Chinese premier says China will establish environmental institute in Kenya

Among the pledges made by Chinese premier Li Keqiang at the African Union meeting in Addis Abeba on 5 May, increasing the credit line to African countries to $30bn by adding another $10bn was probably the one attracting the most headlines. (The full text of Li’s speech has been widely circulated in Chinese media, for example here.) Such promises, however, have been very hard to track. Some of the details of Li’s propositions were more interesting. To begin with, he talked about the “strategic complementarity” (战略对接) of Chinese and African industries in the context of helping localise labour-intensive garment and electronics manufacturing in Africa. This has, of course, long been talked about, but the phrasing is perhaps more explicit than before. Li also mentioned support for setting up a Chinese-African joint venture airline and funding a high-speed railway research centre.

For me, the most interesting proposition was setting up a “Chinese-African joint research centre” (中飞联合研究中心) devoted to biodiversity, desertification control, “demonstration of modern agriculture” and other issues and expected to help promote “clean energy” and “renewable energy.” Although this reads like nothing beyond a list of buzzwords, it has a proposed location (Kenya) and is part of a $10 million pledge for wildlife protection. Running a serious institute would of course easily eat up that budget. If this will indeed be a serious undertaking involving Chinese academics, then I am very curious about the extent to which Chinese environmentalists may be included in the initiative. Some years ago, the Peking-based Global Environmental Institute, closely related to the ministry of the environment, set up a branch in Vientiane, Laos. This has been a low-key operation, but to my knowledge, this was the first time for a Chinese research institute or a non-governmental organisation of any stripe to set up an affiliate abroad, and it has for a while recruited highly qualified young Chinese researchers, some trained in the West.

Li’s announcement of the new institute is an indication of the government’s desire to counteract the negative publicity around the issue of ivory and rhino horn poaching. (One Chinese journalist in Kenya told me that it was the only issue the Chinese ambassador felt embarrassed by.) It also fits into the strategy of “great aid” (大援外) promoted by some foreign ministry officials, meaning that foreign development assistance should involve more actors than just the government, notably the financing or even creation of NGOs (in large part to counterbalance Western dominance of the sector).

Of course, the whole affair may come to nothing, but it  may also conceivably produce more than mere window-dressing. There is a new generation of well-trained Chinese corporate personnel abroad who are not just aware that something must be done about corporate social responsibility (CSR) but are also personally interested in “doing good.” China House, an NGO set up in Nairobi early this year by the journalist Huang Hongxiang, who does PR for a local Chinese company and runs a website devoted to “China-South dialogue,” has already attracted over a dozen young Chinese interested in volunteering or interning as part of such projects. This is a significant development that is certain to become more visible in the coming years. The question is to what extent the government-initiated institute will be interested and successful in harnessing this popular interest, and whether such individuals will be able to influence its agenda.

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Chinese companies contract white Zimbabwean farmers to plant tobacco

Just had an interesting conversation with a white Zimbabwean shipping manager in Harare. He told me some of the white farmers who were thrown off their farms by Mugabe in 2002 have come back and are planting tobacco under contract for Chinese companies, which provide seeds and technical support. Would be interesting to know if anyone has done any reserach on this.

Guest post: An Agricultural Going-Out? The Case of Russia’s Far East

This is a guest post by Jiayi Zhou (Institute of Social Studies, The Hague), who has done research on Chinese in the Republic of Georgia and is preparing to write a PhD dissertation on Chinese “land grabs” in the Russian Far East. Her literature survey has come up with some fascinating information on this little-known subject.

