Economic Diplomacy –

The Case of China and Zambia

Course: Public Diplomacy

Essay Submission by Meha Lodha

5th December 2010

Economic Diplomacy – The Case of China and Zambia

Introduction

Former Indian diplomat, Kishan S Rana defines Economic Diplomacy as “the

process through which countries tackle the outside world, to maximize their national gain

in all the fields of activity including trade, investment and other forms of economically

beneficial exchanges, where they enjoy comparative advantage.; it has bilateral, regional

and multilateral dimensions, each of which is important”.1

China has emphatically registered its presence on the African economic and

political landscape in the last decade. Among other things, the volume of trade between

China and Africa has risen steadily from USD 10 billion a year in 2000 to over USD 40

billion in 2005, and is projected to cross USD 100 billion by 2010. To celebrate and

cement these growing ties, thirty five heads of state from Africa assembled in Beijing at

the invitation of the Chinese president Hu Jintao for the inaugural China-Africa Summit

(referred to as the Summit henceforth) in November 2006. More than 2000 trade deals

were signed in Beijing as China promised USD 5 billion in aid and credit to African

countries in the next few years, and vowed to train thousands of its young men and

women.2

Zambia is a land-locked country in Southern Africa with a population of 13 460

305. Zambia’s natural resources include copper, cobalt, zinc, lead, coal, emeralds, gold,

silver, uranium and hydropower. Zambia's economy has experienced strong growth in

recent years, with real GDP growth in 2005-08 about 6 per cent per year. In 2005,

Zambia qualified for debt relief under the Highly Indebted Poor Country Initiative,

1 http://berkouk-mhand.yolasite.com/resources/economic%20diplomacy%20experinces%20of%20LDCs.pdf Accessed Date: 24th November 20102 Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-63

consisting of approximately USD 6 billion in debt relief. Poverty remains a significant

problem in Zambia, despite a stronger economy.3

China – Zambia Relations

China and Zambia established diplomatic relations on October 29, 1964 and

Independent Zambia’s first president Kenneth Kaunda had famously called China his

country’s ‘all weather friend’ in the early 1980s.4  During the period of President Kaunda

(1964 - 1991), China provided active support to the Zambian government in its efforts to

consolidate political independence and struggle against western colonialist control.

President Kaunda visited China four times before 1990.

China and Zambia have signed several bilateral and multilateral trade agreements

as well as agreements on economic and technical cooperation. Since 1967, China has

undertaken 35 aid-projects such as Tanzania-Zambia Railway (TAZARA), roads, maize

flour factory, textile mill, well and water supply, etc. Of the projects, 33 have been

completed.

In 1996, the two sides started the joint management of Mulungushi Textile Mill,

which was built with Chinese aid in 1982, thus increasing its profits considerably. In

1997, the Bank of China opened its Zambian branch, which was the first branch opened

by the bank in the sub-Saharan region. In the same year, the China Investment and Trade

Developing Center was set up in Zambia. In 1998, China National Nonferrous Metals

Industry Construction Co. (Group) bought the Zambian Chambishi Copper Mine for USD

20 million. The mine started operation in July 2000. The Investment and Trade

Developing Center opened business in June 2001. Bilateral trade volume between the two

countries in 2002 reached USD 83.247 million, of which Chinese export reached US$

46.056 million, and import USD 37.191 million.

3 CIA Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/za.html Accessed Date: 24th November 20104 Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-63

Since 1978 and until late 2003, China has admitted in all 180 Zambian students.

China began to send teachers to work in the University of Zambia in 1992. Since 1978,

China has sent medical teams to Zambia as a form of aid.5 China expressed interest in

helping the country build a multi-million dollar national sports stadium that would be

ready for the All Africa Games that Zambia hosts in 2011.6

It is reported that Chinese companies have invested in over 140 projects and

created 11 000 jobs, quoted Xinhua from Zambia Times. Investment tends to concentrate

on agriculture, machinery processing, mining, and tourism, totaling over US$ 80 million.7

Disasters related to Chinese Investment in Zambia

One of the worst industrial accidents in Zambian history, occurred in 2005 when a

blast at a Chinese-owned explosives factory in Chambishi killed 46 people, most of them

in their 20s.

The Mulungushi Textile Mill set up in 1982, slowed down by 2007 and was

closed in 2008. The mills managers allegedly resorted to buying raw cotton for export to

China’s humming textile industry. “We are back where we started,” said Wilfred Collins

Wonani, from the Kabwe Chamber of Commerce & Industry in Zambia, sighing at the

loss of one of the city’s biggest employers. “Sending raw materials out, bringing cheap

manufactured goods in. This isn’t progress. It is colonialism.” The mine was expected to

open again by the end of 2010 but till date there has been no news to this effect.8 9

A search for Chinese diplomatic reaction to these disasters yielded no results.

5 Ministry of Foreign Affairs of the PRC http://www.fmprc.gov.cn/eng/wjb/zzjg/fzs/gjlb/3114/ Accessed Date: 24th November 20106 Pros and cons of China-Zambia relations, African Business; Feb2008, Issue 339, p53-537 China Becomes the Largest Investor in Zambia, Chinascope; Jan/Feb2009, p49-498 New York Times http://www.nytimes.com/2007/08/21/world/africa/21zambia.html?pagewanted=print Accessed Date: 27th November 20109 http://www.lusakatimes.com/2010/03/06/zambia-china-mulungushi-textiles-to-reopen-this-year-%E2%80%93-mwansa/ Accessed Date: 27th November 2010

China in Zambia – a Friend, Competitor or Exploiter?

