Table.Briefing: China

Marina Rudyak on Africa + Hong Kong lockdown hurts banks

  • Sinologist Marina Rudyak on China’s efforts in Africa
  • Hong Kong’s isolation hurts financial sector
  • EU extends feelers to Taiwan
  • US call for greater Taiwan role at UN
  • Xi plans purchase of more high-tech weaponry
  • Power crisis leads to Diesel shortage
  • USA disconnects China Telecom
  • Profile of horn player Han Xiao-Ming
Dear reader,

China was already providing development aid to Africa, back when it was still a poor nation itself. Now China is rich and can afford a correspondingly generous commitment. Europe cannot keep up. European aid is tied to numerous standards – and there is nowhere near as much money available. While it is true that EU member nations have launched counter-projects to the Silk Road Initiative, they “give the impression that it is more about solving their own China problem than Africa’s infrastructure problems,” says our interlocutor Marina Rudyak. The expert on China’s foreign relations reveals Beijing’s real motives ahead of the China-Africa summit.

According to Rudyak, the infamous story of a devious China that lures smaller countries with money and drops them into a trap is a myth. There is actually a growing fear in China of stepping into a “creditor trap”. But one should not be mistaken: Beijing’s strategists are strictly acting under power-political interests when granting loans. The bottom line, however, is that the nations of the Global South benefit from the attention they receive from the economic power.

While China demonstrates openness towards Africa, it systematically seals off Hong Kongits financial capital. COVID-19 is becoming the go-to excuse to punish the city for its democracy movements. For even individual cases trigger a harsh tightening of isolation mandates. Its economic heart is suffering as a result: the financial sector.

Meanwhile, the Chinese threats against Taiwan are triggering various initiatives in Western countries. EU parliamentarians are planning a trip to Taipei, while Taiwan’s foreign minister was invited to Prague. The US has launched an initiative to restore Taiwan’s greater role at the UN. The government in Taipei is pleased about the idealistic support – but there is a fly in the ointment: all initiatives are uncoordinated and thus remain piecemeal.

Your
Finn Mayer-Kuckuk
Image of Finn  Mayer-Kuckuk

Interview

‘European Integration’ as Europe’s unique selling point in Africa

Marina Rudyak researches development cooperation and China’s international relations at Heidelberg University

Ms. Rudyak, what outcome do you expect from the Forum on China-Africa Cooperation (FOCAC) regarding China’s financial commitments to African countries?

I don’t think we will see an increase in China’s lending commitments to African countries. Until 2015, China did increase its pledges each time at FOCAC summits, but since 2018 they have stagnated. At that time, China did pledge the same value as in 2015. That was $60 billion in loans and investments over three years. But the share of gifts and interest-free loans was lower than in 2015, so the package became more expensive for recipients overall. Loan negotiations have also become more stringent since 2018. At the same time, however, I don’t expect commitments to be nominally lower this time around. That would not fit China’s foreign policy rhetoric of helping Africa overcome the COVID-19 pandemic. But the overall structure of its pledges could change significantly.

Over the past 20 years, China has become Africa’s largest donor. Diplomats frequently like to accuse the People’s Republic of using debt to secure strategic access to raw materials and infrastructure, and of resorting to debt-trap diplomacy.

The term debt-trap diplomacy has become synonymous with Chinese loans in the public debate. The consensus among researchers is that there is no evidence that China strategically drives countries into debt traps. That is not to say that debt traps do not exist. It is just that these do not result from a strategic approach by China, but because governments are over-indebted – not only to China but to European private banks as well.

Can you give an example?

Sri Lanka is often cited as a victim of China’s debt-trap diplomacy since it leased its Hambantota Port to China Merchants Port for the next 99 years. This allegedly happened because Sri Lanka could not service its debt to China. However, in reality, Sri Lanka was not bankrupt at all. Rather, a newly elected president was looking for ways to get rid of an unprofitable port that was the pet project of the old president. China Merchants Port, which had built the port, agreed to lease the facility. But none of its Chinese loans were serviced in return. Instead, the more expensive Eurobonds that were due were serviced – that is, the debts owed to private creditors.

How does China perceive international lending?

In China, lending to the poorest states is now even discussed more like a “creditor trap”, i.e. a trap for the lender, because the risk of default is very high.

The strategy is also being critically reflected in China?

In China, one repeatedly reads about the lack of international experience of the Chinese development banks China Development Bank (CDB) and Eximbank. They are accused of poor credit risk management. This is hard to imagine since the CDB is the largest global bilateral lender. But half of its six-member management board comes from the Agricultural Bank of China, two from banking supervision, one has made a career at the CDB – and not a single one has any actual foreign experience. These people were responsible for China’s rural development and are now expected to finance infrastructure development in Africa. They have little understanding of the African countries they are lending to and the local political context.

However, China has long been the largest donor and investor in African countries. What do you make of this?

I have to agree with former Liberian Labor Minister Gyude W. Moore. He says, even if the Silk Road fails, it is a remarkable attempt to connect the world’s poorest countries to the world’s richest countries. Moore criticizes: Until China came along with the Silk Road, Europe lacked any creativity in dealing with its neighbor. Western approaches to infrastructure development never really worked.

Why is that?

There have been attempts, such as the EU Infrastructure Trust for Africa, initiated in 2007, which have achieved little. Perhaps because Africa is not a priority for the EU. The view of the continent is still shaped by a post-colonial lens that divides the world into developed and developing countries, into donors and recipients. We see development as “their” problem, as “that one over there, in Africa” – not as “our”, common problem. Now some attempts want to compete with China: the G7’s “Build Back Better World” or the EU’s recently announced “Global Gateway”. But unfortunately, they all give the impression that they are more concerned with solving their own China problem rather than Africa’s infrastructure problems.

Is China’s approach succeeding in reducing this development gap in many African states, for example in mitigating the high level of unemployment in Africa?

