Chinese student from Columbia University visits scene of Ecuador copper conflict

As the Spanish newspaper El Pais  reported on 16 March, the Confederation of Indigenous Nationalities in Ecuador (CONAIE), the country’s largest “indigenous” umbrella group, is demanding the cancellation of a $5.4 bn contract with a Chinese-owned group called Ecuacorriente, signed on 5 March, to invest in Ecuador’s copper mining in the Amazon region. Previously, environmentalists protested in front of the Chinese embassy in Quito with banners that read “Chinese enterprises out of Ecuador.” The Chinese ambassador said the Chinese government urges Chinese companies to respect environmental norms and work with local communities.

Huang Hongxiang, a Chinese masters student at Columbia university visited the site of the copper mine and wrote a feature for Southern Weekend, concluding that in this conflict, “there are no simple rights and wrongs; rather, there are different values and a clash of cultures.”

Despite this anticlimactic conclusion, the article itself is quite reflexive and is part of a growing mass of critical reporting in China on China’s megaprojects overseas, often written by young journalists or development professionals, some of whom are employed by international or Western organisations but find it important to share their thoughts with Chinese readers.

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Protecting the rights of cross-border migrant workers

Legal Daily (法制日报）published an intriguing news item. Relatives of two Sichuanese workers who worked at a Yunnanese-owned mine in Burma and disappeared after a traffic accident turned to a migrant-worker rights-protection agency in Yunnan, 云南省农民工法律援助维权中心. The agency contacted “relevant government organs” and got the employer to pay compensation of 540 thousand yuan.

What is interesting is that migrant workers who worked abroad were included in the category of nongmingong, “peasant workers,” and in the institutions of “rights defense” 维权 ， which often carries an overtone of dissidence against state power in labour rights cases.

More private Chinese investment in African manufacturing

Local media in Wenzhou — reputed as China’s capital of private entrepreneurship — report of growing interest in private  investment in African mining as the government has clamped down on small-scale mines in China. The article quotes a lawyer, however, as saying that only 1% of these investments actually succeed. (According to another article, though, 90% of  mines in Katanga Province of Congo-Kinshasa are small Chinese-owned mines with proprietors who sailed in on the tailwinds of state mining companies, each with only some tens of local workers.)

A third article from Wenzhou reports on the expansion of investment in manufacturing in a series of both state-supported and private special manufacturing  zones in Africa, a practice Wenzhounese businessmen are also engaging in in Central America. This practice has grown out of trading: Wang Jianping, for example, started importing shoes to Nigeria in 2001, set up a shoe factory there in 2005 (claimed to be the largest such factory in West Africa, with 600 local workers), and is now setting up a ceramics factory in the industrial zone he established. Nigeria has two more such Wenzhounese zones. Another businessman set up a factory in Egypt, commenting that wages there, at about 1,000 yuan a month, are much lower than in China, and there are export opportunities to the Arab Gulf and Europe.

The article says that the Wenzhou city government assists the expansion of businesses to Africa by organising special trainings and promotions of various African industrial zones. By 2010, city data show an investment of $50 million in Africa.

Chinese newspaper demands action against Chinese companies violating African labour rights

The   21st Century Economic Herald 21世纪经济报道, a newspaper of the Southern Group, published an article by Guo Kai 郭凯 on 21 February, entitled 赞比亚事件：理性规束中国商人海外”劳资异化行为”(The Zambian incident: Reasonable constraints for Chinese businessmen overseas engaging in “behaviour alienating labour from capital”). Commenting on a Zambian court’s indictment of two Chinese managers who shot Zambian mine workers, the paper says that the Zambian government’s announcement of a blacklist of Chinese companies that violate labour rights is insufficient: the Chinese government should also cooperate in not awarding these companies contracts and “ostracizing” (封锁) these companies and individuals. Although the paper notes that, in 2011, projected Chinese investment in Zambia is $2.4 billion compared to a GDP of 13 billion, “China cannot affort opportunism,” because the “incident” has strengthened anti-Chinese sentiments and driven up support for the opposition, which is opposed to Chinese investment. The article also comments that the reason for such “evil” acts by Chinese investors is that China still doesn’t have mature labour-capital relations, and some local governments disregard labour rights in favour of the interests of capital.

This is an interesting article because, while it refers to central government decrees and the “harmonious society,” it uses Africa to criticize domestic violations of labour rights. Is it zealously pro-government or veiledly oppositional?

New “China in … everywhere” book in the pipeline

Spanish journalists Heriberto Araújo and Pablo Cardenal are working on a new book on China’s impact around the world, based on a year of travel across 24 countries, ranging from Ecuador to Burma and from Mocambique to Iran. To my knowledge this is the first book that documents Chinese investments on the ground with a global reach.

