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    “China’s Marshall Plan” eyes industrial bases in Africa

    FT.com / China / Economy & Trade - China eyes industrial bases in Africa


    China eyes industrial bases in Africa

    By James Lamont in New Delhi and Geoff Dyer in Beijing

    Published: December 3 2009 20:07 | Last updated: December 3 2009 20:07

    The World Bank and Beijing are in discussions about setting up low-cost factories in new industrial zones in Africa to help the continent develop a manufacturing base and reverse its declining share in global trade.

    Robert Zoellick, the president of the World Bank, said Beijing had shown “strong interest” in proposals to set up manufacturing bases to help African countries achieve high growth paths similar to Asian ones.


    EDITOR’S CHOICE
    FT interview transcript: Robert Zoellick - Dec-02
    View from the Top: Robert Zoellick - Dec-03
    China seeks Africa joint ventures - Nov-09
    In depth: Africa and China - Sep-30

    “There is not only willingness but strong interest among some in China and I’ve discussed with the minister of commerce, Chen Deming, that there may be possibilities of moving some of the lower-value manufacturing facilities to sub-Saharan Africa – toys or footwear,” Mr Zoellick told the Financial Times.

    Chinese officials and academics have been debating in recent months proposals to use the country’s vast foreign exchange reserves to try to stimulate demand in developing countries – ideas sometimes referred to as “China’s Marshall Plan”.

    Last month, Wen Jiabao, China’s premier, pledged $10bn in low-cost loans over the next three years, an end to tariffs on 60 per cent of exports from the poorest nations and debt forgiveness for several countries.

    Beijing’s loans to governments that come free of western-style political conditions have attracted criticism for propping up unpopular regimes.

    Some African leaders fear Chinese competition in areas such as shoes and textiles is undercutting Africa’s weak industrial base. Chinese officials are also worried that their relationship with Africa could be seen as a new form of colonialism.

    Mr Zoellick said African countries needed to put in place infrastructure – such as power, transport and efficient customs regimes – to attract the transformative Chinese investment.

    “Some of these Chinese industries have the benefit of knowing how to do more labour intensive manufacturing and they have the marketing networks and this is always a challenge when you start an operation,” the former US Trade Representative and deputy Secretary of State said.

    But any plan to shift production to Africa that goes beyond the symbolic is likely to meet resistance. Beijing has opposed growing international pressure to appreciate its currency partly because of fears of job losses in export industries.

    Provincial governments in the interior of China are also desperate to attract jobs to their areas as labour costs in the coastal regions increase.

    Moreover, the prime motivation of the Chinese Marshall Plan has been to find ways to create new sources of demand for Chinese factories, not to shift their output elsewhere.

    The Commerce Ministry in Beijing declined to comment.

    Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
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    http://www.nytimes.com/2009/11/09/wo...gewanted=print

    November 9, 2009
    China Pledges $10 Billion to African Nations
    By MICHAEL WINES

    BEIJING — China offered African governments a multibillion-dollar package of financial and technical assistance on Sunday, stepping up a courtship that already has gained Beijing wide access to oil and minerals across perhaps the most resource-rich continent in the world.

    Prime Minister Wen Jiabao pledged to grant African countries $10 billion in low-interest development loans over the next three years, establish a $1 billion loan program for small and medium-size businesses, and forgive the remaining debt on certain interest-free loans that China has granted less-developed African nations in the past.

    Mr. Wen made the pledge in an address to the Forum on African-China Cooperation, held in the Egyptian resort city of Sharm el-Sheikh. The $10 billion in new loans is double the amount China pledged at the last meeting in 2006. The debt forgiveness continues a series of annual loan cancellations that also extends to 2006.

    Mr. Wen told officials of the 49 African nations in attendance that this year’s session “represents a new stage of development in relations with Africa.”

    Besides the financial assistance, Mr. Wen also promised to form a partnership to address climate change in Africa, including building 100 clean-energy projects across the continent. Beijing will also remove tariffs on most exports to China from least-developed African nations that do not have diplomatic relations with Taiwan, and to sponsor an array of other programs in health, education, culture and agriculture.

    The gestures are likely to further cement China’s good relations with many African nations, and may help address rising concern in some quarters that China is merely replacing Europe as a colonial power.

    China’s focus on extracting oil and minerals from Africa has drawn some criticism from African scholars, and labor and safety conditions at some Chinese-run mines and smelters have sparked outcries by African workers. Some critics say the flood of low-cost Chinese goods into African cities have displaced products once made by local workers.

