How China builds its commercial empire

Let’s go back to Kinshasa. Congo’s got problems. The Western way of helping has been with aid — multilateral, bilateral or through self-funding religious groups and NGOs. To stem fighting in the east, Congo has a 21,000-strong U.N. peacekeeping force, MONUC, the biggest in the world. These efforts have had mixed success. The war hasn’t ended, and the world’s loans to Congo have helped fuel corruption. Little has been done to address Congo’s infrastructure. Coordinating aid among so many groups and nations remains difficult.

Enter China. Beijing doesn’t do gifts; it does deals. In Congo, China’s infrastructure-for-mines deal irked the International Monetary Fund (IMF). The IMF argued that Congo’s guarantee to China that it would recoup at least $3 billion in minerals was an IOU on Congo’s national assets and therefore a new debt. That fell afoul of debt-write-off conditions, which require that the debtor take on no new loans. “If the Congolese take the Chinese deal,” said a Western official familiar with the negotiations in mid-2009, “they will not get any more [Western] support.” A standoff ensued.

An earlier deal, in 2007 with Angola, had also outraged the IMF, which had been negotiating a new loan with Angola for years, with carefully calibrated conditions to block corruption and alleviate poverty. By paying Luanda $5 billion in return for oil concessions and infrastructure contracts, China effectively made the IMF redundant. Diplomats across Africa like to say the continent offers space for everyone. But what’s happening in Angola and Congo is a new scramble for Africa. Xu, the translator, has no doubt that he is engaged in an intense rivalry. “Not everybody is pleased to see us here, that’s for sure. But we are not going to lose.”

For all the heat, IMF officials admit that the Chinese model for African development has some advantages. First, it’s quick. Loan talks with multilateral agencies take years. The China-Angola discussions took weeks. “With the West, there are studies, analyses and bureaucracy,” says the Western official. “The Chinese just ask what the government wants, and they don’t question or comment or judge. They just do it.” China also works as visibly as it does quickly. Drive across almost any African country today, and you’ll find Chinese engineers by the side of the road, sleeves rolled up, overseeing work crews.

… The Asian model of development is looking increasingly attractive in ways beyond aid. African governments look at Western economic instability over the past two years and find a better model in Asia’s extraordinary growth. Special economic zones, one of the engines of China’s growth for two decades, are popping up across the continent. But what really distinguishes Chinese businesspeople from their Western rivals in Africa is how risk-happy they seem.

… Wu Zexian, Chinese ambassador to Congo, elaborates on this new model of development assistance. “Before, African countries never profited from their resources. Now they help them build infrastructure. Other countries say, This country has a lot of problems. We say, This country has huge potential.” The key is long-term vision. “Yes, there is a risk,” says Wu. “But in 50 years, we will still be here. So will Congo and the mines. Short term: sure, problems. Long term: not much risk.”