Agriculture, though one of the target sectors of China’s Going-Out policy, remains a very small portion of Chinese OFDI (0.82% in 2010) and lacks any macro-level strategy. Amidst concerns over the world-wide “land grabbing”, China’s NDRC has tried to make clear that overseas agricultural projects and land acquisitions are not a part of its national food security strategy. But though China does remain largely food self-sufficient, it has become increasingly dependent on imports of soybean and livestock feed, and still faces pressing challenges of limited water resources, environmental degradation, and urbanization. But currently, according to Remin University’s Zhu Xinkai, agricultural investment abroad reflects more the “individual behavior of enterprises.” Now whether or not they have strong state backing, the presence of Chinese agribusinesses in Africa, Southeast Asia, and Latin America has been keenly noted by western media. Very little attention however has been paid to Russia, a fascinating case which might add much to analysis of the actors, motivations, and character of China’s so-called ‘Agricultural Going-Out’:

Russia borders China’s northeast, has vast amounts arable land lying idle, and is suffering from demographic decline and labor shortages – particularly in Siberia and the Far East. In recent years, Russia has been eager to stimulate foreign investment and agricultural production there, evident at the 2012 APEC summit, which was hosted in Vladivostok, and whose theme Russia chose to be global food security. Russia’s land-demography dilemma is the exact opposite of China’s, where in at least in one small village named Sunrise (太阳升村)in Heilongjiang province, peasants are grumbling about the ‘人多地少 ’  [too many people, not enough land] issue (see full story; Sunrise Village, in Dongning county, has only 1000 mu (67 hectares) of land for over 400 people. According to the source, as of 2011 it had some 50-60 villagers operating farms in Russia and even more going abroad as hired help). Chinese agribusinesses also have similar complaints, constrained as they are by village ownership rights – the Household Responsibility System – from easily acquiring large and contiguous plots of farmland (see Zhang and Donaldson 2010). Such factors can at least partly explain the phenomenon of Chinese agribusinesses, entrepreneurs, and peasants crossing the border into Russia to farm – where land is not only abundant, but also cheap.

Some of the larger-scale Chinese agricultural investment projects in Russia include that of Dongning Huaxin Group, with 40,000 hectares (ha) in Primorsky Krai; branches of the Heilongjiang Land Reclamation Bureau, which had some 80,000 ha in Russia’s Far East at the end of 2011; Baoquanling Far East Group, with over 6000 ha; among others (source).  Dongning Huaxin Group and Beidahuang Group have also collaborated to set up a ‘Friendship Farm’ which hopes to reach 200,000 ha by 2016. Larger businesses usually lease large plots of land (for up to 49-years), often in joint-ventures with Russians, and grow mainly soybean and grains, with some livestock projects as well. Export back to China seems to be the goal, but many of the afore-cited sources mention that due to shipping costs, tariffs, and a general lack of policy support from China, much of the production is still sold on the Russian market (source, source).

Nested within large-scale land deals are also small- and medium-sized enterprises, so-called ‘family farms’ [家庭农场], and individuals who cultivate through sub-leases and contracts. Wutong River Farm, for instance, which had “surplus labor, idle machinery, advanced planting technology – but no more available land on which to plant” signed an land concession agreement with Dongning Huaxin Group in 2010, for 3,000 ha of land near the city of Ussuriysk. There are also even smaller-scale Chinese ‘family farms’ which dot the landscape of Russia’s countryside, many of which operate independently and grow greenhouse vegetables for the local markets. One source even reported that Chinese farmers provide some three-fourths of the local vegetables in Russia’s Amur region.

When and how precisely this “farm panning” [种地捞金] rush began is unclear. One official suggests somewhere around the year 2000 (the first intrepid few from Sunrise Village to go farm in Russia left in 1998). According to the Heilongjiang Academy of Social Sciences, the farming boom in Russia is strongly correlated with the rise in the two countries’ cross-border trade (source). No credible statistics about Chinese agricultural activities abroad are collected at the national level, but some local governments have been keeping track: according to what is hopefully a reliable news report published in 2011, Dongning county’s official data showed that locals and locally-based businesses had concessions amounting to over 200,000 ha of land in Russia, with some 160,000 ha actually in development. For some perspective, Dongning county’s own arable land amounts only to some 50,000 ha. The city of Heihe’s data showed that as of 2011, Heihe businesses and persons had contracted some 60,000 ha of Russian land, with 40,000 ha in development.

