Since the 2013 announcement of China’s Belt and Road Initiative, worries of Chinese economic imperialism through funding development projects have continued to inform Western opinions of China-Africa relations. In 2020, Zambia became the first post-COVID African state to “default on its Eurobonds,” eliciting renewed concern about Chinese “debt-trap diplomacy.” The fact that Chinese firms comprise “one-eighth of the continent’s industrial output” is enough to question the equality of the China-Africa relationship. Yet, despite China holding US$153 billion in African loans, the idea that China actively designs loans for national benefit assumes a perfectly calculated conspiracy to induce debt that simply does not exist in Chinese investment in Africa. Closer examination of the Zambian debt crisis, one of the more extreme examples of debt to China, reveals how a lack of development drives African loans, with chronic mismanagement by both China and Zambia creating today’s crisis.
Problems with Chinese Investment
That is not to say that China’s aid to Africa occurs out of benevolence. China’s historical incentives for engaging with Africa cannot be ignored. After a period of isolation due to the Korean War, China sought economic and political connections with Africa, importing raw materials in exchange for greater ownership of their production. In Zambia, the copper mining industry represents 80 percent of economic production, but the collapse in copper prices in the 1970s led to the sale of Zambia Consolidated Copper Mine (ZCCM) to foreign companies like the China Nonferrous Mining Company (CNMC). The acquisition of 85 percent of the Luanshya and Chambishi mines, along with the Chinese Jinchuan Mining Group’s “51 percent majority share in Zambia’s only nickel mine,” further deepened China’s profit control over Zambia’s economy. Furthermore, China’s 2006 creation of the Forum on China-Africa Cooperation (FOCAC) formalized Chinese development of Africa by pledging further aid. The implications of this organization are insidious. The Brookings Institute notes that FOCAC’s recent 2035 Vision conference shares the same goals of international investment and development as the China 2035 Vision conference, in addition to the same timeline of achieving modernization by 2035. Considering the promise of US$60 billion by 2035, FOCAC’s existence clearly reveals how China sees global development as the key to domestic growth. Chinese ownership of the mining industry and the process of providing loans clearly illuminates China’s structural dominance in this relationship.
Western critics blame Chinese abuse of their power for Zambia’s economic woes. Indeed, Chinese labor standards have come under fire for creating poor conditions for African workers. As of 2010, Zambian wages cost China just “0.093 percent of gross income” and health regulations have been criticized for threatening workers with longer hours and greater exposure to “acid … noxious fumes and dust” than what is allowed by Zambian law. The root of these problems appears to be China’s ignorance of international standards of practice, but China’s unchallenged power clearly underlies the neglect of labor rights. A concerning corollary of this control appeared in the 2006 Chambishi riots, where Zambian workers protested a 2005 mining explosion that killed 46 workers in a CNMC mine. Instead of recognizing Zambian demands for improved safety measures and healthcare, Chinese managers shot six protestors. The failure to provide potable water, higher wages, and protective equipment against silicosis stings particularly strongly considering China’s willingness to spend US$350 million on the new Chambishi Copper Smelter with computerized technology (HRW). China’s ignorance of cultural differences and unjust treatment of local workers reveals how China profits off of Zambian suffering.
Poor Regulation of Development in Zambia
Yet, this convenient narrative of Chinese neocolonialism falls apart upon analysis of the debt crisis seemingly driving Zambian dependence on China and labor problems. Zambia has “the highest number of Chinese lenders” of all African states, and China owns 69 percent of the construction industry. However, Chinese debt only represents “17.6 percent of total external debt payments,” showing that Zambian responses to foreign investment in general need reform. African leaders are also complicit in the accumulation of Chinese development loans through electoral incentives. As Ching Kwan Lee explains, politicians frequently receive kickbacks and votes for agreeing to development deals, with President Edgar Lungu raising borrowing from China during a copper price collapse. More fundamentally, Zambian citizens do seek to benefit from development, with officials stating that “we want to borrow for infrastructure” and the people desiring improved road, energy, and digital infrastructure. The historical lack of African development, fueled by European colonialism, led to Zambia’s lack of economic diversity and poor infrastructure, creating the desire to compensate with hyper-development. A 2012 Zambian report found that “the public has totally unrealistic expectations… that all… roads should ultimately be paved,” and Lungu’s Link Zambia 8000 plan for paved roads led the government to take a US$287 billion loan from Chinese Eximbank. With US$863 billion of road development planned in 2020, the Zambian public’s sense of entitlement to modern infrastructure and the government’s willingness to indulge them clearly contribute to the country’s debt crisis. In their quest for infrastructure, the Zambian government violated existing regulations on foreign direct investment, with increasingly centralized decision-making leading to the President and the Minister of Finance directly signing contracts without the parliament’s approval. Yet the fact that no other countries agreed to finance these projects suggests that the global neglect of African development leaves countries like Zambia with few options in the fight for better infrastructure.
