China's Road-building Investment in Congo

In developed nations, access to major roadways is taken for granted. We have six-lane dual carriageways, networks of precisely paved arteries cutting in and out of big cities, and transcontinental highways stretching for thousands of miles. Even those shady side streets and pot-holed back alleys are there when you need them--in my case, when I'm lost (regularly) and need to make a K-turn.

But a recent article in The Washington Post details the lack of highway infrastructure in a growing, but largely undeveloped country, Congo (formerly Zaire). However, a mutually (though perhaps not equally) beneficial road-building deal between the Congolese government and China will bring new transportation opportunities to mining cities in the north and south of Congo, connecting them to western ports. The Chinese, in return, will create its own lucrative inroad into the African nation's rich mining industry.

While this business agreement may seem a world away to economic developers who can proudly tout and sell their extensive and upgraded transportation routes, the anecdotal information in the Post's article is also eye-opening. It details how the grading and smoothening of one, 30-mile dirt road leading to the village of Kilongo has brought beer, electronics, and prostitutes, to name a few, um, "goods" to the once-isolated community.

Check out the full story for a good read. Here's one fascinating stat: "Congo, a country the size of Western Europe, with vast natural resources, has less than 3,000 miles of paved road. Virginia, by comparison, has about 70,000 miles."

Where there is sea, there are pirates, Part 5

These pirates were not after the money, they were after the fish. Eight Guineans have been arrested by Sierra Leone for an act of piracy against Chinese fisherman. The fisherman, who were locally licensed to be in Sierra Leonean waters, were held up by two speedboats carrying men armed with AK-47 automatic rifles.

Sierra Leone has a 400km coast of exclusive territorial waters, where mainly Asian vessels have permits for commercial fishing.

Sources: BBC, Independent (South Africa)
Also See: Where there is sea, there are pirates, parts 1, 2, 3, and 4

China's Product, Georgia's Pride

With China's economy on the upswing, Georgia economic developers have been courting investment from the foreign power. Yesterday, the third Chinese company in 15 months has announced that it will be moving to the state. (Remember when it was American companies scrambling for Chinese manufacturing?)

Sany Heavy Industry Company, a China-based maker of construction equipment, will construct a $30 million plant on a 241-acre site in Peachtree City, Georgia. The plant, expected to be in operation by 2009, will create 200 jobs initially, and potentially up to 600 jobs in 10 years.

Sany will be receiving declining property abatements which will save the company around $2.2 million; Peachtree City and Fayette County split $200,000 donation to buy the $6.5 million site.

Says Governor Sonny Perdue:

It hasn't happened by accident. We've been in Asia and China looking for relationships and partnerships.

And so it is.

Sources: Atlanta Journal Constitution, MSN Money, Sany

The Biggest Piece of Coal in China

The Xinjiang Province, a huge, sparsely populated region in Northwest China, began hosting China's largest coal chemical project this month. Xinwen Mining Group, based in the Sandong Province, has invested $327 million (2.6 billion yuan) in the facility, which will have estimated annual sales of $183 million, or 10 million tons a coal.

This large plant is a needed response to small, dangerous, and sometimes illegal mines are scattered throughout the region, 80 of which were closed this year. China, the world's largest coal producer and consumer, saw 4,746 deaths in coal mine accidents last year--an average of 13 deaths per day. The hope is that larger projects will have tighter regulations on mines.

Xinjiang, sometimes referred to as East or Chinese Turkestan, is home to majority of Muslim Turkic groups. Historically, Xinjiang, like its neighbor Tibet, has fought to separate itself from China. Since the fifties, however, a Chinese propoganda movement known as "Go West" has encouraged Chinese people from the East to settle in the region and transform the frontier. Human rights advocates have historically scorned China for is work prisons (Laogai) and involvement of the World Bank in Xinjiang.

In addition to the new mine, he Xinwen Mining Group plans to invest more than $3.8 billion for coal chemical development in the Yili Rive Valley of Xinjiang.

Sources: China Daily, Industrial Info Resources, Times of India, Tibet Environmental Watch, Interfax China

Where there is sea, there are pirates, Part 2

I have an update for all the folks that transport goods via the high seas. US Naval Commander Rear-Admiral James Kelly told an Australian newspaper last week that China is building up its submarine and warship capacity to help protect its sea lanes.