    China has long offered low-interest loans to African nations, usually on condition that governments spend the money on Chinese-made goods or on projects built by Chinese companies. African governments have eagerly accepted the loans, in part because they are free of conditions that international and Western lenders often attach to loans, like improvements in governance.

    One result is that China has become a major builder of Africa’s infrastructure, from railroads to highways to canals.

    The loans and other overtures have turned China into one of Africa’s largest trading partners. Trade has soared from about $10 billion in 2000 to $106.8 billion last year; Chinese direct investment in Africa leaped 81 percent in the first six months of this year, to $552 million, the Commerce Ministry said.
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    Published on Foreign Affairs (Home | Foreign Affairs)

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    Africa’s Eastern Promise

    What the West Can Learn From Chinese Investment in Africa
    Deborah Brautigam
    DEBORAH BRAUTIGAM is Associate Professor of International Development at American University and the author of The Dragon’s Gift: The Real Story of China in Africa.

    Last November, in the Egyptian resort town of Sharm el-Sheikh, Chinese Premier Wen Jiabao announced a series of new pledges for Chinese assistance to African countries -- and in the process, made many observers in the West very uneasy. Westerners think they know what Africa needs to do in order to develop: liberalize markets, get prices right, promote democracy. And they think they know what China is doing there: offering huge no-strings-attached aid packages to resource-rich countries that prop up pariah regimes.

    But a closer look reveals a somewhat different story. Over the past few decades, China has managed to move hundreds of millions of its people out of poverty by combining state intervention with economic incentives to attract private investment -- the kind of experimentation that the Chinese leader Deng Xiaoping once described as "crossing the river by feeling the stones." Today, China is feeling the stones again but this time in its economic engagement across Africa. Its current experiment in Africa mixes a hard-nosed but clear-eyed self-interest with the lessons of China's own successful development and of decades of its failed aid projects in Africa.

    The first prong of Beijing's efforts is to offer African states resource-backed development loans, an initiative inspired by its experience at home. In the late 1970s, eager for modern technology and infrastructure but with almost no foreign exchange, China leveraged its natural resources -- ample supplies of oil, coal, and other minerals -- to attract a market-rate $10 billion loan from Japan. China was to get new infrastructure and technology from Japan and repay it with shipments of oil and coal. In 1980, Japan began to finance six major railway, port, and hydropower projects, the first of many projects that used Japanese firms to help build China's transport corridors, coal mines, and power grids.

    Since 2004, China has concluded similar deals in at least seven resource-rich countries in Africa, for a total of nearly $14 billion. Reconstruction in war-battered Angola, for example, has been helped by three oil-backed loans from Beijing, under which Chinese companies have built roads, railways, hospitals, schools, and water systems. Nigeria took out two similar loans to finance projects that use gas to generate electricity. Chinese teams are building one hydropower project in the Republic of the Congo (to be repaid in oil) and another in Ghana (to be repaid in cocoa beans).

    So far, most of these loans have been issued by China's export credit agency, the Export-Import Bank of China (China Eximbank). Offered at market rates, they do not qualify as official foreign aid but nonetheless can help development. In poor, resource-rich countries, which are often cursed rather than blessed by their mineral wealth, resource-backed infrastructure loans can act as an "agency of restraint" and ensure that at least some of these countries' natural-resource wealth is spent on development investments.

    Of course, China's loans pose some risks for the African recipients, particularly if Chinese firms are awarded infrastructure contracts without competitive bidding or if prices for the resources, the basis of the loan repayments, are fixed in advance. There is always a risk that African governments will not maintain infrastructure investments and that the Chinese projects' environmental and social safeguards will be too lax. Chinese construction companies often bring in Chinese manpower -- on average about 20 percent of the total labor their projects require -- reducing opportunities for Africans. When they do employ locals, Chinese firms often offer low wages and low labor standards.

    But there are ways to mitigate these dangers. Under most of the agreements, the earnings from exports of natural resources are deposited directly into escrow accounts and their value is assessed at that moment, not fixed in advanced. This removes the potential for unfair pricing. Moreover, African governments are already driving harder and better-informed bargains. Angola required Chinese companies to subcontract 30 percent of the work to local firms and insisted that the Chinese solicit at least three bids for every project they planned to undertake. The Democratic Republic of the Congo (DRC) will receive a $3 billion copper-backed loan from the Chinese government, which will help finance railways, roads, hospitals, and universities. According to some reports, the Congolese government has stipulated that 10 to 12 percent of all the infrastructure work undertaken under this arrangement must be subcontracted to Congolese firms, that no more than 20 percent of the construction workers involved be Chinese, and that at least one-half of one percent of the costs of each infrastructure project be spent on worker training.

