[Transcript]

Elle: Good morning everyone. My name is Elle Wang. I am the founder of The Africa Daily. I am very honored to be joined by Ambassador David Shinn this morning. Ambassador Shinn served ambassadorships to Ethiopia and Burkina Faso under Clinton Administration. He is currently an adjunct professor of international affairs at the George Washington University. Ambassador Shinn, I definitely want to congratulate you on your recent book [China-Africa: A Century of Engagement]. It has received such great reviews and it also enriched the scholarly research on China-Africa relations in general. And I dont think a lot of scholarly pieces have actually such a thorough run down of the historical aspects. Ambassador Shinn: You are right, they havent. We purposely did the book that way because no one else has done it. For those people who have any appreciation for history at all, sometimes I wonder these days if many of them do. I think one real addition to the literature it offers is that every chapter has a significant historical backdrop. It does help put things in perspective in terms of what the relationship was. We went back to even the 1950s, which is important to know how things developed over time. Its a very different situation today, as we all understand that. But if you go back to the 1960s, it was a very different world. The Africa Daily: What prompted you and your coauthor to write such a book in the first place? Amb. Shinn: The idea for writing the actual book is really Josh Eisenmans idea. He is a China scholar, and I am a scholar on African affairs. He approached me in 2006, or maybe even 2005. He was looking for someone to testify before the US-China Commission on China-Africa issues because they have never done a session on that. I explained at the time that I knew Africa very well, I knew a little about China in Africa, but I havent really researched it. But I agreed to testify before this Commission. And one thing let another, eventually Josh arranged managed to get a Smith Richardson grant for doing research in China and in Africa, and as a commitment to that grant, the idea was to write a book. So in fact it was his suggestion that we, 1) get the Smith Richardson grant, and then 2) write the book, which is how it came about. So it was almost an accident, from my side anyway. Josh may have had a grander idea in mind when he suggested we collaborated on this. I wasnt sure I fully understood what I was getting into. I thought we would do a 100-page book or something. It turned out to be a 7-year project, and of course the book is almost 500 pages long. So it became quite an enterprise by the time we were done, we put in enormous amount of work and a lot of travel in Africa and a number of visits to China. The book is the result. The Africa Daily: I see. Any moment of epiphany during the research or the writing of the book? Ambassador Shinn: I think the word epiphany is probably a little strong. Im not sure if there was ever an epiphany. But there were a couple of aha moments were. In the research, we, at least I came to the conclusion that this is the explanation, or this is whats happening and I have not understood this before. There are two in particular. The first was what we often now refer to as the Angola model of chinas involvement in Africa. And its called the Angola Model because Angola is the first country where it was practice. If you think back,

there were enormous multi-billion dollar Chinese loans to Angola. Going back to the beginning of this century, this is where the really huge multi-billion dollar loans began. And the total amount for Angola is upwards 14 billion dollars in Chinese loans. But the model that was created for using this fourteen plus billion dollars since the beginning of this century, was to offer the loans to the Angolan government, at fairly attractive rates, certainly concessionary rates, better than you would get from a commercial bank, but not as good as you would get from the IDA, window of the World Bank, somewhere between, but quite attractive given everything considered. Many arrangements was although the government of Angola could use these loans for whatever purpose they desired in almost every case, they wanted to use them for improving the infrastructure in Angola. And China said, thats great, but we want to tie the infrastructural projects to Chinese companies, usually state-owned companies, the large construction companies in China. And in addition to that, since this is a loan with a fairly modest interest rate attached, we need to identify a way that you will pay the loan off. Well, Angola has a lot of oil, and the arrangement was that as they ship oil at market rates to China that pays down the principle in the interest on the loan. So what you have going on here, is a series of multi-billion dollar loans to Angola, with Angola paying them off by shipping