated with the agreements with the World Bank. In the case of Venezuela, Venezuela now exports oil to both China and the United States. It has received loans of some 45 billion dollars and there are substantial Chinese investments in hydrocarbons. In times of economic crisis like the current one, this is an important tactical aid for Maduro’s government, although it consolidates Venezuelan dependence and oil extractivism.”
—La Izquierda Diario No. 17, 12 April 2015
While acknowledging that China’s global activity has been beneficial for many semi-colonial countries, the TF fails to draw the obvious political conclusion that it is necessary to defend the Chinese deformed workers’ state in any military confrontation with imperialist predators. Leon Trotsky, whose ideas the TF claims to uphold, asserted that Marxists have a duty to take sides in any conflict between imperialists and their victims:
“The coercive imperialism of advanced nations is able to exist only because backward nations, oppressed nationalities, colonial and semicolonial countries, remain on our planet. The struggle of the oppressed peoples for national unification and national independence is doubly progressive because, on the one side, this prepares more favorable conditions for their own development, while, on the other side, this deals blows to imperialism. That, in particular, is the reason why, in the struggle between a civilized, imperialist, democratic republic and a backward, barbaric monarchy in a colonial country, the socialists are completely on the side of the oppressed country notwithstanding its monarchy and against the oppressor country notwithstanding its ‘democracy.’”
—Leon Trotsky, Lenin on Imperialism, February 1939
China’s economic and financial support has permitted a number of African countries to limit the predations of imperialist bankers and the IMF. The various “Trotskyist” groups like the CWI and TF who choose to echo the slanderous imperialist denunciations of the People’s Republic, shamelessly betray the Bolshevik-Leninist heritage upon which they claim to stand.
Chinese SOEs in Africa—resource extraction and infrastructure
China’s SOEs, which are by far the biggest domestic enterprises, are also the main players in foreign ventures:
“A key characteristic of Chinese OFDI [outward foreign direct investment] in SSA is the fact that a significant share of it is backed by the central government, i.e. it is driven by enterprises that are supported by the government, in particular public enterprises, and within this category, firms that are directly supervised by the government: indeed, as shown by Pairault (2013), this latter category would represent on average 80% of the stock of Chinese foreign direct investment: although they enjoy a genuine autonomy, such enterprises therefore can be said to express China’s investment policy in SSA.”
—Milleli, Sindzingre, Op. cit.
In theory SOEs are supposed to be self-financing (i.e., profitable) and not depend on state-owned banks to keep afloat. While 75 percent of China’s state sector companies have been able to turn a profit on their African operations, initially many SOEs were cautious about venturing abroad and two-thirds of those operating in Africa at one point or another had to rely on state funding. Many SOEs had to be nudged into going overseas through a mix of financial incentives and political exhortations. SOE foreign operations are sometimes required to subordinate their pursuit of profit to larger national foreign policy objectives:
“Although Chinese central SOEs have to stay profitable, they are not after maximum profit. As the senior NFCA [Non-Ferrous Metals China, Africa] executive explained, ‘A CSOE [central SOE] is about the nation’s strategic, lifeline, security interests. Its goals, aside from profit, include employment, environment, welfare…. But it is still an enterprise and the government is the largest stockholder. It seeks “feasible” profit: not to maximise profit, and profit is only one of the goals.’
“Opting for profit optimization, the Chinese state mine seeks to accumulate other forms of profits—political capital and resource security. As a central SOE, CNMC [the China Non-Ferrous Metal (Group) Company] is a part of China’s economic diplomacy, which in the current period places strategic emphasis on Asia and Africa and calls for utilizing overseas resource commodities that are in short supply in China—oil, copper, aluminum, and iron.”
—Ching Kwan Lee, Op. cit.
Chinese economic activity in Africa and Latin America is centred on resource extraction and construction. When the 2008 financial crisis hit Zambia, all the multi-national mining corporations slashed jobs and wages in a bid to remain profitable, while Chinese firms pursued a different path:
“In the midst of the turmoil, the Chinese state-owned NFCA publicly announced a three ‘no’s’ policy: no retrenchment, no production reduction, and no salary cuts. Operating with long-term interest in the stable physical production of ore, as opposed to reacting to market fluctuation in ore prices and shareholders’ short-term financial interests, NFCA’s response to the crisis reflected its political and business objectives in Zambia. Seizing the moment to emphasize China-Zambia’s all-weather friendship, publicizing its commitment to remain in Zambia in the long run, NFCA won admiration on the Copperbelt and in Lusaka for its stabilizing impact on the national economy. It was a turning point for Chinese state investment’s public image, which had been seriously tarnished by the 2005 explosion. CNMC also bought the Luanshya mine and extended a lifeline to the mining town of a hundred thousand residents.”
When Zambia passed a Mines and Minerals Act imposing windfall taxes when copper prices rose above a set figure, a similar disparity was evident in the responses of the Chinese SOEs and their imperialist competitors:
“With the conspicuous absence of the Chinese NFCA, the chairmen of the boards of five major mining companies—KCM, MCM, Metorex, First Quantum, and Kansanshi—wrote a protest letter to the president, Levy Mwanawasa, warning him of the potential damage the act would do to Zambia’s reputation as a safe destination for foreign direct investment. Not only did the NFCA not join these foreign companies in voicing public objections; records showed that only NFCA and one other mining company complied with paying the new taxes before the Zambian government rescinded the legislation in the wake of the global financial crisis. A former advisor to president Mwanawasa recalled that the Chinese expressed their support for the windfall profit tax, a position confirmed by the top CNMC executive in Zambia.”
Self-professed Marxists who impressionistically denounce China’s role in Africa as “imperialist” should ask themselves why Chinese mining corporations supported Zambia’s windfall tax law while their “first world” competitors did not. Chinese SOEs operating in Uganda, Kenya and Mozambique have provided significant funding for social programmes that make no direct contribution to their bottom-line profitability. While imperialist corporations sometimes seek to burnish their image through charitable activities, the involvement of Chinese state sector firms is vastly greater in both scale and breadth:
“Community engagement work was emphasised by most of the Chinese companies interviewed. These had been organised largely in response to community requests, and tended to occur mostly in an informal way, except in a few large SOEs with dedicated public relations departments. Most of those interviewed were able to share examples of their community work. These included sponsoring the building or renovation of primary schools, churches or hospitals; donating money to a youth foundation or an orphanage; sending machinery and material for accident or disaster relief; and building roads or drilling wells for local communities. According to these interviewees, good ‘community relations’ are essential to doing business in Africa.”
