The following interview was conducted via email with Deng Chuyang, a University of Pennsylvania student who interned in the Beijing office of Bloomberg BusinessWeek in spring 2015.
QUESTION: In your opinion, what has changed between Africa and China in terms of their political relationship? How does international community think of this change? (For example, how the US view this change?)
ERIC OLANDER: The Sino-African political relationship has evolved considerably over the past ten years. First, I think it is important that we define our terms here. Yes, there is a China-AFRICA relationship as evidenced by Beijing’s support of multilateral organizations like the African Union and African Development Bank. However, much more importantly, is the bilateral relationships that are growing much faster. Both the Chinese and individual African states are developing much more comprehensive ties, beyond just trade, to encompass political, health, military and other areas of mutual interest. Take for example the 2014 8-nation tour by the PLAN Escort Task Group. The tour highlights the growing military-to-military ties the Chinese are building up with individual states. So, the answer to your question is a definitive yes, it’s just happening out of sight at the bilateral level more than at the continental level where most people focus their attention.
In terms of how the international community is reacting to the broadening/deepening Sino-African ties, well, it’s hard to say. In part, the EU and the US don’t comment publicly too much on the matter. Now this might be because they don’t have a lot to say (very likely) or because there really is nothing to say. What you hear out of Washington and Brussels is either ‘no problem, we don’t mind China’s growing presence in Africa.'(I don’t personally believe that) or cautionary talk about how African states should ‘be careful of China as they will import their labor, take down your forests and support your dictators.’ The US, in particular, is pretty consistent with its condescending warnings to African leaders about the dangers of being too close to China. The reason why no one really takes the EU or the US that seriously when they speak of China this way is that they don’t really present much of alternative. Neither is going to spend the billions of dollars that the Chinese are investing in African infrastructure, so I think African leaders humor the Americans and Europeans and then go on with their engagement with the Chinese. The only exception to this premise is US military spending on the continent which has steadily grown over the past ten years as part of Washington’s Global War on Terror campaign. There is no debate in Washington that certain regions in Africa present a direct military threat to US interests and therefore they have leveraged that to spend billions on a string of military bases, particularly in East Africa (Djibouti) and as part of AFRICOM. When it comes to civilian and commercial diplomacy, there is no such consensus in Washington and thus US policy for the continent, even regarding the Chinese, appears to be paralyzed. Ultimately, this is why I don’t think there is much in the way of a reaction to China’s surging engagement in Africa.
QUESTION: Is it appropriate to say that Chinese companies going to Africa was due to Chinese government’s encouragement? In recent years, is Chinese government still encouraging companies to do this? If not, what is the new China-Africa business relationship?
ERIC OLANDER: Absolutely! The Chinese government at both the national and provincial level has played an extremely important in promoting Sino-African trade and investment. Just last month, Hebei held a trade promotion forum for Chinese companies. The event attracted diplomats from 20 African countries and showcases how much activity there still is at the provincial level (https://english.cntv.cn/2015/05/19/VIDE1432035850941185.shtml). Africa has been a major beneficiary to Beijing’s 走出去战略 and there is no evidence that the government’s support is waning. The multi-billion rail projects in East Africa and Nigeria or the new power projects in southern Africa and the oil explorations being conducted by on/offshore are all backed up by SOEs and government-supported loans. In fact, there is an argument to be made that as the Chinese economy slows, the pace of state-backed overseas investment will actually intensify as SOEs look abroad for growth. This is certainly the case for private sector companies like Lenovo and Huawei that see Africa as a vast potential market where they can increase sales, particularly in network hardware and mobile devices.
The area to watch in the coming years is how much Chinese manufacturing is sent offshore to Africa. For now, it’s quite minimal given that most of Africa lacks the required infrastructure for Chinese-scale production, however Chinese shoemaker Huajin is demonstrating that places like Ethiopia do offer manufacturing opportunities. South Africa, too, has been a major beneficiary of Chinese industrial investment, especially in the automotive and electronics sector. For now, Chinese companies are building manufacturing operations in Africa in order to sell to the local/regional market rather than displacing production that was once being done back home. As Africa’s industrial and trade-related infrastructure (ports, highways, etc…) continues to improve, there is a chance we will see actual outsourcing of Chinese production as China seeks to move itself up the value chain.
QUESTION: Companies from the US and Europe had been to Africa long before Chinese counterparts did. Did they have any influence that still prevailing in African countries? Are those influences positive or negative to Chinese companies as late comers?
