Guest Columnist: Chidi Amuta
Some understandable degree of excitement greeted the recent state visit of President Buhari to China. The visit has been marketed by government spokespersons as full of promise for our critically injured economy. There will be investment by Chinese companies in mega projects- railways, manufacturing plants, power plants and even universities. These initiatives when realized will offer employment to our army of young hands and increase our manufacturing capacity so that we become less dependent on imports, hopefully including those from China itself!
Among common folk, China is being projected as the New Jerusalem of economic salvation. In fact, according to a palm wine version of this narrative, some arrangement has been worked out to demystify the US dollar by flooding our banks and bureaux de change with the Chinese Yuan. A more up market version of the same story says the arrangement is meant to weight most of our import bills in Chinese Yuan rather than dollars so that we pay less for imports, mostly from China.
At the height of the euphoria, I asked some friends who are very knowledgeable about economic matters to explain to me the meaning of the financial arrangement with China. Hardly anyone has reverted to me with anything worth my while. The Central Bank called it a ‘currency swap’: Give me Naira, I give you Yuan. The Minister of Foreign Affairs who insisted it was not strictly a swap quickly countered this. But he stopped short of saying what it is exactly. Then the Finance Minister in far away Washington insisted it was a variant of a swap.
Conflicting and confusing explanations climbing over one another: It is an import finance loan. It is a monopolistic trade deal that ropes Nigeria into utilizing a standby credit facility from Chinese banks to pay for only imports from China. One deal. Many explanations. One government. More confusion among ordinary Nigerians. In the run up to and the immediate aftermath of the Buhari visit, I guess the Chinese achieved a massive public relations harvest in Africa’s largest market without spending a Yuan.
This China fever may be understandable in our present sad state. When your economic realities are as desperate as ours, you literally clutch at any straw and name it hope. But we need to ensure that our relationship with China is anchored on a proper understanding of what China means in today’s world. We must be sure of what we need to take away from the Chinese embrace and what we could lose if we misinterpret China. Even as the hype subsides, I think we urgently need to locate our relationship with China within a solid foreign policy context.
At the official government level, Nigeria is in fact a late entrant into the China rush among cash strapped African economies, coming behind Sudan, Angola, Zimbabwe, Ethiopia and even Ghana. Giant strides in technology, manufacturing and construction in the aftermath of the opening up of China to free market forces in the late 1970s has transformed China into an active agent of change in the world. From being a passive vehicle for conveying the material products of Western globalization to a world hungry for consumer goods, China has graduated into an agent of change especially in Africa.
African economies are desperately in need of infrastructure projects and affordable consumer goods while China’s huge industrial base is hungry for raw materials especially hydrocarbons. China has the cash to pay for what it cannot get by barter. And China attaches no silly conditionalities to its credits to African countries unlike the West, which hides its daggers behind the pinstripe jackets of IMF and World Bank executives.
I greatly admire the Chinese and what they have done for themselves in recent history. The miracle that we are witnessing today began literally in 1978 when the late Deng Xiaoping addressed the 3rd Plenum of the 11th Central Committee of the Communist Party. In that landmark speech, he directed the party to shift away from ideology to economic development. Ever since, China has not looked back.
For those enamoured of the new mantra of ‘change’, China is the most glowing example. Until very recently, China has grown at a rate in excess of 9 percent per annum for close to 30 years, the fastest in recorded history. In the process, the country has migrated over 400 million of its nationals out of poverty, again another record in human history. In a period of three decades, average family incomes have increased over seven times. In 1978 (when our military was handing over to President Shehu Shagari!), China made only 200 air conditioning units. But by 2005-2006, it made 48 million units!
There is nothing wrong with trading with or importing substantially from China. The United States does it and has even had to move some of its factories to China where the cost of labour is still cheaper. For instance, Wal-Mart, America’s largest retail chain, which accounts for 2% of US GDP and employs 1.4 million people, imports goods to the tune of $18 billion annually from China.
And China has money. It has accumulated a massive reserve of $3.2 trillion through a strong savings and investment culture as a matter of public policy. Its reserves are 50% more than that of Japan and three times the total holdings of the entire EU. The Chinese also know that our public officials are essentially undisciplined and prone to corruption. So, whatever money they put in our hands will be watched closely. The Chinese do not want to burn their money the way we do ours.
But the Chinese are no fools with their money either. When they lend you money, the interest may be small but they ensure that it is tied to projects to be handled by mostly Chinese contractors. The materials will have to come mostly from Chinese suppliers as well as the workers, who will be shipped here in droves if only to decongest China of some of its 1.3 billion citizens. It is your business to worry about repaying the ‘low interest’ loans when the time comes. If in doubt, go take a look at the new airport terminals under construction in Lagos, Abuja, Kano and Port Harcourt
As a country with a huge population, we must also not lose sight of the large migration of Chinese citizens that travels along with their investments, contracts and loans to various parts of Africa. In his recent book, China’s Second Continent, Howard French, who has studied the phenomenon in 16 African countries, puts the number of Chinese immigrants in these countries at close to two million and still counting. Of course productive diversity is very much needed in Nigeria’s demographic mix. Yet we need to carefully watch our numbers since we are already too many for our resources.
At the diplomatic level, greater dexterity is needed in expanding our relationship with China perhaps more than in any other area. Nigeria is no banana republic that can be easily ignored. What we do is important to the rest of the world when it comes to thinking about Africa. Similarly, whatever China does anywhere in the world today is important to the rest of the world especially the West and specifically the United States. There is a subsisting world order in both diplomatic and economic terms, an order that has prevailed since the end of the Second World War. That order has traditional spheres of economic and diplomatic influence. Nigeria has never been part of a non-Western sphere of influence. Irrespective of how desperate our economic situation may be, we are strategically vital to Western interests in Africa.
The rise of China as both an economic and potentially a military power is an affront to that order no matter how much veneer both the US and China put on the growing war of nerves between them. The contest for global supremacy between the US and China is underway and is most active in the economic sphere. Trade wars are nearly always the precursor of armed muscle flexing. A major issue in the ongoing US presidential campaign season is what to do with China in terms of trade policy and currency engineering.
As John F. Copper has pointed out in his recent three-volume book, China’s Foreign Aid & Investment Diplomacy, China conducts its international economic policy in a manner to sustain its economic prosperity and maintain peace and stability at home. On the contrary, the US does business abroad to sustain its global pre-eminence. The two positions can only co-habit through relentless diplomatic engagement. Every step has to be rigorously negotiated. What is Nigeria looking for in China beyond cheap Yuan and short term trade accommodation? Where does Nigeria stand or wish to go in the emerging global arrangement? What foreign policy underpins the Buhari administration’s slogan of ‘change’?
Any student of big power games will know one thing. Big powers are like powerful co-wives in a polygamous setting. They tend to be aggressively jealous and guard their spheres ferociously. Any attempt by Nigeria to use trade and finance to increase China’s influence in the Gulf of Guinea will be seriously watched by Washington and its European allies, especially France which has a number of satellite states in our neighbourhood.
As President Buhari flies around the world ostensibly in quest for solutions to our present adversity, on no account must Nigeria’s national interest be reduced to a begging bowl diplomacy. Nor should we make a habit of marketing our current economic problems as the essence of Nigeria’s stake in the world. Nigeria may be broke. But the will of our people is not broken.
As for the deals with China, perhaps our current distress leaves us little choice. In the words of Deng Xiaoping: ‘It doesn’t matter if it is a white cat or a black cat. As long as it catches mice, it is a good cat.”
• Dr. Chidi Amuta is the Chairman of Wilson & Weizmann Associates Ltd., Lagos