—Xiaoxue Weng, Lila Buckley (edt.) in International Institute for Environment and Development, Chinese Businesses in Africa, February 2016
In Zimbabwe, China’s Tianze corporation has had a major impact in increasing tobacco production, which now accounts for 12 percent of economic output and is an important source of export revenue:
“Since coming to Zimbabwe in 2005, Tianze has received support from the central Chinese government through access to low interest finance, and they have not suffered the liquidity challenges that have plagued Zimbabwe since ‘dollarization’ in 2009 and have hampered the expansion of local companies. Due to access to more concessionary funding and its reinvesting most of the profits made, the company has become a key stakeholder in Zimbabwe’s tobacco sector. As the general manager confirmed, ‘Tianze’s ability to succeed in a relatively short period mainly benefitted from the Chinese market and financial support from the Exim Bank’. This support enabled the company to become a core player in Zimbabwe’s tobacco sector in a relatively short time. Zimbabwean state officials have been quoted explaining that exemptions were given to Chinese companies because ‘they have been supporting our agriculture and our farmers, so we look at those things when considering whether to exempt them or not’ (New Zimbabwe, 2014).
“Tianze’s local manager expressed no incentive to increase profits: ‘It makes no difference to me if I make one dollar profit or one million dollar profit, because my salary is always the same’, reflecting the conditions in many SOEs, and the wider political role played by such companies.”
—Jing Gu, Zhang Chuanghong, Alcides Vaz, Langton Mukwereza, World Development Vol. 81, 2016
China’s smaller, provincial SOEs are generally under more pressure to be profitable, although in some cases exceptions are made. Provincial governments which Beijing has “twinned” with a particular African country are encouraged to invest and initiate aid projects, usually in agriculture or construction sectors.
Chinese construction companies have seen a huge expansion in their African operations in recent decades which today constitute 30 percent of their total business. They have won many competitions with foreign firms for infrastructure projects:
“In 2000, Chinese EPC [Engineering, Procurement and Construction] companies reported gross revenues of US$1.1 billion from their African projects, and Africa made up just 13 per cent of their global revenues. By 2016, their annual revenues had climbed to US$50 billion, and Africa was providing over a third of global EPC revenues. Loans from China’s export credit agency China Eximbank were intended to stimulate African business for Chinese exporters of goods and services. Yet our data show that only about 20 per cent of these projects were financed by Chinese loans. Chinese companies were getting increasingly good at marketing themselves and competing with others to win tenders.”
—Brautigam 2019, Op. cit.
Chinese builders are often able to underbid their competitors by as much as 20 to 30 percent. In some cases this is because SOEs involved in foreign projects have access to preferential loans but another key factor is that Chinese engineers and other skilled personnel are paid less than their European or North America counterparts:
“Engineering education system investment in China has produced a flow of skilled graduates with salaries still way below developed-country levels for comparable expertise. Thus the Chinese engineering, construction, and telecoms industries win a significant share of international contracts, including from the multilateral development banks.”
—Gu, Carey, Op. cit.
China generally treats Engineering, Procurement and Construction projects as services sold to a country, rather than as capital investments expected to generate a permanent revenue stream. This model was used in the construction of the Tazara rail link to Dar es Salaam in the 1970s:
“Chinese infrastructure projects take the form of engineering, procurement, and construction (EPC) packages. Financing moves from the Chinese policy bank direct to the Chinese contractor. There are no transactions through the home-country public finance systems. This approach has the advantage for the host country of getting around serious capacity gaps in project formulation and financial management while speeding up project completion. Transparency and governance issues associated with this approach are for the developing country alone to resolve. Economic, social, and governance standards are those of the developing country itself (Dollar, 2018).”
—Gu, Carey, Op. cit.
In China’s African activity, infrastructure construction far exceeds investment: in 2013 construction projects were valued at $40.6 billion compared to only $3.1 billion in foreign direct investment. Chinese construction firms have had a major impact across the continent:
“Chinese contractors built the $1.2 billion Tanzania Gas Field Development Project in 2015; the $3.4 billion, 750-kilometer Ethiopia-Djibouti Railway in 2016; and the $3.8 billion, 750-kilometer Standard Gauge Railway in Kenya in 2017.”
A quarter of Chinese construction projects stipulate that building materials from the People’s Republic must be used, although most African contracts do not contain a “buy Chinese” clause (which was common in the Mao era). Still, only 47 percent of expenditure on materials goes to indigenous producers, due to the limited range of items they manufacture. When African governments have required that materials be sourced locally some Chinese firms responded by trying to circumvent these rules, while others sought to upgrade local capacity:
“Several African countries have rules for foreign companies to subcontract a part of their work to local firms, but the results of these rules are mixed. While some Chinese firms established long-term partnerships with local subcontractors, other Chinese firms complained about difficulty of working with local subcontractors and tried to bypass the regulation.
Some Chinese companies provide technological and financial assistance to their local suppliers and subcontractors in order to secure good quality supplies and fulfilment of commissioned tasks. Sometimes, Chinese technicians were sent to work together with the suppliers and inspect their production. Occasionally, Chinese firms provided machines to long-time local suppliers to enhance ties and efficiency.”
—Calabrese, Tang, Op. cit.
In Angola and Ethiopia Chinese infrastructure projects have created enough demand to establish new domestic producers of construction materials. Most studies suggest that Chinese infrastructure projects in Africa have had a positive net impact for the host countries:
“…infrastructure development and the construction sector more generally contribute to economic diversification, not just by way of ensuring stable access to electricity and water or cost-efficient transportation of goods, but also by increasing demand for building materials, some of which start to be produced domestically in both Angola and Ethiopia. This finding is particularly important in light of ongoing debates around China‘s contribution to (de-)industrialisation in Africa and raises further questions, in particular about the role of policy in maintaining symbiotic growth between the two sectors.”
—Wolf, Cheng, Op. cit.
Chinese SOEs in Africa are profit-seeking, but this is sometimes set aside for diplomatic or geopolitical reasons. American business analysts favour investments capable of generating “an indefinite stream of returns” rather than involvement in projects designed to promote future economic development:
“Also important to the BRI: Construction dominance is state dominance. The private sector has at times played a vital role in China’s global investment, but SOEs such as Sinomach account for nearly all construction. SOEs have proven capable of completing large projects in difficult settings, in China and now overseas. They frequently incur losses and rely on highly concessionary finance from state institutions. American and other foreign companies will not compete for such projects without similar financial support. Policymakers should consider if it is worthwhile for American taxpayers to pay for roads in Cambodia or Cameroon. A dollar spent on engineering and construction services has less value than a dollar spent on acquiring an asset. The main reason is that an investment dollar generates an indefinite stream of returns while contract payments are fixed term. Nevertheless, combining the long-term preeminence of rich economies in investment and poorer economies in construction illustrates the scope of the PRC’s activity.”
