Chinese review of The Silent Chinese Conquest

The English edition of Heriberto Araujo and Juan Pablo Cardenal’s The Silent Chinese Conquest, which was apparently published under the title China’s Silent Army, has been reviewed by Bristol University psychology lecturer and blogger Zeng Biao, who also owns a consultancy on Chinese-British relations, for the newspaper 21st Century Economic Herald. Zeng notes the author’s “betrayal” of their interviewees, the Chinese entrepreneurs and managers who proudly showed them around their businesses, but add that such betrayals are the stock in trade of “political and social affairs journalists”. He adds that he feels some empathy for the small traders the authors describe, and wagers that,

if China’s global influence continues to increase and develop bit by bit, as it has, then history’s take on these Chinese peddlers will surely be full of the humour and intimacy of today’s British writings on the East India Company.

Overall, Zeng’s opinion of the book is favourable; his “only regret is that it was not written by Chinese.” And, “in order to avoid more regrets,” he recommends that it be published in Chinese.

Does Zeng agree with the authors’ alarmist tone and sees it as a positive thing, as some Chinese nationalists tend to do with Western books warning of China’s “rise?” Or does he agree with the warning, that the “silent army” has dire consequences in terms of crime, environmental hazards, exploitation and so on, as well? Or does he simply think the authors’ research deserves discussion? This is not clear.

 

More on Chinese investments in North Korea

An article by Jane Perlez in Monday’s International Herald Tribune paints roughly the same picture as an earlier article in Dongfang Zaobao. This article focuses on the Xiyang Group, described as “one of the biggest mining conglomerates in China” and apparently one classed as private. Its chairman, Zhou Furen, is on the Forbes list of the 100 richest men in China.

Xiyang invested $40 million in an iron ore mine, but after four months, by which time the North Korean partner has apparently mastered the technology involved, the mine was taken over by the North Koreans and Chinese workers evicted at gunpoint. Xiyang now demands $31.2 million in compensation, but the North Korean government says that it has failed to deliver on its investment promises.

As Perlez notes, it is perhaps not the fact of the dispute that is news but that it is public. This may have something to do with the size of the investment, which is the largest to date to get into such trouble. The article recalls that in 2009, Wen Jiabao persuaded North Korea to back off from nationalizing the Hyesan copper mine, developed with the Wanxiang group.

It appears that no major investment has been done by an officially state-owned enterprise. The article claims that this is despite North Korea’s invitations to China.

Production costs at the Xiyang mine are half that in China. The government is supposed to provide and feed labour, but Xiyang’s deputy GM says they were obliged to feed the 700 North Korean workers because they were too weak.

Chinese investments in Hungary are slow to materialise

In an article yesterday (Varga T. Gábor, “Papíron maradt beruházások”, p. 5), the Hungarian opposition daily Népszabadság points out that, despite the Hungarian government’s spectacular gestures towards China, the agreements signed during Wen Jiabao’s 2011 visit have been slow to deliver results. The Hungarian national airline has gone bankrupt despite talks about Chinese investment; a rapid rail line to the airport and a logistics hub for Chinese goods in Europe have not been built; and a major real estate project in Debrecen seems to be faltering. The only project known to have made use of a 1bn euro credit line announced by Wen is Wanhua Chemical’s purchase of Borsodchem. Huawei has been expanding in Hungary, but not at the rate expected. There is also the plan of a $8 million invstmentin a solar panel factory.

Reflections of a villager on why Chinese investments in Africa will not matter that much for its economic growth

A purplish red sunbeam was sweeping the thatched roof of the mud huts of the village. Lost in my thoughts, I was admiring that sunrise when a story often told me by my grandpa brought a light smile on my lips. My grandpa said that his father used to tell him that they always had lived their lives before the foreigners came from very far away, then they lived their lives with the foreigners and continued to live their lives after the foreigners left. This story makes me often think of the road being constructed not far away from our village. A road which was said to be an investment of people coming also from a faraway land called China.