    The terms of Chinese loans also tend to be better than those of deals from Western companies. As Congolese President Joseph Kabila has pointed out, a $3 billion joint mining venture in the DRC gives his government a 32 percent share, compared with the 7 to 25 percent that is typical for mining deals with other companies. Former Angolan Finance Minister José Pedro de Morais has said that by setting "a new benchmark," a $2 billion loan from China Eximbank in 2004 helped Angola negotiate better terms for other commercial loans. Thanks to its trillions in foreign exchange reserves, China can offer loans at highly competitive interest rates. Eximbank gave the Angolan government three loans at interest rates ranging from LIBOR (the London Interbank Offered Rate, the rate banks charge each other on loans) plus 1.25 percent to LIBOR plus 1.75 percent, as well as generous grace periods and long repayment terms. Commercial lenders, such as Standard Chartered Bank, have charged Angola LIBOR plus 2.5 percent or more, without any grace period and while requiring faster repayment.

    In its second major experiment, China is helping to build special trade and economic cooperation zones in Africa. Seven such zones are in the works: two in Nigeria; the others in Egypt, Ethiopia, Mauritius, Zambia, and, possibly, Algeria. Special economic zones were an important feature of China's early development; today, China has more than one hundred such areas. The economists Paul Collier, author of The Bottom Billion, and John Page, of the Brookings Institution, argue in a recent report for the United Nations Industrial Development Organization that special economic zones can be a very promising strategy for industrialization and employment in Africa's least developed countries. It allows countries to improve poor infrastructure, inadequate services, and weak institutions by focusing efforts on a limited geographical area. And a targeted focus on boosting manufactured exports can help countries overcome the exchange-rate appreciation and the weakening of local non-energy industries that often accompany natural-resource exports.

    The Chinese government is mindful that these zones must be sustainable in the long term. For decades, Chinese teams in Africa constructed agricultural projects or built factories only to turn them over to inexperienced and sometimes uninterested host governments. Once the Chinese left, the benefits of the projects declined, prompting the host governments to ask the Chinese to return. Now, Chinese companies are taking responsibility for both designing and building the zones and then managing them as businesses. Beijing will subsidize part of the start-up costs, including some of the expenses that Chinese companies incur by moving operations overseas. Several of the agencies involved in China's own successful zones are advising -- and in some cases, investing in -- the projects in Africa. China's venture-capital fund for Africa, the $5 billion China-Africa Development Fund, has taken equity shares in three of the seven planned zones. A new $1 billion fund for small and medium enterprises in Africa, which was announced at the November summit in Egypt, will help African entrepreneurs set up businesses in the zones.

    Why would the Chinese government push some of its labor- and energy-intensive industries to move to special economic zones in Africa, even as the U.S. Congress bans the U.S. Agency for International Development from financing any activities that could relocate the jobs of Americans overseas? Because Chinese planners want industrialists at home to move up the value chain. Polluting industries such as leather tanneries and metal smelters are no longer tolerated in many Chinese cities. And as the world economy recovers from the recent economic recession, wages and benefits will resume rising in China's coastal belt, as they had been before the crisis. Some factories will move further inland, but others will go offshore, closer to both the sources of and the markets for raw materials.

    The early stages of industrialization might bring pollution, low wages, and long workdays, especially if the Chinese zones are successful. But like China's resource-backed loans, the planned economic zones promise to provide African countries with some things they very much want: employment opportunities, new technologies, and badly needed infrastructure. This is an opportunity for African states to ride into the global economy on China's shirttails rather than remain natural-resource suppliers to the world.