Situating Chinese agricultural activity in Russia within broader discourses about China’s Going-Out and foreign economic activities, as well as global ‘land-grabbing’, will of course require deeper and more conceptual analysis – but it’s clear that the case of Russia’s Far East has much to add to the debate. Certainly, this is not the caricaturized case of a ‘weak’ state subjugated by a rapacious economically dominant one (a rather unhelpful framework; see Danielle Tan 2012). And it also does not seem that Chinese agricultural investments negatively contribute to local Russian food security or siphon off jobs – in fact, the opposite may be the case (see Anatolii M. Shkurkin 2002). Layered upon this are also Russia’s domestic politics and geopolitical considerations, which have resulted in policies towards Chinese investment and migration that are ’tangled and fickle’ to say the least.  In September 2012, the Minister of Development of Russian Far East Viktor Ishayev outright stated that in the field of agriculture, Russia prefers cooperation with Japan and South Korea to working with China. In 2013, Chinese agricultural workers have also been effectively banned from working in certain areas (the Amur and Krasnoyarsk regions, among others) for use of harmful chemical additives.

Henan Province encourages farmers to go abroad

According to a local newspaper, Henan Province has issued a new set of “Guiding opinion on implementing opening and ‘going out'” 《关于对外开放“走出去”的指导意见》, which encourages agribusiness enterprises to buy or rent farmland abroad.

The article profiles 49-year-old Tong Guoqiang 仝国强 from Baiying 白营Township, Tangyang 汤阳 County, who started a vegetable farm in Sudan in 2003. He was later joined by 14 fellow villagers. The article also claims that there already are 500 thousand entrepreneurs from Zhejiang Province engaging in various agricultural, forestry, and fishery activities around the world. For instance, Party Secretary Zhang Jin 张金 of Huafeng 华丰 (meaning “Chinese Prosperity”) Village, Xieqiao 斜桥 (meaning “Tilted Bridge” but homophonous with “evil overseas Chinese”) Township, Haining 海宁 Prefecture has bought 200 thousand mu (133 square km) of land in Rio Grande do Sul state in Brazil, on which he is raising 3,700 heads of cattle.

Meanwhile, Shandong Province has approved a joint venture between Gaomi Cotton Technology 高密市锦棉业科技有限公司, a prefectural-level state enterprise, and a Zimbabwean company to invest $100 million in a joint-venture cotton plantation and factory.

Failed Chinese rubber planters’ experiences in Burma

The recent killing of 13 Chinese sailors on the Golden Triangle section of the Upper Mekong led to China’s suspension of shipping there and recriminations against Thailand on the Chinese Internet. In an article published on QQ’s finance page, Chinese rubber planters on the Burmese side of the region — Special Region No. 2, controlled by the United Wa State Army — reported on previous encounters with violence.

One of them planted 5,000 mu in 2002 but, in 2006, UWSA commanders forced him at gunpoint to sign what he describes an extortionate lease contract. He fled to China and was later persuaded to sign the land over to Wa. Another planter, who first invested in Burma in 1998, had two plantations taken over in similar ways by Wa soldiers.

Meanwhile, as part of the media coverage that has followed Burma’s suspension of the Myitsone Dam project, a power industry website published an article about how electricity companies in Dehong Prefecture have been providing power across the border, starting as early as 1985 — that is, when the Burmese Communist Party still controlled the region. An employee would go across the border once a month to take electricity readings. He got himself into dangerous situations but assured the reporter that the company provided the same service to cross-border customers as to domestic ones.

This is a reminder of the complicated power relations in the region. The local ceasefire armies, particularly UWSA, are not simple victims or co-perpetrators of Chinese exploitation: they can also be adversaries. Chinese investors, for their part, can be victims or service providers trying to “act normal”.