I see that, that word ”investment”, indeed, has become the all-encompassing magic word by which everybody and everything swear and which fuels all kind of passions. At the micro-level of enterprises and at macro-level of countries, it is argued that foreign investments and foreign enterprises positively impact on the productivity of domestically-owned firms and the economic growth of host countries but actually there is no clear-cut, unequivocal answer to the question. It is in the background of this debate that I wonder to what extent Chinese investments foster African countries economic development.

You know what? At this moment, Africa is only the third preferred destination of Chinese outward foreign direct investments in the Third World behind Asia and Latin America. When a look is taken at the magnitude of investment flows into China, it becomes evident that China’s investments in Africa are quite modest in size. In 2005 the world total foreign direct investment flows to Africa was US$31 billion of which China’s part to Africa amounted to a mere US$1.6 billion. However the world’s investment flows to China was largely over two times the flow received by Africa and amounted to US$72 billion (UNCTAD 2007) in 2005 and US$124 billion in 2011 against US$42.7 billion for Africa (UNCTAD 2012). China receives more foreign direct investments worldwide than Africa but China’s investments in Africa are marginal and concentrated mainly in resource rich countries and infrastructure projects. These projects in point of fact inflate the turnovers of Chinese enterprises and thus the possibility is created for them to generate profits while they lead to new debt situations for African countries since they have to take new loans to finance the infrastructure projects. Moreover these kinds of projects barely generate foreign exchange reserves for Africa and barely lead to technology transfer already undermined by secretive attitude of foreign enterprises otherwise corporate espionage wouldn’t exist like the historical account of industrial espionage by Harris 1998 shows it.

The investments laid aside, I see that China and Africa trade relations display another picture before me. Despite its spectacularly growth lately, bilateral trade between China and Africa represents less than 4% of the total of Chinese trade worldwide. Besides the fact that African countries’ trade with China shows a deficit of US$10  in 2008 for the former except for few oil and gas exporters their bilateral trade structure shows the same patterns as Africa’s trade with the West (Renard 2011) in that Africa exports natural resources to China and the West and imports for the most part manufactured products, machinery and transport equipment from these latter.

The portrayal laid bare by the investments and trade added to the temporary and poor quality jobs (Alden & Davies 2006: 93-94) the infrastructure projects create, make me think that China’s involvement in Africa will not lead to a substantive economic growth of the continent just like Elu & Price (2010) already pointed out that the opening up of sub-Sahara African markets to the Chinese investments between 1991 and 2004 led neither to economic growth nor did they foster the living standards of African people.

I heard somebody called out my name “Bayi” which pulled me out of my reverie already late in the evening as my village was being wrapped by the evening twilight. Suddenly I realized that   just like in the time of great-grandpa, we lived our lives, we live now our lives with the newcomers and we will continue living our lives even after the foreign road constructors are gone.

Are Chinese-built “instant cities” becoming a global phenomenon?

Ronja Yu’s film “Chinatown” chronicles the failed project of a large Chinese product distribution hub combined with real estate development in the small town of  Kalmar in Eastern Sweden, which hoped it would revive its flagging fortunes. One of the returning motives in the film is the scale model of the new city, with tree-lined avenues, condos, and street lights: something clearly more metropolitan-looking than today’s Kalmar.

The first time I encountered this motive was in Southeast Fujian Television’s drama series Into Europe (走入欧洲), produced at the turn of the millennium, one of a number of dramas about audacious Chinese migrants who make it in the world. There, the protagonist unveiled a similar scale model of urban modernity — for a Chinese trade city near Paris — to an applauding French audience.

Since then, the fantasy of a Chinese hero bringing modernity to the West has come close to turning into reality. The Kalmar project may have fallen through, but others are on the way in Illange-en-Moselle in France and in Milan, Michigan. Both are large greenfield (literally!) developments aimed at attracting Chinese investors an providing them with residential real estate; the Milan project has the additional selling point of in-state tuition at the University of Michigan.

In northern Laos, I have seen a similar scale model in the Golden Triangle Special Economic Zone, an ambitious Chinese-invested gambling enclave with plans for tourism and logistics. Golden Boten City, a similar place nearby, already began looking like the plans before it went bust. Recently, the BBC described a Chinese-built satellite city of Luanda in Angola as a “ghost town,” an allegation promptly denied by the Chinese embassy.