A preview of the book has just been published as a photo essay in Foreign Policy. Nice photos that nonetheless seem to emanate a rather sinister message of an invasion.

In a recent article in Hong Kong’s Sunday Morning Post, Araujo and Cardenal focus on Mozambique, where, they report, violent clashes between Chinese mine managers and African workers have continued over demands for higher wages and shorter working hours. They conclude that wages and working conditions remain worse than at Western employers (although, of course, in most places there aren’t any Western employers). But the article quotes a Zambian labour union leader as acknowledging that the Luanshya Copper Mines, owned by China Nonferrous Metals Mining Co., comes “close to the required labour standards.” According to the mine’s general manager, it has only 42 Chinese employees out of 2,500, wages start at $400, shifts are eight hours, five days a week, and there is free health care.

Considering that Zambia has seen the most protests and violence around Chinese mines, this is rather rapid improvement, although clearly, smaller companies may not be following these standards.

Highlights of final Rising Powers workshop

The last of a series of three workshops on China’s engagement in low-income countries under the UK Economic and Social Research Council’s Rising Powers research network programme is about to conclude at the Institute of Development Studies at the University of Sussex in Brighton. This workshop focused on environmental issues. Topics included carbon emissions trading and China’s participation in environmental governance, as well as more down-to-earth issues such as dams and land leases. Some highlights:

Data shown by Yahia Mahmoud (Lund University) suggest that Chinese companies are second only to Korea in the area of land leases, but that most of these leases are in the Philippines. Andreas Wilkes of the International Forestry Research Council cited a figure of 6 million ha leased by Chinese forestry and agricultural companies in Africa, and talked about research conducted at the institute by Cerutti et al. that concluded that European forestry companies not certified for sustainability engage in practices quite similar to Chinese companies, and that locals often felt that their livelihoods were better under non-certified forestry regimes. I raised the point that the different types of new civil initiatives that are emerging in China concerning the environmental impact of China’s overseas engagement — organisations with direct overseas contacts but also looser formations like Minjian International that provide a discussion platform — would be an interesting subject for research.

The workshop were intended to result in the elaboration of cooperative research proposals.

Two inside views on Chinese acquisitions

With the title “Being eaten by the dragon,” this week’s Economist has a briefing based on a survey of 11 executives of Western companies that have recently been acquired by Chinese state enterprises (and in one case a private one). The picture is what I expected to see: the executives have a variety of opinions, but most of them tend to have a positive view of Chinese managers’ intentions — such as honoring agreements not to fire any previous staff — but a more negative one of their ability to deliver a business strategy, in part because of an opaque and lengthy decision-making process. (The syndrome diagnosed as “state enterprise disease” by Ma Yu. As a result, most companies have been unable to retain their Western staff. As to whether they kept Western executives on for substantive tasks or just for show, opinions differed.

Meanwhile, on 3 November, Zhao Jianfei of the English-language Chinese finance news site Caixin profiled Li Jinhong, Sinopec’s Australia branch director. She (! — how many female managers are there at this level in the oil business?) has had to “to cope with dashed investment expectations, a near-disaster, a contractor dispute and the Australian arbitration process” and “faces a number of challenges, ranging from high labor and equipment costs to an ever-changing policy and political environment.” She

initially planned to bring low-cost labor to Australia from China for construction projects, but found those plans infeasible.

Li said she understands why Australia has been reluctant to open doors to non-Australian labor (…). “Any country would protect their local workforce,” said Li, but adding [sic] that Australia has not specifically barred Chinese exploration teams but has exercised its immigrant labor requirements.

“For instance, there are certain requirements in areas of experience and language proficiency” for imported workers, she said. “Plus, it’s been mandatory to employ a percentage of locals, which offsets the cost advantages of bringing in Chinese teams.”

Earlier, Caixin ran a story about Metallurgical Corporation in China, whose shares have been in decline after a series of overseas acquisitions, including in Papua New Guinea, Pakistan, Australia, Argentina, and Afghanistan, have eaten up the company’s operating margins. These projects have suffered numerous setbacks and been criticized as irresponsible. ” Shen Heting, who serves as company president as well as party secretary and vice chairman of MCC’s parent China Metallurgical Group Corp,” listed a number of reasons, including political issues in Afghanistan, “tribal problems and the illegal arrests of Chinese technicians” at the Ramu mine in Papua New Guinea, and high operating costs in Australia, “since Chinese workers are not allowed in.” Shen

thinks the Chinese government should provide additional financial support. MCC is acquiring resources for the country overseas, he said, and should be given a corresponding level of policy support, with cash at the core. … “This business is not only something we want to pursue but something we need to do for the country.”

