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E. S. Biryukov1
Trade and Economic Relations of China with East Africa2
The article deals with China's economic policy in East Africa. The share of Africa in China's trade flows amounts to significant 4-5%. At the same time, for Africa, China is the largest partner. In some years, their turnover exceeded 220 billion U.S. dollars. Total foreign direct investment flows of China into Africa exceeded 80 billion U.S. dollars. Stages of development of China's trade and economic links with Africa from trade links to investing in social and general economic infrastructure, construction of ports and bases are shown. For Beijing, East Africa is a source of minerals, a market for sales of products, a region for extension of geopolitical influence. China's relations with Ethiopia, Sudan and South Sudan, and the policy of creating transport infrastructure are described in more detail.
Key words: external economic relations of China, FDI of China, Ethiopia, Sudan, South Sudan.
JEL: F21
Statistical indicators of China's cooperation with Africa
The PRC began to attach importance to development of relations with African countries in the 1960s. Activization of China's interaction with Africa may be chronologically dated to the end of the 20th and beginning of the 21st centuries. The countries of the eastern part of the continent play an important role in the African strategy of the PRC. This can partly be explained by historical and geographical reasons: in West Africa, for example, presence of France still takes place, and in the East, influence of the Western powers is weaker, and therefore there is a certain power vacuum. It is noteworthy that of the ten most populated countries of Africa, six are in its eastern part, namely, Ethiopia, Egypt, Tanzania, Kenya, Sudan, Uganda (see Table 1). This increases importance of cooperation with this part of the continent.
1 Evgeny S. Biryukov — Аssociate Professor, Peoples' Friendship University of Russia. E-mail: <biryukov_e@mail.ru>.
2 The article was submitted to the editors in December 2017.
Table 1
Largest countries in Africa (by population)
Position Country Population size (mln people)
1 Nigeria 182.2
2 Ethiopia 99.4
3 Egypt 91.5
4 DR Congo 77.7
5 SAR 55.0
6 Tanzania 53.5
7 Kenya 46.1
8 Sudan 40.2
9 Algeria 39.7
10 Uganda 39.0
Source: World Bank [Electronic Resource] URL: <http://data.worldbank.org/ indicator/SP.PORTOTL?view=chart> (date of access: 19.12.2017).
From a statistical point of view, the countries of Africa, which is quite obvious, are not among the leading trading partners of China. Main destinations for the exports of goods from the PRC are the USA (18% of the total Chinese exports), the European Union (15.6%), and also Hong Kong (14.6%), which is taken separately in Chinese statistics. Nevertheless, for Africa there are statistically significant 4.6% of China's exports. This figure is comparable with the volume of its exports to the Middle East (4.8%), Japan (6%) and significantly exceeds exports to such important trading partners of the PRC as Korea (4.4%), Germany (3.0%), Great Britain (2.6%), India (2.6%), or the Commonwealth of Independent States (2.5%). Although these comparisons are not entirely correct, since all countries of the continent are included in the statistics for Africa, nevertheless, these figures show a high level of China's trade cooperation with Africa. In imports, African positions are similar — 4.0% as of 2015.
While Africa is significant for China, although it is not the leading partner, we should note that China is the key and strategically important counterpart for Africa. As in 2006 China was the third largest trading partner of the countries of the continent with the total turnover of 40 billion U.S. dollars, then by 2012 it had come out on top, having increased the trade turnover by five times to 200 billion U.S. dollars. Dynamics of China's and Africa's exports and imports in 2011-2016 is shown in Table 2.
It is interesting to note that the volume of China's foreign trade with Africa reached its maximum level of 221 billion U.S. dollars in 2014. Then, in 2015-2016, it decreased by 27%, which may partly be explained by dynamics of commodity prices and a general trend towards decline in China's exports and imports compared to their peak in 2014.