Contrary to popular belief that Chinese investors always rely on their own workforce, China is creating jobs in Africa. There are now numerous studies on localization. It is also only logical, local labor is often cheaper.

And what are the working conditions like?

Yes, that’s where it gets problematic. Working conditions are no better at a Chinese construction site or in a Chinese factory in Africa than they are in China. A long-term study by the London School of Oriental and African Studies in 2019 also concluded: Western companies offer very similar conditions.

Are the relations with the EU now deteriorating because there is so much more commitment from China?

African governments turn to Europe for issues such as good governance, human rights or labor and social standards – and to China for infrastructure investments. China, on the other hand, needs raw materials from Africa. So we often see resource-for-infrastructure contracts. At its core, there is nothing wrong with countries wanting to turn their raw materials into economic growth by selling them to China, but the conditions have to be right. That’s where it comes down to African governments: Do they have the interests of the population in mind or the particular interests of a small elite? A strong civil society is also crucial here because it can exert pressure on governments.

The Democratic Republic of Congo wants to renegotiate mining contracts with China. Does this kind of thing occur more frequently, and how does China react to it?

The DRC contracts are also a resource-for-infrastructure deal. That means that China is extracting resources and is supposed to build roads in return. Congolese politicians say: The resources are being extracted, but little is happening for the infrastructure. In fact, of the 3 billion dollars agreed in 2008 for infrastructure development, only 825 million has been spent so far. Incidentally, we see something similar in Ghana, where voices are now calling for a renegotiation of contracts. We hear such calls all the time, especially after changes in government. In the DRC, too, the new president considers the contracts arranged by the old government to be unfair. In general, China tries to respond to demands from partner countries, because it is usually interested in mutual solutions for political reasons alone.

How serious is China about the chances of developing Africa’s export industry? Is the People’s Republic now allowing processed goods into the country?

While China exports massive amounts of machinery and consumer goods to Africa, Africa, conversely, exports mainly raw materials to China. The only notable exception is South Africa. China has long promised to facilitate access for African agricultural products to the Chinese market. It remains to be seen, however, whether there will be any concrete commitments to this effect at FOCAC this time. In addition, China wants to move more “low-tech production” to Africa, which in turn could potentially produce exports to China.

You have often compared China and Europe in Africa. What does Europe have to do, to get its foot back in the door?

I think the attempt to compete with China is wrong. For one thing, Europe is simply not financially competitive, because China can produce much more cheaply. The problems with the New Silk Road Initiative – a lack of transparency, labor, and social standards – must also be solved mutually by China and the partner countries.

What could Europe offer African states that China cannot?

I see Europe’s ‘unique selling point’ – not only in comparison to China, by the way, but to all others as well – in the experience of European integration. Because Africa is in an integration process with the African Union with many similar issues, from reducing regional disparities to creating common markets. I see a key role here, for Central and Eastern European countries in particular; their experience of catching-up development has so far not been taken advantage of when it came to cooperating with Africa. Above all, however, we must change the way we think about development: Development is not Africa’s problem, but one we all share.

  • Africa
  • DR Congo
  • FOCAC
  • Loans
  • New Silk Road
  • Raw materials
  • Trade

Feature

Quarantine policy harms Hong Kong’s financial center

Sealed metropolis: Even isolated cases trigger extreme measures in Hong Kong

Hong Kong’s banks have had enough. Over the weekend, its banks sent an urgent reminder to Financial Secretary Paul Chan, expressing their outrage over the current situation. The government’s “zero-covid policy” and its strict quarantine rules in Hong Kong are jeopardizing the competitiveness of the location compared to other financial centers, the letter says.

While London, New York, and, most recently, Hong Kong’s fiercest competitor Singapore have decided to largely lift travel restrictions, Hong Kong is clinging to its strict rules. Around half of its members are considering relocating staff from the city to other locations, the letter by Hong Kong’s banking association, ASIFMA continues.

In addition to Hong Kong’s financial institutions, numerous other sectors and business associations have complained about the conditions in the Chinese Special Administrative Region in recent weeks and months. Yet no one denies Hong Kong’s remarkable success in keeping the virus at bay. In the past six months, only four local infections have been registered. Most recently, the city saw a record of 50 days without a single infection, until a vaccinated airport employee tested positive. Since then, almost another three weeks have passed without a new case.

The World City becomes the Walled City

This was made possible because Hong Kong has the strictest quarantine rules in the world. Only the People’s Republic has equally strict regulations. Anyone entering the city must spend 14 to 21 days in quarantine in a hotel room, depending on the risk in the country of origin. The demand for rooms in designated quarantine hotels is often greater than the supply of around 10,000 rooms. That limits the number of those allowed to enter. Especially business travelers, who want to stay in a four- or five-star hotel, have to book well in advance.

There is a joke being told among Hong Kong expats. “Asia’s World City”, something with which the Hong Kong government has been advertising the cosmopolitanism of its metropolis for years, has become “Asia’s Walled City”, a metropolis behind walls. Indeed, many companies have settled in Hong Kong primarily because of its central location. From Hong Kong, all other parts of the region are equally easy to reach. Factories in mainland China as well as in large parts of Southeast Asia could be reached with a day trip in the past. But for nearly two years, business trips have been virtually non-existent. Home leave in Europe or the US brings a risk that the subsequent return will be an ordeal.

After it was not clear for a long time how Hong Kong’s government intends to solve the predicament, it has recently announced at least one clear goal. While international borders are to remain closed for the foreseeable future, it does everything in its power to finally reopen the border to mainland China.

Virus-free – but at what cost?

Hong Kong has long since successfully demonstrated that its anti-Covid measures work. Nevertheless, Beijing has so far refused to let Hong Kong residents back into the country without quarantine. Although the financial capital is effectively virus-free, anyone traveling to China must still be confined to a hotel room for at least 14 days or, in the worst case, even to a central quarantine camp. Travel from the mainland to Hong Kong, on the other hand, is possible without quarantine.

