Dambisa Moyo is an international economist and author. Her most recent book is Winner Take All: China’s Race for Resources and What It Means for the World.
Chinese engagement in the developing world has obviously been in the headlines, although it is not a new phenomenon. What has China’s engagement level been compared to that of other nations?
In large part, China’s engagement has focused on economics. If you look back into the colonial area and post-independence area across Africa, for example, there are many remnants of Chinese engagement at that time; interestingly enough, they were building a lot of infrastructure. A good example of this is in my country of origin, Zambia. There is something called the Tazara railway, which links Zambia through Tanzania to the Indian Ocean’s coasts, and that is an example of the sort of infrastructure the Chinese laid down much earlier on. If you recall, that was pre Ding Shao Ping and the revolution; so the economic revolution that has occurred in China was, in many ways, sort of premature for where their economic plans were. That being said, if you look at Chinese engagement today, a large part of their engagement does still have these features of infrastructure roll out; but I think they have a much stronger footprint this time because they have much more money and much deeper pockets.
What about Latin America? Is there not quite as much as engagement?
Not quite as much engagement traditionally, but that has changed significantly through the last decade. As you are aware, China is the largest trading partner and the largest foreign direct investment partner for countries like Brazil, Columbia, Chile and many other places across Latin America. And that has been something that has been quite revolutionary if you think about the fact that traditionally South America has been sort of the backyard of North America, the United States in particular. So it is very interesting with what China’s approach is, again it’s not just about Africa; it’s much broader and its not just about South America, Latin America, and Africa, but also Eastern Europe.
You mentioned infrastructure, but what is the goal for the Chinese economic growth model? What are they looking for from Africa and Latin America?
Well, it’s about economics; they have about 1.4 billion people in China with approximately 10% arable land. Africa, for example, has the most un-tilled arable land left in the world. So it’s very obvious for people; I think it’s very obvious to see that the Chinese imperative is to go into Africa and South America where the agricultural land is available, but also where there are minerals and energy to be exploited as part of the industrialization process that China is undergoing.
What is China offering to African countries and Latin American countries in return for these types of investment opportunities?
I think to answer your question, it’s important to put this in context. In a place like Africa, where 60% of the population is under the age of twenty-four; in places like Middle East and across South America we have similar statistics, in fact I would argue that a lot of what we saw in recently in the Arab Spring is really the problem of a young population that is disaffected and has seen a lack of improvement in their living standards. So China is actually forging ties against that backdrop, their approach has tended to focus on trade, on investment, on job creation; which is precisely the sort of mix of tools and investment propositions that these countries desperately need. In that sense, the China engagement, or the Sino-Africa or Sino-Latin America approach, has been incredibly symbiotic; they invest, they provide, they act as trading partners to these countries, and in return these countries are very happy to mortgage off there commodity resources
Is this economic approach a winning model?
Oh absolutely; look across the world, what has been the formula for economic development? Whether it’s for the United States, for European countries, or even more recently for Brazil, Russia, India, China and so on; it has been investment, it has been job creation, it has been about trade. Unfortunately in places like Africa — even with a billion people, which is about 15% of the world’s population — Africa has been less than 2% of world trade. This is completely unacceptable, and China is offering a different approach. The Pew Institute, a few years, ago put out a survey. They went to about ten countries in Africa, everywhere from Zambia to Senegal to Ethiopia, and across the continent they asked the Africans: “What do you think of the Chinese? Do you like them — do you hate them? How do they compare to the United States?” Consistently, 98% – 99% of the African population said they love the Chinese; they are doing great things, they are investing in our economy, and they are providing us with improvements in livelihoods. I’m afraid to say they felt that they are much better than the Americans. Just to illiterate, the distance from Cape Town, which is the southern point of Africa, to Cairo, which is the northern part of Africa, is three times the distance from New York to California. That’s about 9,000 miles, and the Chinese have built a road that goes that distance. It goes through about fifteen countries and will take about five weeks to drive it, but it’s fully tarred; it’s that sort of investment that is really prized in an environment where you have a young population of people that are keen to improve their livelihoods.
Just to address some of the criticisms — that China is flooding Africa with cheap goods, taking advantage of the labor market, allowing workers to organize, and the loans they’re offering are just a way to undercut the United States — what about some of those?
I think, on the whole, they are exaggerated. I think in a world where you have mobile phones, you’d have much more evidence of this. I think, in many ways, it is an old wives-tale. Now, this is not to say that the relationship between China and Africa is not often fractious, of course it is an evolving relationship and there will be tensions; but I strongly believe that to the extent that there are skirmishes or problems, that people are working through these matters. I also think that there is a propensity to criticize the Chinese, because they are very Unitarian in that sense, very narrowly focused on economic engagement. They are not there for democracy, or for religion, or any other agenda. I think that can be quite frustrating to other people whose agenda might be slightly different.
On the issue of commodities; in your most recent book you said that it’s a zero-sum game, the global race for commodities. How is that playing out between the U.S., China, and places like Africa, Latin America, and the rest of the developing world?
