Tuesday, 28 May 2013

History of Chinese development aid in Africa (1)

Zhou Enlai announces the 8 principles of Foreign Aid (1964)
Chinese involvement in Africa started with the visit made by former Premier Zhou Enlai in late 1963 in a number of countries, namely: Ghana, Mali and Somalia. In that occasion, he introduced the 8 principles constituting the framework of China intervention in the region:

A. The Chinese Government always bases itself on the principle of equality and mutual benefit in providing aid to other countries. It never regards such aid as a kind of unilateral alms but as something mutual.
B. In providing aid to other countries, the Chinese Government strictly respects the sovereignty of the recipient countries, and never attaches any conditions or asks for any privileges.
C. China provides economic aid in the form of interest-free or low-interest loans and extends the time limit for repayment when necessary so as to lighten the burden of the recipient countries as far as possible.
D. In providing aid to other countries, the purpose of the Chinese Government is not to make the recipient countries dependent on China but to help them embark step by step on the road of self-reliance and independent economic development.
E. The Chinese Government tries its best to help the recipient countries build projects which require less investment while yielding quicker results, so that the recipient governments may increase their income and accumulate capital.
F. The Chinese Government provides the best-quality equipment and material of its own manufacture at international market prices. If the equipment and material provided by the Chinese Government are not up to the agreed specifications and quality, the Chinese Government undertakes to replace them.
G. In providing any technical assistance, the Chinese Government will see to it that the personnel of the recipient country fully master such technique.
H. The experts dispatched by China to help in construction in the recipient countries will have the same standard of living as the experts of the recipient country. The Chinese experts are not allowed to make any special demands or enjoy any special amenities.(link

Despite being a developing country, China participated with massive projects, like the Tazara railway,  in the infrastructural modernization of the continent. Nowadays, the country is using with the beneficiary countries the same successful win-win model used by Japan 30 years earlier in China. According to this mechanism, the former invader was trading vital natural resources, like coal and oil, necessary for its boosting economy with the construction and development of infrastructure like ports and railways strongly needed by the Communist country. Between the end of the 1970s and the beginning of of the 1980s, Western countries started to follow the same system.In 1994, China, confident of its economic expansion, established the Export-Import Bank to provide resource-backed loans to pilot seven African countries.

Since the late 1990s, resource-backed loans became a common and successful instrument for the Country to reinforce its economic relations with African states.
The system ensures that natural resources wealth is spent on development investments as outlined in Deborah Brautigam's article on a Foreign Affairs article in 2010.

Chinese loans are successful for the following issues:
- Competitive interest rates
- Political factors
- lack of conditional measures usually imposed by Western partners
- Establishment of Special Economic Zones