Companies in Hong Kong have little sympathy for the unilateral regulation, not least because people from the neighboring city of Macau, also a special administrative region of China, are already allowed to enter the People’s Republic without the need for quarantine for more than a year. Some critics in Hong Kong are already muttering that the central government does not actually have virus prevention in mind. Rather, its unruly child, Hong Kong, should be punished for its rebellious behavior of the past years.

Penny Bay Quarantine Center: torment after returning

Beijing has not expressed any concrete criteria as to when and under what conditions the border will be reopened. Earlier this year, China demanded that Hong Kong had to be free of Covid – a goal that has long since been achieved. Later, there was criticism that vaccination rates were too low. Most recently, mainland officials presented Hong Kong with a new list of demands during border opening negotiations.

For example, work is now underway to introduce an improved health code app that can track where users have been in recent weeks. The Hong Kong government also announced this week that it would end all quarantine exemptions. Such exemptions have previously been granted to some executives of major companies or diplomats. The recent free entry of actress Nicole Kidman for a shoot had sparked a heated debate.

But all this does little to improve the mood among businessmen. There is a lot of anger that Hong Kong’s leadership is not able to present a precise date for opening up to the mainland. Some optimists claim it could be as early as December. Hong Kong media quoted sources as saying borders won’t be opening till after the Winter Games in Beijing, i.e. sometime next March. But no one knows for certain. “No light at the end of the tunnel,” is how the Hong Kong newspaper South China Morning Post summed up the mood among businessmen in the city this week. Gregor Koppenburg/Joern Petring

  • Coronavirus
  • Finance
  • Health
  • Hongkong
  • Market
  • Trade

MEPs travel to Taiwan

A European Parliament delegation will travel to Taiwan next week. The MEPs will meet high-ranking Taiwanese politicians of foreign and justice ministries, South China Morning Post reported, citing parliamentary sources. A meeting with Digital Minister Audrey Tang is also said to be on the agenda.

According to the report, the delegation is led by French EU politician Raphael Glucksmann. Glucksmann is one of several MEPs who were sanctioned by Beijing in the spring. Alongside him, MEPs from Lithuania, Italy, the Czech Republic, Greece, and Austria are traveling to Taipei.

The Chinese representation in Brussels reacted to the announcement of the trip and insisted on the “one-China principle,” calling it the “political basis for the development and expansion of Sino-European relations”, the Chinese representation wrote to the EU on Twitter. “We will continue to respond according to developments,” the tweet said.

Taiwan’s Foreign Minister visits the Czech Republic

Several EU states are currently developing closer ties with Taipei. Taiwan’s Foreign Minister Joseph Wu arrived in the Czech Republic on Wednesday. He followed up a four-day visit to Prague by a Taiwanese business delegation led by two ministers. Wu was received by the chairman of the Senate of the Czech Parliament, Miloš Vystrčil, and met with Prague Mayor Zdeněk Hřib. The entrepreneur delegation had also visited Lithuania and Slovakia last week.

At an event hosted by the Oriental Institute and the Czech research institution Sinopsis, Wu called for a continuation of the long-standing relationship between the Czech Republic and Taiwan. The minister recalled the commitment of former Czech President Václav Havel, who passed away ten years ago. He had visited the island state several times during his term in office and met high-ranking Taiwanese politicians.

Addressing the growing tensions between democratic and authoritarian-ruled states around the world, Wu urged greater vigilance in democratic societies. “We are in the midst of an information war, and the friends of democracy are unarmed and ill-prepared. This is partly because we have become too complacent in the 30 years since the end of the Cold War. We’ve been too confident that the Democratic tide will continue to rise just because history has been on our side,” he said.

China criticizes proposals on Taiwan’s rapprochement with the UN

The US, meanwhile, has made a push to get Taiwan more involved in United Nations institutions. Foreign Minister Antony Blinken has proposed that representatives of Taiwan should again have the capability to send more representatives to UN committees and organizations, for example to the World Health Organization (WHO). Blinken urged other countries to support this approach, calling Taiwan a democratic success story. Over the weekend, representatives of Taiwan and the US had met online to discuss steps to implement the initiative. This should also – like the advances of the EU parliamentarians and the talks in Prague – strengthen Taiwan’s back.

Blinken’s rationale for the push makes clever use of the fundamentals of Chinese foreign policy. This requires that “one China” be assumed to include both the mainland and Taiwan. Blinken now argues that if Taiwan were excluded, “one China” would not be fully represented. China has been particularly wary in recent years of Taiwan’s participation in decision-making in the United Nations, even in a covert manner. In 1971, the United Nations admitted the People’s Republic and expelled Taiwan. For decades, Taiwan has been trying to regain a seat at the table. The Biden administration now supports this endeavor.

On Wednesday, China responded. The People’s Republic is the “only legitimate government representing the whole of China,” a spokesman for the Taiwan Affairs Bureau said at a press conference. Taiwan, therefore, has no right to participate in United Nations consultations – these are reserved for “sovereign nations”.

In relations among nations, de facto customs are also considered a source of law. If Taiwan behaves like a sovereign state on the global stage and no one objects, then it will become a sovereign state. This is the reason why the recent EU and US activities are so important to Taipei. And that’s why they will continue to provoke outrage in Beijing. Amelie Richter/Marcel Grzanna/Finn Mayer-Kuckuk

  • Czech Republic
  • EU
  • Geopolitics
  • Taiwan

News

Rationing of Diesel and other fuels

The power crisis in China has now also affected the Diesel supply. News magazine Caixin reports that gas stations “in many parts” of the country have begun rationing diesel. The reasons are an increasing shortage and rising procuring costs. The rationing affects not only car owners and truck drivers, but also homeowners who heat their homes with diesel oil and companies that use diesel generators to produce power.

The second-largest economy has been struggling to secure its power supply for weeks. Numerous companies, but also private households, are repeatedly experiencing power outages because coal and gas have become scarce. German companies are also affected by the bottleneck.