These comments are interesting since they come at a time when senior officials have been trying to convince Western public opinion that Chinese enterprises are not receiving state help in their projects overseas but pursuing their own objectives. It is likely that there already is a split between older state cadres and younger managers in the state enterprises, although the “privatization of profits and nationalization of losses” has long been a logical pattern in state enterprise operations.

Debate on Chinese investment package in Guinea

On “China in Africa: The Real Story,” Deborah Brautigam takes issue with a new Chatham House report entitled “Guinea: Bought by Beijing.” The report says that

to the surprise of many, after taking control in a coup and then violently suppressing civil society demonstrators in a stadium massacre, Guinea’s military junta formed a transitional government.

But considering a $7 billion resources-for-infrastructure deal with the Hong Kong-based China International Fund, the report “worries that China’s engagement in Guinea might yet spoil the transition to democracy.”

Brautigam observes that a number of other investors are present in the country; that Chinalco backed out of taking over a share of a Rio Tinto mine in Guinea (possibly because it was then trying to take over Rio Tinto itself, or possibly because of fears of negative Western reactions); and that the China International Fund cannot be seen as a proxy for the Chinese state, and it would not make sense for the Guinean government to give the whole deal to the CIF when Chinese state companies are also in the competition.

She promises to devote a future post to CIF. I am looking forward to that, but no matter what the nature of the ties between the CIF and the government in Peking is and where its capital comes from, I am certain that an investment of this magnitude does not proceed without approval by the government. It is very likely that the CIF combines the private interests of Chinese investors with the functions of a proxy 民间 organisation in cases where state companies or China’s sovereign wealth fund prefer not to be exposed, which would make sense in Guinea.

New York Times on Chinese investment in Afghanistan

In The New York Times, Michael Wines writes about China Metallurgical Group Corporation‘s $3.4 billion investment in the Aymak copper mine in Afghanistan. While S. Frederick Starr, the chairman of the Central Asia-Caucasus Institute, accuses China of free-riding on security paid for by the U.S., Wines notes that the Chinese company outbid all other companies, inluding an American one, and that

China is investing more in extracting Iraqi oil than American companies are. It has reached long-term arrangements to buy gas from Iran, even as the government there comes under the threat of Western sanctions for its nuclear program. China has also become a dominant investor in Pakistan (…)

The investment follows the familiar model (increasingly referred to as “the Angola model”): it includes a power plant that will supply not just the mine but Kabul; a coal mine that will supply the power plant; a smelter for the copper ore; and a railway that will link the mine, the smelter, and China. In addition, the contract includes building schools, roads, and even mosques, as well as stipulating that all non-managerial staff (including engineers) will be Afghan within five years.

But the conclusion is inescapable: American troops have helped make Afghanistan safe for Chinese investment. And there is no sense that either government objects to that reality. As diplomats and soldiers alike stress, the war in Afghanistan was never motivated by commercial prospects. Had an American company won Aynak, some Afghans noted wryly, critics inevitably would have accused the United States of waging war to seize the country’s mineral wealth. Moreover, if China succeeds in developing Aynak and generating revenue for the Kabul government, that helps achieve an American goal.

While accusations of bribery have been made against the Chinese company, “the Chinese bid was so clearly superior to others that any bribe money may have been incidental to the outcome.”

As usual, some observers think the bid is unsustainably high, and Wines notes that “an M.C.C. copper mine in Pakistan is widely said to have serious environmental problems. A Pakistan lead mine has been dogged by conflict, including a suicide bombing that killed 29; residents accuse the company’s Chinese work force of stealing local jobs.”

China Metallurgical is not talking. Its officials not only refused to be interviewed for this article, but also sought to prohibit a journalist even from photographing the mine site from afar.

But the company clearly is undeterred. The Afghan government is seeking bids for its second great mineral project, a behemoth called Hajigak that is said to contain 60 billion tons of iron ore. There are seven finalists — all companies from India and China. M.C.C. is one of them.

Steven Walt, a Harvard professor of international relations, compares China’s strategy in Afghanistan favourably to the U.S. government’s “playing whack-a-mole with the Taliban and ‘investing’ billions each year in the corrupt Karzai government,” and reminds his readers that “the United States rose to its position of great power by letting other major powers do the heavy lifting, while Americans concentrated mostly on building the world’s biggest and most advanced economy and building influence with lots of other countries.”  

New report on Chinese bauxite mining in Indochina

The Heinrich Boell Foundation, WWF and the International Institute for Sustainable Development have released a new report by Kate Lazarus on China’s involvement in bauxite mining in Indochina. Mining companies are present in Laos but have not yet started operations; in Vietnam they have so far secured construction contracts, but even that has  attracted opposition and the government may backtrack; whereas in Cambodia they have so far only been involved in road building on the Bolaven Plateau that has coveted bauxite reserves. The report points out the synergy between highly energy-intensive aluminium smelting and the development of hydropower.

The report can be downloaded here.