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Is China Capitalizing on the Congo?

August 10, 2011

On May 27, 2011 in Brussels, China and the Democratic Republic of the Congo (DRC or Congo) signed an $9 billion dollar economic cooperation agreement to increase the trade in natural minerals between both countries.

Today, China is the DRC’s largest foreign investor. The Congo is historically deemed as a country rich in natural resources such as oil, minerals, and timber. With China’s increasing need to intensify development and growth, China sees the DRC as both a development partner and a beneficiary of its economic investments abroad. Thus far, China has built a new foreign ministry, a hydroelectric dam, hospitals, sports stadiums, and an extensive network of roads. Cooperation has been extensive, including infrastructural and business investments totaling more than 2,050 miles of asphalt paved roads, repairs on 2,000 miles of highways, two electricity centers, five cobalt and copper mines, 32 hospitals, 145 health centers, a $367 million hydropower agreement, and many others. Unsurprisingly, these investments have been welcomed by the DRC’s government administration.

In fact, the DRC government representatives assert that the China’s policies for economic investments generate “tangible development.”Serge Mombouli, DRC President advisor and Congolese Ambassador to the US, supports China’s development initiatives to strengthen economic ties with the DRC and believes that the expansion of trade between the two countries will support the DRC’s building of basic infrastructure, and enable domestic development. The Chinese investors have essentially won over the Industrial and Commercial Bank of China, the Bank of China, African governments, private sector companies in Africa and China, the African Development Bank, and other finance institutions. Together, this group of public and private investors is constructing one of the newest investment projects today.

On the ground, Congolese citizens view Chinese investors, engineers, and business diplomats as job providers.  The Congolese people, who continue to face issues such as famine, poverty, conflict, and disease, now believe that “the Chinese will come and fix” not only their roads, but also the country and its people.

To Western ears, this language can conjure certain unpleasant connotations. The financial agreement between China and the Congo has been dubbed as China’s “Angola Model.” Essentially, the Angola Model is a form of public and private sector financial aid engagement, which encourages foreign investors to invest in Africa’s economic growth. However, other parties are less than enthusiastic about the China-DRC engagement.

The flip side of the China’s DRC investment story conjures deeply rooted historical issues such as colonialism and imperialism. Peter Navarro, business professor at the University of California-Irvine, argues that China’s actions can be categorized as “new imperialist” as it takes advantage of the DRC’s abundant supply of natural resources while also supporting its corrupt governments within the DRC. Deborah Bräutigam, professor of International Development at American University, also criticizes a variety of factors in the trade agreement ranging from abysmal wages and safety issues to community tensions and environmental concerns.

At the other end of the spectrum, Chinese African specialist Li Guijin rebuts that China’s relationship with the DRC is built upon joint ventures, business contracts, and friendly relations. Li adds that the trade relation is fair and equally consultative.

Paul Fortin, a Canadian lawyer who negotiated the China-DRC agreement , takes a middle-of-the-road approach. Fortin argues that the China-DRC contract will allow the Congolese state to retain revenue from the mining contract, but adds that “revisitation” and renegotiations are needed to tweak specifics within the contract to ensure a more equal trade agreement.  However, the cost and benefit analysis of the agreement does not just involve China and the DRC.

The International Monetary Fund (IMF) and the World Bank also have a stake in the trade relation between the two countries. The IMF dictates much of the DRC’s international trade activities, and in 2010, the IMF and World Bank announced a debt aid package worth $12.5 million to continue aid support to the DRC. However, the IMF almost scrapped the aid package, arguing that the DRC government has not done enough to increase transparency and democracy. The close relationship between the IMF, World Bank, and the DRC makes for a tangled web once China increased its influence in the country. The IMF opposed China’s mineral deal, arguing that the large scope of the trade agreement places the DRC in a position of high-risk and would potentially provide a debt catalyst, increasing the DRC’s foreign debt crisis. Moreover, the IMF is also greatly concerned with the lack of transparency and democracy in the DRC, a situation hardly likely to improve as the DRC strengthens its relationship with the world’s most powerful communist state.

China’s massive investment in the DRC is only one of the most recent controversial trade negotiations amongst China’s international development projects.  To be sure, increased transparency of the China-DRC contract (as suggested by Global Witness) will ensure fairer trade practices between both countries.  At the same time, China’s investment efforts will help pave the way forward for a conflict-scarred country to escape from its unstable past and begin building the infrastructure for a more stable economy.

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