The rationing of Diesel is likely to have a particularly severe impact on logistics in the People’s Republic. The supply chains of its industry are already suffering heavily from the consequences of the Covid pandemic, as closed borders, export quotas and strict requirements imposed by the authorities are making it difficult to ensure a smooth supply of raw materials and components. Restricting truck shipping would further increase the pressure on supply chains. grz

  • Caixin
  • Energy
  • Supply chains

Xi orders high-tech weaponry

President Xi Jinping has urged the People’s Liberation Army to quickly upgrade its arsenal. The army should explore new ways to develop weapons and equipment, according to a report by news agency Xinhua. Xi made the statement at a conference on procurement matters of the People’s Liberation Army. The head of state praised in particular the breakthroughs in equipping the armed forces that have been made in the past five years.

In fact, the People’s Liberation Army has recently made significant gains in the procurement of high-tech weapons. AI drones, killer robots, unmanned submarines, hypersonic missiles, compact nuclear bombs – the arsenal is becoming increasingly diverse. At the same time, however, large parts of the armed forces are considered obsolete. China currently spends around $250 billion annually on defense. fin

  • Geopolitics
  • Military
  • People’s Liberation Army

USA cuts China Telecom from the network

The government in Washington has revoked the license of a subsidiary of Chinese telecommunications provider China Telecom. China Telecom (Americas) Corp. must withdraw from US business within two months. It will then no longer be allowed to offer telephone and Internet services in the US. The responsible supervisory authority Federal Communications Commission justifies this with security risks. The regulator fears that Chinese secret services could listen in on conversations and data streams.

The US is thus continuing a course started by Donald Trump, depriving large Chinese companies of the opportunity to do business on the US market for reasons of possible security risks. This affects both communications companies and network equipment suppliers (China.Table reported). This makes China Telecom the latest in a number of companies that are no longer allowed to raise capital in the US and therefore were forced to exit the New York Stock Exchange. fin

  • Geopolitics
  • Telecommunications
  • USA

Profile

Han Xiao-Ming – a fan of classical music since childhood

Principal horn of the German Radio Philharmonic Orchestra Saarbrücken Kaiserslautern

Han Xiao-Ming’s great passion is the three B’s – Beethoven, Brahms, and Bruckner. His career as a professional horn player was destined by his family. His parents earned their money as musicians. The fact that German-Austrian Romanticism is so close to the 58-year-old’s heart also has to do with his past. For its sonority accompanied him through Mao’s last dark chapter in the People’s Republic of China.

Han was born in Shanghai in 1963, three years before the Cultural Revolution. When it was forbidden to perform Western music in public in 1966, young Han was continually exposed to the outlawed music at home. Partly because his father made his music students play Mozart, Strauss, and Brahms in private lessons. “The neighbors reported it, of course, and letters were complaining why we didn’t play any red music,” he recalls.

It was not until Mao’s death that China reopened to Western culture, and foreign orchestras flocked to the Middle Kingdom. Nevertheless, art in China remains a political playing field. A state of affairs that continues to this day.

In the early 1980s, Han, therefore, chose the New England Conservatory in Boston for his education – initially only for a one-year scholarship. But in the end, Han did not return to his home country until 1996. Instead, he moved to Germany in 1984 and took up the position of principal horn player with the Deutsche Radio Philharmonie Saarbruecken Kaiserslautern the following year.

Two-year commitment in Beijing

“I waited a long time to return to China because I did not return as promised after my scholarship in the US,” Han says. He feared potential repercussions for his arbitrary absence and only returned to his home country after he obtained German citizenship. He advised young Chinese orchestras, procured sheet music, and arranged contacts. “The Chinese orchestras were always late. But you can’t just book a good conductor a year in advance,” says Han.

After the 2008 Olympic Games and with the opening of the National Center for the Performing Arts (NCPA) in Beijing, Han began to feel a sense of optimism in China. He believed much would change and accepted the offer to build up the NCPA’s orchestra. “In the first year, I had all the freedom. I could invite whoever I wanted. We were the highest-paid orchestra in China,” Han says. Quickly, however, the tide turned. Politics interfered in the program, special concerts were to be performed for individual ministers, the musicians’ holidays were cut, and rosters were overturned.

These experiences left him feeling insecure. Finally, Han returned to Saarbruecken after two years in Beijing. Partly because he missed the German reliability. The structure of the German radio orchestras is exemplary worldwide, especially when it comes to the musicians’ financial security, says Han.

But he has also come to know a certain inertia among German orchestras. “Changes take a lot of time,” he criticizes. In China, many things happen more quickly – even in culture.

Nevertheless, classical music in China remains more of an entertainment for the elites, while it finds a wider audience in the West. Han believes Germany is not doing enough to export its culture to China. “Why isn’t there a ‘German House’ representing German culture in China?” he wonders. In Shanghai, for example, the huge German Chamber of Commerce building would offer space for such an institution. And for Han Xiao-Ming, it would be perhaps a new reason to accompany a new project back to his old homeland. David Renke

  • Cultural Revolution
  • Culture
  • Music

Executive Moves

Alexandre Tavazzi will become Chief Investment Officer for Asia at Swiss asset manager Pictet’s Hong Kong office on November 8. His predecessor David Gaud is leaving the company.

Michael Issenberg, former Asia chief of hotel chain Accor, will become the new chairman of state-owned Tourism Australia. In his new role, he is to prepare the reopening of the continent for travelers.

Dessert

A Chinese medal haul at the 2022 Winter Olympics in Beijing is likely to be limited to a few sports like speed skating. In curling, other nations have traditionally come out on top. 100 days before the opening ceremony, sports enthusiasts and bored pedestrians alike were able to test their curling skills at an event at the foot of the Pearl Tower in Shanghai. Cross-country skiing simulators also offered training in fine motor skills and endurance.