    While the West supports microfinance for the poor in Africa, China is setting up a $5 billion equity fund to foster investment there. The West advocates trade liberalization to open African markets; China constructs special economic zones to draw Chinese firms to the continent. Westerners support government and democracy; the Chinese build roads and dams. In so doing, China may wind up supporting some dictatorial and corrupt regimes, but -- and this is an inconvenient truth -- the West also supports such regimes when it advances its interests. And given the limits of the West's success in promoting development in Africa so far, perhaps Westerners should be less judgmental and more open-minded in assessing China's initiatives there.
    Copyright © 2002-2009 by the Council on Foreign Relations, Inc.
    All rights reserved.
    Source URL: Africa?s Eastern Promise | Foreign Affairs
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    China’s Inroads into North Africa: An Assessment of Sino-Algerian Relations

    Publication: China Brief Volume: 10 Issue: 1

    January 7, 2010 01:16 PM

    By: Chris Zambelis

    Algerian President Abdelaziz Bouteflika (L) and Chinese President Hu Jintao (R)
    The geopolitics of African countries such as Algeria, a country in North Africa that has traditionally enjoyed strong relations with the People's Republic of China (PRC) and whose strategic importance and regional profile have increased markedly of late, is key to grasping the dynamics that shape contemporary Sino-Algerian ties and China’s Africa strategy overall. A glimpse into Sino-Algerian relations at this time is appropriate considering Chinese Foreign Minister Yang Jiechi’s state visit to Algeria in January (Xinhua News Agency, December 31, 2009). Sino-Algerian relations made headlines in the summer of 2009 when al-Qaeda threatened China in response to the unrest between Beijing and ethnic Uighur Muslims in July; Al-Qaeda’s Algerian-based North African affiliate al-Qaeda in the Islamic Maghreb (AQIM) threatened to target the estimated 50,000 Chinese working and living in Algeria and Chinese interests in the country (China Brief, August 5, 2009). In August, a fistfight between a Chinese migrant worker and an Algerian merchant sparked a local crisis that reverberated to the highest levels of power in Beijing and Algiers, raising questions about the role of Chinese migrants in Algeria and xenophobia among Algerians (AFRIK.com [Paris], August 5, 2009). Understanding the dynamics of Sino-Algerian relations, however, requires reading beyond the headlines. This article will examine various aspects of the relationship between China and Algeria as they relate to natural resources, economics and politics. As will be made evident throughout this article, the circumstances underlying Beijing’s relationship with Algiers differ significantly from China’s bilateral ties with most African countries [1].

    Natural Resources

    Considering China’s status as the world’s fastest growing oil consumer and third-largest net importer of oil and Algeria’s position as Africa’s fourth largest producer of crude oil in 2008 (and the world’s 18th largest producer of crude oil), the logic underpinning the PRC’s interests in Algeria seems clear (U.S. Energy Information Administration [EIA], May 13, 2009). China’s relentless pursuit of oil to fuel its growing economy is a key factor driving its Africa strategy. Yet well over 90 percent of Algeria’s high-quality, low sulfur sweet crude oil exports goes to Western Europe (Algeria is the European Union’s second-largest source of natural gas), not China. China’s imports of Algerian oil remain marginal compared to its oil imports from other parts of Africa. At this stage, China’s stake in Algeria’s oil industry revolves around exploration and future development projects. At the same time, China’s role in exploration and future development in Algeria is—like its overall role in Algeria’s hydrocarbon sector—small, especially compared to the role of international blue chip energy giants such as Statoil, Shell, British Petroleum, or Total SA in Algeria’s oil industry. In an era of tightening energy markets, even a small presence in Algeria’s hydrocarbon sector makes sense for China. Algeria is keen on expanding its oil production and export capacity as well as increasing its proven reserves, and it appears that China is positioning itself to reap some benefits when it does.

    China’s minor role in the Algerian oil industry has steadily increased since Algeria has made it easier for foreign companies to enter the Algerian market. In October 2002, China’s Sinopec teamed with Algeria’s state-owned Sonatrach—the largest company in Africa and the world’s twelfth largest oil and gas conglomerate—in China’s first oil development venture in Algeria to jointly develop the Zarzaitine oil field in southeastern Algeria at a cost of $525 million; Sinopec assumed 75 percent of the overall investment (ArabianOilandGas.com [Dubai], August 20, 2009; Alexander’s Gas and Oil Connections [Netherlands], October 22, 2002). In July 2003, the China National Oil & Gas Exploration & Development Corporation (CNODC), a section of the China National Petroleum Company (CNPC), built a $350 million refinery in Adrar, in southwestern Algeria (APS Review Downstream Trends, February 5, 2007). A visit by Chinese President Hu Jintao to Algiers in 2004 ushered in a new round of Sino-Algerian cooperation in the energy sector, leading to agreements between CNPC and Sinopec and Sonatrach for oil exploration rights and related projects (APS Review Downstream Trends, February 5, 2007). Algeria’s Energy Ministry recently awarded the China National Offshore Oil Corporation (CNOCC) an exploration license for Hassi Bir Rekaiz (Reuters, December 20, 2009). In October 2009, Sonatrach announced that Sinopec was among a group of four international companies on a shortlist for consideration to design and engineer a new oil refinery in Tairet, in western Algeria, a project estimated to cost $6 billion. Sinopec is also represented along with other companies bidding for engineering, procurement, and construction (EPC) of the Algiers refinery, a project estimated to cost $300 million (ArabianOilandGas.com, October 21, 2009; Zawya.com [Dubai], October 22, 2009).