—Derek Scisssors in American Enterprise Institute, China’s Global Investment Vanishes Under COVID-19, July 2020
African Special Economic Zones and Chinese private capital
While SOEs predominate in China’s foreign investment, private capital is also permitted to venture abroad if it meets certain conditions, including participation in special economic zones (SEZs) which were introduced in China in the 1980s for private capitalists to produce commodities for export. In 1997, Egypt requested Chinese assistance in setting up an SEZ; since then, Beijing has helped Nigeria, Zambia, Ethiopia and Mauritius create their own special economic zones:
“The African Union’s Agenda 2063 describes the acceleration of industrialization as critical for African countries to reduce poverty (AU 2014). African countries must therefore overcome the constraints of scale and competitiveness by creating enabling business environments with improved policies and infrastructure and competitive transaction costs. African SEZs aim to achieve this by offering a number of advantages to investors, such as reduced customs duties and value added taxes; simplification and centralization of administrative procedures through ‘one-stop-shops’; access to key national and international infrastructure; secured access to, and reduced factor costs for electricity, water, and telecommunication services; relaxation of foreign exchange regulations; preferential interest rates offered by local banks and reduced freight rates. In return African governments are putting regulations in place that oblige investors to create local unskilled and skilled jobs, ensure linkages with the local economy and transfer technology and knowledge, while complying with local social and environmental regulations.”
—“If Africa builds nests, will birds come? Comparative study of Special Economic Zones in Africa and China”, UNDP Working Paper No.06, 2015
The initiative for establishing SEZs generally came from African governments, rather than Chinese SOEs or private capital. While Beijing has been supportive, the record has been somewhat mixed:
“While these Chinese-led initiatives in Africa are still very much in the process of being rolled out, there are some indicators that not all of them are fully meeting expectations as catalysts for development. For instance, despite the publicity associated with the launch, a decade later a number of ECTZs [Economic Cooperation and Trade Zones] remain relatively undeveloped sites (Mauritius, Lekki) with limited Chinese investment or spillovers to local economies, while others are little more than the ‘rebranding’ of existing Chinese investments as an ECTZ (Zambia) (Alves, 2011). In this regard, the Ethiopian ECTZ outside Addis Ababa stands apart and, concurrently, highlights the significant role that African host governments operating in conjunction with Chinese private capital have in fostering this process. Led by a focused Ethiopian leadership and anchored by the investment by Chinese [shoe] company Huajian, the Eastern Industrial Zone has become a magnet for foreign direct investment into manufacturing (including firms from both emerging economies and established economies of the North) and has even inspired the expansion of a broad-based policy of creating industrial parks clustered by sector across different regions in the country and aligned with Chinese-built infrastructure projects like the Addis Ababa to Djibouti railway line.”
—Alden 2019, Op. cit.
The success of Ethiopia’s Eastern Industrial Zone is attributable to a requirement that foreign investors participate in joint ventures with domestic enterprises, which has resulted in technology transfers. In Ethiopia joint ventures account for almost 50 percent of Chinese foreign direct investment, compared to less than 10 percent in the rest of the continent. Sino-Ethiopian joint ventures tend to be integrated into multi-national supply chains producing goods marketed under Calvin Klein, Guess and other brand names. This provides little scope for raking in imperialist super-profits as Chesnais noted:
“Subcontractors are placed in intense competition with each other and more generally the costs and risks associated with fluctuations in demand are shifted to smaller firms and in turn on the workers they exploit.”
Chesnais also observed:
“…GVCs [global value chains] had made export-dependent developing countries highly vulnerable to changes in the level of world demand, and specifically demand from high-income countries. These authors [Milberg and Winkler] make an even more important finding, namely that ‘South-South trade is moulded to some extent by global value chains and the processing of intermediates to serve these chains. In this sense, the expansion of South-South trade still depends on the functioning of GVCs.’ This means that they are tributary to TNC strategies.”
Huajian invested $100 million in Ethiopia, creating 8,000 jobs and generating $150 million in sales in 2019 (chinadaily.com.cn, 27 June 2019). This makes it a major player by Ethiopian standards, but it remains a relatively minor participant in the supply chains of the monopolies that dominate US retailing. The owners of these monopolies are the chief beneficiaries of offshoring production:
“…Milberg drew an even clearer connection between outsourcing and financialization: the ‘impetus to the process of financialization,’ he argued, is a result of the ‘rapid expansion of manufacturing productive capacity in low-wage countries,’ which generates ‘capital flows from the low-wage to the industrialized countries … supporting asset values in the industrialized countries and especially the U.S.’ This connection was observed in empirical data reviewed by Elisa Parisi-Capone, an analyst working for Roubini Global Economics, who concluded that ‘at the TNC level, the cost savings from offshoring are considerable and coincide with historic highs in profit shares.’ But their coincidence, as Milberg explains, is no coincidence.”
— John Smith, Op. cit.
Most Chinese private capital in sub-Saharan Africa is not invested in SEZs:
“Given the relatively poor infrastructure and lack of industrial services available in many parts of Africa, and influenced by their own experience in China where industrial parks are ubiquitous, some Chinese companies have favored investment in Chinese-run industrial parks. We saw this in particular in Nigeria, where we interviewed eight Chinese manufacturing investments in the Ogun-Guangdong industrial park and six in the Calabar Park in Cross River State. Yet even in this case, as in Ethiopia, most Chinese industrial investments were located outside of the existing industrial parks and economic zones.”
—Deborah Brautigam, Tang Xiaoyang, Ying Xia, What Kinds of “Geese” are flying to Africa? Evidence from Chinese manufacturing firms, CARI working paper No. 17, August 2018
Chinese private capital in Africa is chiefly composed of small and medium-sized firms:
“As underscored by the IMF (2011), large state-owned firms tend to focus on resources and infrastructure, whereas private firms tend to concentrate on manufacturing and service industries. Therefore, although resource and infrastructure investment may be the largest sector in value, the number of private projects in other sectors is high and growing, driven by private small and medium enterprises, which target local and regional markets.”
—Milelli, Sindzingre, Op. cit.
Between 2004 and 2015 Chinese FDI in Africa grew from $13 billion to $48 billion; the top two sectors, mining and construction, are dominated by SOEs. Manufacturing, the third largest sector, which accounted for 13.3 percent of Chinese FDI in 2015, is mainly composed of private capitalist enterprises producing goods for local consumption:
“A significant percentage (at least 28%) of Chinese firms had originally come to Africa as traders and later decided to invest in production. The motivations for these investments varied by country, though local market access tended to play a major role while access to resources was minor. However, Chinese manufacturing firms in Ethiopia’s leather and textile sectors were much more export oriented, given the nature of these sectors. A large majority of firms sold their output primarily in local markets. Yet Chinese factories reported that their main competitors were other foreign firms in Africa or imports, not local African firms.”
