As Chinese companies have continued to expand overseas, their projects in Africa have come in for frequent criticism from international and local NGOs. Complaints include a lack of concern for the local environment, poor transparency in major projects and a failure to protect labour rights.
Many Chinese firms do not take these criticisms seriously, even finding them ridiculous: what are countries with 80% poverty rates and average lifespan of less than 50 years doing talking about environmental protection and transparency? For these African countries, economic growth should be the most important consideration, they argue, and Chinese investments will help boost GDP.
China’s understanding of development comes from its own experiences, and is rooted in an outdated view of development economics. However, in international development practice, we find more and more that development is multi-dimensional, and involves changes in social structure, the accumulation of economic growth, the reduction of inequality and more.
There has been an on-going rethink of what true development is. Development of what? And development for whom? Traditional development theory overlooks society and people, particularly the wishes of the vulnerable, the marginalised and the poor. Now the majority of actors take a multi-dimensional view of development: simple economic growth does not necessarily translate into development. Quality development and rapid economic growth require resolution of issues around education, social justice, employment and systems of distribution.
Africa provides many examples of economic growth failing to benefit ordinary people – you only have to look to Africa's major oil-exporting nations. In these countries, oil exports increase GDP, but social development indicators do not rise correspondingly, and some even fall. For example, while the International Monetary Fund expects Angola to be one of the fastest-growing countries economically in 2012, 70% of Angola’s population live on less than US$2 per day, infant mortality rates stand at about 160 per 1,000 live births and more than 50% of the population lack access to improved water sources.
If China is to enjoy a positive investment environment in Africa over the long-term and earn sustainable returns, then the African people must benefit from Sino-African economic cooperation.
The reputation, image and profits of Chinese firms depend not just on their contribution to GDP but, more, on creating local employment, boosting social welfare and improving the overall business environment. And so Chinese firms need to manage the relationship between commercial and developmental interests.
When it comes to certain, highly controversial, projects, Chinese firms must also fully respect and consider the rights of local people to life and development. In large dam construction, for example, they should take into account relocation needs, environmental management and cross-border river sharing and, in certain infrastructure schemes, consider land rights and labour issues.
China is already the world leader in dam construction, with one company alone – Sinohydro – owning 60% of the world’s dam-building business. The Merowe dam in Sudan, the Bui dam in Ghana, the Chafe Gorge Lower Dam in Zambia and the Gibe III dam in Ethiopia, which have been scrutinised by media and African and international NGOs in recent years, these are all Chinese-built and most are funded by loans from Chinese policy banks. Hence, banks should urge companies to carry out due diligence when making their loans. When firms are taking decisions that affect local interests, those interested parties need to be invited to participate to ensure decisions are transparent and fair.
Public participation in development projects is a new lesson for Chinese companies “going out”, because they do not gain relevant experience at home. Multi-stakeholder discussion requires communication skills, time and relevant professional knowledge. For example, resettlement work combines sociological, anthropological and economic knowledge, which is a systematic process. A multi-stakeholder approach to some extent may lower project speed and increase operation costs, but it can ensure to a large extent the comprehensive benefits of economic development projects.
Chinese companies need to abandon the perception that “growth is always at the cost of a small number of people” and realise their investment benefits cannot be guaranteed if they simply transplant China’s domestic-investment model into Africa.
It’s not just western and African media that complain that it’s hard to talk to Chinese companies – researchers have the same problem. Even Chinese academics and journalists struggle to make contact with the business world, often relying on personal connections to get interviews. When faced with questions, Chinese companies act defensively: “We bring development funds and the technology Africa needs,” goes a standard answer. “We provide all these jobs, we just work and don’t worry about politics – why do we get criticised rather than praised?”
These operators can’t imagine that local communities, the media and NGOs are concerned about anything other than job creation – that they also care about welfare issue, like worker safety, training, healthcare and minimum wage provision. Chinese firms either ignore questions around these topics, or provide irrelevant information.
In fact, it's unwise not to respond to doubts from outside. Closing doors won’t better protect Chinese companies. In fact, it costs them an opportunity to explain and even defend themselves, which ultimately deepens misunderstandings. Chinese companies have to learn how better to communicate and establish relevant mechanisms. This includes building independent compliance, CSR and public relations departments, publicising the contacts of these department and dealing with requests in a timely fashion.
Growth always comes at cost. If Chinese companies want to participate in the globalisation process with more confidence, there are lessons they need to learn and rules they need to follow. China says it wants to shift its economic growth model – but in fact what needs to change first is its crude and inflexible view of development.
There are numerous reasons for international objections to the actions of Chinese firms abroad. Clearly, problems exist, rooted not only in the lack of experience and non-compliance of Chinese enterprises, but also in failure of supervision and governance by host governments. However, we cannot ignore the misleading media coverage that contributes to the scepticism and criticism from the west.
Nonetheless, China must fulfil its responsibilities as an investor. Believing that you can simply put up the money and ignore the impacts your investments will have on communities is to shirk those responsibilities. It is an approach that will help neither the long-term prospects of the companies in question nor the development of Sino-African relations.
Anything a Chinese firm does in Africa will be seen as representative of China as a whole. Anything a Chinese immigrant does in Africa will be seen as representative of all Chinese people. It is very much in the interests of the Chinese government to bolster supervision and management of Chinese firms working abroad.
Therefore, it should set standards for Chinese companies going overseas so that they fulfil their environmental and social responsibilities. It should develop mechanisms for compliance; urge companies to increase transparency in investment deals and other operational decisions; and help companies better communicate with local stakeholders.
China’s investments in Africa should create more space for Chinese diplomacy, rather than, as the international community would have it, Chinese overseas investment hijacking China's diplomacy.
Only when you play by the rules can you take the lead. Chinese firms need to play by local rules, respecting and considering other interested parties, better understanding and integrating into host societies – and making this part of their long-term growth strategy. Taking that path is a rational choice that will strengthen China’s soft power and embody its role as a responsible nation. Only then will China’s presence and participation in Africa be fitting of a major power.
Wang Xiaojuan is a project manager at the Heinrich BÖll Stiftung China office.
Part one: hostilities on the ground
Homepage image by Mike DuBose shows a child scavenging for food near Malanje, Angola.