    In spite of its substantial oil resources and membership in the Organization of Petroleum Exporting Countries (OPEC), it is Algeria’s status as a major producer of natural gas and Liquid Natural Gas (LNG) that have solidified its position as an energy powerhouse. Algeria, which became home to the world’s first commercial LNG facility in 1964, is the world’s sixth largest producer of natural gas, 70 percent of which is exported to markets in Europe, the United States, and elsewhere. Algeria is also the world’s fourth-largest exporter of LNG (EIA, May 2009). Algeria’s combined revenues from hydrocarbons account for well over 90 percent of its export earnings. While the United States represents the fifth largest importer of Algerian LNG, China’s imports of Algerian LNG are negligible (EIA, May 2009; New York Times, October 19, 2009). Instead, China relies on domestic natural gas sources and LNG shipments from the Middle East and Asia. Beijing is also awaiting the completion of pipelines that will transport natural gas to China from Central Asia. At the same time, China is committed to further developing its natural gas networks to meet growing demand, to include expanding its LNG terminal network, which may entail a greater role for Algerian LNG in China (EIA, July 2009; People’s Daily, June 22, 2006). Chinese firms have partnered with Sonatrach to explore for gas in Algeria, however, the Chinese footprint in gas exploration operations in Algeria is minimal.

    Economics

    As Africa’s third largest economy and with a population of about 34 million, China sees a great deal of potential in Algeria as a market for Chinese goods and technical expertise. Likewise, Algeria also counts China as a key trading partner. Algeria’s economic strength is crucial to understanding the dynamics underlying Sino-Algerian relations, particularly Algeria’s leverage in its dealings with China. Unlike much of Africa, Algeria does not seek Chinese loan and aid packages in exchange for granting access to its strategic industries and markets to Chinese firms. In fact, Algerian banks regularly finance major projects undertaken by Chinese companies in Algeria (Magharebia.com, April 19, 2006). This bilateral dynamic is unique in Sino-African relations. China’s economic and trade dealings with much of Africa are often characterized by transfers of Chinese largesse into the treasuries of African countries eager to attract Chinese investment. Beijing’s higher appetite for investment risk makes it an ideal partner for African countries with a legacy of social, political and economic instability. In addition to securing lucrative contracts in strategic industries such as hydrocarbons and minerals across Africa, China’s entry into the economic and business sectors in Africa affords it with political influence in the countries where Chinese money flows. In contrast, Algeria’s economic power allows it to negotiate from a position of relative strength and to be more judicious in its business dealings with China [2].

    Overall, Sino-Algerian bilateral trade relations are strong. The volume of trade between China and Algeria has increased significantly in recent years. From a figure of $272 million in 2001, bilateral trade between China and Algeria topped $4 billion in 2008, and the current trends project a further expansion of trade (China Daily, December 19, 2008). After France and Italy, China has emerged as Algeria’s third largest import source (El-Khabar [Algiers], March 30, 2009). China’s economic footprint is most apparent in Algeria’s infrastructure sector, a sector where Algeria lacks the technical expertise and the capacity to undertake major projects on its own. Algeria has emerged as one of China’s largest overseas markets for infrastructure development. In May 2006, Algeria tapped the China International Trust and Investment Company (CICTC) and the China Railway Construction Company (CRCC) to undertake a mammoth effort to help construct the 1216 km road link dubbed the East-West Highway, which is designed to link eastern and western Algeria, and Algeria to Morocco and Tunisia (Reuters, August 4, 2009). At a cost of approximately 12 billion, the East-West Highway is currently the largest construction project in the world. Algiers also awarded three contracts worth $2.1 billion to the China Civil Engineering and Construction Corporation (CCECC) to construct railway networks in western Algeria (Agence France-Presse, July 20, 2009). Algeria also tapped China to help alleviate its housing shortages—a major domestic political issue that has sparked tensions in recent years—in urban centers such as Algiers. Algerian President Abdelaziz Bouteflika is counting on Chinese firms to fulfill his promise of creating an additional 1 million affordable housing units over the next three years (Reuters, October 20, 2009; Xinhua News Agency, February 26, 2008).