Chinese minister of commerce reaffirms focus on agriculture in Africa

Chen Deming 陈德铭, the minister of agriculture, told 21st Century Economic Herald 21世纪经济导报 that he spends his vacation in Africa every year. In line with earlier government statements, but adding some new elements, he said China will prioritize investment in agriculture, manufacturing, finance, trade and environmental protection in Africa. He also said it will accelerate the construction of “economic cooperation zones” and concentrate financing in large-scale infrastructure projects. Agriculture will be the focus of aid, through the establishment of demonstration centres, in particular in the four cotton-producing countries in Northwest Africa where the centres will build up manufacturing chains from cotton to garment. Chen explicitly recommended African governments to learn from China’s example in establishing special economic zones.

The article notes that this is in line with World Bank President Robert Zoellick’s plea that China shift some of its low-value-added manufacturing to Africa.

Chen further offered China’s help in drawing up master plans for regional integration in Africa, including the linking of electricity and transport grids.(Several Chinese commentaries recently have suggested that China focus on exporting infrastructure built to its own specifications, as this will strengthen its economic and political position in the future.)

A Chinese scholar who does believe in development, but not in this way

Minjian International has circulated an interview to be published in the next issue of 《信睿》 (Thinker’s Letter), an intellectual magazine launched this year whose contributors include the director Jia Zhangke. The interview, entitled 绝对不平衡：中国经济成长与发展中国家的现代化道路 (Absolute imbalance: China’s economic growth and developing countries’ development pathways) is with Yu Xiangdong于向东. As I have not heard of him before, I tried to look him up. The most likely possibility is that he is at the Shanghai World Observation Institute 上海世界观察研究所, a semi-private (民办) institution linked to the Shanghai Academy of Social Sciences. (The exercise reminded me how differently the Chinese Internet functions — for example, institutional websites seem to be pure formalities, while all information resides in community portals.) The interview itself reveals, however, that Yu participated in the negotiations of a Chinese bank in Congo-Kinshasa.

The title of the interview comes from Yu’s view that while China’s trade imbalance with the West is “relative” and does not affect the compatibility of the economies  involved, its economic relations with “developing countries” reflect an “absolute imbalance” and cannot contribute to the latter’s development in their current form, but rather delay it.

This is, according to Yu, because Chinese investments strengthen the entrenchment of oligarchies as they have more cash to distribute to their clienteles without effecting a modernizing transformation of society. The latter, Yu says, must start with furthering agriculture (especially, for some reason, animal husbandry) and service industries while building functional rural structures that provide information, credit, and other infrastructure. This is not something that corporations can do: it is a political task, which is why he dismisses China’s non-interference stance as hypocritical and untenable.

On the one hand, Yu sounds very much like World Bank development experts who promote “participatory development,” and he endorses “good-governance” clauses and praises what he calls the rule-of-law legacy of British colonialism, which, in his view, was instrumental in making economies such as Botswana work. (He is careful to distinguish the rule of law from democratization.) On the other hand, though, Yu uses the term 乡村重建 (rural reconstruction) to describe what states should do. This is reminiscent of the terminology used in 1950s China, and he says that Africa has a lot to learn from the way Chinese economic development started, in 1he 1970s, with agriculture.

When talking about what he calls oligarchic power, Yu dismisses the view that it is a consequence of the colonial legacy, but also — largely — refuses to culturalize it. Rather, he offers a fairly sophisticated though not fully developed economic explanation that has to do with the disadvantageous timing of African states’ experiments with import substitution and export-driven industrialization in terms of the global economic environment, as well as other factors such as demographics and accelerated urbanization.

Although the tone of the interview is pessimistic, Yu also mentions that, when taking part in the Congo talks, he tried to separate the interests of the natural-resources export bodies from those of the oligarchy in order to allow the flow of some revenues into “rural reconstruction.” He does not mention how, but is optimistic about the possibility of such setups.

Overall, a refreshing reading compared to the articles of officially anointed no-strings-attached-Confucian-values apostles.

