“There are No Rogue States” – China's Vision for Eurasian Investment in Africa


Politics and economics are truly one discipline, seen from two different points of view. Foreign Direct Investment (FDI), especially if the state is involved, serve not only the profit seeking of private investors, but also the strategic and ideological vision of the home government. This essay will analyze the Chinese model of African investment from both the economic and political points of view. The literature is almost unanimous that the Chinese government is the leading element in all overseas investments, which suggests that diplomatic goals will be parallel to economic ones.

China's capitalists in the “semi-private” sector have a very different model for FDI. Given the close alliance with the state, investment (especially in resource rich Africa) has the goal of building strong states so as to challenge the “democracy” rhetoric of the US. American “soft power” in the form of corporate-sponsored Non Governmental Organizations (NGOs) is the essential prop in this rhetoric. The skepticism on the “democracy” panacea derives from the fact that “democracy” and “liberal capitalism” are identical. They have no real specific meanings except as the “free market” demand for profits. In truth, “democracy” is oligarchy.  Is the Chinese model of investment a better economic and political bargain for African than that from the West? This paper will answer in the affirmative. In the process, it will also detail the very different natures of western (that is, the US and EU) and Chinese forms of investment in Africa.

James Petras (2011) analyzes western investment in Africa and Latin America from the point of view of American and European “austerity measures.” In exchange for loans and market access, the west grants African governments assistance only so long as their state is reduced in size and all (or most) state assets given over to private investors. Without access to credit, building an economy is impossible. Until recently, the west and Japan were the only sources of credit. China is changing that fast (Petras, 2011).

This is, to a great extent, at the heart of China's criticism of liberal democracy the west promotes. Instead, Chinese leaders preach a “non-interference” policy where all forms of government are equally legitimate depending on local circumstances. This makes China a welcome ally for many governments facing the liquidation of their social programs from “austerity measures.”

Presently in Africa, two very different development models are competing for her resources. Africa's potential wealth and power is well known, but in capturing this potential, the west (that is, the European Union and the United States) is pitted against China. The west is a totally private, profit driven agenda, is competing against a Chinese model that is not entirely private and is aimed at long term development. The resulting investments will be different and have very different results. This paper argues in favor of the Chinese model and predicts her victory against the west.

The Chinese Model: An Introduction

The Chinese model here is based on long-term commitments, challenging the west, pluralism in ideology, state power and the willingness to forego short term profits for greater goals. Without the austerity demands of the International Monetary Fund for example, China will build a firm alliance of African states against the west. Their success speaks for itself.

For China's capitalists, Ian Taylor asserts “In many African leaders this self-image is expressed in a deep suspicion of criticism of their regimes on the grounds of 'western-centric' norms of human rights and liberal democracy, and comes into play whenever domestic governance records are criticized” (Taylor, 2007: 939). This is reflected in the Chinese doctrine of “non-interference,” which will not question domestic political priorities except where contracts have been breached. As China sees itself as the leader of the Developing World, this ideological and strategic idea governing Chinese FDI could not be more significant (Taylor, 2006: 939-940).

China's investment in Africa comes from previous failures of western powers in the area. Thompson writes concerning  the (2000) American African Growth and Opportunity Act (AGOA):

In contrast to laudatory official reports about AGOA, empirical findings demonstrate the positive impacts as narrow (mainly one sector in 6 countries), ephemeral (until 2005), and inequitable (favoring the stronger economies and foreign textile companies). AGOA neither impacts the macro-economies of African countries in a positive manner nor brings any meaningful change in the economic conditions of the workers. The results of AGOA's first years question reliance on trade as the primary means for equitable or sustainable growth. Living in an extremely wealthy continent, but with the majority in abject poverty, the peoples of Africa must benefit from the export of the wealth, or trade will never lead to development (Thompson, 2000: 472)

On the other hand, China has granted a $3 billion loan to Ghana in 2012, amounting to 10% of her GDP. Even more startling, China granted the Congo a $6 billion loan in 2008, which is about 80% of her GDP (Sun, 2014: 15). The reasons for this difference can be found in Sun's analysis for the Brookings Institute:

Using what is sometimes characterized as the “Angola Model,” China uses resource-backed financing agreements to reach deals with recipient nations that rely on commodities, such as oil or mineral resources, to secure low-interest loans from China. In these cases, the recipient nations usually suffer from low credit ratings and are not regarded as creditworthy. These nations have great difficulty obtaining funding from the international financial market; China makes financing relatively available and acquirable—with certain conditions (Sun, 2014: 8).