China.Table Editors

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    • Sinologist Marina Rudyak on China’s efforts in Africa
    • Hong Kong’s isolation hurts financial sector
    • EU extends feelers to Taiwan
    • US call for greater Taiwan role at UN
    • Xi plans purchase of more high-tech weaponry
    • Power crisis leads to Diesel shortage
    • USA disconnects China Telecom
    • Profile of horn player Han Xiao-Ming
    Dear reader,

    China was already providing development aid to Africa, back when it was still a poor nation itself. Now China is rich and can afford a correspondingly generous commitment. Europe cannot keep up. European aid is tied to numerous standards – and there is nowhere near as much money available. While it is true that EU member nations have launched counter-projects to the Silk Road Initiative, they “give the impression that it is more about solving their own China problem than Africa’s infrastructure problems,” says our interlocutor Marina Rudyak. The expert on China’s foreign relations reveals Beijing’s real motives ahead of the China-Africa summit.

    According to Rudyak, the infamous story of a devious China that lures smaller countries with money and drops them into a trap is a myth. There is actually a growing fear in China of stepping into a “creditor trap”. But one should not be mistaken: Beijing’s strategists are strictly acting under power-political interests when granting loans. The bottom line, however, is that the nations of the Global South benefit from the attention they receive from the economic power.

    While China demonstrates openness towards Africa, it systematically seals off Hong Kongits financial capital. COVID-19 is becoming the go-to excuse to punish the city for its democracy movements. For even individual cases trigger a harsh tightening of isolation mandates. Its economic heart is suffering as a result: the financial sector.

    Meanwhile, the Chinese threats against Taiwan are triggering various initiatives in Western countries. EU parliamentarians are planning a trip to Taipei, while Taiwan’s foreign minister was invited to Prague. The US has launched an initiative to restore Taiwan’s greater role at the UN. The government in Taipei is pleased about the idealistic support – but there is a fly in the ointment: all initiatives are uncoordinated and thus remain piecemeal.

    Your
    Finn Mayer-Kuckuk
    Image of Finn  Mayer-Kuckuk

    Interview

    ‘European Integration’ as Europe’s unique selling point in Africa

    Marina Rudyak researches development cooperation and China’s international relations at Heidelberg University

    Ms. Rudyak, what outcome do you expect from the Forum on China-Africa Cooperation (FOCAC) regarding China’s financial commitments to African countries?

    I don’t think we will see an increase in China’s lending commitments to African countries. Until 2015, China did increase its pledges each time at FOCAC summits, but since 2018 they have stagnated. At that time, China did pledge the same value as in 2015. That was $60 billion in loans and investments over three years. But the share of gifts and interest-free loans was lower than in 2015, so the package became more expensive for recipients overall. Loan negotiations have also become more stringent since 2018. At the same time, however, I don’t expect commitments to be nominally lower this time around. That would not fit China’s foreign policy rhetoric of helping Africa overcome the COVID-19 pandemic. But the overall structure of its pledges could change significantly.

    Over the past 20 years, China has become Africa’s largest donor. Diplomats frequently like to accuse the People’s Republic of using debt to secure strategic access to raw materials and infrastructure, and of resorting to debt-trap diplomacy.

    The term debt-trap diplomacy has become synonymous with Chinese loans in the public debate. The consensus among researchers is that there is no evidence that China strategically drives countries into debt traps. That is not to say that debt traps do not exist. It is just that these do not result from a strategic approach by China, but because governments are over-indebted – not only to China but to European private banks as well.

    Can you give an example?

    Sri Lanka is often cited as a victim of China’s debt-trap diplomacy since it leased its Hambantota Port to China Merchants Port for the next 99 years. This allegedly happened because Sri Lanka could not service its debt to China. However, in reality, Sri Lanka was not bankrupt at all. Rather, a newly elected president was looking for ways to get rid of an unprofitable port that was the pet project of the old president. China Merchants Port, which had built the port, agreed to lease the facility. But none of its Chinese loans were serviced in return. Instead, the more expensive Eurobonds that were due were serviced – that is, the debts owed to private creditors.

    How does China perceive international lending?

    In China, lending to the poorest states is now even discussed more like a “creditor trap”, i.e. a trap for the lender, because the risk of default is very high.

    The strategy is also being critically reflected in China?

    In China, one repeatedly reads about the lack of international experience of the Chinese development banks China Development Bank (CDB) and Eximbank. They are accused of poor credit risk management. This is hard to imagine since the CDB is the largest global bilateral lender. But half of its six-member management board comes from the Agricultural Bank of China, two from banking supervision, one has made a career at the CDB – and not a single one has any actual foreign experience. These people were responsible for China’s rural development and are now expected to finance infrastructure development in Africa. They have little understanding of the African countries they are lending to and the local political context.

    However, China has long been the largest donor and investor in African countries. What do you make of this?

    I have to agree with former Liberian Labor Minister Gyude W. Moore. He says, even if the Silk Road fails, it is a remarkable attempt to connect the world’s poorest countries to the world’s richest countries. Moore criticizes: Until China came along with the Silk Road, Europe lacked any creativity in dealing with its neighbor. Western approaches to infrastructure development never really worked.

    Why is that?

    There have been attempts, such as the EU Infrastructure Trust for Africa, initiated in 2007, which have achieved little. Perhaps because Africa is not a priority for the EU. The view of the continent is still shaped by a post-colonial lens that divides the world into developed and developing countries, into donors and recipients. We see development as “their” problem, as “that one over there, in Africa” – not as “our”, common problem. Now some attempts want to compete with China: the G7’s “Build Back Better World” or the EU’s recently announced “Global Gateway”. But unfortunately, they all give the impression that they are more concerned with solving their own China problem rather than Africa’s infrastructure problems.

    Is China’s approach succeeding in reducing this development gap in many African states, for example in mitigating the high level of unemployment in Africa?

    Contrary to popular belief that Chinese investors always rely on their own workforce, China is creating jobs in Africa. There are now numerous studies on localization. It is also only logical, local labor is often cheaper.

    And what are the working conditions like?