ERIC OLANDER: Absolutely! The Chinese are relative newcomers to Africa who still trying to figure out local customs and even to speak the local language. Take Gabon for example. The official language is French, the French designed the legal system, French companies continue to dominate the economy and the levers of power are still heavily influenced by Paris. This is partially why the Chinese have not made many inroads into Francophone Africa because they remain at such a strategic disadvantage. The Chinese have not built up the relationships in much of Africa that afford them the close ties that many of the British, French, Portuguese and Italians have done over centuries. So, yes, it will take a lot more time.
It’s also important that the Chinese are novices when it comes to this style of relationship building. It’s still very new for them to operate so far from home in lands where the culture, language and customs have no connection with their own. So this first generation of Chinese diplomats, businessmen and migrants are all feeling their way through the weeds so to speak. This explains why so many Chinese enterprises have encountered legal problems in Africa amid questions of flouting labor, environmental and bribery laws. In many instances the Chinese have simply brought over their own customs to Africa where that way of doing business is not always welcome. Moreover, the Chinese are among the world’s worst when it comes to public relations and public diplomacy (despite the millions they spend on CCTV and CRI among other media outlets in Africa) and so they have struggled to tell their own story and to change their narrative away from ‘China the neo-imperalist boogey man.’
Right now, across Africa, there are thousands of Chinese entrepreneurs, expats and immigrants who are learning the languages, building real relationships with locals and establishing successful businesses that will eventually become the second generation of Chinese to engage Africa. This is where it will become extremely interesting to watch because this second generation of Chinese in Africa will be much more sophisticated than their predecessors who have often struggled.
QUESTION: Asian countries like Indian, Korean and Japanese have also being doing business in Africa before China. What is the difference between Chinese companies’ business strategies in Africa and their Asian counterparts?
ERIC OLANDER: The key difference between China’s investments and all of their Asian counterparts is scale. No one, not even the Japanese, are operating at the scale of the Chinese on the continent. The Indians have been working hard to emphasize their traditional links to East and South Africa while emphasizing that their democratic political system is a better model for Africa while the Japanese have been attempting to rival the Chinese with their pan-African summits and massive aid packages. Nonetheless, the breadth and depth of Chinese corporate engagement on the continent is becoming so vast that these countries (including Japan) lack the resources, even the will, to try and keep up.
That said, the growth of the BRICS, Japan, Turkey and other emerging powers in Africa is definitely not something to be dismissed lightly. Sure, the Chinese have the scale but they don’t always bring the quality that the other countries can deliver. For example, India’s IT outsourcing expertise is far superior, particularly in Anglophone markets, than China’s and this is critical for countries like Kenya, Uganda, Tanzania and South Africa that are hoping to build out their technology sectors. Japanese quality standards are still much higher than most of China’s and that matters in countries where ‘Made in China’ is often associated with counterfeit or low-quality goods.
QUESTION: When doing business in Africa, where Chinese companies would usually start from? Why do they choose those places? I found that many Chinese companies would start from very small countries and then invade in US and Europe occupied markets. Is it the typical strategy that Chinese companies would like to take in Africa?
ERIC OLANDER: There is no simple answer to this question because it really varies a lot. If you look at a map of Chinese investments in Africa, they are spread out across the continent. Moreover, it’s extremely important to differentiate between state-led investment and private sector. The state led investment has traditionally focused on the natural resource sector that requires massive scale. So CNPC in South Sudan is one example of this trend.
I think the reference that you make about the Chinese first going to poor developing countries and then trying to “invade” US and European markets is becoming somewhat out dated. Can you buy a Xiaomi phone in the USA? Nope. Xiaomi doesn’t see the US a promising market right now. Huawei has been blocked from the US for years and yet it hasn’t suffered in terms of global market share and profitability. The US and Europe are extremely complicated markets for Chinese companies and that means it would require a lot of time and investment for them to succeed there. In emerging markets, the barriers to entry are lower and now these regions also include many of the world’s fastest growing markets as well. So the goal may be to really build successful businesses in these markets where margins are thin but at least positive whereas in the larger, more developed markets, it’s significantly more complicated. Chinese brands, for their part, are extremely well-suited for emerging markets. First of all, Chinese companies understand the needs of lower-level consumers as they reflect the true diversity of the Chinese domestic market. Here in Vietnam, Chinese handset makers are brilliant in how to market to consumers because they know this kind of customer profile from their own experience back home. The same in Africa where companies like Hisense and Huawei have been very effective at marketing/selling/servicing their products in often volatile environments. This is a distinct advantage over American and European companies who often lack this type of experience.
QUESTION: In your opinion, what are the advantages that Chinese companies could have in African countries?