This is tantamount to the rejection of usury. In other words, the money is not the issue, the product is. The profits gained from the state bank in Beijing are in the profits coming from the product that loan helped create. Without profit, there is no interest paid. For the west, it is the money alone that matters. Regardless of how the cash might be squandered, the interest will still be demanded. This proves that it is not the product that pays the interest, but the loan money itself, regardless of what it might create.

China's long term perspective makes her investment in Africa far more constructive than the west. The strategy in terms of credit are to approach very poor government or firms in Africa and offer them credit where western or Japanese banks had demanded radical structural reforms. This is the essence of the Thompson piece cited above.

The Chinese view is that there is no single correct form of economy or state, and hence, they tolerate different state structures, especially in the Developing World. The idea is that, faced between a World Bank loan with a long list of preconditions and the Chinese “non-interference” concept, the latter is an obvious choice. This also means that China is in the process of creating markets and administrative structures in “problem” countries

such as Sudan, Zimbabwe and the DRC require more attention not only because China has large vested economic interests in their natural resources, but also because their volatile internal politics often raise international concern and spark criticism that China is “propping up” these authoritarian regimes through economic deals and international political support (Sun, 2014: 20).

The “authoritarian” label and the politicization of this policy is a misdirection. In focusing the attention on the nature of the state in these areas, the economic aspect is no longer the subject of attention. China's investment in much of Africa, especially these “problem” states, is building a potentially powerful and wealthy coalition of countries rejected by Washington due to their “authoritarian” political leadership. There is a tendency to label states that are not cooperative with western powers as “tyrannical,” but these labels have no analytical value.

Corporations are authoritarian, as are all bureaucracies. Politicians do not control investment policy and in fact, are in the west, quite dependent on private capital. Thus, the use of labels is a misdirection for the western elites designed to overthrow pro-Chinese governments and install weak, “democratic” states that will not resist the banking establishment.

China's lack of politicization and lack of political pomposity makes her far more attractive to these African powers than the US. While the Chinese government is heavily involved in FDI, the firm itself, established in an African market, has no interest in the political regime under which it works. Part of this is possibly because of the role of Beijing. China is willing to make long term investments due to her state-led model of growth. In the case of the US and EU, it is private capital that makes these decisions and creates policy. Not only is this model quite authoritarian and usually outside of public channels, it means that the FDI coming from the west is aimed at short term profits, while that from China, being state-driven, is based on long term infrastructural changes. The “threat” of China to the United States or the EU is precisely in this.

In Bracking's (2004) essay on Chinese investment in Africa, he states:

Solutions to inequality, poverty and redistribution, while ultimately contextual, in a theoretical sense hinge on questions of government legitimacy, rather than mathematical rationality. From the perspective of political theory, where power is acquired and exercised according to justifiable (legal) rules, and with evidence of consent, we call it rightful or legitimate; a legitimacy that is enhanced by its concordance with prevailing social beliefs and values (Bracking, 2004: 12-13)

While not apparent at first glance, this idea is essential to Chinese FDI in Africa. Democratic states (or more accurately, regimes guided by a broad “liberal” ideology) are based largely on money. Politicians require large war-chests, and the government, having to (at least formally) answer to voters, requires a steady stream of credit. From this, the conclusion is that liberal states – those following the Washington Consensus – are those in which western capital can more easily penetrate and control.

On the other hand, a representative but not democratic state might be able to go over the heads of local strongmen and institute real reform. Famously, Taiwan and South Korea have successfully followed this model, not to mention China herself. This is the concept of “legitimacy” mentioned above, it is the product of historic evolution and is aimed at legal and often ethnic unity. This might preclude democratic governance in war-torn societies, or those with extreme inequalities of wealth. For these, elections and “freedom of speech” might well result in continued civil war.