The fact of the matter is that our resources — land, water, energy, and minerals — are finite. By their very nature, this makes the whole game a zero-sum gain. They are not only finite, they are also scarce and depleting resources. China’s engagement has tended to be multilateral, so as I mentioned earlier, they tend to focus on building symbiotic relationships; in the book I call it befriending the “Axis of the Unloved.” So these are regions such as Africa, Latin America, and Eastern Europe that have traditionally not been destinations of investment from western countries. But there are other aspects of the Chinese approach as well, this multilateral approach. They are dipping into a very vast amount of money that they have saved over many years, current estimates of their foreign exchange reserves are over three trillion dollars, and those two things together are making China a go-to buyer for resources; in many ways making China the price setter, the marginal price setter, of many commodities such as copper and coal in the global markets. If you contrast that approach with the approach the United States has taken, which tends to be much more unilateral and, in many cases, focused on military incursions and engagement. For example, the United States going into Iraq and Afghanistan — those approaches, I think, are not only undermining the relationships between the United States and the emerging countries; but overall, I think, they are making the outcomes of commodity prices much more detrimental. By that, I mean there is an artifact of higher prices that is owing to this more aggressive approach that the United States has tended to use.
What can the U.S. do better in terms of engaging with the developing world?
The fact of the matter is that many people who have grown up in the emerging world want to emulate what the United States has done. 88% of the world’s population live in the emerging markets and see what happened in the United States — a transformation from nowhere into a world economic powerhouse — and know that the tools that were used to make America successful have been have been things like trade, foreign direct investment, property rights, issues around transparency, and encouraging innovation. However, the United State’s approach to places like Africa has been very different. Rather than encourage innovation investment and so on, there has been a tendency to focus on aid. If you really think about it, the altitude of many Americans has tended to be couched in, what I have called, “The Four Horsemen of Africa’s Apocalypse.” So by that I mean the focus has been on corruption, disease, war, and a general economic malaise about how Africa operates. I believe that those four elements have tended to be very detrimental for the American approach to Africa. That has not been the approach the Chinese have taken. The Chinese have looked at Africa as an investment destination and they look at Africans as partners. I think overall, in terms of what the United States can do, is shift the approach of looking at Africa as a destination for pity and really start to engage with Africans; also with Brazilians, Chileans, Argentinians, Peruvians, and Eastern Europeans. Look at people and see them as economic partners to try and stave off economic poverty in the world going forward.
And it’s not too late to do that?
It’s absolutely not too late. The United States remains a leader in economics, in innovations in technology, in academic institutions, and so on. But, I do think that the United States has got a lot of problems at home. It will have to do a heck of a lot of work to try and really bridge the gap between what the traditional approach has been with the rest of the world, and what’s going to be necessary in the world to go forward.
How is the European debt crisis going to impact China’s engagement with these developing countries, as well as the U.S.?
So, if you look again at the world, you’ve got a very interesting picture emerging. We are going to be nine billion people on the planet by 2050, three billion people additionally moving into the world’s middle class by 2025. The bulk of people emerging across the world or becoming wealthy are in the emerging markets; there has been a greater push towards what has been traditionally called “south-south engagement.” So countries like Brazil, South Africa, China and so on are engaging much more amongst themselves and less with the more developed regions. I do worry this schism will become much more evident as western countries continue to suffer the aftermath of this financial crisis; whereas we are still seeing relatively high growth rates in the emerging markets. Places like China are talking about worst case estimates of about 7- 7.5%; this is very different from sort of negative growth rates in places like Europe. I do think there is a risk, certainly in the near period, that countries will be more focused on their neighborhood; so the emerging markets would tend to band together and we are seeing the evidence of that already. There is a “Brick’s Bank.” There is talk of much more cooperation amongst the emerging markets, leaving developed markets to sort out their own problems. My sense is that this is not good for the world in totality. I do hope that the sooner western countries are actually able to remedy their economic woes, the faster I think we will get to a place where there is much more globalization and more integration.
You did mention the growth rate in China, but what about in some parts of Africa and Latin America?
Absolutely, if you look at the IMF statistics for 2012 Africa, after China and India it is expected to be the fastest growing region in the world. Africa is open for business now. We now have about sixteen countries in Africa that have credit ratings. There is a significant scope and upside in terms of foreign direct investment. Though nowhere near as much as we would like it to be, trade; but a billion people and less than 2% of world trade does not gel with the fact that this is the continent with the largest amount of arable land and places like China come desperate to source food for their populations. The political environment in Africa has transformed quite significantly; if you look at the transparency international corruption perception index, things are improving. If you look at data on the number of democratic countries in Africa, that is also significantly improving. I’m very optimistic because Africa has traditionally been ring-fenced from all of the globalization that has been happened around the world in the past thirty years. Africa doesn’t have a de-leveraging problem anywhere near the sort of leveraging index problems we seeing around the world.