    In a trend typical of China’s ventures in Africa and the developing world, Chinese firms awarded contracts by Algeria largely use Chinese laborers—both skilled and unskilled workers—to see their projects to fruition. While Chinese firms do employ Algerians, their overall numbers and the wages they tend to earn remain low. Moreover, skilled and unskilled Chinese laborers are often able to undercut the salary demands of their Algerian counterparts (Financial Times [London], June 2, 2008). These circumstances are largely tolerated by Algiers, as the state is primarily concerned with achieving quick completion of its projects. Yet the prominent Chinese presence in the Algerian labor force has also bred resentment in a country where strong overall economic indicators have yet to dent high unemployment rates, especially among youth; with a median age of 26, seven out of 10 Algerians under the age of 30 are unemployed (Christian Science Monitor, April 9, 2009; China Daily, August 5, 2009). In spite of feelings of resentment, relations between Algerians and Chinese on the personal level in Algeria are characterized as very good (Agence France-Presse, November 6, 2009). In addition to working as laborers in the construction sector, Chinese merchants also operate shops throughout the country. Estimates of the number of Chinese living and working in Algeria run as high as 50,000, making them one of the largest communities of overseas Chinese in Africa. Questions surrounding the Chinese presence in Algeria topped regional and international headlines when a fistfight erupted over a dispute between an Algerian shopkeeper and a Chinese migrant worker in Bab Ezzouar, a suburb of Algiers, and spiraled into clashes between groups of Algerians and Chinese. Bab Ezzouar has been dubbed “Chinatown” by the local proprietors and customers who shop at the many Chinese-owned businesses there (El Watan [Algiers], August 4, 2009). After scores were injured and thousands of dollars in property damage, Sino-Algerian diplomacy stepped in to downplay international media reports claiming that the incident signaled a rift in Sino-Algerian relations. In spite of the media hype, there is little indication that the flare up in violence in August represented something more than an isolated incident.

    Politics

    China and Algeria share a strong tradition of political ties rooted in their respective roles as leaders of the Non-Aligned Movement (NAM) and their staunch support for anti-colonial and national liberation movements across the globe. As an Arab, Berber and Muslim country, Algeria has always been a staunch advocate of popular causes such as Palestinian nationalism and resistance against Israeli military occupation. During a July 2009 visit to Algeria by Wu Sike, China's Special Envoy to the Middle East, Algerian officials thanked China for its vocal support for Palestinian self-determination (Chinese Foreign Ministry Website, July 28, 2009). Public diplomacy in Sino-Algerian relations is also imbued with references to the “brotherly” ties both countries profess to share based on equality and mutual respect and their efforts to further South-South cooperation (Xinhua News Agency, August 31, 2008). China’s approach to relations with Algeria are well-received; owing to its particularly harsh experience under French colonialism, Algeria often pursues a fervently independent foreign policy and is sensitive to outside interference in its domestic affairs. President Bouteflika once described Sino-Algerian relations as the model for further Sino-African cooperation (Xinhua News Agency, November 7, 2006).

    As the first non-Arab country to recognize Algerian independence in 1962, China occupies a special place in Algerian diplomacy. Prior to Algeria achieving formal independence from France, China was among a handful of countries to have recognized the Gouvernement Provisoire de la République Algérienne (Provisional Government of the Algerian Republic, known by its French acronym GRPA) in 1958, the political wing of the Front de Liberation Nationale (National Liberation Front, known by its French acronym FLN), an armed resistance movement fighting French colonialism. Significantly, Beijing and Algiers mark the establishment of bilateral relations from the day China established ties with the GRPA on December 20, 1958 [3], four years before Algeria won its independence (People’s Daily, December 31, 2008; China View, March 21, 2008). Chinese diplomacy often contains references to the political, economic, and military support Beijing provided to the FLN during the Algerian independence struggle. China also expresses its gratitude to Algeria for its unequivocal support of the “One-China” principle that defines Taiwan as part of the PRC and its support for the restoration of China’s seat at the UN in 1971 (PLA Daily, September 16, 2009) [4]. Sino-Algeria relations also contain a strong cultural component marked by regular exchanges of artists, students, scientists and educators. When Algeria was struck with a devastating earthquake in 2003, China dispatched a rescue team to assist relief and aid workers in Algeria. The decision to dispatch rescue workers to Algeria marked the first time China sent rescue workers abroad. China also played a major role in developing Algeria’s health care sector following Algeria’s independence. Not coincidentally, the team of doctors dispatched by Beijing in 1963 to Algeria marked the first time China sent doctors overseas (Xinhua News Agency, March 21, 2008).

