Comment on CGD paper:
China’s Development Finance to
Africa: A Media-Based Approach
Yan Wang, Ph.D.
Senior Fellow, NSD, Peking University
Visiting Professor, GWU
yanwang2@gwu.edu
1
Outline of my comment
• The paper provides useful information and adds value by
promoting open data and transparency. The methodology
is basically sound. However
• 1. It needs to take into account China’s income per capita China is one of the Southern Partners starting at an equal
footing as SS African countries
• 2. China’s key role in providing bottleneck-releasing
Infrastructure in Africa, e.g. power generation
• 3. Following comparative advantages and China’s own
experience in development in aid, trade and investment
• 4. Complementarity with established partners
• 5. Future role of BRICS as development financiers – “China
is successful because it has been a good student”, and is
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still learning to catch up. This is just a beginning……
What’s missing in the paper?
Income gaps btw the North and South
35,000
Per Capita GDP in 1990 international dollar
30,000
Europe
25,000
W. Offshoots
E. Europe
20,000
F. USSR
15,000
L. America
Asia
10,000
Africa
5,000
0
1
1000
1500
1600
1700
1820
1870
1900
1950
1980
• 60 years ago, when
China started the
South-South Dev
Cooperation, it was
poorer than the SS
African Countries
• Now, China’s per
capita GDP is only
1/4th of that for West
European countries
China
• Southern partners
differ from the
Northern partners 3
2008
What’s Missing? China’s GNI per capita
China 2010
Source: Yan Wang 2011 for OECD-DAC
Page 22, volume II.
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II. China’s role in infrastructure
• Southern Partners, incl BRICS and Arabs, are
Leading Financiers for African Infrastructure.
• China accounts for over 30% of total value of
infrastructure projects being implemented in
Africa, higher than other donors
• China has focused on “bottleneck-releasing”
infrastructure by meeting the “unmet”
demand from African governments
• The size of projects is large as compared to
those of Western donors.
5
China has played a key role in providing
Electricity in Africa, esp hydro-power
China-OECD/DAC Study Group 2011, Volume ii, page 81.
6
China contributes to 9 gigawatts in
power generation in Africa
Pipeline of Chinese-Funded Power Generation Projects
Hydropower
generation (MW)
Thermal
generation (MW)
Total Generation
(MW)
Agreement
3,412
1,470
4,882
Construction
1,022
397
1,419
Completion
1,553
1,170
2,723
Total
5,987
3,037
9,024
Source: World Bank-PPIAF Chinese Projects Database, 2010.
For ease of comparison, the Hoover dam in the US generates
2 GW of electricity.
That is, China has helped /is contributing to 4 x Hoover dam.
Whereas the paper underestimated this aspect of China’s role.
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Merowe Hydropower Statio
Roseires Dam In Sudan
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Merowe Hydropower Station
•A large-scale hydropower project constructed in Nile.
•Including concrete gravity dam, clay core rockfill dam,
concrete faced rockfill dam and earth dam.
•Total length: 9.2km; total installed capacity: 1,250MW.
The Contract was won by Sinohydro in June, 2003, with the
contract price of $650 million USD) and the contract period
of 5 years.
Sinohydro takes 50% of the shares & the entire 100% of
construction tasks.
This project has been completed in 2010.
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Before……
After…..
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Tekeze Hydroelectric Project
• One of the largest water and hydropower project in
Africa
• Double curvature concrete dam
• Maximum dam height: 185m; total installed capacity:
300,000 kW
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Tekeze Hydroelectric Project
Contract won by Sinohydro in
June 2002 through
competitive bidding.
Including the main dam work,
diversion work, underground
powerhouse, intake and
outlet work, manufacture
and installation of steel work
structures, etc.
The contract price is $224
million USD
Sinohydro took 62% of the
shares.
This project will be completed in 2013.
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III. Comparative adv following (CAF)
strategy in trade, aid and investment
• “Comparative advantage still explains much, perhaps
most of world trade. ” –Paul Krugman 1995
• China has been following comparative advantages
(Justin Lin 2011, 2012)-key to success
• …Also following comparative advantage in providing
South-South Dev. Cooperation (SSDC)
• …Also following China’s own experience and building 6
Special Econ Zones in Africa… focusing on “hardware”
• With limited institutional capacity, China is, still,
learning to catch up (incl SSDC / aid). What you have
seen is the beginning stage.
• Next stage, paying more attention to the “software”,
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intangibles, and the quality of SSDC or aid.
China combines trade, aid & OFDI
China's trade with Africa
trade volume in billions USD
250.00
198.40
200.00
Total Trade
150.00
Total Export
100.00
Total Import
93.24
73.08
50.00
0.00
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source:http:www.stats.gov.cn; UN COMTRADE
Construction sector is labor-intensive and it is part of
China’s comparative advantages.
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As labor cost rising, Chinese enterprises
are “going global”: Ave. Wage Rates
$70,000
$5,000
$4,720
$4,500
$60,000
$4,000
$50,000
$3,000
$40,000
$2,500
$30,000
$2,000
Wages in Dollars
PRC's Labor Productivity
$3,500
$1,500
$20,000
$1,000
$10,000
$500
$0
$0
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
PRC's Labor Productivity
Wages in Dollars
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BRICS are becoming Leading
Dragons: outward FDI (OFDI)
2000-2011 (in USD billions)
Source: Justin Lin, Chandra
and Wang 2012 using
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UNCTAD data.
V. Emerging G20 Countries become
development financiers in 2015-2050
Share of Total G20 Savings
100.00
90.00
80.00
70.00
%
60.00
Advanced G20
Emerging G20
50.00
40.00
30.00
20.00
10.00
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: Bank of England, The Future of International Capital Flows,
Financial Stability Paper No. 12, December 2011.
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Sources of saving and finance till 2050
Source: Bank of England.
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China’s role in Africa/development
• "China is already making a substantial
contribution to the continent’s economic
development, and we believe that it can play an
increasingly important role in the future.
• In that spirit, we are engaging at multiple levels
to shape Chinese actions on issues such as good
governance, human rights, and transparency –
issues that we believe should play as prominent a
role in China’s Africa policy as in ours."
•
•
By Principal Deputy Assistant Secretary Don Yamamoto, The Bureau of African
Affairs, U.S. Department of State, March 29, 2012
http://www.safpi.org/news/article/2012/assessing-chinas-role-and-influenceafrica
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VI. Questions to be debated
• As an Emerging G20 country and a Southern partner,
China has helped build 9 gigawatts of electricity
generating capacity, 4 times the Hoover dam. 30+ more
power stations will be constructed in next few years.
• Constructed other “bottleneck releasing” infrastructure
– roads, bridges, railways and sea ports and SEZs…
therefore helping manufacturing industries to develop
in Africa.
• What’s the developmental impact? Who has benefited?
Are African people better-off with or w/o?
• With weak institutions, esp legal institutions, China is
still learning to catch up, and learning fast.
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• How can we help China in helping Africa, now & future?