There is good reason to argue that liberalism is identical to western capitalism. That is, the rhetoric is a smokescreen that blinds subjects to the fact that the real power is economic and “private sector.” From this, if the US, for example, continues to demand a single form of government for the world, the US will lose this battle for Africa. American investment (and all US and EU investments in general) is for quick profits and if needed, a quick getaway (ibid). Manipulating the legal system of the country is easier if politicians are dependent on western cash to function. A strong state with a charismatic leader might be a tougher nut to crack.

The total privatization of investments from western powers means that the state is an appendage of capital. The oligarchs in the US or UK are far stronger than their governments, and particularly in the financial realm, have the state as a dependent client. China's model is far stronger, longer term, and not entirely motivated towards profit. Little, if any, is motivated to short term profit, and seems ready to take short term losses in exchange for the building of a future relationship that would be of immense profit to both sides.

Chinese FDI is guided by the state. The state is not only underwriting these investments, but also actively involved in their direction. It is fairly clear that early losses are acceptable for long term gains both economically and politically. Given the structure of American and multinational corporations, the long term is almost always not an option. Stockholders want capital gains or (better) dividends as soon as possible. The state functions as a clearly separate entity from private capital in China, where for the US, the state is at least in large part a tool of finance capital; it is indistinct from the oligarchs that make investment decisions.

The western case is far better known than the Chinese model. In general, the stress is on the individual and the market. Believing that the state is the main problem (rather than solution) to poverty and underdevelopment, western investment, while profit driven, also has positive effects on the Third World. Wages for western firms are higher, and technological development is rapidly diffused from the newly arrived experts from the west. The basic thrust is that trade with the US and EU is the means of gaining a foothold in the world economy and earning the hard currency so critical to economic health.

The World Health Forum of the United Nations argues that the “Washington Consensus” is based on trade rather than aid, building free economies with the smallest possible state and the greatest amount of privatization. In addition, fully free trade and the total equality of foreign and domestic capital are also essential (WHO, 2015).

The Role of the Chinese Government

China today is acting like any other major power attempting to secure its resources. The west, that is, elites in London and New York, have opined that this is “destabilizing” to “world order.” In the work of Lai (2007) argues that China's expansion of its oil resources outside of the middle east into Africa, as well as securing oil transport from Central Asia and Russia, are not destabilizing, even if the “world order” is as sacrosanct as it has been stated.

China has not bothered the US, in fact, the US is presently dependent on it. Klare argues that China's growth will cause clashes in the South China Sea (2002: 110-116). Further, American commitments in the Philippines is also a problem since soon, western and Chinese interests will clash in that country (Herberg, 2004: 353). In 2005, the American Congress blocked China's National Offshore Oil Corporation's (CNOOc) from taking over Unocal based on the alleged threat to American security (Goodman, 2005: AO1).  Again, this is a matter of misdirection. The political or military aspects of this are publicly made the center of the debate while the reality is entirely economic (Jiang, 2009: 599).

The state's role in Chinese investment is critical to understanding the argument here. Wang's (2002) article stresses the role of the state in all Chinese overseas investment, not just in Africa. Explicitly, Wang argues something similar to this paper, that the state does not merely look at typical variables such as profit or market share, but also

The government aim has been to carry out FDI in targeted sectors and industries in accordance with China's long-term strategies. Indeed, its overall strategy has been to encourage its manufacturing enterprises to invest overseas so as to fully utilize the so-called “two resources and two markets” principle. This has involved targeting both domestic and international markets as well as seeking strategic resources. . . both domestically and globally (Wang, 2002: 194)

In Wang's paper, he argues vehemently for the dominance of the state in all overseas investments. This outweighs localized power such as the region in which the firm is located or the Board of Directors. Foreign investment is identical to the more security-conscious nature of foreign policy. Primarily, it is a long term commitment that separates Chinese capital from the elite of the western world.  Resources, goodwill and strategic thinking go into all major investment decisions. Wang maintains that capital is just another version of military security in the Chinese view.

