Business, Finance & Economics

How is China expanding its economic empire in Africa?

This story is a part of

Human Needs

This story is a part of

Human Needs

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Iron ore is unloaded from the Star Fortune bulk carrier at Rizhao Port, one of China's biggest ports for importing the commodity, in Shandong province, in March 2010.

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REUTERS/Stringer

The tiny West African nation of Guinea just made history by signing a $20 billion mining deal to tap into one of the largest reserves of iron ore on the planet. Guinea is one of the world's poorest countries, so this could be huge news for that country.

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Another big winner in the deal, though, is China.

Guinea signed the deal with the British-Australian mining giant Rio Tinto, the International Finance Corp., which is the private sector arm of the World Bank, and the Chinese state-owned Aluminum Corp. of China.

"With massive infrastructure investment, this project is of critical importance for the people of Guinea,” said President of the Republic of Guinea Alpha Conde. "It's a nationwide priority that goes beyond the mines and far beyond our generations. With transparent and fair deals, our mining sector has the potential to be a game changer for Guinea."

The corporate partners involved said they were working on financing for a new railway and a deep-water port to serve the mines. The project would create 45,000 jobs, they said. And it could double the size of Guinea's struggling economy.

The deal has been years in the making, but it looks like another sign of China's expanding economic clout across the continent of Africa.

“The Chinese have [some] advantages going for them right now,” says Howard French, author of the new book, “China's Second Continent: How a Million Migrants Are Building a New Empire in Africa.”

French says China has proclaimed publicly that it will not get involved in the internal affairs of other countries. “One of the things that means,” French says, is that they believe “it's not our business if our money or payments are being squandered, or banked illicitly or whatever. That's simply not China's business.”

The US and other Western nations, by contrast, might have a history of engaging in corrupt practices of their own in Africa. But they also have to heed domestic laws against corrupt practices, and however imperfect those might be, they can still act like constraints for doing business deals.

Another one of China's advantages comes with its status as the world's most important manufacturing center, French says. “If we're talking primary products of cobalt, bauxite or iron, China is the premier market for those kinds of things. So, African companies — or Australia, or South American companies, for that matter — cannot avoid looking to China to do deals.”

“The final thing,” French says. “China has incredibly deep pockets at the moment. It can pay cash on the barrel, right up front, for whatever it wants.”

Chinese commercial interests are playing catch-up with their Western counterparts, and French says they are gaining ground quickly. The mining deal in Guinea is just the latest example.

“China knew that the rest of the world, namely the West, had been sort of sidelined by Guinea's political disorder of the last decade or two. So, realizing that Guinea was a place that had not been in play, the Chinese were very, very eager to conclude a big deal in Guinea.”

“Guinea is one of the world's most attractive places for mining,” French says.

It is not true in all cases, but French says he has noticed during his 35 years of experience working in Africa that American business leaders have often behaved as if they expected the rest of the world to come to them. “They have treated Africans as if the Africans have to deal with them on their terms,” French says.

“The Chinese know that they have to catch up, and they have this hill to climb against entrenched competitors,” he explains. Chinese businesspeople and diplomats in Africa, especially those from the younger generation, have been very good at developing the cultural sensitivities, including foreign languages, that can help them get ahead.

Official Washington has indicated a belated state of alarm in recent years, French says. “[Hillary] Clinton, as secretary of state, made a tour of Africa in which she went around essentially telling people they need to be wary of China, and to remember who 'your real friends are,' to paraphrase her.”

“This didn't go over terribly well,” French says. “Africans have felt for a long time that the United States and the West in general have been under-engaged in Africa, that there are huge economic opportunities in Africa that are not generally being recognized, that Americans and Westerners in general are not terribly much competing for their business or for their interests.”