—Deborah Brautigam, Xinshen Diao, Margaret McMillan, Jed Silver, “Chinese Investment in Africa: How Much Do We Know?”, 17 July 2019
One factor pushing Chinese private capital to venture abroad has been the rise in labour costs at home:
“Meanwhile, there are also important labour market trends that are changing the prevailing labour regimes in China, driven by rapid wage growth above productivity growth since the early 2000s (Lo, 2018), more significant labour militancy, and greater government concern for the welfare of workers (Xu and Chen, 2019; Luthje et al., 2013). These labour market trends are shaping the nature of ‘going out’ processes among different varieties of state and private capital in China, and driving the dynamics of expansion and relocation of low-wage productive segments overseas, including towards Africa.”
—Carlos Oya, Florian Schaefer, Chinese Firms and Employment Dynamics in Africa, 2019
China’s imposition of higher environmental standards has also prompted some entrepreneurs to set up operations in Africa:
“We found evidence that some Chinese firms have brought technologies that produce more pollutants to Africa. This is not to be unexpected, as tighter environmental regulations are often a push factor for firm relocation, and China’s environmental restrictions are in general being enforced more vigorously. For example, Baoyao Steel in Nigeria bought and imported the physical assets of an old steel plant in Shanghai that had been shut down by the Chinese government due to tighter environmental standards. We also noted that both Ghana and Tanzania continue to use plastics that are banned in China. For example, polypropylene bags, which are banned in China because they cannot be recycled, remain in production for local use in Africa. Conversely, the Chinese government only allows firms to produce biodegradable plastic bags. The machines and technicians in the polypropylene recycling sector thus found their way to Ghana, where PP recycling was still considered to be a progressive step.”
—Brautigam, Tang, Ying, Op. cit.
Most private Chinese firms on the African continent are small operations, often set up by individuals previously employed on major construction projects who decided to use their savings to go into business for themselves. Those who settle down become African capitalists of Chinese origin, rather than “Chinese” capitalists in Africa. Angola has many such immigrant entrepreneurs:
“While there are Chinese firms active in the Angolan manufacturing sector, these tend to be ‘translocal’ firms established by private Chinese entrepreneurs. These businesspeople are part of the growing Chinese diaspora in Angola. The biggest wave of Chinese immigration into Angola occurred in the early reconstruction period, especially in the early 2000s, when over 100,000 Chinese migrants are estimated to have settled in the country. Most came to work in construction, but some also to establish small- and medium-sized businesses, especially in services, and, to a lesser extent, also in manufacturing. None of the Chinese manufacturing firms in Angola are globally integrated suppliers and FDI to manufacturing is still limited, even if our interviews did suggest that a significant share of the limited manufacturing employment in Angola is in firms that are either foreign or ‘translocal’.”
—Oya, Schaefer, Op. cit.
Many Chinese immigrants in Africa keep their options open:
“Amongst the entrepreneurial migrants, even a modest return on initial investments can afford continued travel between Africa and China. Often young men who have spent a few years in Africa will go to China to find wives. Many young people send their Africa-born children back to China to be raised by grandparents or other family members so that they can attend Chinese schools and learn to ‘be Chinese’. They have invested in businesses, but often live modestly, even frugally, still uncertain about longer-term decisions about ‘home’. One indicator of this transitory, ‘limbo’, or sojourner life is that many of these entrepreneurs continue to live in spaces carved out at the backs of (or upstairs from) their business premises or in rental properties. The transnational overseas Chinese operates in a more cosmopolitan, globalised world. He can make investments in one or more African cities or countries; maintain business interests in manufacturing in China and wholesale outlets in several African countries; travel to and fro several times a year; educate his children in good, private, schools of his/ her choosing; and keep at least two or three homes in several different countries. There are a small number of such transnational Chinese operating in various African countries.”
—Yoon Jung Park, Chinese Migration in Africa, January 2009
A McKinsey report on Chinese capitalists in Africa noted that “Two-thirds of the private firms we surveyed, and over half of all firms in our sample, reported that their investments were self-financed through retained earnings or savings, or funded through personal loans”. Like their domestic counterparts, Chinese business owners in Africa tend to resent the preferential treatment accorded to SOEs:
“As a POE [privately-owned enterprise] senior manager felt that ‘The government is unfair to private companies in terms of providing loans and credit.’ Another POE president complained that the loans for their upcoming major project in Africa would have been approved long ago if they had been a SOE. Despite the potentially high profitability of the project in question, and their company’s good credit record (in the interviewee’s eyes), the Chinese policy banks have hesitated to provide support. As a result of this perceived bias, a degree of bitterness was expressed among some private companies about the lack of policy assistance provided by the Chinese government to support them in their going-global endeavours. A POE senior manager in the mining sector bluntly commented, ‘The [Chinese] government support and policies regarding China going global do not extend to private companies. So I do not concern myself with such policies.’”
—Weng, Buckley, Op. cit.
The Chinese government’s relationship with private business is very unlike that in Japan, Europe or North America. In Socialism: Utopian and Scientific, Frederick Engels described the bourgeois state as “the ideal personification of the total national capital.” But in China the state power created by the social revolution of 1949 has an ambivalent attitude toward private capital:
“There needs to be a greater understanding of the relationship between the Chinese state, mainly the Chinese central and provincial governments, and China’s increasingly diverse business sector. The case studies show how there is a proliferation of Chinese businesses in Africa acting independently or, depending upon ownership, semi-independently of the Chinese state. They are from different provincial locations in China, and with different relations with the central state. Driven by market pressures and the intensifying exposure to globalization, Chinese firms (both state-owned and private) principally operate to their own commercial priorities, although government and party ownership retain an influence on the policies and structures within which these firms operate. Our research shows, therefore, how the conventional wisdom of collusive state–business relations is misleading.”
—Gu, Chuanghong et. Al., Op. cit.
Many private Chinese enterprises in Africa produce commodities that were either previously unavailable, imported from abroad, or produced by foreign owned companies:
“… it appears that Chinese firms may be competing more with imports and other foreign firms in country than with African manufacturers themselves. In Ghana, for example, we asked firms about their main competitors. Of the 21 firms that answered this question, only eight (mainly small plastics companies) mentioned local African firms as competitors, with the others naming other locally based foreign firms (Chinese, Indian, and Lebanese) or imports as their main competition.”
—Brautigam, Tang, Ying, Op. cit.
In response to Chinese traders underselling and bankrupting domestic retailers, Ethiopia simply prohibited foreign traders:
“Perhaps most striking about Ethiopia’s relationship with China is that it does not allow Chinese firms to set up trading business and most services businesses. (Ethiopia does not allow any foreign firms into the trading business.) As a result, 62 percent of the nearly 700 Chinese firms in Ethiopia are manufacturers—double the percentage of manufacturing firms in our eight countries as a whole.”