Wang's unique importance to this field is that, being fluent in the language, he cited a Chinese-language article that polled elites in the “private sector.” They asked these major Chinese capitalists what their geographic target is. Almost 40% said “Africa,” which makes it a winner by plurality (Wang, 2014: 198). Surprisingly, only 30% responded with any reference to southeast Asia.

Further, there have been some shifts concerning Chinese foreign investment since 1995. First, Asia became even more essential to Chinese capital. Though Africa seems to be the most interesting alternative, China's own sphere of influence in Asia makes up for 50% of all Chinese overseas investment. Second, while in 1991 it was North America that had about half of these investment funds, by 2005, its percentage was under 10% (Cheung and Qian, 2009: 317).

Third, while Africa in the 1990s was about 2% of all Chinese overseas investing, in 2005, it had increased to 10% which is the same as Europe. Finally, while Australia was once a critical hub of Chinese capital, today, it is only about 3% of all Chinese funds (Cheung and Qian, 2009: 317).

In Alden's (2009) essay on the political nature of Chinese investment in Africa, strongly suggests that politics is at the root of Chinese goals for the region, while profit is the main goal for the western elite. Yet, he refuses to lose sight of the more “profit” related motives of the Chinese. He reports that in many of the first wave of China's investment in Africa after 2000, the enterprises founded used almost always Chinese labor even to the point of importing ethnic Han Chinese for unskilled jobs.

He remarks that the Chinese approach is colored by the idea that China is the natural leader of the third world since it too was the victim of colonialism. Of course, so were the Balkans and Russia at one time. Part of the reason for the often speculative condemnations from the west is that China's policy of “non-interference” is seen as threatening. When China invests in an area, she establishes many institutions for training and local development. Without giving cash directly, these institutions act as financial intermediaries that “channel” where this money goes. Beyond that however, the idea of “non-interference” precludes Beijing from inquiring as to the use their largess is put.

The crux of the argument is in the creation of Economic Processing Zones (EPZ). Alden suggests that these all-encompassing attempts at Chinese-led reform are a means for Chinese government officials to begin reorganizing African economies. China claims that these Zones are not about Chinese control directly, but are primarily a means of coordinating Chinese investments over several sectors. It is a means to create a vertical integration (of a sort) for Chinese funds (both in terms of aid and investment) that permits an adaptation to local conditions (Seddon, 2006: 749). These zones are integrated and comprehensive economic unities. It is one variable showing a fairly sharp difference between west and east in terms of investments.

BRICS in Africa

Some of the most important distinctions in China's investment strategies in Africa concern the regional importance of the economy. For western Africa for example, Nigeria is by far the largest country and, conveniently, s loaded with oil. The evidence of both Wang and Cheung strongly suggests that even if a smaller neighbor like the Ivory Coast had more oil with more profit potential, Nigeria would still be the main target due to its size and potential hegemonic influence over western Africa (Sun, 2004: 28).

Overall, FDI flows into Africa from all states have a tendency to concentrate around just a few countries. South Africa and Nigeria are the two main recipients. The former due to its first world status achieved under Apartheid, while for Nigeria, her sheer size and oil potential are extremely significant economically and politically. For South Africa as a part of BRICS, there is a tendency that even that country, an ally of the US since apartheid fell, have sided with the “enemy” in Russia and China. This country's mineral wealth and gold might be at stake for the west. China directs about 35% of its FDI flow into South Africa.

Sun (2014) argues that much of China's initial interest in Africa comes from the 1997 meltdown in southeast Asia. This was traumatic for economic elites in these areas, and diversification became a popular panacea. Subsequent crises and the universal belief that these will be regular and recurring are at the root of even Provincial governments in China directing their own flows of FDI into Africa. Part of the reason is that Chinese labor costs are rising, so this is a form of “outsourcing.” Anhui Province for example, with its main city of Shanghai,  has announced that Africa is their primary target for the strong construction industry that typifies that region. Anhui funds make up about 50% of southern China's overseas contracts (ibid).

