Economic Diplomacy –

The Case of China and Zambia

Marcov Alexandru Cristian

Economic Diplomacy – The Case of China and Zambia

Introduction

Former Indian diplomat, Kishan S Rana defines Economic Diplomacy as “the process through which countries tackle the outside world, to maximize their national gain in all the fields of activity including trade, investment and other forms of economically beneficial exchanges, where they enjoy comparative advantage.; it has bilateral, regional and multilateral dimensions, each of which is important”.[1]

China has emphatically registered its presence on the African economic and political landscape in the last decade. Among other things, the volume of trade between China and Africa has risen steadily from USD 10 billion a year in 2000 to over USD 40 billion in 2005, and is projected to cross USD 100 billion by 2010. To celebrate and cement these growing ties, thirty five heads of state from Africa assembled in Beijing at the invitation of the Chinese president Hu Jintao for the inaugural China-Africa Summit (referred to as the Summit henceforth) in November 2006. More than 2000 trade deals were signed in Beijing as China promised USD 5 billion in aid and credit to African countries in the next few years, and vowed to train thousands of its young men and women.[2]

Zambia is a land-locked country in Southern Africa with a population of 13 460 305. Zambia’s natural resources include copper, cobalt, zinc, lead, coal, emeralds, gold, silver, uranium and hydropower. Zambia's economy has experienced strong growth in recent years, with real GDP growth in 2005-08 about 6 per cent per year. In 2005, Zambia qualified for debt relief under the Highly Indebted Poor Country Initiative, consisting of approximately USD 6 billion in debt relief. Poverty remains a significant problem in Zambia, despite a stronger economy.[3]

China – Zambia Relations

China and Zambia established diplomatic relations on October 29, 1964 and Independent Zambia’s first president Kenneth Kaunda had famously called China his country’s ‘all weather friend’ in the early 1980s.[4] During the period of President Kaunda (1964 - 1991), China provided active support to the Zambian government in its efforts to consolidate political independence and struggle against western colonialist control. President Kaunda visited China four times before 1990.

China and Zambia have signed several bilateral and multilateral trade agreements as well as agreements on economic and technical cooperation. Since 1967, China has undertaken 35 aid-projects such as Tanzania-Zambia Railway (TAZARA), roads, maize flour factory, textile mill, well and water supply, etc. Of the projects, 33 have been completed.

In 1996, the two sides started the joint management of Mulungushi Textile Mill, which was built with Chinese aid in 1982, thus increasing its profits considerably. In 1997, the Bank of China opened its Zambian branch, which was the first branch opened by the bank in the sub-Saharan region. In the same year, the China Investment and Trade Developing Center was set up in Zambia. In 1998, China National Nonferrous Metals Industry Construction Co. (Group) bought the Zambian Chambishi Copper Mine for USD 20 million. The mine started operation in July 2000. The Investment and Trade Developing Center opened business in June 2001. Bilateral trade volume between the two countries in 2002 reached USD 83.247 million, of which Chinese export reached US$ 46.056 million, and import USD 37.191 million.

Since 1978 and until late 2003, China has admitted in all 180 Zambian students. China began to send teachers to work in the University of Zambia in 1992. Since 1978, China has sent medical teams to Zambia as a form of aid.[5] China expressed interest in helping the country build a multi-million dollar national sports stadium that would be ready for the All Africa Games that Zambia hosts in 2011.[6]

It is reported that Chinese companies have invested in over 140 projects and created 11 000 jobs, quoted Xinhua from Zambia Times. Investment tends to concentrate on agriculture, machinery processing, mining, and tourism, totaling over US$ 80 million.[7]

Disasters related to Chinese Investment in Zambia

One of the worst industrial accidents in Zambian history, occurred in 2005 when a blast at a Chinese-owned explosives factory in Chambishi killed 46 people, most of them in their 20s.