oil to China. But in addition, the loans are being implemented in a fact by large Chinese construction companies that bid infrastructure projects that Angola wants, so they desperately seeking for the infrastructure, and no other country ever has stepped in to offer anything similar to this proposal. The Angolan government at one point contacted western countries, asking for large loans from them to do something similar, and basically they were not accommodated by the western companies. So China is filing a void. But the point is that, in the sense, there are two wins for this for China. One they get oil that they desperately need at market rates on a sustained basis from Angola. And at the same time, the Angolan government is using most of the money to pay for these infrastructure projects by bringing in Chinese companies to do it. Furthermore, there is usually an element of Chinese labor involved in the projects. The percentage varies enormously from country to country. So Angola gets the same infrastructure projects, but China gets its oil, and also gets the business for its construction companies, plus sometimes, an added component of employment of Chinese labor. Its kind of the win-win-win proposition as I see of two wins for China and one for Angola. But the Angolan government is quite happy with the arrangement. They are not complaining. And the same model has now been exported to other resource- rich African countries, using either oil or minerals to pay down the large Chinese loans. For example, the Democratic Republic of the Congo, its minerals are coming to play not oil. So, to me, that is sort of a-ha moment. This is how it works, and it works very well for China, but it also works for the African countries that have a lot of resources that they can in a fact sell to China to pay off the loans. So that was one aha moment. The other one was simply trying to dissect the different Chinese communities in Africa. Cause there are so much confusion in our mind that who are those Chinese people who are in Africa. And by doing research in seven different countries in Africa, and interacting with many elements of the Chinese communities there, since Josh Eisenman speaks fluent Mandarin, it was possible for us to speak directly with them. So whenever we would go to a country, we always go to the local Chinese restaurants and 2

chat them up. We meet with the Chinese companies and businessmen, and we always go to the Chinese Embassy. And Josh would even go out and locate Chinese labors who were digging ditches, or driving equipments, and chat them up. They were basically willing to talk with him in Mandarin. Sometimes we spent evenings with them at wherever they were living. The point is after all of these interaction with different Chinese communities in Africa, we concluded that they were three different kinds of Chinese communities there, three basic categories. In a sense you could start to argue there were four, because there is also a historical community, a very old community. They predate the PRC that began before 1949. These were the people who were affiliated with imperial China or they were from either imperial China or from the Republican China after 1911. So that historical group that has long lived in Africa, and some of them have taken long local nationalities, although they still maintain their cultural ties and still consider themselves as Chinese. But thats the category that Im not referring to. Im referring to sort of three modern groups. The first group is what I called the professional community. That group of Chinese who come to Africa for set periods of time, anything from Embassy employees to the people who are senior managers of state-owned companies, some of the private Chinese companies, the people running aid projects, construction projects, they are all professionals in their own right in one finish or another. And some of them bring families with them, some dont. They tend to interactive with international community, pretty freely they often live where the rest of the international community lives, and they always speak some language spoken in Africa, whether its English or French or Portuguese or Arabic. They are able to communicate with Africans at least educated Africans in one fashion or another. Thats the first community of Chinese in Africa. The second community is, a lot of confusion about this, is the labor group that is the contract labors, who were brought in mainly to help implement these large infrastructure projects they are run by Chinese companies. And they come for maybe a set contract over a year, maybe a year renewed for another year, maybe they come for two years. Theyre minimally educated. They sometimes have semi- skills, a developed skill or a skill having equipment. They come without their families. They almost never speak the language other than Mandarin. So they are