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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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.

Wenzhou businesspeople apply “overseas development zone model” in Costa Rica

According to an article published in a Wenzhou newspaper — but almost certainly based on materials sent by the investors rather than own reporting — a private company from Wenzhou, Huage, opened the first Wenzhounese “overseas development zone” in Central America. The Huage Costa Rica Chinese Products Industrial and Commercial Park and Exhibition Centre 华格哥斯达黎加中国产品工贸园展示中心 opened in San José, capital of Costa Rica, which until 2007 maintained relations with Taiwan. The first phase of the project is a 10 thousand square meter exhibition hall, while the second phase envisages manufacturing and assembly facilities that will enable Chinese companies to receive Costa Rican certification of origin for their products, thus gaining unfettered access to American markets. The article quotes Costa Rica’s minister of foreign trade and the deputy head of the Zhejiang Province department of commerce as praising the project.

According to the article, Wenzhounese businesses have already established such “overseas development zones” in Russia, Vietnam, and Uzbekistan.

The model of wholesale/retail centres for exhibiting Chinese products and serving as regional hubs of their distribution is  familiar from Eastern Europe and has gained some Chinese government support. What is interesting here is the borrowing of the term “overseas development zone,” familiar from state-to-state projects in Africa and elsewhere, to lend legitimacy to private trade initiatives, albeit possibly with a minor assembly component.

The choice of Costa Rica probably has to do with a relatively large recent Chinese immigrant population, but it is likely also a choice encouraged by the Chinese government as a reward for switching diplomatic relations.

Global Times reports on Boeung Kak lake

The Boeung Kak development has been the most often cited negative example of Chinese investment in Cambodia since 2006. All NGO reports and Western news articles talk about how Boeung Kak Lake has been given to a secretive Chinese company to develop, which has started to move residents out but then stalled amidst their opposition. The case is cited as an example of environmental malfeasance (turning a lake into luxury real estate), cultural insensitivity (the area is said to be of symbolic significance to Phnom Penh residents),  rights violations (forcible evictions without proper compensation), greedy tycoons and venal officials in cahoots with China (the developer, Shukaku, is owned by Lau Meng Khin, an ethnic Chinese business strongmen close to the dictatorial prime minister).  A Sino-Khmer businessman assured me that the development was certainly not off the agenda, as Prime Minister Hun Sen personally supported it, and that it stalled simply because of the financial downturn and lack of investors.

Now, unusually, the generally nationalistic Global Times, an offshoot of People’s Daily, published an article that cites a Voice of America report and a Phnom Penh Post article alleging that locals are so angry about the affair that they want to boycott Chinese goods. The Phnom Penh Post reported that Shukaku recently signed a partnership with 鄂尔多斯鸿骏, a company from Inner Mongolia, which agreed to invest $40 million. Hun Sen initialed the agreement, which, according to Chinese media reports cited by the Post, was “part of a US$3 billion package of investment deals that also included a 750-megawatt power station in Sihanoukville,” presumable a coal-fired plant also owned by a Lau Meng Khin company in the Sihanoukville Special Economic Zone, “and a bauxite exploration project in Mondulkiri province.”

The lakeside development… rights groups say will ultimately displace more than 4,000 families … . Protests by Boeung Kak residents have become a weekly occurrence in Phnom Penh … villagers charge that they are being denied market value in compensation for their homes. (…)

“We will starve to death if they do not find a solution for us and
forcibly evict us from our homes,” 32-year-old lakeside resident Naon Sok Nen said yesterday. City Hall claims around 2,000 families from the lack have already accepted compensation packages. Those facing eviction have received varying compensation options, including cash payments of $8500.

According to Global Times, the demonstrators who demanded more compensation were paid by an NGO that “did not want to be named” to join the protest. The article makes the impression that this too is gleaned from the Post, but this is not the case. Global Times ominously, but in this case correctly, writes that the protests have been organised by “some human rights groups inside and outside Cambodia,” leaving no doubt that once again we are dealing with a Western plot to undermine China.

The article generated some discussion: over 6,000 people posted or reacted to around 160 comments to date. The most popular comment recommends the demolition team to go to Japan instead of Cambodia. But interestingly, aside from this anti-Japanese but irrelevant comment, the next most popular ones reflect that Chinese readers are not “buying” the account. They are critical both of the company and what they see as China “exporting” the way it deals with resettling populations, using the affair to criticise the government and thus in fact linking the investment to state behaviour in the same way as Western critics often do.

China in Latin America book out

Finally, after a dozen China in Africas, here is a China in Latin America, written by R. Evan Ellis. His post as “professor at the Center for Hemispheric Defense Studies” made me wary, but, even though the book is based on the usual combination of newspaper accounts and interviews, it is in fact good. It has a wealth of country-by-country information that is exceedingly difficult to obtain elsewhere (unlike the now-considerable overlap of sources about Africa), which includes very useful brief descriptions of Chinese immigration and everything else you would expect (from trade and infrastructural projects to military cooperation and what he calls “intellectual infrastructure,” which includes the teaching of Chinese). One shortcoming here is that there is no separate discussion of development aid, even though Ellis does mention low-interest loans.