By comparison, Russia, an ally of China through the Shanghai Cooperation Organization (SCO), has increased its own investments in Africa's oil producing hegemons as well. Russia mirrors China's investment, suggesting that the SCO might be coordinating the two countries' Africa strategy. Shubin (2014) seems to conform this when he states that as Russia became more involved in BRICS. Once South Africa was included as the “S” in that acronym, Russia took notice of these squandered opportunities for the first time.

Since 2010, Shubin argues, this investment is now diversified beyond energy. It includes a satellite system for Angola with the cooperation of the Bank of Africa and St. Petersburg's VBT. In addition, infrastructural projects also rank high, both financially and geographically. The SCO seems dedicated to the EPZ concept. In 2006, it was clear that Russian attitudes towards Africa were changing. Sergei Lavrov made it a priority to stress that the Russian VTB, opening a branch in Luanda, the capital of Angola, would be just the beginning of Russia's presence in the sub-Saharan part of this continent. His statement at the time was that Russia will be a part of Angola's financial reform projects, again stressing a strongly long-term view of the situation (Shubin, 2014: 2-5)

Both Russia and China have extended credit at excellent rates. Again in Angola, Moscow has loaned that desperate government $1 billion (US) with a seven year period for repayment. Predictably, the American banking establishment condemned the deal as “corrupt.” Saying that the investments coming from Russian transfer companies in England and Switzerland “were not open to any internal review” is likely a statement of frustration that the west cannot control these funds or any political profit down the road (ibid).

The main accuser is Andrew Feinstein, member of Parliament in South Africa and an advocate of London banks, stated that this deal was one of many designed to repay Angola's debt to the former USSR during that country's civil war (Gurev, 2013). Much of this was based on debt forgiveness, writing off almost $5 billion of debt to about $1.5 billion. The Guardian, however, suggested that the real reason why Feinstein was so upset was that Russia had exposed European tax-havens on the Isle of Man and Cyprus in the process (Gurev, 2013). This has also come up in relations with China. Part of the problem is that Chinese FDI, whether for profit or for power politics, is usually accomplished through intermediaries under Chinese control. Since they have no prima facie reason to share their data with the outside world, the west was quick to pounce and call this “non-transparent” and hence corrupt (Alden, 2009: 567).

The BRICS had in 2013 organized a “BRICS in Africa” conference to continue the investment of its members into Africa. Shubin claims that conferences such as this are part of how Russia was able to reconnect with Africa as the USSR had done before. He reports that the Russian Foreign Ministry is aiming at “debt relief” as the primary initial means of Russian financial reform for Africa (Shubin, 2013: 6). Russia and China, it seems, are involving Africa in a new financial regime independent of the major Washington and London banks. It is no accident that China has bought about 30% of the stock recently in the Standard Bank of South Africa (Alden, 2009: 573).

These identical sorts of western media condemnations occurred in the oil deals struck with Gabon from 2005 to 2007. This major deal was comprehensive. While aimed primarily at oil, Beijing realized that without infrastructure, the oil is useless. They loaned the government about $5 billion for roadways and rail transport, a large hydroelectric dam and a deep water harbor. The western elites retorted that the deal was “too secretive” and that Chinese “control” over these projects was unacceptable (Alden 2009: 571). Alden also describes the use of corporate funded “NGOs” that accompany investments are designed to force competitors from the BRICS out. It is clear that western elites in fiance and petroleum find China a clear threat (ibid).

From 2001-2013, the amount of FDI accruing to Africa increased about 500% (Copley, 2014). Copley remarks that “This growth was primarily driven by China, whose FDI grew at an annual rate of 53 percent, compared with 29 percent for Japan, 16 percent for the EU and 14 percent for the U.S. China’s stock in SSA amounted to $18 billion in 2012” (Copley, 2014).

Two Competing Visions:

The Failure of Western Neoliberal Ideology

While almost 60% of the American investment in South Africa is in the mining industry, only about 30% of China's is. This is curious in that it suggests – superficially at least – a “quick profit” motive for the west while the lower amount from China suggests the desire for deeper, more diversified reform. In fact, Copley states:

China’s reported FDI composition was more diversified than the composition of U.S. FDI, with 19.5 percent in financial services, 16.4 percent in construction, 15.3 percent in manufacturing, and the remaining 18.2 percent in business and tech services, geological prospecting, wholesale retail, agriculture and real estate (Copley, 2014).

