Why does this page look this way?
It appears that you are using either an older, classic Web browser or a hand-held device that allows you to view our content but may not work with every feature of our site. If you are using an older browser, please upgrade for the best experience.
Home |
Site Index |
FAQs |
Contact |
RSS
|
Podcast
home > by publication type > backgrounder > China, Africa, and Oil
Email
Academic Module: More Than Humanitarianism: A Strategic U.S. Approach Toward Africa, Academic Module: The River Runs Black: The Environmental Challenge to China’s Future, Academic Module: U.S.-China Relations: An Affirmative Agenda, A Responsible Course, Academic Module: Toward an Angola Strategy: Prioritizing U.S.-Angola Relations
| Author: | Esther Pan |
|---|
Updated: January 26, 2007
As global demand for energy continues to rise, major players like the United States, European Union (EU), and Japan are facing a new competitor in the race to secure long-term energy supplies: China. With its 2006 GDP growth hitting 10.7 percent, China is intent on getting the resources needed to sustain its soaring economy, and is taking its quest to lock down sources of oil and other necessary raw materials across the globe. With the Middle East mired in long-term instability, China has turned toward another major oil producing region whose risks and challenges have caused it to be overlooked by much of the rest of the world: Africa.
China's voracious demand for energy to feed its booming economy has led it to seek oil supplies from African countries including Sudan, Chad, Nigeria, Angola, Algeria, Gabon, Equatorial Guinea, and the Republic of Congo. The U.S. Energy Information Administration says China accounted for 40 percent of total growth in global demand for oil in the last four years; in 2003, it surpassed Japan as the world's second-largest oil consumer, after the United States. In the first ten months of 2005, Chinese official sources say, Chinese companies invested a total of $175 million in African countries, primarily on oil exploration projects and infrastructure. On January 9, state-owned Chinese energy company CNOOC Ltd. announced it would buy a 45 percent stake in an offshore oil field in Nigeria for $2.27 billion. China already has a significant presence in many African countries, notably Sudan: China takes 64 percent of Sudan's oil exports. "China is very deeply engaged in exploiting Africa's oil resources," says Elizabeth Economy, C.V. Starr Senior Fellow and Director for Asia Studies at the Council on Foreign Relations.
They include:
China's booming economy, which has averaged 9 percent growth per year for the last two decades, requires massive levels of natural resources to sustain its growth. Once the largest oil exporter in Asia, China became a net importer of oil in 1993. By 2045, China is projected to depend on imported oil for 45 percent of its energy needs. The country needs to lock in supplies from relatively low-cost African or Middle Eastern sources, experts say. But after the terrorist attacks of September 11, 2001, and the subsequent upheaval throughout the Middle East, China is actively trying to diversify its supply lines away from Middle Eastern crude. Experts say China has adopted an aid-for-oil strategy that has resulted in increasing supplies of oil from African countries.
Experts say China has adopted an aid-for-oil strategy that has resulted in increasing supplies of oil from African countries.
The need to find resources is now the driving component in Chinese foreign policy, David Zweig and Bi Jianhai write in an article, "China's Global Hunt for Energy," in the September/October 2005 issue of Foreign Affairs. China's manufacturing sector has created enormous demand for aluminum, copper, nickel, iron ore, and oil. Zweig and Bi write that China "has been able to adapt its foreign policy to its domestic development strategy" to an unprecedented level by encouraging state-controlled companies to seek out exploration and supply contracts with countries that produce oil, gas, and other resources. At the same time, Beijing aggressively courts the governments of those countries with diplomacy, trade deals, debt forgiveness, and aid packages. The strategy is working: China has gained access to key resources around the world, from gold in Bolivia and coal in the Philippines to copper in Chile and natural gas in Australia. And, of course, oil from Africa. "The interesting thing to me is that China's foreign policy has gotten sophisticated enough to accomplish these goals," says David Kang, a visiting professor of East Asia Studies at Stanford University.
Trade and economic activity. Sino-African trade grew by 700 percent during the 1990s, and the 2000 China-Africa Forum in Beijing set off a new era of trade cooperation and investment that is producing notable results. From 2002 to 2003, trade between China and Africa doubled to $18.5 billion, and then nearly doubled again in the first ten months of 2005, jumping 39 percent to $32.17 billion. Most of the growth was due to increased Chinese imports of oil from Sudan and other African nations. China's foreign direct investment in Africa represented $900 million of the continent's $15 billion total in 2004. China is now the continent's third most-important trading partner, behind the United States and France, and ahead of Britain.
Experts say Chinese companies see Africa as both an excellent market for their low-cost consumer goods, and a burgeoning economic opportunity as more countries privatize their industries and open their economies to foreign investment. Some textile manufacturers, for example, are reportedly investing in African factories as a way to get around U.S. and European quotas on Chinese textiles. "China is very pragmatic about this," Kang says. "It's cutting deals with governments all over the world."
With integrated packages of aid that lead to business opportunities and market share for Chinese companies. "One of the interesting things about doing business with China these days is that it's a full-on supplier," Economy says. "They will come in and provide everything that surrounds the development of the country." In Angola, which currently exports 25 percent of its oil production to China, Beijing has secured a major stake in future oil production with a $2 billion package of loans and aid that includes funds for Chinese companies to build railroads, schools, roads, hospitals, bridges, and offices; lay a fiber-optic network; and train Angolan telecommunications workers. Economy says China is following a very traditional path established by Europe, Japan, and the United States: offering poor countries comprehensive and exploitative trade deals combined with aid. For example, Japan after World War II paid $5 billion in war reparations to South Korea, Taiwan, and China in the form of export credits for Japanese goods and loans to be used for Japanese construction and other services, Kang says.