Nomen est omen: portrait of Han Dajun, an Anhui planter in Burma

An article in Hefei Evening News profiles one of four “peasants” from the city of Fuyang 阜阳, Anhui, who, in January, signed an agreement with Burma’s Special Region 2, under the control of the United Wa State Army, to rent 8,000 acres of farmland (the duration is not specified in the article) to plant rubber and tea and raise livestock. The total investment is 3 million yuan. The man, 47, is called Han Dajun 韩大军, “Han Big Army.” Another fitting name after that intrepid pioneer of Chinese farming in Africa, Liu Jianjun (Liu Army-Founding).

 (Photo from http://worldstory.org)

Han started as a poor peasant but began a small business reselling produce in 1989, and later became a shipping entrepreneur with 5 lorries. In 2009-10, he met some Chinese farmers who were planting rubber in Burma and said it made a lot of money. The agricultural machinery office 农机局 of 颍州区, one of Fuyang’s districts, gave Han a grant of 150 thousand yuan to purchase machinery to take to Burma (see photo).

The article describes the hardships faced by Han and his mates in Burma, and touts him as an example of how that with enough determination, “peasants too can change their fate.”

More support for Chinese agricultural investment abroad as manufacturing investment matures

Last year, I speculated about signals from the Chinese government that it might be shifting its focus towards supporting investment in manufacturing and agriculture overseas, and away from mining and oil. With the new “Notice on gooddoing the work of funding applications for the Foreign Economic and Technical Cooperation Programme in 2011” 《关于做好2011年对外经济技术合作专项资金申报工作的通知》, jointly issued by the ministries of finance and economy, greater support for agricultural investment is now official, but not at the expense of mining. As a recent article on a Chinese finance news website reports, the Notice singles out agriculture, forestry, fisheries, and mining as key areas of support. Such investments can now apply for a government subsidy of 30 million yuan.

Formerly, subsidies were smaller and were granted mostly to manufacturing investments. But manufacturing investment has now taken off, and according to one report, it now accounts for 22% of Chinese investment in Africa, as against 29% in mining, leading The Economist to state that “the Chinese … have always wanted to do more than dig up fuel when investing abroad.” The received wisdom of China being interested only in resources may be changing. (Here are Deborah Brautigam’s comments on The Economist article.) An article in the Chinese edition of Global Times profiles the 26-year-old general manager of the Ethiopian branch of Lifan 力帆, a car manufacturer that opened an assembly plant there in 2010. In that year, it achieved a market share of 25%, second only Toyota in car sales. Another Chinese entrepreneur in Ethiopia runs a leather processing factory with 20 Chinese and 300 local workers. The article also cites a Zambian government figure that states that Chinese companies created 15 thousand jobs for Zambians in 2010.

The finance article opines that this new support policy will be a turning point in China’s overseas agricultural investment, as Chinese agribusiness is generally relatively undercapitalized. But perhaps more important is the official support that has now been made clear. In 2008, the Ministry of Agriculture proposed a plan to support land acquisition abroad, and even earlier a senior policy bank official proposed to send Chinese farmers to Africa, but the government denied such plans after they generated negative publicity abroad. Until now, China has been a minor player in land acquitions compared to the Gulf states and South Korea, and only 0.8% of its 2009 FDI was in agriculture. It is likely that the strength of the denials in 2008 and the cautiousness of Chinese land acquisitions reflects conflicting views and interests within China’s bureaucracy: the foreign ministry is likely to be wary of the unpopularity of “land grabs.” (Or there might even, as in Henning Mankell’s thriller The Man from Beijing, be a struggle within the Party between left-wingers opposed to anything resembling neocolonialism and others linked to corporate interest…)

The article does not mention the denials, but notes that land acquisitions are likely to meet with opposition, not least from the multinationals that now control much agricultural production, particularly in South America, through contract farming. It notes that the activities by a Chongqing company, 重庆粮食集团, which has been at the forefront of agricultural investment in Brazil and Laos, have triggered the drafting of a law banning foreign land acquisitions in Brazil (the law has not yet been tabled). To mitigate such opposition, Chinese consultants interviewed in the article recommend co-management with host governments, couple agicultural investments with manufacturing, improve the assessment of political risks (the loss of Chinese projects due to the fighting in Libya has apparently caught investors unprepared), and finally to increase China’s military strength.