—Irene Yuan Sun, Kartik Jarayam, Omid Kassiri, Dance of the lions and dragons, June 2017
In Ghana circa 2013, fluctuating rates of exchange pushed up prices of essential inputs and bankrupted Chinese manufacturers. As a rule, however, Chinese capitalists have generally found it easier to make money in Africa than at home:
“In interviews, Chinese firms, particularly in manufacturing, identify ample pricing headroom in Africa as a key factor in their profitability. For example, a manufacturer in Kenya said, ‘I expect to make back my investment in less than a year because the prevailing market price is so high for my product.’ Indeed, factory bosses like him who are used to squeezing a quarter of a percentage point of margin to survive in the ultracompetitive manufacturing sector in China breathe much easier in Africa…. Nearly one-third of the Chinese firms we surveyed reported 2015 profit margins of more than 20 percent. For several sectors for which data is available, Chinese firms’ profit levels are significantly higher than those of other African firms.”
Many Chinese entrepreneurs have a record of ignoring regulations on workers’ rights and the environment:
“Far more problematic in the longer term is the conduct of Chinese small and medium enterprises, some of which deliberately flout labour and environmental standards as well as local regulations in pursuit of profit. … As pointed out above, these businesses are the product of provincial or individual initiatives and, in that way, reflect interests and practices drawn from their domestic experiences.”
—Alden, Op. cit., 2009
When Chinese capitalists get into difficulties with African governments, Beijing’s local representatives step in to take remedial action. In Zimbabwe:
“According to officials at the Chinese Embassy in Harare, regular meetings are held with business leaders through the Council to discuss issues such as Corporate Social Responsibility. This close relationship resulted from an Embassy perception that existing associations were insufficiently responsive to their policy initiatives. New councils linked to the central state are expected to act as bridges between the Embassy and the Chinese business community, helping to communicate government policies and perspectives.”
—Gu, Chuanghong, Op. cit.
Chinese investment & African development
During the 1980s and 1990s IMF structural adjustment policies bankrupted many African manufacturers unable to compete with foreign corporations:
“To be sure, Nigeria’s manufacturing sector has had a particularly precipitous decline, but it is emblematic of trends across the continent. Ghana’s manufacturing sector as a share of total GDP declined by half from 1960 to 2010, and Tanzania’s declined by a third. Overall, African nations had more robust manufacturing sectors in the years immediately following independence from colonialism in the 1960s and the 1970s than they have today. Manufacturing now accounts for only 13 percent of Africa’s GDP and 25 percent of its exports, both smaller shares than in any other region of the world save the oil-rich Middle East.”
—Sun 2017, Op. cit.
The penetration of imperialist monopolies, which devastated agriculture in many regions, was deliberately intended by the architects of “structural adjustment”:
“As then-U.S. Agriculture Secretary John Block put it at the start of the Uruguay Round of trade negotiations in 1986, ‘the idea that developing countries should feed themselves is an anachronism from a bygone era. They could better ensure their food security by relying on U.S. agricultural products, which are available, in most cases at lower cost.’
“What Block did not say was that the lower cost of U.S. products stemmed from subsidies that were becoming more massive each year, despite the fact that the WTO was supposed to phase out all forms of subsidy. From $367 billion in 1995, the first year of the WTO, the total amount of agricultural subsidies provided by developed country governments rose to $388 billion in 2004. Subsidies now account for 40% of the value of agricultural production in the European Union (EU) and 25% in the United States.
“The social consequences of structural adjustment cum agricultural dumping were predictable. According to Oxfam, the number of Africans living on less than a dollar a day more than doubled to 313 million people between 1981 and 2001 – or 46% of the whole continent.”
—Walden Bello, Destroying African agriculture, tni.org, 4 June 2008
Chinese private manufacturers, although often guilty of abusing both their workers and the environment, did at least partially offset some of the ravages of the IMF:
“According to data provided Cheru and Oqubay (2019), who draw on Ethiopian Investment Commission (EIC) data and other sources, foreign investors created around of 183,000 manufacturing jobs in the period 2000-2017, with Chinese firms accounting for 21% of these new jobs, as shown in Figure 4 below (Cheru and Oqubay, 2019). Our own inventory of EIC manufacturing investments between 2010 and 2017 also confirms that Chinese firms rank first as source of manufacturing jobs created by FDI, with one third of permanent employment created during this period.”
—Oya, Schaefer, Op. cit.
Ethiopian firms which were located in the vicinity of Chinese enterprises saw average productivity increase by 16 percent and were exposed to new technologies which created opportunities for African business:
“…Chinese firms engage in substantive technology transfer in Africa. Nearly half of Chinese firms in Africa have introduced a new product or service to the local market, and more than one-third have introduced a new technology…. In some cases, Chinese firms have lowered prices for products and services by as much as 40 percent through improved technology and efficiencies of scale…. And others have introduced technologies that significantly improve service levels, such as Huawei’s 4G telecommunications technology. Consider Kenya-based mobile telecommunications operator Safaricom, which launched the mobile payment initiative M-Pesa in 2007. Today M-Pesa provides cellphone-based banking services to tens of millions of people in East Africa and beyond. It is recognized as a world-leading African innovation that has used technology to leapfrog traditional financial services models.”
—Sun, Jarayam, Kassiri, Op. cit.
A South African manufacturer of electro-technical equipment observed that Chinese businesses are more willing to share technological know-how than their European competitors:
“He said Chinese suppliers took a longer-term view than their Western counterparts: ‘Our Chinese supplier is willing to take the risk and do the research and development for the specific parts that we need, then transfer the technology to us in order to build a long-term partnership. Suppliers in Europe are unlikely to do so, and they tend to be far more concerned about their patents.’”
Chinese private enterprises launched by individuals who previously worked on SOE resource extraction or construction projects, tend to cluster around their former employers. While there is positive linkage between Chinese presence and per capita productivity, the net effects vary considerably from one country to another:
“While differences in manufacturing sector performance are observable across groups with different China-related effects, we also observe that countries with more or less similar and indeed very large China effects have very different outcomes. For instance, countries with a high Chinese export demand and a high Chinese project presence have had, on average, the highest manufacturing output growth over the last decade. However, within this group, Angola performed much better, from a similar starting point in terms of manufacturing per head, than, for example, Congo-Brazzaville, despite the fact that Chinese projects accounted for about 5% of Angolan GDP compared to 10% in Congo-Brazzaville.”
—Wolf, Op. cit.
On balance it seems clear that the impact of Chinese economic activity in Africa and Asia, unlike that of the IMF’s structural adjustment programmes, has been positive:
“Comparing empirical evidence worldwide, Fu and Buckley (2015) point out that Chinese investments in lower-income countries has a positive and significant impact on their long-term economic growth, but the growth impacts vary as they are based on multi-dimensional complementarity between Chinese investments and host country conditions, in terms of financing, knowledge, resources and the status of competition. Chinese investments contributed most significantly to economic growth in Africa and, to a lesser extent, in Asia, whereas the influence on Latin America was insignificant.”