Selling arms to African countries helps China cement relationships with African leaders and helps offset the costs of buying oil from them. China doesn't have the same human rights concerns as the United States and European countries, experts say, so it will sell military hardware and weapons to nearly anyone. Indeed, Beijing sees Africa as a growth market for its military hardware. China's active exploration of oil sources in Africa also leads to a need to ensure security around them, experts say, which has led Beijing to send Chinese military trainers to help their African counterparts. In return, China gains important African allies in the United Nations—including Sudan, Zimbabwe, and Nigeria—for its political goals, including preventing Taiwanese independence and diverting attention from its own human rights record. A report, "China's Arms Sales: Motivations and Implications" by Daniel Byman and Roger Cliff for the RAND Corporation, says China's government exerts strong central control over its arms exports and uses them as a foreign policy tool.
Between 1955 and 1977, Le Monde reports, China sold $142 million worth of military equipment to Africa, and the pace of sales has picked up significantly since then. The Congressional Research Service reports China's arms sales to Africa made up 10 percent of all conventional arms transfers to the continent between 1996 and 2003. They include:
It is officially termed "non-interference in domestic affairs." Chinese leaders say human rights are relative, and each country should be allowed their own definition of them and timetable for reaching them. "Let's not forget, this is an authoritarian state itself," Kang says. Economy says the Chinese perspective is that, unlike the United States, they don't mix business with politics. In fact, China has argued that attempts by foreign nations to discuss democracy and human rights violate the rights of a sovereign country. Some experts say China's approach is not significantly different from how any other country pursues its interests. "The United States is highly selective about who we're moral about," Kang says. "We support Pakistan, Egypt, Saudi Arabia—huge human-rights violators—because we have other strategic interests. China's not unique in cutting deals with bad governments and providing them arms."
"China's not unique in cutting deals with bad governments and providing them arms," Kang says.
Economy says many Africans are concerned over how China operates in Africa, accusing Chinese companies of underbidding local firms and not hiring Africans. International observers say the way China does business—particularly its willingness to pay bribes and attach no conditions to aid money—undermines local efforts to increase transparency and good governance and international efforts at macroeconomic reform by institutions like the World Bank and the International Monetary Fund.
On the other hand, Africa registered 5.2 percent economic growth in 2005, its highest level ever, in part because of Chinese investment. African nations are enthusiastic that Chinese demand has pushed up oil prices, says Princeton Lyman, adjunct senior fellow for Africa studies at the Council on Foreign Relations. The roads, bridges, and dams built by Chinese firms are low cost, good quality, and completed in a fraction of the time such projects usually take in Africa, experts say. The UN-supervised China-Africa Business Council, based in China, encourages much-needed trade and development with the continent. In 2004, China contributed 1,500 peacekeepers to UN missions across Africa, including Liberia. It has undertaken or contributed to construction projects in Ethiopia, Tanzania, Zambia, in addition to the countries named above. It has cancelled $10 billion in bilateral debt from African countries, sends doctors to treat Africans across the continent, and hosts thousands of African workers and students in Chinese universities and training centers. Critics say these projects are meant to build goodwill for later investment opportunities or stockpile international support for contentious political issues. Lyman says China's interest in Africa has both positive and negative effects. "It's good for the continent because it brings in a new actor who's willing to invest, but it's bad for Africa if it turns countries away from the hard work of political and economic reform," he says.
Overall, experts say, China's involvement could likely jump-start change on the continent. "This is Africa's internal problem," Kang says. "How do you build infrastructure without outside investment? And how do you have a stable government with no resources?" The roads and schools built by Chinese companies didn't exist before, so their presence is an improvement. And the infrastructure improvements help African countries secure other loans and investment opportunities, contributing to an atmosphere of development that may one day change the continent -- a welcome, even if unintended, result of China's quest to secure global energy resources.
Weigh in on this issue by emailing CFR.org.
In The Fall and Rise of the Islamic State, Noah Feldman tells the story behind the increasingly popular call for the establishment of the sharia—the law of the traditional Islamic state—in the modern Muslim world.
In Regional Monetary Integration, Peter B. Kenen poses an important question: Should various country groups follow the lead of the European Monetary Union and form similar full-fledged monetary unions?
Walter Russell Mead recounts the story of the centuries-long rivalry between the English- speaking peoples and their enemies in God and Gold.
Complete list of CFR Books.
In this POP, Adjunct Fellow Michelle D. Gavin suggests steps the Bush administration could take to promote political and ethnic reconciliation and to restore the viability of Kenya’s governing institutions.
In this paper, Senior Fellow Daniel Markey poses a set of recommendations for the United States to consider in response to Pakistan’s ongoing political crisis.
To address the growing importance of Africa, the Council on Foreign Relations and Foreign Affairs present Beyond Humanitarianism, a collection of recent work that explains underlying trends on the continent and provides an absorbing look at Africa’s emergence as a strategic player on the world stage.
To order Task Force reports, Council Special Reports, and Critical Policy Choices, please call, fax, or order online from our distributor, the Brookings Institution Press: phone +1-800-537-5487, fax +1-410-516-6998.
For information on other reports that are not for sale, or for general publications information, please call +1-212-434-9516 or email publications@cfr.org.
To request permission to reuse Council materials, please email publications@cfr.org or fax +1-212-434-9859.
Please include the complete information of the requested work—author, title, sections/pages to be copied or reprinted, and number of copies to be made—along with a brief description of where and how you would like to reuse the work.
You may also request permission for Council material through Copyright Clearance Center. For more information, please click on the logo below.
By Region | By Issue | By Publication Type | The Think Tank | For The Media | For Educators | About CFR
Home | Site Index | FAQ | Contact | RSS | Podcast
Copyright 2008 by the Council on Foreign Relations. All Rights Reserved.