Many of the newly announced “instant cities,” like Bui City in Ghana, may never materialise. Others are struggling. In Peru, the Chinese state aluminium company Chinalco is spending $50 million to build a new town next to the Morococha copper mine to resettle locals whose houses are in their way. With 1,050 new houses, the company describes this as the largest non-state “social project” in the history of Peruvian mining. Nonetheless, it admits that not all locals have been persuaded to move.

Even so, the appeal of instant cities, both as investment hubs and as modern places, seems wide. The way a journalist describes the Morococha new town is typical of the developmental enthusiasm of these stories:

Unlike the precarious labyrinth of corrugated metal shacks and painted brick houses that make up the old town, the houses built by Chinalco all have quality inside plumbing and concrete walls.

According to a (…) mine official, most of Morocoja’s residents used to rent their living spaces. After the construction of the new town, some families own their houses and enjoy modern comforts that had not existed in Morocoja before, such as running water, sewage, 24-hour electricity, and a police office.

While the residential appeal of instant cities, particularly their low-end rural versions, may not be as high as hoped by the investors, it would be a mistake to dismiss them summarily as prestige projects intended to whitewash extractive exploitation. My bet is that these new export products of Chinese urbanism are here to stay.

Highlights from a workshop on Chinese investment in Europe

A workshop called The Politics of Hosting Chinese Investment in Europe was held at the University of msterdam on 29-30 June. Kristina Johnson and Sophie Meunier (Princeton) cited the 2011 Pew Global Attitudes survey that shows that more respondents in the major European countries, except Poland, believe that China’s economic growth is good for their country than in previous years. This is surprising because of the negative publicity Chinese investments in Europe have been getting.

Brian Burgoon (Amsterdam) and Damian Raess (Geneva) reported that Chinese FDI has not favoured more those European markets that are less regulated than other FDI. They also, based on a separate study, asserted that vulnerable (lower-paid, less-educated etc) workers were more likely to view Chinese FDI positively, but the method of this study was challenged by other participants.

How easy is it for an African scholar to study Chinese companies in Africa?

The ever growing involvement of China in Africa through its enterprises and projects has retained the attention of the media and the academic world among others. China itself likes to recall its connections with Africa and prides itself to have stood by Africans in their ideological fight against Western imperialism and to have delivered development assistance like the Tanzam railway about which it has harped on lately.
Does this Chinese rhetoric about ideological and economic brotherhood together with China’s involvement in Africa imply that Chinese enterprises but most specifically the state owned ones are open and accessible to African academics seeking to advance an understanding of Chinese ways of conducting business and to support a mutually beneficial cooperation?
As an African woman scholar moved by the above question, I attempted to study two Chinese state owned enterprises to find out that access to the managements of these firms were impossible. It is not that they constitute an exception but studying powerful people is a challenge of its kind. R. J. Thomas has pointed out that it took him about two years of all sorts of tribulations to finally be able to interview two executives. Hence having exhausted all means at my disposal to enter in direct contact with the managers of the concerned firms, I resorted to a local assistant who was a sort of gatekeeper with the right connections to the right persons.
However this solution confronted me with two quandaries. On the one hand the executives still restricted for me access to their enterprises and their business cultures. On the other side the gatekeeper identified himself with the powerful research subjects and started acting like one leaving me powerless in an interview situation. I ended up with a partial access to the enterprises and almost no knowledge about their ways of conducting business in Africa.
This led me to seriously question how can Africa be equal partner in a trilateral cooperation with the West as Lu Shaye , a highly ranked representative of the of the Chinese Foreign Ministry’s Department of African Affairs, put it, if African scholars cannot contribute to bringing insights into Chinese firms’ ways of doing business? A mutual understanding of respective business cultures is one of the important factors needed in a balanced relationship. Chinese firms already face enough criticisms about not just insulating their Chinese imported workers but also about them not being able to communicate with African employees and the population at large and all these due to language and other cultural barriers. Moreover the Chinese state also is being criticised as being the neo-colonialist in Africa. So why shouldn’t it go beyond the rhetoric and make possible an equal partnership with Africa, task for which I praise it. Nevertheless I am really curious about how the Chinese government plans to concretise such a challenge.