—Calabrese, Tang, Op. cit.
The IMT, one of many impressionistic pseudo-Trotskyist tendencies that casually branded China as “imperialist,” concedes that its neo-colonial clients have derived far more benefits from this relationship than they did from their previous colonial masters. This admission is accompanied with the bizarre complaint that Beijing has turned Britain into its “poodle”:
“China’s influence extends far beyond its own ‘back yard’. Of note is China’s influence in Ethiopia, a so-called ‘rising star’ of Africa. Ethiopia has essentially enlisted China to build its entire infrastructure, including a new modern metro-rail system for Addis Ababa. Chinese companies are building factories and industrialising the country. Recently China ‘gifted’ Ethiopia the $200m headquarters of the African Union.
“China has now upped its foreign aid and input into UN ‘peacekeeping’ forces. It is following all of the steps needed to become a global power. The launch of the AIIB is significant not just for the export of capital, but also its diplomatic triumph on the world stage….Having perfected its poodle tactic with the US, Britain knew how to deploy it to China. David Cameron quickly forgot about the Dalai Lama and rolled out the red carpet for Xi Jinping in a truly elaborate state visit in 2015. George—‘I for one welcome our new Chinese overlords’—Osborne even took the unprecedented step of visiting Xinjiang capital Urumqi as he bidded [sic] for British companies to be involved in the Chinese development of its restive Uighur province.”
—Marxist.com, 24 November 2016
This brazenly social-patriotic concern about the subordination of the heirs of the blood-soaked British Empire to the Chinese Stalinists is of a piece with the IMT’s long-standing reformist appetite for political integration into the pro-imperialist Labour Party.
Chinese companies & African workers
In Angola and Ethiopia “Chinese firms contributed the lion’s share of newly created jobs between 2013 and 2018 in both countries, accounting for over 60% of new jobs in some years”; by some estimates, Chinese companies employ five percent of Kenya’s labour force. While SOEs in Africa originally chiefly employed Chinese workers, today their workforce is overwhelming African:
“…the contribution to the mass creation of unskilled and semi-skilled jobs for African workers is beyond doubt, and the implications for processes of structural transformation are significant since many of these jobs contribute to the gradual building of an industrial labour force in Africa.”
—Carlos Oya, “China-Africa Labour Regimes and Workplace Encounters”, in: Oqubay, Lin, Op. cit.
In China, workers in SOEs have higher wages, better conditions and more benefits than private sector employees, but in Africa, the situation of SOE workers and those employed by imperialist multi-nationals are roughly equivalent. While SOEs offer somewhat more stable employment—for example during the 2008 economic crisis Western firms shed many more jobs—they tend to pay lower wages. In Zambian mines, for example:
“…Chinese state capital’s emphasis on stable production led to a stable subcontracting relationship with just one contractor, a more favorable condition for worker solidarity and effectiveness in pushing employers to offer permanent terms of employment than at the other two mines [which are Swiss and Indian-owned]. As miners on the Copperbelt often complained throughout my fieldwork, however, the Chinese state mine was also the one that for more than a decade paid the lowest wages among the major mines.
* * *
“My argument is that neither Chinese state capital nor global private capital was particularly benign to labor, but they did present relatively different bargains: stable exploitation (secure employment but low wages) or flexible exclusion (precarious employment but higher wages).”
—Lee, Op. cit.
Angola and Ethiopia, the two African countries with the most Chinese investment, SOE workers receive benefits that offset their lower wages:
“In both countries, the origin of the firm was not a determinant for wages: once the characteristics of the individual workers and the sectors were considered, Chinese firms were offering similar wages to domestic and other foreign firms. In Angola, wages were lower for workers employed in factories with a ‘dormitory labour regime’ (predominantly Chinese). However, these workers obtained free food and accommodation, and ended up saving more and having more disposable income compared to workers employed in other firms.”
—Linda Calabrese, Chinese Firms and Employment Dynamics in Angola and Ethiopia, May 2020
In building highways and laying railway tracks in remote areas of Angola, Chinese SOEs employed a workforce that was largely (70 percent) composed of former subsistence farmers attracted by the prospect of earning more money. Many of these recently proletarianised individuals, after learning new skills on the job, go on to find better paid positions in other enterprises:
“Chinese firms contributed to training and skills development at least as much as their counterparts; differences were in the formality of the training provided to workers, and in the modalities in which it was offered. In Angola, domestic and some foreign firms were providing formal training more often than Chinese firms. Both formal and informal training contributed to skills development of the workers, especially considering the low starting point in terms of skills. Migrant workers who entered the industrial and construction labour market for the first time with these jobs were the ones who gained the most in terms of skills.”
A British survey of mines and construction projects in Ethiopia and Angola reported fewer work-related accidents among those employed by Chinese companies than either local or Western ones. This is not the sort of story that the imperialist media tends to promote but it is an example of the factors that have made China’s African involvement relatively popular among the indigenous population.
Ching Kwan Lee reported that Chinese managers, who generally earn less than their western counterparts, commonly exhibit a more egalitarian attitude towards their workers:
“Chinese managers’ and engineers’ hands-on work style was also a subject of praise from more than a few Zambian veteran miners and engineers. They commended Chinese work culture for being more egalitarian than the Boers, the Indians, and even the Zambians. Younger workers reported learning skills from Chinese masters who always worked side by side with them on construction sites or underground. A miner who had joined the mines in 1974 remarked, ‘Chinese engineers come to the shop floor and participate in actual work, like they would come to repair motors regardless of their ranks. We were surprised to see the CEO join the lunch queue. The whites would just ask their secretary to get food from the canteen and eat it in their own offices.’”
—Lee, Op. cit
SOE managers in Africa have very different metrics by which success is measured than their private sector colleagues. In general, capitalist enterprises must either make a profit or appear to have a reasonable chance of doing so in the near future. But SOE managers, whether at home or abroad, have as their overriding priority the implementation of directives from above; the issues of cost recovery and turning a profit are entirely secondary:
“Encouraged by the government’s promotion of Chinese companies ‘going global’, many companies, especially SOEs, often blindly enter the African market without an adequate understanding of it. According to one SOE interviewee, competition among Chinese companies can take the form of price wars: newcomers in particular tend to propose a price far lower than the market average in order to compete for a project, in part because they underestimate the hidden costs of doing business in the African counties and in part because they want to break into the market whether or not the project is profitable for them.
“By driving prices below profitable margins, however, this competition drives a ‘race to the bottom’ that can damage the interests of the entire Chinese business community and squeeze industry profitability as a whole.
. . .
“Several SOE interviewees identified SASAC’s [State-owned Assets Supervision and Administration Commission which directs the SOEs] annual performance appraisal as a possible driver behind the cutthroat competition: SASAC uses the number of project contracts as an important indicator in evaluating an SOE’s annual performance.