ERIC OLANDER: This is going to sound unconventional but I think the Chinese and African business cultures have far more in common with one another than the African and Western systems do with one another. China, like Africa, is fundamentally a tribal or clan-based culture. People conduct business based on relationships and place significantly less value on the contractual norms common in the West. Therefore, when Chinese entrepreneurs arrive in Africa they focus on building relationships and generally feel more comfortable operating in a barter-system. Now, please do not misunderstand me, this is not to say that Chinese or African companies are not effective within the confines of a contractual system, not at all. Rather, I am suggesting that the individual instincts of each businessman/woman may have a lot more common with one another in China & Africa than a lot of foreign observers have previously suggested.
There is an old saying that the Chinese are like turtles and they can make their home wherever they are in the world. Over centuries of migration, the Chinese have proven to be among the world’s most adaptable populations, pretty much everywhere in the world. This is especially true in Africa where Chinese merchants and migrants are able to endure unimaginable difficulties to build businesses, farms and manage complex investments. The Chinese ability to 吃苦 is a definite advantage, particularly somewhere as unpredictable as Africa where many countries lack developed legal systems, infrastructure and functioning economies as in the case of the DRC, for example.
One of the most significant advantages that the Chinese have in Africa, and elsewhere too, is their perception of time. Westerners are often very short-sighted when it comes to foreign investment as there is a culture of operating from quarter to quarter. The Chinese, in contrast, can be very patient and often have more longer time horizons for the return on their investments, which is particularly important in regions like Africa where quick returns are often difficult to come by.
QUESTION: During interviews, some people who have been working in Africa for many years believe that Africa is a promising place for investment. Do you agree with this idea? Which areas do you think is best for investment now in Africa?
ERIC OLANDER: No, I would not say “Africa” is a promising place for investment, instead I would say there are countries in Africa that are quite promising. Africa is simply too large and too diverse to describe as a singular entity, just as Asia is too vast and complicated to present as a promising place to do business. So, there are regions such as Rwanda and Ethiopia that have very business-minded autocratic leaders who are focused on developing the economy where there is clearly a lot of investment potential. Conversely, Mali, Libya, South Sudan highlight the equally dangerous pitfalls that confront Chinese businesses who underestimate the risks of operating in these countries that are effectively lawless.
The Chinese are clearly demonstrating that Africa’s growing telecom, automative and natural resource exporting sectors offer tremendous growth potential. However, China must be careful in how it manages its investments in Africa because although there is a lot of potential and more African countries are opening themselves to international investment, there is a high risk of a backlash. The Chinese must do better to respect local labor, environmental and corruption laws or else the investment climate for Chinese companies could deteriorate significantly.
QUESTION: What strategies should Chinese companies take in order to adapt themselves into local environment and culture?
ERIC OLANDER: The Chinese must respect the same advice that they give to foreign investors who want to come to China. If you don’t speak Chinese, understand Chinese culture, respect Chinese laws, learn Chinese customs, well, then you are not going to be very successful in China, right? For some reason, a lot of Chinese businesses do not seem to understand this basic concept and they go overseas to places like Africa without knowing the language, laws, customs and culture. It is imperative that both public and private sectors in China do more to learn about the world without the filters of media censorship. It is vital that Chinese business leaders understand both the positive and negative implications of China’s “Going Global” strategy and not consider any criticism of China, its policies and the behavior of its people to be a personal attack. It’s not. China is a large and complex culture that is now a global force. This will inevitably foster positive developments but it will also, invariably, spark questions and problems. The Chinese people must fully grasp all aspects of their role in the world and engage people from different cultures on their terms, not China’s. Humility and respect must be more than propaganda slogans and be reflected in policy and tangible actions on the ground.
The Chinese must do a better job of telling their own story in Africa and elsewhere. The PRC has a lot of incredible accomplishments to be proud of in Africa but they are often drowned out by the much louder criticisms that the Chinese either leave unanswered or respond to clumsily. Chinese companies and diplomats must overcome their fear of social media and engage people in dialogue. True, open, honest dialogue. If not, the Chinese will remain the victim of other peoples’ narratives.
Beijing must wake up to the mind-boggling damage to its global reputation that ivory consumption in China is having. Li Keqiang’s 10 million dollar donation and all of the joint CCTV/UNEP partnerships ring hollow so long as China does not implement a full ban on ivory sales. Whether it is fair or not is besides the point but China is blamed for fueling the bloody ivory trade that is rapidly wiping out some of the earth’s most precious animals, jeopardizing vital tourism industries in many countries and contributing to a trade that relies on the proceeds from ivory to sustain insurgency, terrorism and chaos. If China announced tomorrow a full and total ban on ivory it would not only raise its profile in Africa, it would also then shift attention to the world’s number 2 and 3 destinations for African ivory, the United States and Europe respectively. A win-win for Chinese foreign policy, right?
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