    The tradition of strong Sino-Algerian relations also extends to the security realm. Algerian military officers have trained in China over the years. In fact, high-level exchanges between Chinese and Algerian military officials occur regularly; Algeria has maintained a defense attaché in Beijing since 1971 (Xinhua News Agency, August 15, 2006; China Brief, May 30, 2007). China has also played a key role in Algeria’s nuclear program. At one point, Sino-Algerian cooperation in the nuclear arena raised concerns in U.S. intelligence circles about Algeria’s possible intentions to develop nuclear weapons [5]. While Russia remains Algeria’s largest source of arms, especially advanced weapons platforms, China is determined to expand its arms exports to Algeria. Algeria was the first country in Africa to import China’s C-85 (Project 802) missile boats fitted with C-802 ship-to-ship missiles and a 5,550 ton training ship (UPI, December 31, 2008; UPI, November 5, 2007). Algeria has also purchased Chinese artillery, namely 155mm howitzers (UPI, January 30, 2009).

    Conclusion

    Sino-Algerian relations will remain strong and are poised to develop further in the future. Given Algeria’s relative economic strength, growing strategic significance, and overall leverage, however, the trajectory of Sino-Algerian relations will likely continue to follow a path distinct from China’s relations with other countries in Africa. Yet China is not alone in its efforts to expand ties with the Maghreb’s preeminent power; long regarded as a country within France’s sphere of influence, the United States, NATO, and Russia are also aggressively courting Algeria [6]. How China maneuvers these dynamics will say a lot for the extent of its influence and interests in Algeria and beyond.

    Notes

    1. Many of the author’s insights into Sino-Algerian relations were shaped by a September 2009 trip to Algeria.
    2. While a decline in global oil and gas prices will contribute to a decrease in its GDP in 2009, Algeria’s economic indicators remain strong, even amid the global financial downturn. A November 2009 assessment of the Algerian economy conducted by the International Monetary Fund (IMF) concluded that Algeria is one of the countries least affected by the global economic crisis. The windfall in hydrocarbon revenues in recent years has enabled Algeria to maintain a strong trade surplus and to pay down the majority of its external debt to the Paris Club and other global multilateral financial institutions and to accumulate foreign exchange reserves of about 146 billion. For more details, see “Statement of the IMF Mission on the 2009 Article IV Consultation Discussion with Algeria,” Press Release No. 9/388, November 4, 2009, Press Release: Statement of the IMF Mission on the 2009 Article IV Consultation Discussion with Algeria.
    3. Prior to formally establishing ties with the GRPA, China acknowledged its legitimacy upon its founding in September 1958.
    4. Algeria was one of 23 countries to have put forth a motion at the 26th session of the UN General Assembly to restore the PRC at the UN.
    5. See William Burr, “The Algerian Nuclear Problem, 1991: Controversy over the Es Salaam Nuclear Reactor,” National Security Archive, Electronic Briefing Book No. 228, September 10, 2007, The Nuclear Vault: The Algerian Nuclear Problem.
    6. For the United States, Algeria’s experience fighting radical Islamists on its soil facilitated unprecedented levels of intelligence cooperation between Washington and Algiers immediately following the September 11, 2001 attacks. Given its diplomatic influence in Africa coupled with its own particularly harsh experience under French colonialism, Washington is also sensitive to Algeria’s position as it defines the mission of the recently established Africa Command (AFRICOM). Algeria also participates in joint military training exercises with U.S. and NATO forces. A resurgent Russia is also courting Algeria as more than just a reliable customer when it comes to its defense exports. Russia, the world’s leading source of natural gas, and Algeria have floated the idea of establishing an OPEC-like cartel for natural gas powers.
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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