China rising: have cash, buy oil

Recently Beijing broke a new ground in the region by giving Buenos Aires access to more than $10 billion in yuan, its currency. Argentina was one of the three major trading partners of China which were given this facility, the others being Indonesia and South Korea. This was a modest effort by Beijing to help diversify the existing international reserve currencies system, dominated by the US dollar, with a view to reducing the risk of a global credit crunch recurring.

Lest one believe the China’s quest for oil is all one-sided, in exchange for Africa’s hydrocarbons and minerals, China sold low-priced goods to its inhabitants. More importantly, it assisted African counties to construct or improve roads, railways, ports, power plants, hydro-electric dams, telecommunications systems, and schools. CNOOC won its $2.7 billion contract in the Niger Delta of Nigeria in 2006 when it was coupled with Beijing’s commitment to invest $4 billion to build economic infrastructure in the region. Since 2001, the PRC has completed 200 infrastructure projects in Africa.

Little wonder that during the first six years of this decade, China-Africa trade quadrupled to $48 billion a year in 2006, with almost 500 Chinese companies active in the continent on their own or in partnership with local firms. Chinese workers and executives became a common sight in the continent.

At the summit of the first China-Africa Forum in Beijing in November 2006, Chinese president Hu Jintao pledged a further $5 billion in assistance to the continent, cumulatively providing $20 billion in infrastructure spending and trade financing during 2007-2010. This was equivalent to the aid the World Bank gave to Africa in fiscal 2008 (July 2007-June 2008), after which, due to the slump in the Western economies which fund the World Bank, this figure declined.

Whereas financial assistance by the World Bank or the International Monetary Fund (IMF) comes almost always with the stipulation of liberalising the economy - curtailing state spending and subsidies, slashing administrative bureaucracy, privatising public sector enterprises, reducing tariffs, and so on - Beijing claims to offer its aid without any strings attached.

For better or worse, mutual non-interference in each other's internal affairs has been a cornerstone of the PRC’s foreign policy ever since the rise of Deng Xiaoping as the Supreme Leader in 1978. This policy has gone down well with several African leaders who - like their counterparts in Russia and Central Asia - resent lectures on democracy and unfettered market economy by the United States, the main player at the IMF and the World Bank.

And such a policy indeed seems to be working. A survey of 47 countries by the Washington-based Pew Global Attitudes Project in 2007 found that in most African countries the proportion of those viewing China favourably to those viewing it unfavourably varied between 70 per cent or more to 11 to 17 per cent. Also, overall, China’s influence was widely seen as growing faster than America’s, and having a more beneficial impact on African countries than did the US.

Like all expansion of foreign aid and influence, China’s current rising stature is not without its problems like misallocation of resources and corruption. But with the West mired in the economic crisis of its own making, a prospering China has an unprecedented opportunity to build on its already powerful economy and project its influence with little competition.