Sautman's work (2008) summarizes the differences between American and Chinese FDI in Africa by stating first, that China seems less interested in extraction of raw materials. Secondly, they are more profitable than American investments. Part of the reason for this centers around the lack of trust in African institutions from the American side. Any large project in most of Africa is deemed “too risky” (Sautman, 2008: 26). Third, there is more cooperation between China's local investors and African business and finally, that the lack of a directly politicized agenda in Africa gives them more flexibility.

The latter distinction bears closer scrutiny. American capitalists operate under the illusion that “democratic” governments govern best, regardless of consequences. Removal of western FDI in non-democratic states leave a void filled by China. This leaves Beijing open to the charge of “coddling despots,” but the PRC has little interest in the elite American media. In a telling passage:

The popularity of features of China's presence in Africa, compared with that of the main Western states, goes well beyond elites.118 The 2007 Pew Global Attitudes Survey asked Africans in ten countries to compare the influences of China and the US in their own countries. In nine of the ten countries, by margins of 61 to 91 percent, African respondents said the Chinese influence was good. These percentages substantially exceeded those for the US. One important implication of the Chinese presence in Africa then is that Western states and firms may need to engage in greater self-reflection about their own presence in the continent (Sautman, 2008: 28).

The reason Sautman offers is close to the argument of this paper: the US demands democracies as a means of making the state less able or willing to block or modify US investment. Given the Chinese approach stressing cooperation and self-sufficiency, China's longer term approach is highly infrastructural in all senses of that word. In fact, China has turned the tables on the US by making precisely this point: democratic governments in the very poor African nations are merely rubber stamps for American finance.

On the other hand, a strong state under a military leader dedicated to unity and development will have an agenda for FDI that can only be met with cooperation and adaptation. Since the US is unwilling to do this, it is interpreted as the desire to divide, weaken and exploit Africans. In this passage, he sums the entire argument this way:

It is an image of a developing state that does not fully implement WC prescriptions, does not impose onerous conditions on African states' policies, and is more active than the West in promoting industrialism in the global South. According to one South African scholar, China has succeeded in creating “a somewhat idealistic impression of the distant partner or big brother in the East.” Whether this positive view of the Beijing Consensus is warranted continues to be debated, although its accuracy may be seen as less important than the fact that it exists and plays a role in how Africans appraise the policies of both China and the Western states. The “Beijing Consensus” as a Competing Framework (Sautman, 2007: 81).

This is the crux of the matter. The essence of this “image” is that the west uses liberalism as a disguised form of colonial rule. Politicians desperate for money seek all forms of aid and FDI regardless of conditions. The short term mentality of African politicians (that is, elected ones) is perfect for the short-term mentality of the American profiteers. The Chinese model stresses a strong local state, self-sufficient development, all inclusive reform and a strong social service sector. The IMF's demands for massive cuts in social spending is well known. By contrast, in 2006, there were about 600 specific, distinct infrastructural projects in Africa financed by the Chinese (Sautman, 2007: 87). Many loans contain provisions for lowering interest rates in case of global trade declines and have long periods where no interest is charged at all. States can afford to do this, industries in a tightly competitive environment cannot (ibid).

The west has abandoned Zimbabwe, for example, due to the authoritarian policies of Robert Mugabe. The void was quickly filled by China to predictable cries about “supporting tyranny.” A desperate Zimbabwe, with almost no hard currency reserves, was very relieved to have a Chinese sponsor (Hilsum, 2005: 422).

In Sudan, the civil war that created two countries where there was once a single military state drove out all western investment. Chinese oil firms stayed put. The west condemned the Islamic government and placed sanctions on it. China began selling them weapons. The US Senate imposed an embargo on the country, China took over all of Chevron's abandoned fields (ibid). The author cites an interview he conducted on Canada's Channel 4 news:

“If a G8 country had wanted to rebuild the stadium, for example, we'd still be in meetings!” said Sahr Johnny, Sierra Leone's Ambassador to Beijing. “The Chinese just come and do it. They don't start to hold meetings about environmental impact assessment, human rights, bad governance and good governance. I'm not saying that's right, I'm just saying Chinese investment is succeeding because they don't set high benchmarks” (Hilsum, 2005: 423-424).