Protecting Chinese investments abroad is the subject of an article by Miao Yingchun 苗迎春, an international relations scholar at Wuhan University, which has been published in 红旗文稿 (Red Flag Essays), a “theory” forum of the Chinese Communist Party. Miao believes that China is still far from being the kind of global capital exporter that the U.S. is, and makes seven proposals, including accelerating investment by China’s sovereign wealth fund; spreading more investment to Africa and the developed world; leveraging foreign aid in promoting investment; strengthening the assessment of political risk; and strengthening anti-piracy activity.

The most interesting is his proposal to increase aid: he writes that at the moment China’s foreign assistance is only 1/3 of the OECD average, about the same as Switzerland’s. Since aid, he says, is an important driver of investment, trade, and construction contracting, it should be increased.

Miao reports that “the Chinese side” owns assets of $1 trillion abroad, including $230 billion in FDI, $240 billion in shares, and the rest in “other forms.” According to the Global Times article, there were 2000 companies in Africa owned by Chinese firms, with a total investment of $32.3 billion.

Yet another article, in First Financial Daily 第一财经日报，lists several large recent agricultural investments abroad. Fudi Agricultural Ltd. 福地农业优先公司has invested 200 million yuan in 17 thousand ha of land in Brazil to plant soybeans; Julong Group 聚龙集团 of Tianjin spent $200 million on a 20 thousand ha palm oil plantation in Southeast Asia; and Chongqing’s Chongliang group, mentioned above, has announced a 2.5 billion yuan investment in a Brazilian soybean plantation. This is the largest Chinese agricultural investment abroad so far, and the article notes that it is seen as a very large project for a local state-owned enterprise. About 2/3 of the capital, $234 million, has been loaned by China Development Bank; if the profit of the company remained as it was in 2009, then it would take 20 years to repay this loan. A further $102 billion has been pledged by a Chongqing investment company. Chongliang is planning further investments in Canada and Australia (rapeseed oil), Cambodia (rice), and Malaysia (palm oil), totalling $3.4 billion.

A commentator interviewed by the newspaper said that Chongliang’s investments reflect the Chinese authorities’ desire to circumvent the Chicago commodities exchange and secure direct grain and oil supply.

Report on contract sugar cane planting in Kokang

云南糖网 (Yunnan Sugar Net) has published a feature article on contract sugar cane planting in Kokang, a now-defunct Special Region 1 of Burma’s Shan State. The article does not mention the occupation of the region byBurmese  government forces in 2009, and the figures it gives suggest that contract farming has not been affected.

Yunnan’s Zhenkang 镇康 County signed an agreement with Kokang on the joint development of 30,000 mu (2,000 ha) of farmland in 1996 under a Chinese government “opium substitution” subsidy scheme. 13 thousand mu was actuallyplanted, of which 9 thousand with sugar cane. In Kokang’s Minzu Township 民族乡, for example, most of a population of 14 thousand now derive their livelihoods from sugar cane. At current prices, one mu of sugar cane results in 1,900 yuan of net annual revenue. One household made 40,000 yuan last year and bought a car.

The Kokang representative of 镇康南华南伞糖业, a Zhenkang sugar mill, recalls that locals met the — presumably more or less forced — “sugarification” with suspicion. The company provided the cash, seedlings, technology, and management, and collected the crop; the Zhenkang County government “mediated”, and the Kokang government organised the distribution of seedlings and fertilizers. In 2010-11, Kokang sugar cane made up 60% of the cane used by the company’s mill. By March 2010, it had invested 17 million yuan in the scheme, including road construction.

In 2008, at the time of the commodity price boom, two other companies from Zhenkang signed agreements to plant 100 thousand mu of walnuts and rubber, respectively, in Kokang. The article does not mention if these plans are now going ahead. The Zhenkang government also designated an industrial park next to the Kokang border.