“According to one interviewee from Kenya, SOEs with a greater number of contracts—not just greater profitability of projects completed—are more favourably judged, thus encouraging SOEs to bid cheaply for the greatest quantity of projects possible.”
—Xiaoxue Weng, Lila Buckley, “Chinese Businesses in Africa,” February 2016
Initially many SOEs were openly hostile to trade unions and African workers frequently came into conflict with management. The All-Chinese Federation of Trade Unions, which operates essentially as an arm of the CCP, is far more inclined to damp down discontent than vigorously fight to advance the interests of its members. African trade unions, by contrast, are generally more susceptible to pressure from their base, although the picture varies from one country to another:
“Overall, we find higher rates of unionisation and collective bargaining in Angola than in Ethiopia, where the workers in the construction sector have almost no trade union coverage and the manufacturing sector is bifurcated into companies with strong links into low-margin global value chains. While in Angola the largest differences are found between Chinese companies on the one hand, and other foreign and Angolan companies on the other, in Ethiopia Chinese and other foreign companies are quite similar to one another but very different to Ethiopian enterprises. Unionisation levels are much higher in Ethiopian firms, which are more established in the country and are far more accustomed to tripartite dialogue than foreign investors.”
—Oya, Schaefer, Op. cit.
A United Nations study of the Sinohydro’s Bui Dam project in Ghana found that militant industrial actions resulted in improved wages and benefits. Sinohydro’s management eventually decided to recognise the union rather than risk continued disruptions:
“despite their reputation for anti-union behaviour, in certain situations Chinese companies are prepared to recognise unions and enter into dialogue with workers’ representatives at workplace level. The combination of circumstances at Bui in Ghana—a democratic system of government, well established industrial relations law and practice, an organised labour movement within a broader civil society, a workforce prepared to take action—will not be present everywhere. However the experience at Bui shows that Chinese MNCs do adapt to local conditions and, as the company increasingly works with trade unions, there may be scope for a wider extension of collective bargaining throughout its international operations.”
—Glynne Williams, Steve Davies, Julius Lamptey, Jonathan Tetteh, Chinese Multinationals: Threat To, Or Opportunity For, Trade Unions?, ILO, 2017
A 2018 study on “conflicting perceptions of work ethics between Chinese and Africans….caused by evolving notions of time that accompany a transition from a pre-capitalist manner of production to that of industrial capitalism” focused on the experience at Tanzania’s Urafiki Textile Mill. In 2013, the plant’s general manager, Wu Bin, introduced an incentive system in response to workers’ demands for higher wages:
“On the one hand, he gave salary bonuses and extra food to all employees during local holidays and festivals; such egalitarian methods were commonplace in China’s socialist past…. On the other hand, he attached more importance to giving bonuses and overtime pay to the ‘best workers,’ that is, those who produced the most in a given period of time.”
—Tang Xiaoyang, Janet Eom, “Time Perception and Industrialization: Convergence and Divergence of Work Ethics in Chinese Enterprises in Africa”, China Quarterly No.238, June 2019
Wu assigned “work teams” specific production targets—members of teams that met their targets were rewarded with substantial bonuses. Wu’s scheme succeeded in part because of the collaboration of the union leadership:
“Wu noticed changes in the perceptions of the Tanzania Union of Industrial and Commercial Workers (TUICO). In the past, TUICO directly requested an increase in wages without any connection to the workers’ production. But, in its 2014 May Day speech, the union requested the factories’ management ‘to increase the workload so that the pay increases.’ On behalf of the workers, the union also stated: ‘We need to increase production this year. We are ready to work … Planned production targets must be known to workers and the TUICO branch should be informed about these targets so that it can cooperate fully in the reaching of the targets.’ Wu was delighted with these requests: ‘They [the Tanzanian workers] have realized that they should make money through more work, and not simply demand a rise.’“
Beijing encourages SOEs to comply with local labour legislation:
“Labour-law compliance is one area in particular to which many Chinese interviewees devoted considerable attention. A majority of them emphasised following local labour laws and regulations as the most important avenue for respecting the rights of workers.… Most SOE interviewees reported that a labour union had been set up in their companies, and that labour disputes were handled through the union.”
—Weng, Buckley, Op. cit.
While there have been strikes in SOE enterprises (e.g., the NCFC mining conglomerate in Zambia and Sinohydro in Ghana), on the whole China’s state-owned companies have generally enjoyed better relations with unionised workforces than their private sector competitors, although again this varies from one country to another:
“…strike action was far more common in Ethiopia than in Angola, which also reflects different work mobilisation cultures across countries. Workers in all but two companies in our sample reported strike action having taken place during their tenure. In the construction sector, workers at Ethiopian companies were most likely to report having witnessed strike action during their tenure, while Chinese companies were the least likely. A quarter of employees at Ethiopian companies reported work stoppages, compared to 15% at other foreign companies and 14% at Chinese construction firms. In the manufacturing sector the situation is quite different. Here workers at Ethiopian companies are the least likely to have witnessed a strike, while the employees at other foreign companies reported the most strikes. In other foreign firms 55% of workers reported strikes, compared to 36% in Chinese companies and only 19% in Ethiopian enterprises.”
—Oya, Schaefer, Op. cit.
The CCP’s pursuit of “socialism in one country” does not involve raising living standards abroad, much less spearheading a struggle against global imperialism. China’s activity has undoubtedly accelerated African industrialisation through job creation, upskilling and technology transfer, but this was incidental to the pursuit of other objectives. Revolutionary struggle to overturn capitalist rule remains the only road to the liberation of the tens of millions of proletarians, semi-proletarians and oppressed peasants of semi-colonial Africa. This perspective was outlined by Leon Trotsky in his letter to the working people of the Indian subcontinent on the eve of World War II:
“We must cast away false hopes and repel false friends. We must pin hope only upon ourselves, our own revolutionary forces. The struggle for national independence, for an independent Indian republic is indissolubly linked up with the agrarian revolution, with the nationalization of banks and trusts, with a number of other economic measures aiming to raise the living standard of the country and to make the toiling masses the masters of their own destiny. Only the proletariat in an alliance with the peasantry is capable of executing these tasks.”