It is not that China refuses “high benchmarks,” its rather that the Eurasian view of investment is radically different than the west. Democracy and liberalism have no place in war-torn, traumatized and divided societies. They weaken the state so that the west can extract resources with little hindrance, but the long term results are a collapse of the state, as Russia learned to the near extinction of her people. That example did not go unheeded. “Democracy” was seen to have American teeth.

In that same interview, Zainab Bangura, the head of a corporate-financed western NGO called “The National Accountability Group” stated:

If our leaders know that China can sustain and support them, and China effectively becomes a donor country, then the United States and Britain will start accommodating them. . . So if a leader starts trying to change the constitution, or imprisoning journalists, or breaching procurement rules and regulations, they'll pretend not to understand, for fear they'll go over to China (Hilsum, 2005: 424).

In the work of Thompson (2004) dealing with American attitudes in Africa, he summarizes the nature of these ideological conditions for US investment. These include free trade, liberal democracy, the “corporation-as-person” idea, a pro-American foreign policy and certain human rights standards for labor and citizens at large. Most will admit that much of this is for public consumption, but these standards are all – to one extent or another – means by which the US can then leverage its funds in a country to reshape it as an obedient supplier of raw materials. Thompson points out that the economic conditions are so stringent that the US is losing the content to others (meaning Eurasia). An African opposition group said this about American conditions:

We oppose all the overt and hidden conditionalities in AGOA which lead directly to increased poverty and social inequality and which undermine social and economic human rights of our people; We denounce the USA failure to ratify most of the ILO Conventions and the UN Declaration on the Rights of the Child; We oppose the USA for its leading role in imposing globalization worldwide, in part through its own military force and in part through the Washington-based IMF and World Bank; We oppose the USA for its constant work to erode the sovereignty of other states (cited in Thompson, 2004: 471).

This idea is based on what “liberalism” really is  or at least, how the Developing World sees it. Liberalism uses inflated rhetoric to justify an almost totally economic system. For western citizens, there is a tendency to see “democracy” as a matter of mere procedure that guarantees basic “rights.” For the Developing World, it is the rule of western capital and its media. It is a power-ideology where procedures mask the reality of domination. One example might be the condescending claim of Taylor's (2006) article:

Of equal concern, however, is China's relatively casual stance towards the liberal norms of human rights and democracy. In China's defense it might be averred that the strategies adopted by an incoming power, seeking to grab opportunities wherever it can, and those of an established power, seeking to protect its investments in an unstable environment, are intrinsically different and that China's status as the former accounts for some of its actions. But the key question is: how long is it going to take for Beijing to move from one stance to the other? (Taylor, 2006: 952).

The assumption here is the radical claim that all mankind is moving inevitably towards a liberal-democratic and capitalist future. Yet, there is no reason to believe authoritarian states are more corrupt than democratic ones, or even that the very nature of authoritarianism is in itself corruption. For Taylor, strong states are corrupt intrinsically, since it is not ratified by liberal democracy. Yet, bureaucrats are the same regardless of the nature of the leadership, and corruption is easier in states where politicians need all the favors they can get.

The connection between big money and elections has yet to be broken anywhere. Thus, China's refusal to assume the “end of history” is easy to excuse. China's “non-interference” policy is in part based on this view, that is, that liberal democracy, being congenial to capitalism, is the secret of historical development (ibid).

In brief, the argument from writers such as Sautman (2007) is that the Chinese model is heavier on infrastructural and long term investments. Africans, so he argues, are far more interested in this model rather than the west's “unequal and disparate exchange that locks in underdevelopment” (Sautman, 2007: 80). The Chinese model is seen as one to emulate, given its rapid lifting of many millions out of poverty (Sautman, 2007: 80).