    Yes, that’s where it gets problematic. Working conditions are no better at a Chinese construction site or in a Chinese factory in Africa than they are in China. A long-term study by the London School of Oriental and African Studies in 2019 also concluded: Western companies offer very similar conditions.

    Are the relations with the EU now deteriorating because there is so much more commitment from China?

    African governments turn to Europe for issues such as good governance, human rights or labor and social standards – and to China for infrastructure investments. China, on the other hand, needs raw materials from Africa. So we often see resource-for-infrastructure contracts. At its core, there is nothing wrong with countries wanting to turn their raw materials into economic growth by selling them to China, but the conditions have to be right. That’s where it comes down to African governments: Do they have the interests of the population in mind or the particular interests of a small elite? A strong civil society is also crucial here because it can exert pressure on governments.

    The Democratic Republic of Congo wants to renegotiate mining contracts with China. Does this kind of thing occur more frequently, and how does China react to it?

    The DRC contracts are also a resource-for-infrastructure deal. That means that China is extracting resources and is supposed to build roads in return. Congolese politicians say: The resources are being extracted, but little is happening for the infrastructure. In fact, of the 3 billion dollars agreed in 2008 for infrastructure development, only 825 million has been spent so far. Incidentally, we see something similar in Ghana, where voices are now calling for a renegotiation of contracts. We hear such calls all the time, especially after changes in government. In the DRC, too, the new president considers the contracts arranged by the old government to be unfair. In general, China tries to respond to demands from partner countries, because it is usually interested in mutual solutions for political reasons alone.

    How serious is China about the chances of developing Africa’s export industry? Is the People’s Republic now allowing processed goods into the country?

    While China exports massive amounts of machinery and consumer goods to Africa, Africa, conversely, exports mainly raw materials to China. The only notable exception is South Africa. China has long promised to facilitate access for African agricultural products to the Chinese market. It remains to be seen, however, whether there will be any concrete commitments to this effect at FOCAC this time. In addition, China wants to move more “low-tech production” to Africa, which in turn could potentially produce exports to China.

    You have often compared China and Europe in Africa. What does Europe have to do, to get its foot back in the door?

    I think the attempt to compete with China is wrong. For one thing, Europe is simply not financially competitive, because China can produce much more cheaply. The problems with the New Silk Road Initiative – a lack of transparency, labor, and social standards – must also be solved mutually by China and the partner countries.

    What could Europe offer African states that China cannot?

    I see Europe’s ‘unique selling point’ – not only in comparison to China, by the way, but to all others as well – in the experience of European integration. Because Africa is in an integration process with the African Union with many similar issues, from reducing regional disparities to creating common markets. I see a key role here, for Central and Eastern European countries in particular; their experience of catching-up development has so far not been taken advantage of when it came to cooperating with Africa. Above all, however, we must change the way we think about development: Development is not Africa’s problem, but one we all share.

    • Africa
    • DR Congo
    • FOCAC
    • Loans
    • New Silk Road
    • Raw materials
    • Trade

    Feature

    Quarantine policy harms Hong Kong’s financial center

    Sealed metropolis: Even isolated cases trigger extreme measures in Hong Kong

    Hong Kong’s banks have had enough. Over the weekend, its banks sent an urgent reminder to Financial Secretary Paul Chan, expressing their outrage over the current situation. The government’s “zero-covid policy” and its strict quarantine rules in Hong Kong are jeopardizing the competitiveness of the location compared to other financial centers, the letter says.

    While London, New York, and, most recently, Hong Kong’s fiercest competitor Singapore have decided to largely lift travel restrictions, Hong Kong is clinging to its strict rules. Around half of its members are considering relocating staff from the city to other locations, the letter by Hong Kong’s banking association, ASIFMA continues.

    In addition to Hong Kong’s financial institutions, numerous other sectors and business associations have complained about the conditions in the Chinese Special Administrative Region in recent weeks and months. Yet no one denies Hong Kong’s remarkable success in keeping the virus at bay. In the past six months, only four local infections have been registered. Most recently, the city saw a record of 50 days without a single infection, until a vaccinated airport employee tested positive. Since then, almost another three weeks have passed without a new case.

    The World City becomes the Walled City

    This was made possible because Hong Kong has the strictest quarantine rules in the world. Only the People’s Republic has equally strict regulations. Anyone entering the city must spend 14 to 21 days in quarantine in a hotel room, depending on the risk in the country of origin. The demand for rooms in designated quarantine hotels is often greater than the supply of around 10,000 rooms. That limits the number of those allowed to enter. Especially business travelers, who want to stay in a four- or five-star hotel, have to book well in advance.

    There is a joke being told among Hong Kong expats. “Asia’s World City”, something with which the Hong Kong government has been advertising the cosmopolitanism of its metropolis for years, has become “Asia’s Walled City”, a metropolis behind walls. Indeed, many companies have settled in Hong Kong primarily because of its central location. From Hong Kong, all other parts of the region are equally easy to reach. Factories in mainland China as well as in large parts of Southeast Asia could be reached with a day trip in the past. But for nearly two years, business trips have been virtually non-existent. Home leave in Europe or the US brings a risk that the subsequent return will be an ordeal.

    After it was not clear for a long time how Hong Kong’s government intends to solve the predicament, it has recently announced at least one clear goal. While international borders are to remain closed for the foreseeable future, it does everything in its power to finally reopen the border to mainland China.

    Virus-free – but at what cost?

    Hong Kong has long since successfully demonstrated that its anti-Covid measures work. Nevertheless, Beijing has so far refused to let Hong Kong residents back into the country without quarantine. Although the financial capital is effectively virus-free, anyone traveling to China must still be confined to a hotel room for at least 14 days or, in the worst case, even to a central quarantine camp. Travel from the mainland to Hong Kong, on the other hand, is possible without quarantine.

