LONDON - A barter deal with the Democratic Republic of Congo (DRC) trumpeted by
China as a showcase of its "win-win" strategy in Africa has been hit by charges
of corruption, a court case and a barrage of Western criticism. The surprise
onslaught is causing Beijing to suspect a plot to undercut its expanding
presence in the resource-rich continent.
"It is now clear that Western countries don't want to see China's influence
grow in Africa," says Duan Hongwu, a Beijing-based analyst who has been
following China's investment in Congo. "The barter deal is an obvious 'double
win' - it helps Congo convert its rich mineral resources into a real economic
capital. At the same time, it takes care of China's abundant foreign reserves
by finding a suitable outlet for investment."
The US$9 billion package deal that Beijing signed with Kinshasa
in 2008 raised China's stakes in Africa, transforming it into one of the most
influential players on the continent and the biggest investor in one of its
largest and most populous countries.
Under the terms of the deal, China pledged a $9 billion loan and agreed to
build copper and cobalt mines, 4,000 kilometers of roads and railways, upgrade
Congo's beleaguered mining sector, and build schools, hospital and clinics. In
exchange, Beijing secured copper and cobalt concessions that over 25 years will
supply Chinese manufacturing with 6.8 million tonnes of copper and 620,000
tonnes of cobalt.
Hailed by Kinshasa as Congo's Marshall Plan, the Sicomines project has run into
a series of troubles since its signing. It was frowned at by Western powers,
and before the ink on its paper had dried the International Monetary Fund had
begun exerting pressure on Congolese leaders to renegotiate its terms to secure
a new aid package from their Western donors. Congo had eventually to agree, and
late last year the deal was cut to $6 billion.
"Was the US worried that by investing big in Africa, China may gradually reduce
its share of US treasuries?" suggests Duan. In February, China sliced its
massive US Treasury bond holdings to the lowest level in at least nine months
amid speculation that Beijing was considering diversifying its portfolio.
But the downsizing of the deal did not spell the end of trouble for Beijing.
China Railway - China's largest construction company, and one of Congo deal's
undertakers - has been hit with a decision by a Hong Kong court blocking its
entry into the Congo market until the bad debts contracted by the Mobuto Sese
Seko regime with Tito's Yugoslavia over a defunct hydropower project in 1980
had been paid up. Mobuto Sese Seko was president of the Democratic Republic of
the Congo, formerly Zaire, from 1965 to 1997.
FG Hemisphere, a hedge fund that had managed to buy up chunks of the Seko
regime's debt and then repackaged it, obtained in February a favorable decision
by a Hong Kong court on its claim that China Railways' "entry fees" should be
used to offset Congo's unpaid debt.
China Railways has a wholly owned subsidiary in Hong Kong, and under the "one
country, two systems" arrangement in place in Hong Kong since its return to
mainland China in 1997, the territory enjoys an independent judiciary system.
Beijing's deal has recently also been a subject of investigation by a
commission set up by the National Assembly of DRC. The probe is focused on the
disappearance of $23 million in a signing bonus that Chinese companies were due
to have paid to Congo's Gecamines, their local partner in the Sicomines
project. The adverse publicity China has received in the probe is raising
questions about the transparency of its long-term projects in the country and
in Africa as a whole.
Some Western critics say China is interested only in extracting Africa's
natural resources to feed its fast-growing economy, and cares little for
African development, acting like the new colonial power on the continent.
But Chinese experts see the lingering shadow of a "Cold War" mentality in the
West's accusations of "new colonialism".
"Is China buying cheap and selling pricey to qualify as a colonial power?" asks
Shen Jiru, an expert on international relations with the Chinese Academy of
Social Sciences. "Exactly the opposite - we are providing free-interest loans
and aid, and we are a reliable backup for Africa's economic development."
China pledged last year to give Africa $10 billion in concessional loans over
the next three years, and is accelerating its drive to pour vast sums of money
into developing infrastructure in many African nations. African leaders have
hailed the new wave of China's investment in the continent.
Speaking at the World Economic Forum on Africa held in Tanzania last week,
Ethiopia's Prime Minister Meles Zenawi said China's interests were consistent
with those of African countries striving to overcome the legacy of reliance on
commodity exports and move towards industrialization.
It made sense for China to spend in Africa, Zenawi said, because its massive
foreign exchange reserves are largely denominated in dollars, and Beijing needs
to diversify those assets. "It's in their interest to spend tens of billions of
dollars in Africa, and it's in our interest to have access to those tens of
billions of dollars."
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