—Leon Trotsky, An Open Letter to the Workers of India, July 1939
Chinese foreign investment—a balance sheet
We have yet to see any attempt by the various self-proclaimed Trotskyists who casually denounce the CCP’s “imperialism,” to substantiate their position with serious evidence. Most of these fake-revolutionary formations seem content to echo the propaganda churned out by the US State Department against the Chinese deformed workers’ state. The truth is that, on the whole, Chinese engagement, particularly that of the SOEs, has promoted African economic development. Chinese concessionary loans, far from creating the “debt traps” cynically bemoaned by imperialist publicists have forced the IMF to improve the terms of its loans in order to remain in the game. Beijing’s BRI represents an ambitious attempt to secure critical resources and political/diplomatic influence in the semi-colonial world through a complex mix of bureaucratic state-planning with market competition. While China’s global outreach has not and cannot change the fundamental contours of the world economy, it has somewhat loosened the imperialist grip on the countries of the “Global South.” By undercutting the imperialist mantra that “there is no alternative” to unregulated market piracy it has helped undermine the foundations upon which the system of global imperialist exploitation stands. Elizabeth Economy, no friend of the CCP, complains:
“…China’s innovation strategy, the BRI, and SOE reform reflect non-market principles and behavior that pose a challenge to U.S. economic interests at home, in China, and globally.”
—Economy, Op. cit.
The popular masses of the semi-colonial world, unlike the many supposed “Marxists” whose denunciations of “Chinese imperialism” merely recycle misinformation from the Western media, are not inclined to view China’s engagement with Africa in a negative light. The American ruling class, by contrast, increasingly views China’s “win-win” economic diplomacy as a serious threat to the stability of the imperialist world order:
“In the United States, our bridges and roads are crumbling, but China’s relentless investment in shiny new ports, roads, railroads, and power projects at home and abroad is welcomed and admired in countries where the vast majority of people live without access to electricity. The United States can’t easily counter China’s business diplomacy.”
—The American Interest, 4 April 2019
Thirty years ago the post-Soviet triumphalism of the rulers of the “free world” was captured by Francis Fukuyama’s claim that the fall of the USSR signified “the end of history.” Today many Western ideologues fear that global capitalist hegemony may turn out to have been built on sand:
“It was the US’s economic superiority, not its military threat, which eventually created the conditions for the defeat of the USSR. By the 1980s the USSR’s economic problems meant it was impossibly squeezed by Reagan’s new arms race. Rather than carry out a fundamental economic reform—as China had been doing for a decade—Gorbachev and then Yeltsin capitulated to the West, dissolved the Communist Party, accepted shock therapy and the break-up of the USSR.
“Today, setting out to contain China, this balance is inverted. The US may be by far the most militarily powerful state on the planet and China cannot match that, but the US is no longer the most dynamic major economy. And while military power can achieve some objectives, it cannot compensate for lack of economic power.”
—Jude Woodward, The US vs China, 2017
Chinese investment has provided a welcome alternative for victims of IMF structural adjustment/austerity programmes, but Beijing’s potential in Africa should not be overstated. The CCP’s foreign economic expansion is shaped by the chimerical pursuit of integration into the capitalist world market and long-term, stable coexistence with global imperialism. As is becoming increasingly obvious, the imperialist predators are not reconciled to the existence of a major non-capitalist competitor—strategists on both sides recognise that the current situation cannot long be sustained. The 2017 Foreign Investment Law, which drastically reduced foreign investment by SOEs, Eximbank and the China Development Bank, signalled the limits to Beijing’s capacity to extend foreign credit. The same law also limited private capital exports, even in pursuit of productive, profitable opportunities and overseas investment.
A serious investigation of China’s actual record in Africa reveals the claims of the various leftist critics of “Chinese imperialism” (the Trotskyist Fraction, Socialist Action, CWI, IMT et al) to be bogus. Their arguments, which combine ignorance about and indifference to actual developments on the ground, echo the talking points with which Whitehall and the White House justify political, economic and ultimately military sanctions against the Chinese deformed workers’ state. We recognise that many members of these groups are seriously committed to advancing the struggle for socialism and know that political positions must be based on social reality, rather than popular illusions. Those comrades who are prepared to investigate China’s actual record in Africa today will discover that all the denunciations of CCP “imperialism” essentially boil down to recycled, contrafactual bourgeois propaganda.
Marxists welcome China’s economic engagement with African and other semi-colonial countries to the extent that it improves infrastructure, raises living standards, increases economic output and expands the industrial working class. We do so without turning a blind eye to the appalling working conditions in some Chinese-owned enterprises, particularly in the private sector, nor making apologies for similar conditions in China.
The Chinese Revolution of 1949, led by Mao Zedong, was a world-historic event that decisively changed the balance of power in Asia and dramatically improved the lives of hundreds of millions of impoverished peasants. The expropriation of foreign and domestic capital laid the foundation for China’s astounding economic development but the CCP’s essentially nationalist framework, common to Mao, Deng or Xi did not, and could not, establish the basis for creating a classless society free from material scarcity, which Marx, Engels and Lenin regarded as an essential characteristic of “socialism.” Such a society, the great teachers of Marxism agreed, could only be constructed on the basis of a global division of labour based on the diffusion of the most advanced technology.
The program of “socialism in one country,” which Mao adopted from Stalin, was a perversion of Marx’s vision—it was an ideological construct designed to rationalise the material privileges of the ruling Communist Party elite in the Soviet Union. When Mao claimed that China too had established “socialism,” he meant that the CCP had replicated the essential features of Stalin’s Soviet Union and created an isolated, autarkic society based on collectivised property with a dictatorial bureaucratic stratum possessing total political monopoly.
China’s involvement in Africa and the broader BRI project, represents an attempt to transcend the limitations of bureaucratic planning within a single country. But, like Deng‘s “market socialist” reforms, it will be unable to overcome the profound contradiction between proletarian, collectivised property forms and the straightjacket of “socialism“ within China’s national frontiers:
“Insofar as capitalism has created a world market, a world division of labour and world productive forces, it has also prepared world economy as a whole for socialist transformation. Different countries will go through this process at different tempos. Backward countries may, under certain conditions, arrive at the dictatorship of the proletariat sooner than advanced countries, but they will come later than the latter to socialism.
“A backward colonial or semi-colonial country, the proletariat of which is insufficiently prepared to unite the peasantry and take power, is thereby incapable of bringing the democratic revolution to its conclusion. Contrariwise, in a country where the proletariat has power in its hands as the result of the democratic revolution, the subsequent fate of the dictatorship and socialism depends in the last analysis not only and not so much upon the national productive forces as upon the development of the international socialist revolution.”
—Leon Trotsky, The Permanent Revolution, 1931
Those who stand on the authentically communist tradition of Marx and Lenin, championed by Leon Trotsky against Stalinist revisionism, defend the social gains of the Chinese Revolution, while also advocating a supplementary proletarian political revolution to put power directly in the hands of democratically-elected workers’ councils modelled on those led by the Bolsheviks in October 1917. An insurgent Chinese working class, armed with such a genuinely revolutionary internationalist perspective, would abandon all illusions in the possibility of long-term coexistence with global capitalism and instead seek to encourage and promote movements dedicated to promoting workers’ revolutions throughout both the semi-colonial world and the imperialist heartlands of Europe, Japan and North America.