The Mulungushi Textile Mill set up in 1982, slowed down by 2007 and was closed in 2008. The mills managers allegedly resorted to buying raw cotton for export to China’s humming textile industry. “We are back where we started,” said Wilfred Collins Wonani, from the Kabwe Chamber of Commerce & Industry in Zambia, sighing at the loss of one of the city’s biggest employers. “Sending raw materials out, bringing cheap manufactured goods in. This isn’t progress. It is colonialism.” The mine was expected to open again by the end of 2010 but till date there has been no news to this effect.[8] [9] A search for Chinese diplomatic reaction to these disasters yielded no results.

China in Zambia – a Friend, Competitor or Exploiter?

It is reported that Chinese presence is disproportionately clustered in certain African enclaves (like the Copperbelt Province in Zambia). It follows that there are variegated experiences of China across space and populations in Africa. State elites, the business community, trade unions, workers, and the unemployed youth may or may not have a shared opinion. China may be variously viewed as a “friend,” “competitor,” or “exploiter,” depending on where and to whom one poses the question. A place where China has become increasingly salient in the economy and politics, Zambia has seen divisive and frequently violent politics related to the Chinese presence.[10]

In February 2010, Chinese President Hu Jintao held talks with his Zambian counterpart Rupiah Banda in Beijing. Hu said that China attaches great importance to developing ties with Zambia and is ready to join hands with Zambia to push bilateral friendly cooperative relations to a new level in the following four aspects. First, consolidate and develop a political relationship of sincerity and trust. Second, expand and deepen economic and trade cooperation of mutual benefit. Hu said China would work with Zambia based on the principle of mutual benefit, emphasis on practical results and pursuit of common development to carry out the already-agreed cooperative projects on schedule and launch new programs step by step. He called on the two countries to jointly do well in the building of the Zambia-China trade and economic cooperation zone in Zambia, well implement the cooperation within the framework of the Forum on China-Africa Cooperation (FOCAC) and expand cooperation in agriculture, mineral resources, infrastructure, among others. Hu said China would support businesses with a strong capacity and good qualifications to invest in Zambia. Third, enrich and promote humanities exchanges in various forms. Hu urged both sides to further expand cooperation in the areas of education, culture, public health and journalism and deepen mutual understanding and the traditional friendship. Fourth, enhance coordination and cooperation in international areas and multilateral affairs.[11]

In 2007, despite the disasters at Chambishi and Mulungushi Textile Mill, Felix Mutati, the then Zambia’s Minister of Finance said, “There is no doubt China has been good for Zambia. Why should we have a bad attitude toward the Chinese when they are doing all the right things? They are bringing investment, world-class technology, jobs, value addition. What more can you ask for?”[12]

But in October 2010 when Felix Mutati became the Commerce, Trade and Industry Minister of Zambia, he said that the Zambian government through the Ministry of labour is working to ensure that conditions of service in private owned companies meet the minimum requirements as set by the Zambian government. He also said that the Government is working through the Ministry of Mines to ensure that the safety regulations and requirements in mines are as defined by the laws of Zambia.
He explained that the strategies are being put in motion and government will take action against anyone who does not comply. He is quoted as saying, “For us we are not looking at the face of the investor, we are looking at the compliance to the rules and regulations of the country as the principle driving force for the residence of the investor into our country and nothing else.” Mutati also noted that China takes the center stage in terms of being an engine for creating the transformation that is required for Zambia and the rest of the world. He also said China is one of Zambia’s key trading and investment partners
He also said trade between Zambia and China annually is in the excess of USD 900 million and is one of the countries Zambia has recorded positive trading surpluses. “So for us China remains a key partner in our effort to meet the vision 2030 for Zambia to become a mid income country.” he added.[13]

In 2006, a mainstream Zambian political party, the Patriotic Front (PF), contested the elections on an explicit anti-China platform, and its defeat in the presidential elections triggered riots directed at Chinese establishments in the capital Lusaka and the Copperbelt Province. The rising sentiment in favor of economic nationalism has been most clearly articulated by the Patriotic Front (PF) and its leader, Michael Sata, who have exploited the latent dissatisfactions while further fueling them. Their 2006 campaign spoke against the continued control of outsiders over the Zambian economy, and this populist position pushed Sata to a surprising second-place in the presidential elections, as PF won every single urban parliamentary seat in the Copperbelt Province.[14]

