China has had an aid program since the 1950s; Egypt was the first African recipient of Chinese aid in 1956. Recent remarks by African Ministers report a need for Chinese aid because it is increasingly difficult to get assistance from traditional donors. Author Brautigam argues traditional donors too often focus on negative aspects of Chinese aid (influx of Chinese products and Chinese laborers, supplying arms in exchange for oil; fear that intent is transhipment of Chinese products relabeled as 'African'), and that it offers real opportunities for development. In general, Chinese aid is more targeted, less bureaucratic, faster, and increases African nations' bargaining power vs. other donors (eg. larger joint venture shares, lower interest rates). It addressrd concerns about corruption and possible diversion by keeping the money in China as much as possible rather than transferring cash. It is also more targeted to important infrastructure projects with long maturity and long-term potential. China's development aid to Africa has rapidly increased at an average rate of 46%/year over the past decade. At the same time, Africa's exports to China have doubled, with crude oil making up about 70% of the total - mostly from Angola and Sudan.
The lion's share of aid to Africa is export credits, non-concessional state loans, or aid used to foster Chinese investment. In 2006, the Chinese government indicated it would establish up to 50 overseas economic and trade cooperation zones worldwide. (China's outward investment 2005-10 totaled $316 billion, with about 9% in the U.S., 11% in Autralia, 13% in Europe, 17% other Asia, 16% in the Middle East and North Africa, and 14% in Sub-Saharan Africa.) Of this, it is pursing six (possibly seven) economic cooperation zones in five (possibly six) African nations for 'mutual benefit.' Land concessions run from 50 to 99 years. Locations near major ports were generally favored. (Algeria, Egypt, Ethiopia, Mauritius, Nigeria, Zambia) Initial intent indicates an intent to help China's restructuring, allowing labor intensive, less competitive, 'mature' industries such as textile, leather goods and building materials to move offshore. This would also reduce African nations over-reliance on imports of consumer and manufactured goods. Chinese companies (some nationally-owned, others owned by municipalities, the remainder private) have taken the lead in developing these - over 120 have proposed projects, and 19 were selected.
One zone will concentrate on mineral processing, the others mainly on manufacturing. Some are 100% Chinese-owned, others joint ventures with African national or state-level governments as minority partners. The Chinese government provides support for the zone developers via grants and long-term loans. All subsidies are performance-based - the company has to first pay the costs, only later reimbursed.
China's government has taken a 'hands off' attitude towards African policies - no evidence of conditionalities. Host governments are expected to provide infrastructure outside the zones, the Chinese developers inside. Long timeframes are the expectation - past experience in China was it usually took 10-15 years before a zone 'took off,' primarily because of the immense construction work and the need to convince investors to set up factories in a new locale. Most of the zones plan to foster clusters; hopes are that Chinese companies will make up 70 - 80% of the enterprises. In general, Chinese workers are limited to a proportion of local labor - eg. 60%.
China's experience with development zones was that initially it was happy to just get the investments; now it requires technology and R&D transfer. No agreements have been reached regarding these African zones. Regardless, in the near term Chinese zone developers are anticipated to bring future-oriented design, high-standard infrastructure, and world-class professional management to the areas.
Author Brautigam also address China myths and partial truths. 1)China gives money to almost every country in Sub-Saharan Africa, even those that don't acknowledge the One China policy. There is little evidence that it gives more aid to nations with more natural resources or targets countries with worse governance. The World Bank's database, supplemented by additional research, reveals that only 7 African countries have used large, natural resource-backed lines of credit from China for infrastructure projects not directly connected to the exploitation of those resources. 2)Chinese workers and managers in Africa live in extremely simple conditions, contrary to Western advisers. 3)China has flouted social and environmental standards, but is improving. It now uses either its own standards or those of the host nation. 4)Funds from China are frequently far below media reports - eg. reports about Chinese loans in Nigeria mention figures of $5 billion or more, China only provided $589 million between 2000 and 2009. China's reluctance to release foreign aid data helps create such confusion.
China has also earmarked $5 billion for investment in African farming, causing some alarm. Resentment has also been created by Chinese traders - halving the cost of chicken, reducing cabbage prices by 65% in Soweto markets. Others resent Chinese-run textile factories paying salaries of about $200/month - more than in China but less than the local minimum wage.
Summarizing, Brautigam believes there is little that China is doing, good or bad, that has not also been done by Europeans, Americans, Japanese, or Russians. Secondly, most of the sins in Africa are committed by African governments themselves.