Beijing: Economic Development and the China Africa Summit

Start learning Mandarin now.

I traveled to Beijing last November as an invited speaker to a conference on Open Standards, IP and Innovation.  I arrived in Beijing late in the evening, but all along the drive to the hotel there were signs for the China Africa Summit.  "Friendship, Peace, Cooperation, and Development" was loudly proclaimed in Chinese, English, and French.  Over the next few days I realized Beijing was blanketed with these signs.

 
I had no understanding of what the summit was about, so didn't pay a lot of attention to it at first.  I also quickly entered the "Lost in Translation" zone, where time ceases to mean much and you spend odd hours awake and unable to sleep regardless of exhaustion levels, traveling through a wildly different cultural experience. (There was even an evening on San Li Tun reminiscent of the "out on the town" scene from the movie.) 

But then I started to see coverage of the summit on TV on both CCTV (the China news station in English) and BBC World News. Western media coverage was scant.  A Google news search towards the end of that week showed a pair of BBC articles, an AP article, and a Reuters article.  CNN merely grabbed the AP article and moved on.  There were a reasonable number of articles in the People's Daily and various African news services. A search on BBC and Reuters today shows more complete coverage (below).  [AP wants to charge for its archives so they're left out.]

Essentially, in its need for resources to continue to feed the maw of infrastructure development, China rolled out the red carpet to the African nations.  This is apparently the third such summit, and the biggest.  Many leaders of various nations were in attendance. 

Stop and consider what Africa and China together means.  This is not simply resources to China.  It means money into Africa.  And as those battered economies start to improve, it means China is opening its next export market, likely on terms far more interesting to the African nations than any G8 economy is going to offer.   The arrogance of assumed position in the G8 countries will cause them no end of grief here.

The TV interviews all followed a pattern.  An African leader or their economic minister basically felt pretty good about the deals they were negotiating.  They regularly expressed the view that China was making them feel good about the opportunity, and NOT treating them like some backward colony in need of a hand-out.  (Never underestimate the power of presentation and marketing, even at the macroeconomic level.) 

I ran into around a dozen delegates over a few evenings in the pubs.  All of them echoed the opinions of their delegation leaders on TV.  They were never made to feel second class in the discussions in China.  They were pleased with the deals and what they were taking home. (The deals totaled one and a half billion dollars.)

A recent article in the Economist (sorry — subscription required) described the effects of China in Africa best perhaps:

In Angola a $4 billion line of low-interest credit enables Chinese companies to help rebuild the bridges, roads and so on that were destroyed in decades of war. The debt is repaid in oil.

For Angola, which has been keen to get going with the reconstruction of its infrastructure, China's straightforward approach is an attractive alternative to the pernicketiness of the IMF and the Paris Club of creditors, which have been quibbling over terms for years. So it is with many African countries, fed up with the intrusiveness of Europeans and Americans fussing about corruption or torture and clamouring for accountability. Moreover, the World Bank and many Western donors were until recently shunning bricks-and-mortar aid in favour of health and education. China's credit to Angola is not only welcome in itself. It has reduced the pressure from the West.

Thanks to China, therefore, workers from the Middle Kingdom in straw hats are now helping Angolans to lay down new rails on the old line from Luanda to the eastern province of Malange. Another railway, from Benguela to Zambia, once used to carry copper, is also being rebuilt. China is happy: the work helps offset some of its trade deficit with Angola. The Angolan government is also happy: it is rebuilding its shattered economy at last.

 

Interesting things start to happen when China gains the support of 30-40 countries in large international organizations.  Think about a voting block in the UN.  As a sometimes standards wonk, I can't imagine what it will mean when the Chinese can start to drive their standards efforts and agendas through ISO differently. 

Of course the western news agencies covered the Western concerns raised over China's human rights track record and the possible support for less than free-thinking regimes in parts of Africa.  I can only partially share the concern. 

• I'm a Canadian, and like the U.S. and Australia, Canada was a colony.  I'd observe, however, that the U.S., Canada, and Australia are "different" as colonies go.  We obliterated the native culture we found and we are essentially extensions of the democracy that created us.  Not so with the African colonies that have re-gained their independence over the past four or five decades with the waning of European colonization. 
• I now live in the United States.  If I understand the recent news, I am living in a country where I can be declared an enemy of the State, and locked up without recourse.  The President can declare martial law and deploy the military against his own civilians.  (I lived in Canada in 1970 during the October Crisis when Trudeau invoked the War Measures Act and put the army in the streets of Montreal at the height of the FLQ crisis.)  Of course these powers would never be used irresponsibly.  But what's the diplomatic message: "It's okay that we have these powers, but not you." 
• Standing next to the Square in downtown Beijing, I can appreciate the horror of what happened here, but I'm afraid I don't see a difference from the Kent State shootings beyond a body count.  President Nixon attempted to justify the Kent State shootings at the time with the statement, "This should serve as a grave reminder that when dissent turns to violence, it invites tragedy." 
  