not able to interact with the Africans, except those very very few Africans who speak Mandarin. They come to do a job and they accept the contract because they pay probably 50% more than they would be paid if they were doing similar amount of works in China. They leave their families behind. Many of them are not particularly happy to be in Africa. They are there because theyre making more money. And they have minimum interaction with Africans. They live in their own quarters. They live separately and they ate Chinese foods. Theyre pretty much isolated from the African communities, except from their working side by side with Africans. I would say 98% of them go home after they finish their contracts, and theyre very happy to go home. They have no interest in remaining in Africa. Occasionally, some will stay behind. Theres almost no marriage, no personal contact with the Africans. Thats the second category of Chinese community. The third one, in many respects, the most interesting and in a sense maybe potentially the most important, and these are the small traders and small business people and entrepreneurs who are migrating to Africa on their own. So theyre literally nothing to do with the government. The

government often does not even know who they are, or how many they are. And sometimes the government gets frustrated with them, because they end up getting into trouble somewhere, and they dont know that theyre there. Its a problem for the government. But these numbers are growing rapidly, and these are Chinese not necessary coming directly from China. They might be coming from somewhere else from Southeast Asia. Maybe they started out in like Latin America and decide they couldnt make money there, and they move to Africa. Sometimes they move around Africa. They go to one country, the security turned out to be not so good, so they go to another African country. Theyre constantly on the move. Theyre often with families. They usually learned just enough language of the country that they can get buy so they can carry on their business. No one knows how many of them there are. I mean there is just a guess to their numbers. They often are criticized because theyre seen as competing with the African counterparts in the market place. They work very hard, very long hours. They are importing Chinese products that are being sold often, at less cost than equivalent African-made products. So sometimes they cutting African businesses, and that makes their African competitors very unhappy. On the other hand, the African consumer may not be unhappy, because the African consumer may say: hey Im getting a product which is as good as the African product but paying a little less. Im not unhappy with these people. But there are cross-cutting pressures on them, and this is the community that is getting the most criticisms of Africans today. For some of their practices, and some of their competition with the Africans, because not only are they sometimes outcompete their African counterparts, but because theyre bringing in so many Chinese products that under-selling African batteries, or radios or whatever. They are making the African industrial owners unhappy, because they are finding a hard time compete with them. So these are the three communities in Africa, and this was another aha moment. This confusion about the Chinese in Africa, who are these people, and our conclusion was these are the three groups basically. Its a bit of oversimplification, but generally speaking, Im happy with that sort of arrangement of the Chinese community. The Africa Daily: These are sort of very very important points because the Angola model and Angola was the first African country to say no to the World Bank, conditionality loans and started to turn to China and basically open the door for what has happened for the past ten years. Ambassador Shinn: Its worked out very well for China and for Angola. There is no doubt about it. And its true that the west and the World Bank, IMF, they didnt abandon Angola. But they made it difficult for Angola. And as a result, Angola turned to China. But my point is China arguably gets more out of that relation than Angola. Elle: As you said, a lot of the critiques come from the large inflow of Chinese population coming to Africa regardless of their intentions, whether to migrate there or to just work on short-term projects. David: Yes, and the point I was making is that the labor, almost all of them, are there for short-term construction projects. I mean, how can they stay, they do not speak any of the language. Its almost a no-brainer that you come, you do your job, and you leave. The small traders, thats their business to stay there and stay there for a long time to make a profit. Thats why you have Chinatowns developing in quite a bit of African cities just like you have Chinatowns in the United States and around the world.