Chinese investments in North Korea

A couple of years ago, when I asked a Chinese migrant entrepreneur in Cambodia what his next plan was, he said he was waiting for North Korea to open up: that was the next bonanza. According to a recent article in the newspaper Dongfang Zaobao, there are in fact already numerous Chinese investments in North Korea, mostly in mining, but also a bicycle and a tobacco factory. Some were arranged via high-ranking contacts by Chinese traders from the border areas who used to engage in smuggling before North Korea cracked down on it. According to the article, in 2006-07，ten mines were sold to Chinese companies, but in 2009, one of these was renationalised without compensation.

Wenzhou legalises individual investment abroad

Last year, the Wenzhou city government passed a regulation allowing individuals to invest abroad. This is currently not allowed because of currency controls, under which individuals are only allowed to purchase foreign currency worth $50,000 per year. At that time, the central government annulled the decree after less than two weeks.

Now, Wenzhou passed a new regulation allowing adult Wenzhou residents to invest up to $3 million per year per project abroad (including Hong Kong), up to a total of $200 million. Wenzhou has a long tradition of entrepreneurship and a large overseas diaspora, and individuals’ currency reserves in banks total around 600 billion yuan. City statistics say that Wenzhou people invested over 50 million yuan abroad in 2011, but it is not clear whether this was in contravention of the ban or via legal channels. The new rule doesn’t extend to financial services, stocks, real estate, and “companies with special purposes”. But an article in Information Daily ( 温州再次闯关民资出海通道 ) notes that it is precisely in stocks, real estate, and mines that Wenzhou businessmen have been keenest to invest, since the Chinese real estate market has become sluggish. Another article, in Liberation Daily, suggests that this has been done via intermediaries in Hong Kong, and cites the example of recently popular investments in gold mining in Ghana, where one “production line” costs 5 million yuan. (In Peru, unlicensed Chinese gold panners recently evicted by the army from the Madre de Dios region reportedly operated dredgers wort a million dollars.)

It is unclear whether the new rule will have any real impact, as it is clear that there has been a very large amount of overseas investment even while it was technically illegal. More than anything else, it is interesting as a reminder of the oddity of Chinese “legislation.” Private companies are allowed to invest abroad, but, as the Liberation Daily article notes, Wenzhou regulations require a business to operate in in China for a year before it can invest abroad, as well as to comply with various sales and tax quotas and have an export permit, obtaining which may take as much as a year. In 2009, only 600 Wenzhou businesses were officially registered as having overseas investments. But in reality, individuals have been funnelling money into overseas ventures since at least the early nineties, when the wave of entrepreneurial migrants to Eastern Europe often financed their business expansion by pooling capital from China.

New investor at Boten and new casino in Cambodia

Martin Saxer alerted me to a number of news reports, including this one in the Bangkok Post, on a Lao government announcement that the Golden Boten casino has been close by the government following reports of criminal activity, and the new investor will develop tourism in the area. This seems like claiming credit for that the earlier closure of the Boten casino last year under Chinese government pressure. But it might also be a confirmation that the Special Economic Zone will continue operating. The question is how the new government of the zone, formerly delegated by the earlier investor, will be constituted. The same news items also say that the other big casino, in the Golden Triangle Special Economic Zone, won’t be affected.

Meanwhile, a Forbes journalist writes that “the Cambodian government sold off more than 130 square miles of a national park to a Chinese developer, Tianjin Union Development Group,” which is “planning a city-sized $3.8 billion complex with a casino, a dock for cruise ships, and an international airport.” Sounds exactly like the Golden Triangle. This is, on paper, the largest foreign investment in Cambodia to date. It was approved by the Cambodian government back in 2008, and concerns a beach in Kirisakor and Botomsakor districts, Koh Kong Province.