China and Russia are two significant members of the group known as the BRICs. The other members are India, Brazil and South Africa. While China seeks to use its economic influence in buying world power, Russia seeks to regain its lost political influence by challenging the United States and Western Europe. This paper seeks to examine and explore China’s use of economic incentives in the form of cheap loans to gain influence in Sub-Saharan Africa. It also examines Russia’s constant antagonism with the United States and its allies in Eastern Europe and the Middle East. The argument advanced is that both Russia and China use their position as emerging economies to challenge the United States and the West’s norms and liberal policies. Economic and political support to governments that are suffering from political and economic mismanagement is done to challenge the United States’ unique position as the global unipolar power. The paper draws its theoretical foundations from the critical global political economy approach as well as literature on neocolonialism.
China in Africa
Despite the risks involved in investing in a volatile and uncertain climate, China buoyed by strong economic performance at home and the demand for resources to feed its developing economy began to extend loans and invest in big infrastructure projects in almost all African countries except for Swaziland. These resource-backed infrastructure loans are changing the terms and nature of the international aid system, and, the changes are having a great impact on the dynamics of international politics and the global economy. Because they are request-based, the loans have been operating on a ‘market-like’ structure were they are offsetting the huge demand for infrastructure on the continent. In addition, an increase in Chinese infrastructure loans has been accompanied by an increase in GDP indicators. Developing nations, in particular, those populated by the “bottom billion” have been witnessing relatively moderate to high levels of economic growth in general which for the first time in decades has made the goal of ending poverty seem achievable. The Chinese presence in Africa is growing and economic projections reveal that economic and political engagement between these two parties is expected to strengthen and grow with Africa becoming China’s biggest trading partner by 2017 (China Daily, 2012).
At the turn of the 21st century, limited access to foreign exchange, slow economic growth and lack of government tax instruments to raise revenue domestically impelled African governments to accept and embrace resource-backed infrastructure loans tied to their natural resources. These loans were extended to countries with weak domestic economic institutional capacity and struggling governments that failed to secure loans and attract foreign investment from traditional western trading partners due to corruption, bad governance, underdeveloped infrastructure and weak legal systems incapable of upholding property rights (Auer, 2008). Also, the preceding decades had seen efforts at economic revolution through liberalization produce mixed economic results (Burnside & Dollar, 2000). In cases where governments succeed in securing ‘development’ aid, the desire to satisfy aid conditionality and selectivity terms resulted in the adoption of economic liberalization policies that led to heavy indebtedness and ‘negative’ decoupling (Brautigum, 2010).
Since aid and loan supplies are contingent on results, and on the willingness of recipients to accede to loan conditions, the political motivations of those in control of aid recipient governments, as well as those with power in donor states, must be considered (De Mesquite & Smith, 2009). Together these factors determine the allocation and use of aid. In considering the causes of aid, and reflecting on what causal conditions support foreign aid, political economy perspectives are useful. A critical political economy perspective treats aid as a policy action of donors, to be explained by political and economic goals as well as power relations. These, in turn, are products of culture, institutions, power distribution and the dynamics of competitive interests. A critical political economy approach also views aid as a potential developmental tool that can be explained in political and economic terms.
Resources for Loans in Africa
Resource-backed loans can be defined as loans that are specifically designed to finance construction of public schools, public housing, roads, dams, or electric facilities of a city, country or region and they use a country’s natural resource such as minerals as collateral (Brautigum, 2012). Because of the complexity and lack of transparency from the Chinese government, scholars have struggled to define the characteristics of Chinese loans. Brautigum (2010) comes close in differentiating the different forms China’s resource-backed loans take. She observes that China provides the equivalent of Official Development Assistance (ODA) through three instruments: grants, zero interest loans, and concessional (fixed-rate, low-interest) loans.
Pehnelt (2007) identifies characteristics that make Chinese loans unique. He finds out that an important characteristic of Chinese aid is that China puts emphasis on loans rather than grants and usually provides project assistance with a strong focus on physical infrastructure and prestige projects. One of the reasons why China primarily provides loans may be that Beijing tries to use these loans as leverage over recipient nations. Loans offer the chance to generate positive perceptions in two ways: first when providing the loan, and then again by forgiving the debt. Beijing uses debt relief as a reward for closer political and economic relationships (Pehnelt, 2007). Aid is often delivered as tied to commodity and technical assistance. Much of China’s aid is in the form of concessional loans to African governments for infrastructure projects. Most of them are implemented primarily by Chinese corporations. The corporations are often government owned and get their funding from the Chinese government.
