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Yao Yang participates in The Economist debate on China?s presence in Africa


Professor and Director of China Center for Economic Research, Peking University

Yang Yao is professor and director, the China Center for Economic Research (CCER), and deputy dean, the National School of Development (NSD), Peking University. His research interests are in economic transition and development in China. He publishes widely in international and domestic journals and is a prolific writer for domestic and international media. He has obtained several important awards including the 2009 Sun Yefang Award in Economic Science, the most prestigious economics award in China. He obtained his BS in geography in 1986 and MS in economics in 1989, both from Peking University, and his PhD in agricultural and applied economics from the University of Wisconsin-Madison in 1996.

The motion can be posed in a less provocative but more productive fashion. Instead of asking whether Africa should welcome China''s presence in the continent, a better question is: how should Africa respond to China''s presence?

Free flow of goods and capital is one of the defining characteristics of this round of globalisation. China''s own history shows that participation in the world system has been critical for its successful economic growth in the last 30 years. When the Western powers knocked on its door 170 years ago, China failed the challenge and went into a long period of stagnation and turmoil. Since 1978, China has intentionally adopted the open-door policy. Now it is the world''s second largest recipient of foreign direct investment, and exports contributed about 40% of its economic growth in most of the last decade.

To be sure, there are downsides of economic opening. China has managed them relatively well, though. Now it is Africa''s turn to face the challenge posed by China''s presence on the continent.

There are areas where China''s presence brings ubiquitous benefits to Africa. China''s involvement in infrastructure building, agricultural development, fighting tropical diseases and education should be welcomed by Africa without doubt. In other areas where contentions arise, it is a matter of how Africa should respond instead of a wholesale rejection.

China''s cheap manufacturing exports have the potential to suppress Africa''s indigenous industries. However, to put the blame on China will not help; even before China began to sell manufacturing goods to the continent, Africa was trapped in exporting resource-based products. It is for Africa itself to find ways to escape the trade trap. Thirty years ago, the majority of Chinese exports were also resource-based; today, electronic products have led China''s exports.

There are many hurdles for Africa to overcome before it can develop a viable manufacturing sector. However, judging by the Chinese experience, the most significant hurdle, whose antithesis is often used by the international community to criticise China, is that there are too many restrictions in the labour market. At a dinner table in a small conference held in Cape Town, an American studying both China and Africa asked why South Africa did not permit informal factories, sort of China''s "sweat shops", to exist. The reaction of our South African hosts was nothing short of astonishment. Yet in the name of protecting labour rights, heavy regulations may deprive those intended to be protected of jobs. Unemployment is serious in many African countries; heavy regulations protect the few with jobs, but discriminate many without.

The problem, however, is deeper than relaxing labour regulations. Gillian Hart, a South African who teaches in the University of California-Berkeley, compares industrialisation in China and South Africa in her book Disabling Globalization. She observes that industrialisation has been much cheaper in China than in South Africa. Chinese farmers own land so they have to contend with small salaries and meagre fringe benefits, whereas South African workers are mostly landless and have to rely on their employers for everything. Africa is endowed with abundant and fertile land, but the continent is still suffering from hunger. The lack of development in agriculture, partly due to the neglect of the international donor community, should take the blame. A viable agriculture not only solves the hunger problem, but also provides jobs to people and lowers the costs of industrialisation.

An area in which China catches more international attention is its pursuit of oil and other natural resources in Africa. "Neo-colonists" is often the name given to Chinese companies. However, China''s share of Africa''s total oil export is small, less than 10%, although it relies heavily on Africa for imported oil. In the future, China''s share will increase, but there is no obvious reason to believe that Chinese oil companies will be significantly different from other international oil companies. That is, if exporting oil and other natural resources entails a resource curse for Africa, China is not a bigger contributor than other countries.

In the end, it requires Africa to find a way to break the curse. There are countries that have successfully done that; Australia and Canada are but two examples. The key is to utilise the money earned by natural resources to facilitate the development of the manufacturing sector. In this regard, China''s involvement in infrastructural building helps Africa.

Many analysts believe that the most serious obstacle for Africa in converting the rents from natural resources to real economic development is that the rents have been controlled by a few elite groups. This leads to another criticism of China, namely, it has not paid attention to the political regimes with which it is dealing; instead, its business operations are helping authoritarian regimes. Indeed, some people also worry that China is spreading its own model of authoritarianism in Africa.

Leaving aside the question whether authoritarianism has been central in China''s recent economic growth, one has to realise that Africa desperately needs economic growth, even for the purpose of reaching the minimal goal of stability, just like what China faced three decades ago. When human rights violations hit the headlines of the world media, it is often forgotten that the underlying causes are more often economics than politics. On the surface, each African country has inherited the framework of a constitutional democracy from its colonial past. Yet the last half-century has witnessed great tragedies instead of progress; today, an average African is poorer than his counterpart half a century ago. Although the causality between economic prosperity and political stability can be debated, there is a consensus among scholars that economic growth helps democratic institutions to consolidate.

Perhaps here the Chinese experience can offer help. One of the successful factors in China''s transition from economic planning to a market economy is that in the process China has created many midway institutions, that is, institutions that do not match the best practice, but nevertheless resolve urgent difficulties at the time. Africa has more distinct historical and cultural heritages than China, but the spirit should be the same: Africa should be left alone to develop the institutions that serve its most urgent purposes.