Elle: And also its a two-way street because there is also a growing number of African traders going to China and import back goods, and it increased the competition for the trading for small commodities. David: Right. Elle: Given all the comments and critiques, in your opinion, what is the biggest misconception of China- Africa relations. David: I go back to this Angola model question. And I dont blame China for this because I dont think the China or the Chinese government is trying to give the idea that what they are doing is different than what they in fact are doing. The problem is with the Western and the African press. They are often kinda sloppy in how they write about and describe the multi-billion-dollar Chinese loans to these resource-rich countries which end up providing money for all these large infrastructure projects. And often in the media, you see them described as aid projects and you see them described as investments, implying foreign direct investment. In fact, they are neither of these. They are in effect business deals, for China is getting something out of it, the companies getting something out of it, and the host governments like Angola or the Democratic Republic of Congo are getting something out of it because they are getting a loan. To suggest this as aid project is just not correct. If the concessionary part of the loan is low enough that it beats the equivalency of IDA interest rate, which is rarely the case or if it meets OECD definition of a loan, then you can say at least the concessionary part of the loan is equivalent to an amount of aid. But they are really not aid projects because they are being paid off. And the Chinese companies are the ones implementing the infrastructure project, and therefore its a business deal. So likewise, this is not an investment. And investment is when you go in and you put capital into Africa to build something up, thats not what it does. When I see the press accounts that so often refer to them as investments or aid projects, I get a bit cranky coz its a misunderstanding of what they are. As I said, I dont fault the Chinese governments for this because they are not the ones using this terminology. Its just the journalists are not digging deep enough. They describe these projects and they get a lot of attention because its so large. Elle: Talking about Chinas economic involvement in Africa, they just published the White paper on China-Africa trade 2013. What is your take on this white paper? David: I read the document very carefully. It is a very helpful document. I like to see China do more and more these white papers. This one came out in August this year. It actually covers more than trade. It covers investment, trade, infrastructure project we just talked about, and it also covers soft power issues. Its a fairly comprehensive document, a lot of facts and figures, some of them are very useful for scholars like myself because China has not always been terribly transparent in the amount of information they release particularly on things like aid. They are quite good with trade figures. When it comes to investment and aid, there is just less solid information out there. Indeed even in this white paper, all they have increased the figure they are using for Chinese foreign direct investment in Africa, they have accumulative figures more than 21 billion dollars that is notably higher than they last released. I would still argue they are significant underestimates for Chinas FDI to Africa. Its not in Chinas interest necessarily to understate the amount. The problem is that they simply dont know how much foreign

direct investment there is in Africa. As I look at it, sort of studying African reports, I think theres more FDI than what China is acknowledging. And part of the problem is that by the admission of China, they only use figures that are officially reported to them by Chinese companies, particularly state-owned companies. They expect complete information. When it comes to Chinese private companies, if they dont report, the numbers dont counted. Or if they are investing through Cayman Island, British Virgin Islands, or Hong Kong, so the figures may not get picked up. And I think theres a lot going on as a result. So I argue the number is higher than 21 billion dollars. So theres some issue in the white paper. But its a really helpful document. Like any government document, from any country including the United States, they put best gloss on the relationship. They put Africa in most complementary context vis--vis China. Any government would do that. I dont disparage the effort. For example, one thing that is not discussed in any detail at all in the paper is the enormous trade deficits with some of the poorest countries. We talked about Angola a moment ago that has trade surplus because it sells so much oil. But if you look at countries like Ethiopia or Kenya that dont sell that much to China because they simply dont have what China wants. They have enormous trade deficits with China. You take other countries like Benin or Togo, very poor countries, proportionally they have even greater trade deficits with China. This is non sustainable over the long term. Its important for China to diminish the huge deficits that these poor countries have with China. Thats the sort of thing is not discussed in the paper because its not a positive thing. Everything thats in here tends to be positive. There are some issues in the paper, for example collaboration with Africa on climate change. I dont know if China really has that much in common with Africa in climate change, I think theres a lot of rhetoric here. I dont see the policies of China and of Africa are all that similar in climate change. So put that in a positive term is kinda hard to do in my mind. And there isnt an awful lot has been said about it. But the paper is a good one, its a useful paper, Id like to see China to do more of these white papers. But its also important to realize that its going to