    Companies in Hong Kong have little sympathy for the unilateral regulation, not least because people from the neighboring city of Macau, also a special administrative region of China, are already allowed to enter the People’s Republic without the need for quarantine for more than a year. Some critics in Hong Kong are already muttering that the central government does not actually have virus prevention in mind. Rather, its unruly child, Hong Kong, should be punished for its rebellious behavior of the past years.

    Penny Bay Quarantine Center: torment after returning

    Beijing has not expressed any concrete criteria as to when and under what conditions the border will be reopened. Earlier this year, China demanded that Hong Kong had to be free of Covid – a goal that has long since been achieved. Later, there was criticism that vaccination rates were too low. Most recently, mainland officials presented Hong Kong with a new list of demands during border opening negotiations.

    For example, work is now underway to introduce an improved health code app that can track where users have been in recent weeks. The Hong Kong government also announced this week that it would end all quarantine exemptions. Such exemptions have previously been granted to some executives of major companies or diplomats. The recent free entry of actress Nicole Kidman for a shoot had sparked a heated debate.

    But all this does little to improve the mood among businessmen. There is a lot of anger that Hong Kong’s leadership is not able to present a precise date for opening up to the mainland. Some optimists claim it could be as early as December. Hong Kong media quoted sources as saying borders won’t be opening till after the Winter Games in Beijing, i.e. sometime next March. But no one knows for certain. “No light at the end of the tunnel,” is how the Hong Kong newspaper South China Morning Post summed up the mood among businessmen in the city this week. Gregor Koppenburg/Joern Petring

    • Coronavirus
    • Finance
    • Health
    • Hongkong
    • Market
    • Trade

    MEPs travel to Taiwan

    A European Parliament delegation will travel to Taiwan next week. The MEPs will meet high-ranking Taiwanese politicians of foreign and justice ministries, South China Morning Post reported, citing parliamentary sources. A meeting with Digital Minister Audrey Tang is also said to be on the agenda.

    According to the report, the delegation is led by French EU politician Raphael Glucksmann. Glucksmann is one of several MEPs who were sanctioned by Beijing in the spring. Alongside him, MEPs from Lithuania, Italy, the Czech Republic, Greece, and Austria are traveling to Taipei.

    The Chinese representation in Brussels reacted to the announcement of the trip and insisted on the “one-China principle,” calling it the “political basis for the development and expansion of Sino-European relations”, the Chinese representation wrote to the EU on Twitter. “We will continue to respond according to developments,” the tweet said.

    Taiwan’s Foreign Minister visits the Czech Republic

    Several EU states are currently developing closer ties with Taipei. Taiwan’s Foreign Minister Joseph Wu arrived in the Czech Republic on Wednesday. He followed up a four-day visit to Prague by a Taiwanese business delegation led by two ministers. Wu was received by the chairman of the Senate of the Czech Parliament, Miloš Vystrčil, and met with Prague Mayor Zdeněk Hřib. The entrepreneur delegation had also visited Lithuania and Slovakia last week.

    At an event hosted by the Oriental Institute and the Czech research institution Sinopsis, Wu called for a continuation of the long-standing relationship between the Czech Republic and Taiwan. The minister recalled the commitment of former Czech President Václav Havel, who passed away ten years ago. He had visited the island state several times during his term in office and met high-ranking Taiwanese politicians.

    Addressing the growing tensions between democratic and authoritarian-ruled states around the world, Wu urged greater vigilance in democratic societies. “We are in the midst of an information war, and the friends of democracy are unarmed and ill-prepared. This is partly because we have become too complacent in the 30 years since the end of the Cold War. We’ve been too confident that the Democratic tide will continue to rise just because history has been on our side,” he said.

    China criticizes proposals on Taiwan’s rapprochement with the UN

    The US, meanwhile, has made a push to get Taiwan more involved in United Nations institutions. Foreign Minister Antony Blinken has proposed that representatives of Taiwan should again have the capability to send more representatives to UN committees and organizations, for example to the World Health Organization (WHO). Blinken urged other countries to support this approach, calling Taiwan a democratic success story. Over the weekend, representatives of Taiwan and the US had met online to discuss steps to implement the initiative. This should also – like the advances of the EU parliamentarians and the talks in Prague – strengthen Taiwan’s back.

    Blinken’s rationale for the push makes clever use of the fundamentals of Chinese foreign policy. This requires that “one China” be assumed to include both the mainland and Taiwan. Blinken now argues that if Taiwan were excluded, “one China” would not be fully represented. China has been particularly wary in recent years of Taiwan’s participation in decision-making in the United Nations, even in a covert manner. In 1971, the United Nations admitted the People’s Republic and expelled Taiwan. For decades, Taiwan has been trying to regain a seat at the table. The Biden administration now supports this endeavor.

    On Wednesday, China responded. The People’s Republic is the “only legitimate government representing the whole of China,” a spokesman for the Taiwan Affairs Bureau said at a press conference. Taiwan, therefore, has no right to participate in United Nations consultations – these are reserved for “sovereign nations”.

    In relations among nations, de facto customs are also considered a source of law. If Taiwan behaves like a sovereign state on the global stage and no one objects, then it will become a sovereign state. This is the reason why the recent EU and US activities are so important to Taipei. And that’s why they will continue to provoke outrage in Beijing. Amelie Richter/Marcel Grzanna/Finn Mayer-Kuckuk

    • Czech Republic
    • EU
    • Geopolitics
    • Taiwan

    News

    Rationing of Diesel and other fuels

    The power crisis in China has now also affected the Diesel supply. News magazine Caixin reports that gas stations “in many parts” of the country have begun rationing diesel. The reasons are an increasing shortage and rising procuring costs. The rationing affects not only car owners and truck drivers, but also homeowners who heat their homes with diesel oil and companies that use diesel generators to produce power.

    The second-largest economy has been struggling to secure its power supply for weeks. Numerous companies, but also private households, are repeatedly experiencing power outages because coal and gas have become scarce. German companies are also affected by the bottleneck.