The book really does fill a gap. For instance, I have long known about the large and new Fujianese immigration to Argentina and the fact that these migrants run a lot of groceries, and have wanted to know whether this group has anything to do with infrastructure investments from China. Ellis tells me that it does not, yet. He also confirms that although Brazil has the largest number of Chinese, Chinese megaprojects here have been relatively insignficant (partly because of a lack of excitement about Chinese loans and labour) and there is no rush on the Chinese language, unlike in Chile (though this section is made less reliable by the fact that Ellis uses only Spanish and English sources, no Portuguese ones). His data in some cases go up to December 2008, so that he is already able to account for some of the effects of the recession. As of that date, it appears that the ambitious transcontinental rail and road projects in which Chinese companies and banks have been mooted as investors and contractors have not yet taken off.

The book is not led by a preconception of what China is doing in Latin America — perhaps because it is not so easy to have such preconceptions, unlike in Africa. This makes the continent all the more interesting as a case study. Indeed, Ellis details how the resource-shopping of Chinese mining and metallurgy companies in South America often takes the form of joint ventures that are not unidirectional; thus, Chilean-Chinese and Chilean-Brazilian joint ventures have announced plans to open smelters and fertilizer plants in China, a Brazilian company owns Chinese nickel mines, and a Chilean wine makers has invested in wine production in Xinjiang. While nearly all current South American administrations are keen on contacts with China, this has not prevented them from taking measures such as Chile’s ban on Chinese fishing vessels using port facilities as retaliation for what they say is Chinese overfishing of the sea outside Chile’s territorial waters.

Ellis also notes that despite all the attention of China’s “strategic partnership” with Venezuela and its warm welcome by leftist Andean presidents, Chinese investors, like all others, prize political stability, transparency, and developed infrastructure. This means that they have been far keener to provide loans to Chile, Argentina and Brazil than, say, Venezuela. Like in Africa, Chinese companies (and presumably politicians) are keen to leverage their comparative advantage in unstable places shunned by Western investors (or where Western investors are unwelcome), but they are equally intent to enter larger, stabler countries and play by the rules if they have to.

More energy investments by China

The weekend’s New York Times (David Barboza, “China gets a warmer welcome for its cash”) reports on further Chinese energy investments abroad following the Rio Tinto and OZ Minmetals deals. Venezuela got a $6 billion loan and agreed to increase oil shipments to China; this brings Chinese investment in the country to $12 billion. Brazil signed a $10 billion oil-backed loan agreement with China, and Russia’s state-owned Rosneft and Transneft oil companies got a $25 billion loan in exchange for 15 million tons of crude oil in the next 20 years.

So the question whether the recession will speed up or slow down Chinese involvement abroad seems to have been answered in favour of the former. It is possible, though, that as Chinese companies now find easier access and better deals in larger, richer countries, some of the traditional client states like Laos and Cambodia will receive less attention.

Inquiry about Chinese in Suriname

Since I have moved to Holland, the news I get from my anthropologist colleagues about Chinese migration and development projects tend to be from Africa or the former Dutch colony, Suriname. Here, recent Chinese immigrants are running more and more corner stores and restaurants, while larger Chinese companies have been building roads (very bad ones, according to my Surinamist colleague Marjo van de Theije) and setting up oil palm plantations.

What is interesting is how similar the discourse about these issues in Suriname — a poor country even by South American standards — seems to be to the one in Holland itself, and even more, to Southern and Eastern Europe, at least according to the main newspaper, De Ware Tijd: Chinese are illegal immigrants, victims/perpetrators of human trafficking, carriers of exotic illnesses, smugglers and money launderers.

Recently, the minister of justice has been accused of selling residence permits to Chinese (an accusation that has been levelled by the opposition at the governments of many countries, from Belize to Tonga and the former Yugoslavia). In an article entitled “Middenblok wants parliamentary enquiry about Chinese invasion,” and dated 24 December 2008, De  Ware Tijd reports that the opposition has proposed to subject Chinese immigrants to a medical examination in order “to minimise the occurrence of new diseases … (such as bird flu)” and to require them to learn Dutch. It has also asked the government to disclose any special agreement with China about granting Chinese immigrants privileged conditions and to reveal the sources of financing of Chinese supermarkets and restaurants, as it “did not have the impression that this came from local banks.”

In another article, entitled “Don’t flood Marowijne with Chinese,” De Ware Tijd reports about concerns over a Chinese oil palm plantation, an investment of China Zhong Hen Tai in Marowijne Province. A local politician, Ronny Brunswick, insisted that only “management needs to come here,” while all workers should be hired and trained locally.

Judging by comments on one website, Wereldomroep, though, Surinamese (at least those that are active online) seem much less concerned about (Chinese) immigration than their peers in Europe. One comment explicitly states that Suriname benefits from Chinese migrants, while the others either defend the minister or berate the government for corruption, but none even mentions the Chinese.