The Political Stand-Off to End Poverty

Shayna Servillas

          The Chinese development model is an alternative to the Western liberal democratic approach to development with state-driven growth and authoritarian​ political tendencies. The values of the ‘Beijing Consensus’ — multilateralism, consensus, and peaceful co-existence — also serve as antithesis to the Washington Consensus of democracy, good governance, and poverty reduction. The main physical features of the model include a combination of foreign direct investment, ‘no-strings attached’ financial assistance, and higher trade volumes guided by foreign policy strategy. Each of these features feeds into the others. For example, financial assistance is often tied into larger investment programs, while preferential terms of trade are given as incentives for choosing Chinese firms as development contractors. A defining feature of the Chinese Development Model in terms of implications for future African success is its funding of transportation infrastructure, a necessity in order for growing markets to capitalize into blossoming economies. Competitive terms such as a lack of political and economic policy conditions, as well as little to no interest loans strike urgency on the part of Western development agencies, undercutting the strength of their demands. Overall, the Chinese Development Model has the potential to be quite beneficial for African Development, and criticisms of the model are well-founded yet not strong enough to discredit the strength of its impact.
            China certainly takes part in these development strategies in pursuit of its own interests. Practically, Africa is a worthwhile investment — returns on Federal Direct Investment in Africa ranged from 29% to 40% in 2005.[1] Additionally, the state needs reliable low-cost access to raw materials in order to fund its burgeoning manufacturing sectors. It also hopes to shelve its more labour-intensive, less competitive ‘mature’ industries, such as textiles, onto Africa in order to devote its population to higher value-added activity. The relationship is, in part, due to necessity. Harsh terms given by the West on account of China’s murky human rights record has encouraged a ‘pivot’ to Africa as an alternative for trade. Fortunately for China, this change fits into longstanding political ideologies — having been the unofficial ‘leader of the Third World’ during the Cold War, its language of ‘South-South cooperation’ neatly situate practically advantaged investments into an admirable narrative. Overall, Africa serves as a convenient and volatile ‘high-risk’ ‘high-return’ investment. China faces few competitors and can secure better rewards, but faces more political and economic risk from constant change.
            Notably, Western development literature has criticized China for its ‘non-interference’ approach to aid giving, as its wanton funding of undemocratic, irresponsible, or unsustainable regimes undercuts the incentive structure built by the IMF and WTO to encourage ‘good governance’ behaviour. Unfortunately for China, the fact that some of the ‘worst’ regimes also tend to be some of the most resource-rich make many skeptical of its pure ideological stance which prioritizes development assistance over all ‘less pressing’ concerns. While some believe both the West and China assume ideologies in order to justify grounded economic and political interests, it is worth evaluating the merit to these accusations. From a microeconomic perspective, the destabilization of ‘good governance’ policy is a natural outcome of a more competitive market. The entrance of China into the market has strengthened the position of the ‘consumer’ (Africa), and so naturally suppliers of aid will race to the bottom to secure contracts. Before, the IMF had essentially held a cartel which was extorting higher profits in the form of ‘good governance policies’. China was therefore a rational player, having every incentive to cheat. Unfortunately, as this is a situation of moral goodness with political and social outcomes, rather than just economic ones, the implications of such cheating are harder felt. Further concerns from no-strings attached aid include concern about trapping Africa in vicious indebtedness cycles, as well as a lack of transparency from situating aid within larger investments.
             However, the position of the West to criticize China’s model falls flat when revent poverty eradication policies have proven only marginally more successful than past structural adjustment.[2] Concerns have been rising about the effectiveness of Western aid programs: delivery is fragmented and comes through a confusing array of modalities, it places too much pressure on recipient states and increases transaction costs.[3] Meanwhile, Chinese aid is delivered through projects rather than long-term endowments, making it less prone to corruption and favorable to quick, tangible results. This model and its efficiency are clearly informed by Chinese enterprise and business-minded incentives, rather than government agencies with stronger moral imperatives. Chinese investors such as Huang remark that “Chinese aid centres on the real needs of the recipient countries, free from the shackles of unpractical ideas.” Liu Guijin outlines the normative justification of its decisions, as “we think that providing assistance is just for the benefit of the people, it is not for political purposes, not for showing off to the outside world.”[4] To say that this stance is morally superior to the West would also be a shallow evaluation. Guijin’s ideological stance just so happens to align with China’s material interests. With that being said, backlash from aid to Sudan has pushed China to weaken its non-interference stance.[5] However, one could also argue that the stance of the West is immoral itself. If one has the means to aid in development, restricting the standards of living of everyday people indefinitely is perhaps as morally questionable as the decision to lend aid to poor governance regimes. The loss of living standards and opportunity is felt every day that children are unable to go to school and adults are unable to find work. If China continues to become more cognizant about their investment choices, they could aggregate with the West towards a middle ground between staunch political demands and pragmatism.
            In outcomes for the African people, the benefits of the Chinese Development Model outweigh the drawbacks. Trade, for example, both assists and disturbs African economies. African countries benefit from the cheap access to imported capital goods, which stimulate infrastructure for the economy, while local producers struggle to compete with cheaper, quality Chinese imports.[6] However, Pooja Khosla notices that artificially maneuvered trade patterns distort the intra-trade flows between African states, disrupting development. On average, an African country traded less with another African country if one of them had trade relations with China in that particular year. Trade relations with China also caused imports from (exports to) other African countries to be lower by approximately 85 percent (13 percent).[7] However, these negative trends have proven to become less negative over time. Therefore, contingent on this trend continuing, the negative trade impact ought to be overcome by the positive impact of stronger transportation infrastructure to stimulate intra-continental trade. Additional benefits include considerable economic expansion within Africa, including networks of trade, aid, and investment in up to 50 countries.[8] The impact on growth is apparent. Africa’s highest ever growth of 5.8% in 2007 is likely attributable to Chinese involvement.[9] As a more direct measurement, direct investment and aid in Angola pulled its growth rate up to 22.3% in 2007, at that time the fastest growing economy in the world.[10] This impact has manifested in social benefits, such as cancelled debt, presence of doctors, and treatment of infectious diseases such as malaria and HIV/AIDS.[11] Concerns however, have been presented about the possibility of crowding out African labour in favour of Chinese migrants and about adherence to labour and environmental standards. However, investigation into labour usage in Chinese Special Economic Zones (SEZs) have demonstrated a tendency for Chinese initiatives to use local labour for at least half of their workforce in every case.[12] As fas an environmental and labour standards, only one case has ever been cause for concern with, the zone developer CNMC in Zambia was criticized for low wages and poor labour standards. However, by 2020, wages and benefits had both increased to reasonable levels.[13] Therefore, concerns both about labour usage and salary concerns have found little actual grounding in reality. Meanwhile, concerns about trade are well-founded, but this trend appears to be decreasing over time. In general, the benefits of chinese investment are quite apparent, with impressive economic growth, provision of social benefits, and the ability to provide infrastructure to kickstart intra-continental economic activity.
          In conclusion, the real benefits of infrastructure, growth, and efficient provision outweigh both concerns about trade flow distortion and the undercutting of global governance techniques. Western agencies are going to need to increase the effectiveness and decrease the demands of their respective aid packages. Hopefully, Chinese companies will become more agreeable and continue to become morally inclined so that both regimes may be able to successfully invest in African development.
 