Table 2
China's foreign trade with African countries in 2011-2016
2011 2012 2013 2014 2015 2016
China's exports to all countries of the world, bln USD 1 898 2 049 2 209 2342 2 282 2098
including Africa 72 86 93 105 105 94
Africa's share in China's exports (%) 3.8 4.2 4.2 4.5 4.6 4.5
Imports to China from all countries of the world, bln USD 1 743 1 818 1 950 1958 1 682 1587
including Africa 92 113 117 116 67 68
Share of African countries in China's imports (%) 5.3 6.2 6.0 5.9 4.0 4.3
Sources: a) for 2011-2015: Trade Policy Review. Report by the WTO Secretariat. China [Electronic Resource] // URL: <https://www.wto.org/english/tratop_e/tpr_e/s342_e. pdf> — pp. 150, 151 (accessed 30.11.2017); b) for 2016: World Trade Statistical Review 2017 [Electronic Resource] // URL: <https://www.wto.org/english/res_e/statis_e/ wts2017_e/wts17_toc_e.htm> — p. 102 (accessed 30.11.2017).
As for the FDI sphere, it is more difficult to trace interaction between China and African countries from their official statistics.
According to Chinese statistics, 71% of FDI exports are directed to just one territory, namely, Hong Kong1. Analysis of statistics on the re-exports of invest-« ment from Hong Kong (most of which have Chinese origin) also does not lead | to clear information as leading positions are related to China and offshores.2
£
| In 2016, the China-Africa Research Initiative (CARI) at the School of Advanced <1 International Studies (SAIS) published the results of its research on Chinese H loans to Africa between 2000 and 2014. During this period, Chinese banks, companies and government provided Africa with over 80 billion U.S. dollars. The largest recipients were Angola (21.2 billion), Ethiopia (12 billion), followed by Kenya, Sudan and the DRC (5 billion each). Chinese loans to the continent were directed primarily to construction of infrastructure facilities — roads and railways, electrification, etc., rather than extraction of hydrocarbons and minerals.
1 Trade Policy Review. Report by the WTO Secretariat. China [Electronic Resource] URL: <https://www.wto.org/english/tratop_e/tpr_e/s342_e.pdf> — pp. 150, 151 (accessed 30.11.2017).
2 URL: <http://gia.info.gov.hk/general/201712/11/P2017121100368_273846_1_15 12981029908.pdf>
Evolution of cooperation: from trade and investment to infrastructure development
It may be assumed that cooperation of the PRC with African countries has passed through several stages, with each of the following ones retaining all elements of the policy of previous stages, but adding new aspects. The slowdown in the growth rate of the Chinese economy, which occurred in recent years, did not fundamentally affect the PRC's plans to develop cooperation with Africa.
At the first stage, Beijing developed basically economic interaction only. As a part of this policy, China not only invests in mining and extractive industries, but also in the manufacturing sector. Different objects of social infrastructure were created, e.g. schools, hospitals, etc. Products produced on Chinese-built enterprises are partly used by African countries, and partly directed to China, allowing for return on investment. In this respect, the PRC approach in many ways resembles the policy of the USSR and radically differs from the Western one, aimed primarily at gaining access to African resources, opening up markets for imports and supplying arms.
At the second stage, economic interaction was supplemented by targeted development of the transport infrastructure. Formally, China's projects in Africa go beyond the geographical scope of the Chinese strategy of the New Silk Road. At the same time, the essence of the African strategy of Beijing is similar owing to development of transport infrastructure with the aim of more active interaction between China and recipients of its investments. Creation of transport infrastructure in Africa by the PRC may be divided into two components — inland and port.
At the third stage, the first Chinese foreign naval base was established at the port of Obock in Djibouti which opened in 2016. This marked a departure from the policy that American authors specializing in security issues characterized by the term «hands-off approach», i. e. elements of military cooperation were added to economic and political cooperation.