The Chinese motivation for extending loans to different African countries is varied. However, we can deduce a few of the key political and economic reasons that motivate loan extension. Pehnelt (2007) in his analysis of the Chinese aid system identifies three political economy factors that influence China’s loans to Africa. The first factor concerns China’s foreign policy of the principle of non-interference called ‘sovereignty doctrine’. This principle, which contrasts strongly with the West’s ‘good governance approach’, has been the basis of Chinese foreign policy since the Five Principles of Peaceful Coexistence were formulated in the 1950s by the then Chinese government. Beijing consistently argues that non-interference is a necessary condition for building a harmonious world (Glosny, 2006). The issue of sovereignty also defines who gets aid from China. So far only one country in Africa (Swaziland) which still recognizes Taiwan as the real China does not get trade or loan privileges from Beijing. The principle of non-interference has drawn a lot of criticism especially from pro-democracy western nations and has been seen as the reason for the continuing existence of Robert Mugabe’s regime in Zimbabwe and Omar Al-Bashir in Sudan. China’s respect for only sovereignty and a lukewarm dedication to human rights can be located in its own bad human rights record and this point reflects the pragmatism of China’s program in Africa. It cannot argue for human rights in Africa especially when it is failing to address problems of the same nature within its borders (Tibet), hence, the propagation of dialogue as the practical way to solve intra-state and inter-state problems.
Another political economy factor is the fact that China follows the state-led business model. State-owned Chinese companies have a lower risk aversion than Western companies because they are heavily backed, both financially and politically, by the government. Most of the Chinese companies operating in Africa are tied to the Chinese government. The close coordination between government officials and Chinese businessmen makes it easier for China to stimulate investments in risky but strategically important countries. Chinese companies have a rather long time horizon and are to a much lesser extent under short-term profit pressure than an ordinary Western firm that has to satisfy private shareholders. Chinese corporations may feel free to act risky or to be risk averse than their competitors because they can rely on China’s state-controlled banks for financial support regardless of their economic performance (Gill & Reilly, 2007).
The Chinese government plays a prominent role in Chinese investors’ corporate governance through its wide-ranging provision of financial and other support. Such support affords the Chinese government an element of control over Chinese firms present in Africa’s private sector; resulting in what Tull has calls an ‘interconnectedness of political, diplomatic and economic interests’ (Pehnelt, 2007). At a time when most multinationals operating in Africa are private, large Chinese investors in strategic sectors such as energy, mining and construction are frequently state-owned (Frost & Ho, 2005). Financial support for Chinese firms takes the form of equity, debt or other financial incentives such as investment insurance (Brautigum, 2010). Debt-financing and other financial incentives are provided largely through the Chinese government-owned Exim Bank, which in 2005 disbursed funding in excess of $15 billion (Brautigum, 2010). The relevance of such assistance is reflected in survey rankings showing ‘government support’ as the second-most important reason for Chinese firms to go abroad (Broadman, 2006).
A third important political economy factor is what Pehnelt (2007) calls the “niche strategy”. With the niche strategy, China traditionally funds high-profile and prestige infrastructure projects, such as stadiums, dams, railroads, state houses, ministry buildings as well as hospitals and plants. This is in contrast to other donors who usually do not finance most of these kinds of projects anymore which gives China a competitive edge because prestige projects are still popular amongst African leaders. China is in a way following a niche strategy, filling the gap other donors have left. This gives Beijing another advantage in using aid as a vehicle to gain influence on the African continent.
Another key issue is that Chinese construction firms are much cheaper than Western companies and Chinese workers and engineers in contrast to citizens of Western countries are willing to work and live abroad without high compensation. This results in significant cost advantages in the construction sector and related fields. Infrastructure is central to Beijing’s funding program, much as it used to be for donors like the World Bank. Between 1946 and 1961, 75% of World Bank loans financed transportation and electricity projects but this trend changed before most African states were even independent. Senegalese President Abdoulaye Wade laments that China has helped African nations build infrastructure projects in time (Brautigum, 2006). Citizen constraints on Western countries make conditionality a key element of loan extension and inhibit Western countries from taking on prestige projects. This element brings this discussion to the critical issue of conditionality.
Despite marginal observed changes in political systems, EU and Chinese financial institutions have increased infrastructure development loans and projects in Sub-Saharan Africa. Two of the important institutions tasked with foreign lending are the EU’s European Investment Bank and the China’s China Exim Bank (Brautigum 2010, Grimm 2011 and Stahl 2014). These two institutions hail from disparate political ideologies and visions of global governance. China Exim Bank is an extra arm of China’s long held non-interference policy in sovereign affairs. The EU, China and Africa trilateral dialogue is an effort by the EU and China to come up with a coherent strategy for cooperation. To understand competition and conflict, it is imperative that the operations of the two most salient institutions are reviewed and analyzed.