China Fulfills Zambian Needs
Despite the massive number of Chinese lenders supporting the road debt crisis, Zambia’s energy industry lacks this predatory investment. Only the Chinese Sinohydro emerged as the contractor for the Kafue Gorge Project and 76 percent of energy contracts, and only four new power plants have been implemented since 1977. This single company deal suggests that China does not actually hope to gain Zambian assets through debt in the energy sector. More broadly, these differences in behavior show that claims of Chinese economic imperialism cannot be generalized. In fact, China’s economic support has, at times, benefitted Zambia. China-Africa Cotton, China’s cotton firm, has created “contracts with more than 100,000 farmers” in Malawi and Zambia, funding training trips to transfer knowledge to Zambian cotton managers. During the 2008 recession, around 100,000 Zambians lost their jobs when “Western mining companies reduced and even closed production,” but CNMC stayed and even gave US$10 million to Zambia’s Non-ferrous Company-Africa, thus preserving the industry. More broadly, studies have found that Chinese investment in Africa increases business density and fosters entrepreneurship in 38 countries including Zambia. More recently, Chinese telecommunications company Huawei has provided Wi-Fi and digital interconnectivity in 40 African countries, loaning US$280 million to build 808 telecommunication towers. Given that 60 percent of the African public views China’s investments favorably, China’s investment clearly provides more than just economic exploitation.
Reevaluation of Chinese Economic Imperialism
Regardless of the harms or benefits of certain Chinese investments, what is clear is that China cannot possibly and does not perfectly craft each deal with Zambia to their benefit. Loan proposals must be accepted by China’s “export credit insurance agency Sinosure,” industry associations, and the Ministry of Commerce, resulting in significant pressure from this bureaucratic machine on African governments to accept without reservations. This rapid acceptance leads to poorly planned projects that quickly fail, thus wasting Chinese capital and hurting their image in African nations. The consequences of these failures led to China canceling US$158 million in Zambian debt in 2006, eventually resulting in a US$392 million write-off. While the Chinese approval process contributes to these write-offs, the issue of Zambian trust that China will continue to write off debt, in addition to their unrealistic development goals, is ultimately responsible for the decades of debt accumulation and write-offs.
Zambia, with the second-most Chinese lenders and the greatest amount of write-offs, remains an outlier in the grand scheme of China-African relations. Yet, the underlying causes of the debt crisis reveal the complexity of mistakes by both the Zambian and Chinese governments in regulating development. China certainly cares about the optics of its economic power in Zambia. A Chinese manager of a mining company justified their continued presence during the 2008 economic crisis by wondering, “if we cut production… what will the Zambian people think of us?”, suggesting that China aims to maintain a narrative of aiding countries neglected by the West. But, contrary to Western complaints, China’s job creation and infrastructure development is clearly valuable to Zambia’s government and people. What, then, is the path forward in preventing further debt accumulation and improving China-Zambia relations?
Next Steps for Zambia and Africa
The dual problems of centralized decision-making and poor regulation of Chinese investment can be addressed by strengthening the Zambian parliament’s ability to enforce regulations. While corruption may be difficult to root out, the national government can develop strategic commissions similar to the African Union’s Partnerships Coordination and Interactive Platform (AU-PCIP), which oversees partnerships with other countries. Greater scrutiny of Chinese investment plans will enable Zambia and its African neighbors to avoid extravagant and exploitative interactions, pushing back on FOCAC and domestic pressures. Given China’s economic and political incentives for continuing to invest in Zambia, Zambian reassessment of priorities is unlikely to lead to a sudden dearth of development. And while total economic independence seems unlikely in the near future, Zambia can at least work towards greater equality in loan agreements with China to slowly regain control of its mining industries and escape the cycle of debt.
Indeed, progress has already been made. In 2020, the G-20’s Common Framework created a mechanism for African countries deep in debt to receive IMF loans in exchange for promises of debt restructuring. Zambia, led by new president Hakainde Hichilema, accepted a US$1.4 billion loan in the hopes of restructuring the economy through “cuts to fuel and electricity subsidies worth about US$800 million a year.” These economic reforms, in conjunction with improved transparency to creditors about the extent of Zambia’s debt, have reduced inflation from 24.4 percent to 9.4 percent and committed new investors like Canada’s First Quantum Minerals to expand copper production. Yet, with South Africa being the only African member in the G-20 and just Zambia and two other countries using the Common Framework, historical distrust of richer nations and a lack of representation in deciding the terms of restructuring casts doubt on the future of debt restructuring in Africa. Zambia’s path to economic redemption, in which domestic and international reforms proceed in sync, may become the exception rather than the new norm for African countries seeking economic relief from the burden of debt and the persistent threat of economic neocolonialism from both East and West.
Source: Hir.Harvard.Edu