    The rationing of Diesel is likely to have a particularly severe impact on logistics in the People’s Republic. The supply chains of its industry are already suffering heavily from the consequences of the Covid pandemic, as closed borders, export quotas and strict requirements imposed by the authorities are making it difficult to ensure a smooth supply of raw materials and components. Restricting truck shipping would further increase the pressure on supply chains. grz

    • Caixin
    • Energy
    • Supply chains

    Xi orders high-tech weaponry

    President Xi Jinping has urged the People’s Liberation Army to quickly upgrade its arsenal. The army should explore new ways to develop weapons and equipment, according to a report by news agency Xinhua. Xi made the statement at a conference on procurement matters of the People’s Liberation Army. The head of state praised in particular the breakthroughs in equipping the armed forces that have been made in the past five years.

    In fact, the People’s Liberation Army has recently made significant gains in the procurement of high-tech weapons. AI drones, killer robots, unmanned submarines, hypersonic missiles, compact nuclear bombs – the arsenal is becoming increasingly diverse. At the same time, however, large parts of the armed forces are considered obsolete. China currently spends around $250 billion annually on defense. fin

    • Geopolitics
    • Military
    • People’s Liberation Army

    USA cuts China Telecom from the network

    The government in Washington has revoked the license of a subsidiary of Chinese telecommunications provider China Telecom. China Telecom (Americas) Corp. must withdraw from US business within two months. It will then no longer be allowed to offer telephone and Internet services in the US. The responsible supervisory authority Federal Communications Commission justifies this with security risks. The regulator fears that Chinese secret services could listen in on conversations and data streams.

    The US is thus continuing a course started by Donald Trump, depriving large Chinese companies of the opportunity to do business on the US market for reasons of possible security risks. This affects both communications companies and network equipment suppliers (China.Table reported). This makes China Telecom the latest in a number of companies that are no longer allowed to raise capital in the US and therefore were forced to exit the New York Stock Exchange. fin

    • Geopolitics
    • Telecommunications
    • USA

    Profile

    Han Xiao-Ming – a fan of classical music since childhood

    Principal horn of the German Radio Philharmonic Orchestra Saarbrücken Kaiserslautern

    Han Xiao-Ming’s great passion is the three B’s – Beethoven, Brahms, and Bruckner. His career as a professional horn player was destined by his family. His parents earned their money as musicians. The fact that German-Austrian Romanticism is so close to the 58-year-old’s heart also has to do with his past. For its sonority accompanied him through Mao’s last dark chapter in the People’s Republic of China.

    Han was born in Shanghai in 1963, three years before the Cultural Revolution. When it was forbidden to perform Western music in public in 1966, young Han was continually exposed to the outlawed music at home. Partly because his father made his music students play Mozart, Strauss, and Brahms in private lessons. “The neighbors reported it, of course, and letters were complaining why we didn’t play any red music,” he recalls.

    It was not until Mao’s death that China reopened to Western culture, and foreign orchestras flocked to the Middle Kingdom. Nevertheless, art in China remains a political playing field. A state of affairs that continues to this day.

    In the early 1980s, Han, therefore, chose the New England Conservatory in Boston for his education – initially only for a one-year scholarship. But in the end, Han did not return to his home country until 1996. Instead, he moved to Germany in 1984 and took up the position of principal horn player with the Deutsche Radio Philharmonie Saarbruecken Kaiserslautern the following year.

    Two-year commitment in Beijing

    “I waited a long time to return to China because I did not return as promised after my scholarship in the US,” Han says. He feared potential repercussions for his arbitrary absence and only returned to his home country after he obtained German citizenship. He advised young Chinese orchestras, procured sheet music, and arranged contacts. “The Chinese orchestras were always late. But you can’t just book a good conductor a year in advance,” says Han.

    After the 2008 Olympic Games and with the opening of the National Center for the Performing Arts (NCPA) in Beijing, Han began to feel a sense of optimism in China. He believed much would change and accepted the offer to build up the NCPA’s orchestra. “In the first year, I had all the freedom. I could invite whoever I wanted. We were the highest-paid orchestra in China,” Han says. Quickly, however, the tide turned. Politics interfered in the program, special concerts were to be performed for individual ministers, the musicians’ holidays were cut, and rosters were overturned.

    These experiences left him feeling insecure. Finally, Han returned to Saarbruecken after two years in Beijing. Partly because he missed the German reliability. The structure of the German radio orchestras is exemplary worldwide, especially when it comes to the musicians’ financial security, says Han.

    But he has also come to know a certain inertia among German orchestras. “Changes take a lot of time,” he criticizes. In China, many things happen more quickly – even in culture.

    Nevertheless, classical music in China remains more of an entertainment for the elites, while it finds a wider audience in the West. Han believes Germany is not doing enough to export its culture to China. “Why isn’t there a ‘German House’ representing German culture in China?” he wonders. In Shanghai, for example, the huge German Chamber of Commerce building would offer space for such an institution. And for Han Xiao-Ming, it would be perhaps a new reason to accompany a new project back to his old homeland. David Renke

    • Cultural Revolution
    • Culture
    • Music

    Executive Moves

    Alexandre Tavazzi will become Chief Investment Officer for Asia at Swiss asset manager Pictet’s Hong Kong office on November 8. His predecessor David Gaud is leaving the company.

    Michael Issenberg, former Asia chief of hotel chain Accor, will become the new chairman of state-owned Tourism Australia. In his new role, he is to prepare the reopening of the continent for travelers.

    Dessert

    A Chinese medal haul at the 2022 Winter Olympics in Beijing is likely to be limited to a few sports like speed skating. In curling, other nations have traditionally come out on top. 100 days before the opening ceremony, sports enthusiasts and bored pedestrians alike were able to test their curling skills at an event at the foot of the Pearl Tower in Shanghai. Cross-country skiing simulators also offered training in fine motor skills and endurance.

    China.Table Editors

    CHINA.TABLE EDITORIAL OFFICE

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