 It is true that the Chinese state (that is, political elites at the federal or local level) do not govern the daily grind of micro-economic work in its overseas firms. Haglund (2009) makes reference to the State-owned Assets Supervision and Administration Committee (SASAC) as the institution that governs the behavior and ideological strategy of overseas investment. For example, in 2008, this committee issued an order that issues of environmental pollution, labor rights, and community development need to be essential parts of all African FDI from China (Haglund, 2009: 632). Part of the SASAC is also to ensure no managers at the higher levels are hired outside of the official ideological consensus. The identical, though less formal, vetting exists in the US and EU.

Critic Michael Parenti argues that “liberal democracy” is merely a code word for capitalist demands. He states, referring to global capitalism in general:

Instead of trying to make money by the arduous task of producing and marketing goods and services, the marauders tap directly into the money streams of the economy itself. During the 1990s we witnessed the collapse of an entire economy in Argentina when unchecked free marketeers stripped enterprises, pocketed vast sums, and left the country’s productive capacity in shambles. The Argentine state, gorged on a heavy diet of free-market ideology, faltered in its function of saving capitalism from the capitalists (Parenti, 2009).

Parenti's criticism is in line with this paper's thesis: political agendas exist in all forms of FDI, but the west is challenged by China based on the above: the political agenda has nothing do with the greater good of the host country, but by weakening the state such that MNCs can do as they please. The Argentinian state, based on some version of the “rule of law” permitted western investors to come and go at will. They paid the price as a result.

Similarly, Sara Flounders (2014) argues that the western support for the Hong Kong democracy protesters is an example of precisely this.

Wall Street is not satisfied with the deep inroads that capitalism has made into China and is increasingly fearful of Chinese competition in global markets. The U.S. pressure for political liberalization in China is to promote further economic opening and further privatization of state industries (Founders, 2014).

For her, the issue is to unleash bourgeois elements into the population that will then demand greater privatization, remove state controls and institute free trade. Ultimately, this is what “democracy” and the “rule of law” mean to western capitalists.

Petras put together a comprehensive list of the “westernization” traits involved in imposing “government reform” or austerity. These include some fairly well known traits such as the shift in production for export rather than domestic consumption, the stress on paying debts above all else, privatization, and free trade guarantees. However, other conditions include the imposition of a bureaucratic technical elite, the existence of an oligarchy living from rents and the presence of corporate funded NGOs that claim to be “civil society” in these economies.


The conditions for western aid and investment are the international face of liberalism. The point here has been to show that western ideological demands are a) a cover for capitalist penetration, b) designed to weaken the state, and c) a means to force debt repayment through the privatization of assets. The state is the handmaid of capital in the west. The opposite is true for Eurasia.

On the other hand, China's investments in Africa are based on long-term commitments and broad goals in building a society based on local customs, elites and the principle of “non-interference” in purely domestic political concerns. When faced with a choice between these two forms of aid or FDI, China will win each time.

Liberal democracy depends on a private, and hence corporate, media to promote pro-western, liberal policies. Thus, all state owned media are usually liquidated. Elites can play on fears and prejudices, while ruling dishonestly through “private” organizations. The NGO is a symbol of why the Chinese model is succeeding: it is the appearance of “civil society” with the substance of capitalist exploitation. They are inherently dishonest since, while promoting their mission as “independent,” are in fact financed by economic elites in the west.

One example is the powerful Peace and Security Funders Group, a critical NGO advocating for globalization and the erasure of borders, is financed by America's blue-chip elite. Their sources of funding include the Rockefeller Brothers Fund, the Carnegie Corporation of New York, and George Soros' various groups. This group, though some of its subsidiaries throughout the world, claim to be the bedrock of global “civil society” while in truth acting as a spokesman for elite foundations and major conglomerates.

Given this, the Chinese model dispenses with such charades. Without claiming that she has found the riddle of history, Chinese FDI is based on non-interference, pluralism and a long term commitment not available to western capitalists. The result is democracy and the “rule of law” which is really the deregulated, free trade system in the interests of western capital. Ultimately, China's model is healthier and more realistic.