I do not condone human rights abuses anywhere.  The tragedy in Darfur is heartrending, and continues partially due to China's machinations in the UN Security Council, presumably in exchange for some of those Sudanese oil rights.  What I do object to, however, is hypocrisy from the Western states.  Our hands may be "cleaner" by some moral measure, but they certainly aren't clean.   

But let's focus on the economics instead of highly charged politics.  What I saw for the most part in my travels in Beijing were the effects of the boom and a growing middle class. 

I went shopping in a number of venues.  I visited the Hong Qiao market one day.  As always, the market was packed with five floors of tourists buying inexpensive goods.  (The West might have less of a problem with Chinese replicas if so many Western tourists would stop buying them.) 

Notice all the new cars and buses in the photo.  The streets are overrun with new Hyundai Elantra taxi cabs and some form of Volkswagon that looks like a rebranded Passat.   This is very different from the masses of black BMW and Mercedes of four years ago when I last visited.  Then they were mostly company cars.  Now people can afford cars as well. 

I saw a number of bicycle stores on my walks and taxi rides.  The stores and sidewalks in front of them were packed with racks of new bicycle frames in bright colours.  They still looked pretty rugged, no doubt to deal with the pot holes that litter the side streets, but apparently even bicycle owners can buy new bicycles. 

And yes, that is a blue sky in the photo.  The smog was punishing the first few days in Beijing.  Then a huge wind came through and we had awesome blue skies for several days.  The smog was very reminiscent of the way my father talked about Los Angeles, CA in the early 1970s.  Hopefully the Chinese government will tackle the problem soon, just the way other developed nations have so done.  Traffic was certainly crazy.  The government used the China Africa Summit to try (apparently successfully) the traffic procedures they will put in place for the Olympics.   

I also found out that WalMart has hit town.  I wandered into the store because I just could NOT pass up the chance to see how the brand transfered.  It was fascinating.  It actually looked nicer — the aisles were not as crowded, and the clientèle felt more budget conscious than budget constrained.   

I passed what looked like a new IKEA store on the out skirts of town on my way to and from the airport.   I would loved to have checked it out if time permitted. 

I wandered into the new Beijing Modern Plaza at the end of a long walk Sunday.  This was much different.  It is essentially a five story collection of upscale boutiques (all international brands) all under one roof — a glass and chrome upscale version of the Hong Qiao market.  I had been walking for some time at that point so stopped in the Starbuck's for a latte.  It was indistinguishable to my poor palate from anything I'd find in North America.  The store held table space for about 40 people and it was packed on a Sunday afternoon.  There were only a few of us that were visibly from somewhere else.  The mall itself was again full of a well dressed middle class out for some Sunday shopping. 

As I pointed out in the post on the standards and IP conference, the Chinese are not mimicking the West.  They are developing their own middle class culture.  At a holiday party, a colleague suggested that the conventional wisdom that says the country that makes the most has the strongest economy may be wrong — it may be the country that consumes the most.  If this is the case, then China is well on its way to world dominance by either measure.

I had the privilege over several days on either side of the weekend of meeting with a number of small (20-50 person) Linux companies around Beijing.  In each case, I saw a vibrant company aggressively looking for new opportunities.  Most already recognized that they could no longer rely on a business culture based on depending on friends and family and the government for business connections.

One company had reinvented itself 4 times over the past 10 years, re-purposing its Linux expertise on new and different embedded markets with new partners every 3-4 years.  Another was rapidly moving from training to consulting.  A third was rapidly re-inventing its hardware line.  Each of them is growing.  All of them live in the shadow of Lenovo. 

In the early 1990s we were all panicked by Japanese investment into North America.  We were essentially "for sale" and we should all start learning Japanese.  The Japanese real estate market tanked in conjunction with a lot of bad debt floated by the Japanese banks, and the "takeover" ended.  China as an economic force is different.  They aren't simply investing.  They're building and consuming and exporting. 

When I started this post suggesting you should start learning Mandarin now, it's not that Chinese will replace the need for English as the lingua franca of global business. Rather to be completely successful internationally I believe it will be necessary to work in both.  The Chinese are already rapidly learning English.  If you only speak English, you will be at a distinct disadvantage as an international business "partner".   

China Africa news links:

• BBC Coverage (6 Nov Wrap-up, 4 Nov on Aid, 3 Nov on Trade, 2 Nov Kick-off)
• Reuters (5 Nov - Summit Close, 4 Nov - $1.6B worth of deals, 2 Nov - Plans)
• The Economist ran an excellent article (as always) just prior to the Summit.  [Unfortunately it requires a subscription.] It does a fine job of teasing out the political concerns as well as the economic, including the strong-arming in the UN Security Council from China on the tragedy in Darfur. 

www.flickr.com stephenrwalli's Beijing photoset