China’s economic and political influence in Africa has been defined by some as the rise of neo-colonialism. According to the neo-colonial theory, the end of territorial occupation of African countries did not mark the end of colonialism. Former colonizers now use their influence in multilateral lending institutions to affect policies at every level especially in Africa. Individuals like Walter Rodney and Kwame Nkrumah observed that the end of territorial occupation did not mean the end of Western control. An example of colonization is the creation of Special Economic Zones in Zambia (Chin; Taylor, 2006). These zones allow Chinese families and businesses to prosper in their special areas and they are tantamount to territorial as well as economic colonialism. China is in a unique position in Africa since it has no history of colonization on the continent. Research by Brautigum (2010) shows that what has emerged in China’s active involvement in Africa is a complex partnership based on mutual understanding of needs. The new Chinese imperialism in Africa cannot be defined by its active seeking of land for Chinese expansion but its support of rogue leaders and states. China has for decades refused to condemn AL Bashir and Robert Mugabe despite the availability of evidence that the two leaders are behind repression and the misadministration of economies.
The presence of multiple actors call for an exploration of multilateral lending that considers the independent powers of the EIB and the China EximBank. Recent literature on trilateral relations between China, the EU and Africa show the complexity of cooperation and governance in the new global order. An attempt at cooperation between the three actors is complicated by the reality of self-interests. The sudden entrance of China in developmental finance raised scholarly interest into these new loans without conditions.
Russia and its Political Influence in Eastern Europe and the Middle East
While China increases its economic strength and challenges the international economic institutions power, Russia has made strides in its effort to maintain its political power on the global arena especially in former Soviet territories like Ukraine. Russia annexed Crimea as a ploy to frustrate United States and Western Europe’s influence in Eastern Europe. Russia was well aware of Ukraine’s desire to strengthen its relations with the United States and its NATO allies and one way to stop the expansion of NATO power was to annex Crimea. The annexation of Crimea has been identified as a significant development in Russia’s reemergence as a super power after it had gone through an economic and political struggle that came with the end of the cold war and the disintegration of Soviet Russia (Tsygankov, 2008). The Russian President, Vladimir Putin has made the strengthening of the BRICS power a priority. Despite economic challenges that came with the global financial crisis and falling oil prices, Russia believes that the BRICS provides the most legitimate and viable opportunity to challenge the United States and the rest of the Western world.
Russia’s goal of challenging American political influence across the globe is more illuminated in its support of North Korea. North Korea has for decades shown that it is an unstable state that threatens global peace and security. It has made its ambitions to make nuclear attacks visible by constantly doing long range missile tests. Despite the unstable nature of North Korea, Russia has continued to trade in arms with a potential world peace hazard (Tsygankov, 2008). The United States has constantly placed sanctions on Russia which has had little influence in stopping the Russians and Chinese from trading with North Korea. The refusal of Russia to condemn North Korea comes from its desire to challenge the United States rather than the need to gain financially from North Korea. Russia’s support of North Korea works more as a reminder that it objects to the United States’ position as the policeman of the world. There are more benefits to condemning North Korea than to encourage yet Russia still oppose the United Nations Security Council measures to slap North Korea with sanctions. As a BRICS nation and a member of the United Nations Security Council, Russia uses its vote to resist the United States’ quest to expand its power.
The most recent political challenge Russia posed to the United States and Western Europe is manifest in the Syrian civil war. While the United States has condemned Bashar Assad’s Syria as an outpost of tyranny and sought to actively have Assad removed as the leader of Syria through its support of Syrian rebels, Russia entered the Syrian civil war to protect Assad from ouster. Russia stands to benefit little from the Syrian conflict except political influence in the Middle East. As in all other Eastern European cases, Russia’s involvement in Syria is more about frustrating the United States’ efforts at maintaining peace and spreading liberal democracy than anything else. Russia is well aware that a successful campaign to keep Assad in power will have the desired repercussions of ensuring that the United States has less control of the Middle East. Most of Russia’s political response to American efforts around the world is geared towards frustrating the West. The South to South cooperation that has emerged in Russia’s political support of America’s enemies targets the limiting of America’s power. After the end of the Cold War, the United States became the unipolar power and the best case of its manifestation of power is the Iraq war. During the Cold War, Russia had some influence in both Iraq and Afghanistan which it ended up losing when the Soviet empire broke down. Russia still desires to regain its former political influence and is prepared to use all means including supporting individuals like Assad whose role in escalating the Syrian civil war is very apparent.
Conclusion
The BRICS is still a disjointed group of emerging economies but it has made its desire to challenge established liberal norms and forms of governance known. China and Russia use their unique positions as key members of the groups to influence economic and political outcomes in developing nations. China seeks to influence the international financial institutions and their operations while Russia seeks to maintain strife as a way of letting the United States that it is still powerful. China’s new loan system to Africa has both promises and challenges while Russia’s constant antagonism is geared towards maintaining its circle of influence. Other members of the BRICS have both political and economic desires but they have little capacity to influence international policymaking. South Africa was an afterthought addition to make sure that Africa was represented. Russia and China use their BRICS membership as a stepping stone to challenging the West.
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