try to put everything in the best positive light for the China-Africa relationship. And this paper does that. Elle: And also the US had the AGOA conference this year, and just based on your prediction, after the US officials read this paper and also their own development agenda or strategy in Africa, what might be US response towards Chinas involvement in Africa moving forward, and what is some of the things you hope to see in this bilateral partnership? David: United States has worked hard trying to increase imports from Africa. That was the whole purpose of AGOA, and they did increase some. But I will be very honest with you that AGOA has in some respects been a disappointment. The amount of US buys from Africa still limited simply because Africa is not offering what the US wants. Or in some cases, the African countries are not pursuing hard enough the opportunities that AGOA offers. Some of the problems are on the African side. Its true that United States has a huge trade deficit with Africa. United States doesnt sell that much to Africa either. So there is not a trade problem for Africa with the US because they sell far more to the US than the US sells to Africa most because of oilUS still buys so much oil from Africa that creates this trade deficit. In all fairness, I should point out that, in the last couple of years, China has had a trade deficit with the 54 countries of Africa collectively. In earlier years, sometimes China would have surplus, sometimes China had deficits, and in last several years China actually had a lot of trade deficit with Africa. The US

consistently has a trade deficit with Africa. But nevertheless, I would still like to increase the amount of products other than oil that go from Africa to the United States. It has been a little bit disappointing. It just hasnt worked out as well as one expects. What the United States is trying to do is, 1) extending AGOA beyond its current lifetime, 2) also to open up a little more to make it even easier for Africans to export to the United States, 3) and more importantly, what the United States is trying to do is to get American companies to invest in Africa. That was one of the major reasons for President Obama to make the trip to Africa, he made huge efforts to bring American private companies into the visit and help explain to them the benefits of investing in Africa. Its one of the huge differences between the China model and the US model. Because China has so many state-owned companies, the collaboration between Chinese government institutions, lending institutions particularly the China-Africa development bank, the export-import bank, there is much closer collaboration and the ability to encourage Chinese companies, or almost tell them to invest in Africa than there is in the United States. In the United States, the companies are totally private. If they dont want to invest in Africa, they are not going to invest and they dont care what the American government says. All the American government can do is to encourage them, to ask them, to offer incentives. We have an export-import bank also, using the Export-Import Bank to try to encourage American companies to invest in Africa. I think the Obama Administration is serious about this. You will see an increase in American investment in Africa, but its much harder for the US to do this than for China to do this. Thats going to be a major push in the coming years on the US side. Elle: Thank you so much for this meaningful conversation this morning. The China-Africa relation is so dynamic it changes almost every year, even subtly. There are a lot of issues, opportunities and challenges that we will see in the coming years. David: There are. I think from the China-Africa side, you are probably already seeing this that the Africans operate from something of a disadvantage, whether they are interacting with the United States, the European Union, and China, particularly with China and the US. Because they are 54 countries, in the case of China, there are 50 countries of the 54 recognizing China while 4 countries recognize Taiwan. Of those 50 countries that recognize Beijing, its very hard for them to come forward with a unified position. China speaks with one voice and the US speaks with one voice. Its much easier for the US and China to interact with Africa collectively. Whenever the Africans speak, they speak, in the case of the US, 54 voices, and in the case of China, 50 voices. As a result, theres a lot of distance, and theres a lot of differences of points of view. The Africans got to come together more effectively in order to present a more common position. And they understand that and they appreciate that this is a problem for them. Because little countries like Benin, what kind of leverage does it have vis--vis with China or the US, almost none. But Benin can interact with all 54 countries in Africa in common position, and suggest standards for work requirement laws, or standards for worker safety, or standards for trade regulations. Then they can have far more impact in their interaction with the big countries like China and the United States. That I think you are going to see more of in the coming years. You already begin to hear some desire and see some effort by the Africans to do that. Observer: Like an African EU.

David: Of course that is what they are trying to create. The whole idea of African Union was to pattern itself after the European Union. Its far far from having reached that stage. Even the European Union doesnt always have one voice, but its much stronger than the African Union. Observer: At least on economic issues, they are quite successful. David: Thats true. Thats the goal of African Union, but theres a long way to go. And there are more countries in Africa than there are on the European Union. Observer: And probably more cultural differences. David: Probably. Probably. There are a lot of cultural differences and probably greater in Africa, and certainly more languages.