China's booming economy means that it has a voracious appetite for raw materials (see previous China-related blogs), much of which needs to be imported. And this means that it has plenty of incentive to have the capability to keep its sea lanes open.

Most of China's trade goes through the Malacca Straits and the Bay of Bengal, which have more pirate activity than anywhere else in the world.

Over 65,000 vessels pass through the strait every year, carrying half the world's oil and more than a third of its commerce. The Strait of Malacca is notorious for robberies and kidnappings by pirates, mostly directed against commercial shipping. Increased security patrols by Malaysia, Singapore and Indonesia have helped the number of attacks drop drastically.

Sources: The Age, The Malaysia Star, The International Herald Tribune
Also See "Where there is sea, there are pirates," Part 1

Dangerous Business Part 3: Economic Development or Exploitation?

"The discovery of oil in Africa has been, almost without exception, a disaster for the host countries," writes Andrew Leonard in his Salon.com review of John Ghazvinian's novel, "Untapped: The Scramble for Africa's Oil," "The reasons are partly economic, partly having to do with the lack of well-developed institutions in many African states, partly owing to colonial legacies, and partly the fault of Western oil companies all too willing to turn a blind eye to corruption while the getting is good. In virtually no case has oil money been successfully employed for economic development, and so far, the likely prospect is that nearly every African country with significant oil deposits will end up worse off after the oil is gone than they were before the pumping started."

The assumption is that when a wealthy country finds resources on a poor country (such as Ethiopia) the lives of the people in that country will be drastically improved. The company will mine the resources, and in return, help the country with infrastructure, schools, etc. The opposite is in fact may be true. Between 1970 and 1993, writes Ghazvinian, countries without oil saw their economies grow four times faster then those countries with oil.

You have most likely heard the stories of corrupt governments, fat pockets, poverty, and environmental destruction that seem to be the result of in Western expansions in many African countries. High risk investments in politically and economically unstable counties will most likely lead to violence, as on on April 24, when over 70 employees in a Chinese-run oilfield in Ethiopia were killed, and more were kidnapped.

According to the Voice of America the government has been urging state-owned companies to operate internationally to help support China's expanding economy. Today's article in the Sudan Tribune reported on the annual meeting of the African Development Bank, which will take place in Shanghai on May 16. The location alone shows the powerful role that China has in African redevelopment. Over 800 Chinese companies, and around 100,000 Chinese citizens, live in Africa.

Since the U.S. began operations of AFRICOM in February, Pentagon and many military analysts argue the continentŐs growing strategic importance necessitates a dedicated regional command.

On May 3, the Council on Foreign Relations reported:

Some experts suggest the commandŐs creation was motivated by more specific concerns: China and oil. With Soviet influence gone and FranceŐs traditional presence much diminished, China has poured money into the continent in recent years as it jockeys for access to natural resources. And the United States is projected to import at least 25 percent of its oil from Africa by 2015, according to the National Intelligence Council.

I was reminded to pay closer attention to this story when I read another article in The Sudan Tribune. A Darfur-based rebel group (the Sudan Liberation Movement) warned foreign oil companies that they should stop doing business in the area. They said that the mineral resources are the property of the people of Darfur, and should remain unexploited until the conflict (civil war) is over.
Only people of Darfur are enabled to decide on the fate of this wealth, they said.

Sources: The Wall Street Journal (subscription), Voice of America, The Sudan Tribune, Salon.com
Image: The African Oil Politics Blog

Dangerous Business, Part 2

Yesterday, Businessweek published an article called "Why Taming the China Dragon Is Tricky." "China's $2.6 trillion economy, which blew away market expectations and clocked 11.1% growth in the first quarter, is rushing along like some blisteringly fast, runaway maglev train," writes Brian Bremner.

The world has never seen such a sudden and sustained rise of an economy that was so desperately poor just three decades ago. China has averaged 9.6% growth rates for 30 years and is now the fourth-biggest economy in the worldŃand likely will overtake Germany as No. 3 in the next year or so. It's the third-biggest trading nation: Two-way trade between China and the rest of the world hit $1.76 trillion last year.

