The Daily Reckoning PRESENTS: Africa has found more than a buyer for itsraw materials. It has found a new source of aid and investment. China isnow Africa's biggest source of aid. Read on...CHINA'S UNQUENCHABLE THIRSTby Brian DurrantIn the Spring of 2004 there was a spate of thefts of manhole covers inGloucester and Aberdeen, the craze spread to East London, Montreal,Chicago and Kuala Lumpur. As darkness fell, they would be levered up, soldto local merchants who cut them up and loaded them onto containers. Themotives for the thefts were financial.China's runaway economic growth had forced up the price of steel and scrapmetal prices followed suit. The 130 manhole covers stolen in Aberdeen wereworth £13,000 and the metal would be shipped to China and used to makewashing machines and the like. At the time this incident brought home tome the growing influence of China on our way of life.Then this autumn I read a news item about an outbreak of rioting in theZambian capital Lusaka in which supporters of the defeated oppositionalleged vote rigging. Nothing new here, you might say. But what reallycaught my eye was that the opposition's anger had been targeted atZambia's rapidly growing Chinese community. Beijing had been investingheavily in the country and Chinese firms, some of which came under attack,have been accused of driving Zambians out of business. Just as the manholecover thefts were a symptom of China's voracious appetite for rawmaterials, was this evidence of 21st colonialism another manifestation ofthe same thing?The Chinese have had a stab at securing influence in Africa in the past.In the 1950s Zhou Enlai backed left wing governments, giving aid andfunding lavish infrastructure projects. But the strategy was not verysuccessful. Maoist China was not wealthy enough to establish China as aleading force, while the export of revolutionary ideas did not go downwell with African leaders. Now, rather than using ideology, China is usingtrade...with impressive results.While African trade with the EU and the US has been declining, its tradewith China has been booming, because unlike the west, China imposes noduties on commodity imports. Europe's share of total trade withsub-Saharan Africa has fallen from 44% to 32% over the past 10 years,meanwhile China's has increased from around 2% to 10%. Over the sameperiod trade between China and Africa soared from $3bn in 1995 to $32bnlast year. China is now Africa's third most important trading partnerafter the US and France.China's push for breakneck economic growth has resulted in an unquenchablethirst for raw materials, including copper, cotton, platinum, lumber, ironore and most important of all, oil. This year Angola overtook Saudi Arabiaas China's largest supplier of crude oil. China realises the strategicimportance of oil supplies to its development plans. In January this yearthe China National Offshore Oil Company paid $2.27bn for a 45% stake in aNigerian oilfield, trumping a $2bn bid from an Indian rival. China hasshown a similar interest in other oil producers like Sudan, Equatorial Guinea, Gabon and Congo-Brazzaville, which already sells a third of itsoutput to Chinese refiners.Moreover, Africa has found more than a buyer for its raw materials. It hasfound a new source of aid and investment. China is now Africa's biggestsource of aid. This year alone it has pledged more than $8bn in loans tosub-Saharan Africa. By comparison in 2004, the US gave loans of $3.5bn,France $3bn, while this year the World Bank is lending $2.7bn. Thisinvestment is often an entry ticket. For example, in Nigeria, Chinesepromises to invest $4bn in refineries and power plants were conditional onsecuring oil rights. In Angola a $4bn low-interest credit line to fundinfrastructure rebuilding after decades of war is repaid in oil.African nations have found that dealing with China offers fewercomplications than with the IMF, where loans are sometimes conditional ongood governance and human rights records. China has also flooded Africawith workers in straw hats from the Chinese Middle Kingdom.There are an estimated 44,000 Chinese workers in Namibia. The Chinese arebuilding a railway line in Angola from the capital Luanda to the easternprovince of Malange. There are also numerous Chinese traders that sellcheap electronics, plastic goods and textiles manufactured in China,undercutting local traders and manufacturers.However, given China's unsatisfactory human rights record it is notsurprising that it backs the vilest regimes in Africa. When Westernnations imposed sanctions on Robert Mugabe's Zimbabwe, China stepped inwith aid, arms and electronic communications technology for the corrupttyrant. From then on Mugabe launched operation Murambatsvina, in which700,000 had their homes or businesses destroyed. China neutered allattempts at discussion, let alone condemnation, at the UN SecurityCouncil.China's record in Sudan is just as bad. When in 2004 the Sudanesegovernment was said to be fuelling the genocide in Darfur, China resistedUN military intervention and instead invested $150m in the country thatyear, three times as much as any other donor. In turn China has becomeSudan's largest export market.But China's aid and support for African nations at the UN comes with oneimportant proviso: the ditching of their recognition of Taiwan. To date 48African countries paid due obeisance to Beijing, which brings us back tothe Zambian presidential elections. Given the suggestion that MichaelSata, the main opposition candidate, would have recognised Taiwan, theChinese ambassador said he would consider cutting diplomatic relations ifhe won. This is tantamount to a public intervention by China into theinternal affairs of a sovereign African country.There will be plenty of hand wringing in the West about its impotence inthese issues, but the actions of its leaders are partly to blame. The warin Iraq has preoccupied the West. Whether the mission was to secure oilsupplies for the West, give ordinary Iraqis security or spread freedom anddemocracy in the region, it has failed dismally on all counts. And thereis a wider diplomatic and strategic cost to the West. While Bush and Blairgot the West bogged down in Iraq, China has stolen a march on the Westerninterests in Africa. With the result that China has an increasingly tight grip on oil suppliesand political influence in the region. The West will be regretting playingits first "regime change" card so ineptly.Regards,Brian Durrantfor The Daily Reckoning