In general, ambitions to acquire port assets in key bottlenecks for international shipping is an important aspect of China's activities in the world throughout recent years. So, back in 2000, the Chinese company Hatchison Wampoa won a tender for management of the Panama Canal. In 2015, Chinese Landbridge Group took long-term lease of port infrastructure in Australian Darwin, and in 2016 — in Panama's Margarita Island. In 2014, Beijing began construction of the Nicara-guan Canal. The PRC invests in the Pakistani port of Gwadar, the Greek Piraeus, the Kenyan Lamu, the Namibian Walvis Bay, and others.
Considering Chinese projects for development of transport infrastructure, it is reasonable to analyze the results and prospects for construction of railways in East Africa. In 2016, China completed construction of a new branch of the Djibouti-Dire Dawa-Addis Ababa railway, which is of strategic importance to Ethiopia because of the lack of sea access of this country. China needs this route to monitor supply chains whilst taking resources from Africa and delivering Chinese prod-
ucts to the «black continent». Thus, Beijing links land and sea logistics infrastructure into a single network.
There are plans to extend the railway from Addis Ababa in two directions — to Juba, the capital of Southern Sudan, and to the port of Lamu in Kenya (this project was named LAPSSET — Lamu Port-Southern Sudan-Ethiopia Transport Corridor). The obstacle to creation of this transport corridor is the civil war in Southern Sudan. In this regard, its solution, as well as de-escalation of the conflict between Sudan and South Sudan, would be of great importance for China's interests. However, in the medium term this seems unlikely.
In Kenya, Beijing began implementing its plan to build an interstate East African railway. In 2017, a branch was completed between the port of Mombasa and Nairobi, the capital of Kenya. As for the second stage, it is planned to build a line between Kenya, Uganda, Rwanda and Burundi. For implementation of this project, funding of 8.1 billion U.S. dollars is required. At the first stage, the necessary funds amounting to 3.6 billion U.S. dollars have been allocated mostly by the Export-Import Bank of China. An important feature of this project is that in all four countries China is building a gauge of 1435 mm wide — while in Africa there was previously no single standard. It created additional difficulties in providing railway services. In the long term, this railway should be extended to the north through Ethiopia to Southern Sudan and to the south to Tanzania.
Andrew Korybko notes in his papers that if these corridors were created, the idea to provide railway communication across the entire African continent from Egypt to South Africa could become real. In the south, this would require modernization of already existing branch connecting Tanzania and Zambia, and in the north — implementation of the project of construction of the Egypt-Sudan railway, in which both countries would be interested. In general, technically and economically, these projects are feasible, but the security situation may be an obstacle. In addition to the meridional railway, Harry Valentine and Andrew Korybko independently from each other analyzed the possibility of establishing by China of latitudinal lines of «east-west» — from Ethiopia and Tanzania to the coast of Nigeria, DR Congo and Angola, where China's positions are also strong.
Cooperation with individual countries
The level, scope and direction of China's cooperation with individual countries of East Africa vary significantly. Ethiopia, Sudan, Djibouti and Kenya are of the strategic importance for the PRC.
Ethiopia is the key partner of Beijing in East Africa. The foreign trade turnover of these two countries is 3 billion U.S. dollars per year (noting GDP of Ethiopia for 2015 being 61.5 billion U.S. dollars). The accumulated volume of Chinese foreign direct investment amounted to 20 billion. Various types of loans and official development assistance provided by Beijing are rather significant for economic development of Ethiopia. China finances construction of dams on the Nile for de-
velopment of the energy sector, agriculture and shipping; creation of telecommunication infrastructure; the underground transport system in Addis Ababa. In the coming years, with partial financing from the Asian Development Bank, Ethiopia intends to build six industrial zones specializing in the textile industry, the total amount of investments to be 3 billion.
Chinese labor force in Ethiopia is, according to various estimates, 20 to 60 thousand people. (This is very much, as, for comparison, in the heyday of cooperation between the USSR and Egypt, 32 000 Soviet specialists worked in this African country.) A significant portion of the Chinese people come on their own initiative. In addition, according to the Xinhua News Agency, in 2007, a state program was implemented in which 300 volunteers were sent to Ethiopia, Zimbabwe and the Seychelles to carry out such work as teaching the Chinese language to the local population, familiarizing physicians with Chinese medicine, assisting in the agricultural sector, etc.