And article in Asia Times today reads:

It is now setting the tempo for the global economic orchestra. The transformation is still in the early stages. China will soon move into higher-value-added sectors, such as automobiles, aerospace and pharmaceuticals. A larger swatch of the population has to be incorporated into the new economy. That means that sunny skies lie ahead for most emerging-market countries as they help feed the ravenous needs of the new rising superpower.

This hype might sound familiar. However, the investment that China is taking in other countries is new. Is it possible that instead of outsourcing to China, China's about to outsource to you? Perhaps she already is.

China's relationship with Africa may be helping several countries run up substantial debt burdens, Business Day South Africa reported today. The Chinese Exim Bank, the export credit agency, has, according to media reports, agreed to finance a dam and hydroelectric plant in Mozambique and a credit line in Angola. The interest in oil rights is surely one of the motivating factors (see yesterday's blog). President Kibaki of Kenya and Mr. Jia Quinglin, chairman of the National Committee of the Chinese People's Political Consultative Conference, signed an economic agreement that would allow china to pay 2.1 billion shillings, or almost $31 million, to build a road. Of course, this is not to mention China's investment in Sudan, which exports around 60% of its oil to China and whose conflicted Darfur region continues to struggle with a deadly civil war.

"Our goal is to help Africa develop processing and manufacturing industries to create more jobs and revenues, thus facilitating local economic and social development and improving people's life," Jia told more than 400 officials and entrepreneurs attending the opening ceremony of the China-Kenya Economic and Commercial Cooperation Forum.

Such investment will help Africa if it earns a good return. But it was failed export credit borrowing that made up much of the crushing weight of African debt written off over the past decade by rich countries in what some call a debt-relief scheme.

Sources: Kenyan Broadcasting Corporation, Asia Times, Xinhua Online, BusinessWeek, Business Day,

Dangerous Business

This morning, at least 74 employees of China Petroleum and Chemical Corporation were killed by a rebel group. Before today, I did not know much about the Chinese investment in African oil.
China has spent billions of dollars up front to get preferential, long-term oil contracts with African countries. These deals typically ensure exploration and development rights as well as oil supply. They are made government to government, or national oil company to national oil company.
At the beginning of this month, African finance ministers met in Addis Ababa, the capital of Ethiopia, to assess the African economic situation. Africa's growth performance in 2006, as in previous years, was underpinned by improvement in macroeconomic management in many countries, and strong global demand for key African export commodities, especially crude oil.
In last week's blog, I noted that trade between Africa and China has grown 40% over the last year--and is still growing. The United States has also taken note.
In January of 2006, in his State of the Union address, President Bush said he wanted to reduce America's dependence on Middle East crude by 75 percent by 2025. Oil-rich areas in Africa would seem like a logical investment. In February, the US announced its intention of establishing more of a central command in Africa, called AFRICOM, to begin fully in October 2008. Troops already deployed in North Africa were involved in anti-terrorism efforts following September 11, 2001. Forbes reported, via the Associated Press, that "Officials also have said that Africa is strategically more important because of its oil production and increased efforts by China to gain influence on the continent." Hyperdynamics Corporation and Shell oil are two examples of American companies in Africa. In 1996, ExxonMobil discovered between 800 million and 1 billion barrels of oil in the Doba basin of southern Chad. The expansion highlighted the one of the major issues with Western development--while 98% of Chadians had no access to electricity, the twenty-five-mile-wide ExxonMobil facility lit up the night sky for miles around.

Armed militants in Nigeria kidnapped nine Chinese oil workers in January, and two more in March. Also in March in Nigeria, five Chinese telecommunications workers were abducted.
This morning in Ethiopia, the oil workers were attacked by members of the separatist group, the Ogaden National Liberation Front, or ONLF, reportedly because they felt that the company was exploiting the region's natural resources. In 1977, Somalia lost that particular region to Ethiopia. Thirty years later, the ONLF continues to wage a low-level war of independence on behalf of that region
Africa needs development. China and the US need resources. Now how do the superpowers help to empower these incredibly unstable parts of the continent without turning it into a cluster of indebted, and even more violent, countries?

Sources: BBC, Forbes, Business Week, InTheseTimes, Reuters, The Globe and Mail, The International Herald Tribune