China to Hold Africa Showcase Summit for Year of the Dragon

The Previous China-Africa summit held in Beijing

Officials are building up expectations for the fifth Forum on China-Africa Cooperation (FOCAC V), which Beijing will host in the last quarter of this year. The showpiece summit, which began in 2000 and has been held every three years since, now returns in the year of the dragon – which will be doubtlessly trumpeted as auspicious for China-Africa relations.

FOCAC V will fall in a busy season for Beijing, as it completes its long-gestating leadership transition at the 18th Communist Party Congress. Stability – both at home and in terms of relations with its African partners – will remain a priority.

Xi Jinping and Li Keqiang are almost certain to take the top positions (AAC Vol 4 No 2); that will will make them the new national President and Prime Minister respectively. But the final line-up of the nine-member Politburo Standing Committee remains uncertain. Two prominent provincial bosses are jockeying for seats, each bringing a markedly different ideological perspective.

As the head of Chongqing province since 2007, Bo Xilai quickly made his mark with a broad crackdown on corruption and organised crime. He courted the national media and encouraged the singing of revolutionary ‘Red Songs’. Mobile phone users were relentlessly bombarded with his text messages containing choice Mao Zedong quotes.

Bo is a former Commerce Minister and, as son of one of the founding leaders of the People’s Republic, a prominent ‘princeling’. The princelings have profited handsomely by their connections to the political elite but attract public resentment for the advantages they enjoy in a wildly unequal society.

Wang Yang governs Guangdong, the most outward-looking of China’s provinces and an economic powerhouse. It was here in 1992 that Deng Xiaoping, on a southern tour that included the cities of Shenzhen, Guangzhou and Zhuhai in Guangdong, launched China’s economic transformation with the (possibly apocryphal) phrase, ‘To get rich is glorious.’Since 2007, Wang has attracted attention for his reformist style. In late 2011, a protest erupted on his turf after local leaders sold off peasants’ land in the village of Wukan. The conflict escalated until the protesters forcibly evicted the local cadres and barricaded the village. Security forces surrounded Wukan, a village of 13,000, but the expected crackdown was averted when Wang despatched a deputy to negotiate a peaceful settlement on 22 December.

In January, Wang indicated a willingness to concede Guangdong’s top position in provincial income rankings to fast-gaining Jiangsu. ‘We won’t fight this battle,’ he said. ‘Overtake us if you want, we must take care of restructuring first.’

Each General Secretary since Mao has needed to lead in an increasingly consensual style. The diverging outlooks of the new entrants will ensure vigorous debates inside the black box that is Zhongnanhai, the party headquarters in Beijing. The ramifications will soon reach Africa.

Gaining on Europe

China’s trade relations with Africa are strengthening while much of the developed world languishes in economic doldrums. China was Africa’s third-largest export market, behind Europe and the United States, and it trailed only Europe as a source of imports. China-Africa trade in 2011 is expected to reach US$150 billion, up 26% from $126 bn. the previous year. That is far ahead of US-Africa trade and fast catching up with Europe-Africa trade. Some forecasts suggest the number will double to $300 bn. by 2015.

From January to September 2011, Africa’s trade with the European Union was $267.8 bn., compared to African trade with China of $122.2 bn. and African trade with the USA of $97.6 bn.

Chinese finance for Africa remains a linchpin for relations. According to data from the State Council, 45% of all China’s concessional loans have gone to African countries, with China Export-Import Bank alone lending $67.2 bn. to African states between 2010 and 2011. The latest China Exim Bank deal was a $612 million financing package signed with Ethiopia in December for two railroad links that will be built to connect Addis Ababa to the border with Djibouti.

China’s foreign reserves – which dropped in the last quarter of 2011 but remain the biggest in the world at $3.2 trillion – mean that Beijing can take advantage of trouble in the eurozone by making large acquisitions and state-backed infrastructure deals. The international uranium market has hit new lows due to the ongoing Fukushima nuclear crisis in Japan. This makes it cheaper for companies to buy out uranium miners to snare their exploration licences.

Uranium was the sub-text of Foreign Minister Yang Jiechi’s January visit to Côte d’Ivoire, Niger and Namibia. Niger is a big supplier of uranium to France and set to become the world’s largest producer by 2014. A fortnight earlier, International Monetary Fund head Christine Lagarde warned the Niamey government of the grim outlook for the European economy. The timing could not have been better for China; Yang sweetened the relationship with $3.2 mn. in loans.

Days after Yang’s departure from Namibia, China Guangdong Nuclear Power Group’s bid to take over Britain-based Kalahari Resources moved forward a step, winning the blessing of the Namibia Competition Commission. If successful, the acquisition will give CGNPG a controlling stake in the Husab uranium mine, a deposit containing some 280 mn. tonnes.

To interfere or not

China struggles to adapt its policy of non-interference to African political and economic realities. The wrangling between Sudan and South Sudan over oil exports have reached deadlock. State-owned China National Petroleum Corporation is one of the largest investors in the petroleum operations that straddle both Juba and Khartoum’s jurisdictions.

For now, the only export route for South Sudan’s crude is via a pipeline to Port Sudan in the north. Khartoum, which lost about two-thirds of its oil reserves after the South’s secession on 9 July 2011, wants to charge Juba $32 per barrel (about a third of the price of a barrel of oil on the sport market). Initially reluctant to take a public role in the talks, Special Envoy for Africa Liu Guijin is now trying to broker compromise. Even with a regional agreement, it would still take years to build an alternative route for South Sudan’s oil exports.

It’s not just China that has learned to tread carefully where politics and economics intersect. South Africa’s non-response to the Dalai Lama’s visa request to attend the 80th birthday of Archbishop Emeritus Desmond Tutu in October 2011 sparked outrage in the press at the perceived betrayal of South Africa’s support for human rights in favour of ‘selling out’ to China, again. Vice-President Kgalema Motlanthe was in Beijing at the time signing multibillion-dollar deals, which did nothing to dispel this impression.

President Jacob Zuma will find it difficult to balance relations with China with the demands of domestic politics. More so as China’s footprint in Africa’s largest economy increases. In December 2011, China Investment Corporation, a sovereign wealth fund, bought a 25% stake worth $240 mn. in the unlisted Shanduka Group.

It was a shrewd move: Shanduka’s Executive Chairman Cyril Ramaphosa, a prominent industrialist with impeccable political credentials, is a possible successor to President Jacob Zuma. Shanduka, as an investment holding company, could serve as a conduit for further investments in South Africa and other African countries.

Moves to make the renminbi an international reserve currency offer African economic managers a chance to consolidate relations with Beijing. Nigeria has taken the lead: in September 2011, the Central Bank of Nigeria finalised plans to hold 10% of its $35 bn. in reserves in yuan, adding the managed currency to its mix of US dollars and euros. Others are likely to follow, particularly African countries wishing to lower their exposure to the embattled euro. Given the composition of China-Africa trade, the renminbi’s potential as a commodity-pricing currency is considerable. In late December, Sudan’s central bank governor, Mohamed Khair al-Zubair, said that Khartoum would seek to limit its transactions with China to the yuan and Sudanese pound, with the aim of ending its use of the US dollar.