There are also political links between countries. Thus, Ethiopian high-ranking officials repeatedly commented on the Tibetan issue in the sense that it is an internal affair of China. Parliament of Ethiopia adopted one resolution approving the Chinese law on combating separatism. As for domestic political processes in Ethiopia, Western scholars believe that having foreign political support from China, Ethiopian authorities are more resolute in contact with the opposition and regarding freedom of speech inside the country.
In the military sphere, Beijing is the main supplier of light weapons and armored vehicles to Addis Ababa. However, cooperation in the military sphere currently is not the main direction of cooperation between these countries. We can say that the relationship between them is consistently developing. At present, they are more concentrated in economic and, to a certain extent, in ideological spheres.
The PRC is also promoting large-scale partnership with Sudan. Relations intensified in 1989 after the coup in Khartoum and coming of the National Islamic Front led by political leader Omar Bashir and theologian Hasan Turabi to power. Western countries imposed sanctions on Sudan which contributed to development of Sudanese-Chinese cooperation.
In 1996, the Chinese National Oil Company, along with Malaysian and Indian firms, gained control over main deposits of oil in Sudan. Since then, the total amount of investment from China to the economy of Sudan has amounted to 15 billion U.S. dollars. Currently about two-thirds of the Sudanese oil exports go to China. At the peak of production in Sudan, 6% of the oil consumed by the PRC was provided by this country.
Major projects of bilateral cooperation included construction of the railway from Khartoum to Port Sudan, a gas power plant in Rabak, a coal power station in Port Sudan and the Meroe HPP. In the political sphere, interaction between Khartoum and Beijing is more developed than Ethiopian-Chinese contacts. In the UN Security Council China has repeatedly imposed a veto on anti-Sudanese resolutions.
Since 2011, China has faced the need to build relations with two Sudanese states. After the referendum on independence in Southern Sudan, 75% of oil resources of the previously united country are concentrated on the territory of this new country. At the same time, since a high probability of disintegration of the country was manifested several years before 2011, Beijing had been ready for such a scenario. China was able to quickly build relations with southerners, became one of the first countries to open its Consulate and then its Embassy in Juba. Currently, 40% of the oil industry of South Sudan belongs to China. Thus, China has demonstrated its ability to respond to the situation rather quickly, and to be guided not only by allied relations, but by its economic interests.
However, in 2013, a civil war broke out in South Sudan between its two largest nationalities, the Dilka and the Nuer. It led to death of 50 thousand people, and emergence of 2.5 million refugees. The fall in its GDP in 2016 was 13% along with inflation rate of about 500%. China is interested in stabilizing South Sudan and in establishing stable oil exports. Among the 12 000 peacekeeping contingent of the UN there are 1 000 Chinese military. In 2015, Secretary General of the CPC Central Committee Xi Jinping proposed sending additional 8 000 Chinese soldiers to South Sudan to maintain peace, but this proposal was not supported either in South Sudan or in the UN. In the case of pacification of South Sudan, China could begin construction of the strategically important railway connecting Juba to seaports by the route Juba-Addis Ababa-Djibouti/Juba-Lamu (Kenya). In the present time, Western countries urge China to increase humanitarian help to South Sudan and invest $ 2 billion in humanitarian and economic programs. This is stated in the publications by Bloomberg, The Globe and Mail, and others. However, the Chinese are in no hurry to do so, apparently realizing that having spent the funds, they would not be able to settle the conflict.