Resentment towards Chinese business people is widespread among Zambia's small-business community as Chinese imports displace locally made goods. Low-paid workers employed by Chinese enterprises also complain of poor working conditions. The Federation of Free Trade Unions (FFTUZ) in Zambia has alleged that Chinese companies are the main culprits in the use of casual labour, where no social security payments are made and low pay is the norm. FFTUZ president, Joyce Nonde also blamed the country's weak legal framework which she said allows foreign investors to abuse Zambian workers with impunity. According to statistics from the Chinese embassy, investment by its nationals in the Zambian economy stands at more than USD 300 million, spread across 160 enterprises and employing more than 10 000 Zambians. Zambian traders in the capital Lusaka are said to be unhappy with Chinese traders who have taken up shops in the sprawling market of Kamwala, the city's oldest trading place. The Zambian traders complain that Chinese retailers have brought in cheaply-priced garments which have lured customers away from the Zambian manufactured apparel.[15]

Conclusion

Measured in some ways, Zambia’s economy is booming. Copper prices have soared from 75 US cents a pound in January 2003 to more than USD 3 a pound this year, driven in large part by Chinese demand. That demand has pushed Zambia’s long-dormant copper mines into record production.

When China’s president, Hu Jintao, visited Zambia in February 2010, he received the usual red carpet treatment from his Zambian host, President Levy Mwanawasa, but the reception from many ordinary Zambians was nasty. A trip to the site of the infamous Chambishi mine, China’s big investment, had to be scuttled entirely because of fears of unrest, and the circumstances of the industrial disaster there are still not entirely understood.[16]

Based on the information and discussion presented above and comparing it with Rana’s definition of Economic Diplomacy, it appears that China is benefiting more that Zambia from its investment in Zambia. The effects of China’s economic diplomacy initiatives seem lop-sided and may not hold good in the long run. The opposition party in Zambia, the Patriotic Front, coming to power could prove a hindrance to the present set up of Sino-Zambian bilateral ties. If China were to focus more on upliftment of the civilian population in Zambia, than it has been focusing on until now, it can produce positive opinions about China in the minds of the Zambians.

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[1] http://berkouk-mhand.yolasite.com/resources/economic%20diplomacy%20experinces%20of%20LDCs.pdf Accessed Date: 24th November 2010
[2] Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-63
[3] CIA Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/za.html Accessed Date: 24th November 2010
[4] Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-63
[5] Ministry of Foreign Affairs of the PRC http://www.fmprc.gov.cn/eng/wjb/zzjg/fzs/gjlb/3114/ Accessed Date: 24th November 2010
[6] Pros and cons of China-Zambia relations, African Business; Feb2008, Issue 339, p53-53
[7] China Becomes the Largest Investor in Zambia, Chinascope; Jan/Feb2009, p49-49
[8] New York Times http://www.nytimes.com/2007/08/21/world/africa/21zambia.html?pagewanted=print Accessed Date: 27th November 2010
[9] http://www.lusakatimes.com/2010/03/06/zambia-china-mulungushi-textiles-to-reopen-this-year-%E2%80%93-mwansa/ Accessed Date: 27th November 2010
[10] Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-63
[11] Ministry of Foreign Affairs of the PRC http://www.fmprc.gov.cn/eng/wjb/zzjg/fzs/gjlb/3114/3116/t660703.htm Accessed Date: 30th November 2010
[12] New York Times http://www.nytimes.com/2007/08/21/world/africa/21zambia.html?pagewanted=print Accessed Date: 27th November 2010
[13] Lusaka Times http://www.lusakatimes.com/2010/10/23/felix-mutati-warns-investors/ Accessed Date: 27th November 2010
[14] Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-63
[15] Pros and cons of China-Zambia relations, African Business; Feb2008, Issue 339, p53-53
[16] New York Times http://www.nytimes.com/2007/08/21/world/africa/21zambia.html?pagewanted=print Accessed Date: 27th November 2010