Notes
[1] Adisu, K., Sharkey, T. and Okoroafo, S. (2010). “The Impact of Chinese Investment in Africa,”
[2] Tan-Mullins, M., Mohan, G. and Power, M. (2010). “Redefining ‘Aid’ in the China–Africa Context,” Development and Change 41(5), 857–881.
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Khosla, Pooja. “Intra-Regional Trade in Africa and the Impact of Chinese Intervention: A Gravity Model Approach.” Journal of Economic Development, vol. 40, no. 4, 2015, pp. 41-61.
[7] Ibid.
[8] Adisu, K., Sharkey, T. and Okoroafo, S. (2010). “The Impact of Chinese Investment in Africa,”
[9] Adisu, K., Sharkey, T. and Okoroafo, S. (2010). “The Impact of Chinese Investment in Africa,”
[10] Tan-Mullins, M., Mohan, G. and Power, M. (2010). “Redefining ‘Aid’ in the China–Africa Context,” Development and Change 41(5), 857–881.
[11] Adisu, K., Sharkey, T. and Okoroafo, S. (2010). “The Impact of Chinese Investment in Africa,”
[12] Tan-Mullins, M., Mohan, G. and Power, M. (2010). “Redefining ‘Aid’ in the China–Africa Context,” Development and Change 41(5), 857–881.
[13] Ibid.

Bibliography
1. Adisu, K., Sharkey, T. and Okoroafo, S. (2010). “The Impact of Chinese Investment in Africa,”
2. Bräutigam, Deborah and Tang Xiaoyang. “African Shenzhen: China’s special economic zones in Africa.” Journal of Modern African Studies, vol. 49, no. 1, 2011, pp. 27-54.
3. Khosla, Pooja. “Intra-Regional Trade in Africa and the Impact of Chinese Intervention: A Gravity Model Approach.” Journal of Economic Development, vol. 40, no. 4, 2015, pp. 41-61.
4. Tan-Mullins, M., Mohan, G. and Power, M. (2010). “Redefining ‘Aid’ in the China–Africa Context,” Development and Change 41(5), 857–881.
5. The Economist. “A thousand golden stars: China goes to Africa,” July 20 2017. https://www.economist.com/news/middle-east-and-africa/21725288-big-ways-and-smallchina-making-its-presence-felt-across