Egyptian-Chinese economic relations are developing as well. Egypt is the third largest trading partner of China among the Arab countries after Saudi Arabia and the UAE. China is in the first position among Egypt's trading partners.1 The bilateral trade is 11.6 billion dollars. The concept of «One Belt — One Way» has much in common with the plan of the Egyptian government to promote the project «Corridor of the Suez Canal», which creates significant opportunities for cooperation. Progress has been made in the Sino-Egyptian cooperation in the field of production capacities, which became the main feature of bilateral cooperation. In order to invest in projects across Egypt, China uses the infrastructure of free economic zones of this country.2
1 Kitai i Egipet Uspeshno Razvivayut Sotrudnichestvo v Sfere Proizvodstvennyh Moshnostey (China and Egypt Successfully Develop Cooperation in the Sphere of Industrial Facilities) [Electronic Resource] // People's Daily Online. — 22.01.2016. — Mode of access: <http://russian.people.com.cn/n3/2016/0122/c31521-9008035.html> (date of access: 20.11.2017).
2 E. S. Biryukov. Politika Egipta po Sozdaniyu Zon Svobodnoi Torgovli i Perspektivy Sozdaniya Zon Svobodnoi Torgovli mezhdu Rossiei I Egiptom (The Policy of Egypt on the Creation of Free Trade Areas and Prospects for the Creation of Free Trade Areas between Egypt and Russia) // Mezhdunarodnaya Torgovlya i Torgovaya Politika (International Trade and Trade Policy). 2016. No. 1 (5).
Chinese-Eritrean economic relations have significantly intensified in recent years. In 2015, a contract was signed between Eritrea and the Chinese company Sea-Hitch-China (China Harbor Construction Company) to expand the port of Mas-sawa. The project envisages construction of a bulk cargo terminal, with capacity of 70 thousand tonnes and multi-terminal capacity of 50 thousand tonnes. The amount of the contract is 400 million U.S. dollars. It is the largest single foreign investment in Eritrea during existence of the state. Companies from China are actively represented in Eritrea in the field of extraction of natural resources, power generation, construction. However, on the whole, China and Eritrea are not strategic partners for each other, since each of the parties focuses on other partners.
According to the Financial Times, in Djibouti China plans to invest 12.4 billion dollars in infrastructure projects. In Kenya, the biggest infrastructure project since independence, worth 3.8 billion U.S. dollars, namely, the railway mentioned above, is funded by China.
Thus, China develops cooperation with different countries of Africa, not only in mining but also in manufacturing, development of land transport corridors and seaports. The PRC's policy is sound and effective from both economic and geopolitical points of view. Beijing's long-term dividends will allow to recoup investments. At the same time, China receives natural resources from the constructed facilities, expands export markets, and increases its political influence. Beijing essentially turned a significant part of Africa into a zone of its influence despite competition and counteraction carried out by Western countries, including the sphere of security. The PRC can provide African countries with lots of opportunities for more equitable conditions of integration into a multipolar international system.
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Бирюков Е. С.1
Торгово-экономические связи КНР с Восточной Африкой2
Рассмотрена экономическая политика Китая в Восточной Африке. Доля Африки в торговом обороте Китая составляет значительные 4-5%. В свою очередь, для Африки Китай является крупнейшим партнером, товарооборот в отдельные годы превышает 220 миллиардов долларов. Общий объем прямых иностранных инвестиций Китая в Африку превысил 80 млрд долл. Показаны этапы развития торгово-экономических связей Китая с Африкой от торговых связей к инвестированию в социальную и общую экономическую инфраструктуру, строительство портов и баз. Для Пекина Восточная Африка является источником полезных ископаемых, рынком сбыта продукции, регионом трансляции геополитического влияния. Более подробно описаны отношения Китая с Эфиопией, Суданом и Южным Суданом, политика создания транспортной инфраструктуры.
Ключевые слова: внешнеэкономические связи Китая, ПИИ Китая, Эфиопии, Судана, Южного Судана.
JEL: F21
1 Бирюков Евгений Сергеевич — доцент Российского университета дружбы народов, кандидат экономических наук. E-mail: <biryukov_e@mail.ru>.
2 Статья сдана в редакцию в декабре 2017 г.