It is reported that Chinese presence is disproportionately clustered in certain

African enclaves (like the Copperbelt Province in Zambia). It follows that there are

variegated experiences of China across space and populations in Africa. State elites, the

business community, trade unions, workers, and the unemployed youth may or may not

have a shared opinion. China may be variously viewed as a “friend,” “competitor,” or

“exploiter,” depending on where and to whom one poses the question. A place where

China has become increasingly salient in the economy and politics, Zambia has seen

divisive and frequently violent politics related to the Chinese presence.10

In February 2010, Chinese President Hu Jintao held talks with his Zambian

counterpart Rupiah Banda in Beijing. Hu said that China attaches great importance to

developing ties with Zambia and is ready to join hands with Zambia to push bilateral

friendly cooperative relations to a new level in the following four aspects. First,

consolidate and develop a political relationship of sincerity and trust. Second, expand and

deepen economic and trade cooperation of mutual benefit. Hu said China would work

with Zambia based on the principle of mutual benefit, emphasis on practical results and

pursuit of common development to carry out the already-agreed cooperative projects on

schedule and launch new programs step by step. He called on the two countries to jointly

do well in the building of the Zambia-China trade and economic cooperation zone in

Zambia, well implement the cooperation within the framework of the Forum on China-

Africa Cooperation (FOCAC) and expand cooperation in agriculture, mineral resources,

infrastructure, among others. Hu said China would support businesses with a strong

capacity and good qualifications to invest in Zambia. Third, enrich and promote

humanities exchanges in various forms. Hu urged both sides to further expand

cooperation in the areas of education, culture, public health and journalism and deepen

10 Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-63

mutual understanding and the traditional friendship. Fourth, enhance coordination and

cooperation in international areas and multilateral affairs.11

In 2007, despite the disasters at Chambishi and Mulungushi Textile Mill, Felix

Mutati, the then Zambia’s Minister of Finance said, “There is no doubt China has been

good for Zambia. Why should we have a bad attitude toward the Chinese when they are

doing all the right things? They are bringing investment, world-class technology, jobs,

value addition. What more can you ask for?”12

But in October 2010 when Felix Mutati became the Commerce, Trade and

Industry Minister of Zambia, he said that the Zambian government through the Ministry

of labour is working to ensure that conditions of service in private owned companies

meet the minimum requirements as set by the Zambian government. He also said that the

Government is working through the Ministry of Mines to ensure that the safety

regulations and requirements in mines are as defined by the laws of Zambia.

He explained that the strategies are being put in motion and government will take action

against anyone who does not comply. He is quoted as saying, “For us we are not looking

at the face of the investor, we are looking at the compliance to the rules and regulations

of the country as the principle driving force for the residence of the investor into our

country and nothing else.” Mutati also noted that China takes the center stage in terms of

being an engine for creating the transformation that is required for Zambia and the rest of

the world. He also said China is one of Zambia’s key trading and investment partners

He also said trade between Zambia and China annually is in the excess of USD 900

million and is one of the countries Zambia has recorded positive trading surpluses. “So

for us China remains a key partner in our effort to meet the vision 2030 for Zambia to

become a mid income country.” he added.13

11 Ministry of Foreign Affairs of the PRC http://www.fmprc.gov.cn/eng/wjb/zzjg/fzs/gjlb/3114/3116/t660703.htm Accessed Date: 30th November 201012 New York Times http://www.nytimes.com/2007/08/21/world/africa/21zambia.html?pagewanted=print Accessed Date: 27th November 201013 Lusaka Times http://www.lusakatimes.com/2010/10/23/felix-mutati-warns-investors/ Accessed Date: 27th

November 2010

In 2006, a mainstream Zambian political party, the Patriotic Front (PF), contested

the elections on an explicit anti-China platform, and its defeat in the presidential elections

triggered riots directed at Chinese establishments in the capital Lusaka and the

Copperbelt Province. The rising sentiment in favor of economic nationalism has been

most clearly articulated by the Patriotic Front (PF) and its leader, Michael Sata, who have

exploited the latent dissatisfactions while further fueling them. Their 2006 campaign

spoke against the continued control of outsiders over the Zambian economy, and this

populist position pushed Sata to a surprising second-place in the presidential elections, as

PF won every single urban parliamentary seat in the Copperbelt Province.14

Resentment towards Chinese business people is widespread among Zambia's

small-business community as Chinese imports displace locally made goods. Low-paid

workers employed by Chinese enterprises also complain of poor working conditions. The

Federation of Free Trade Unions (FFTUZ) in Zambia has alleged that Chinese companies

are the main culprits in the use of casual labour, where no social security payments are

made and low pay is the norm. FFTUZ president, Joyce Nonde also blamed the country's

weak legal framework which she said allows foreign investors to abuse Zambian workers

with impunity. According to statistics from the Chinese embassy, investment by its

nationals in the Zambian economy stands at more than USD 300 million, spread across

160 enterprises and employing more than 10 000 Zambians. Zambian traders in the

capital Lusaka are said to be unhappy with Chinese traders who have taken up shops in

the sprawling market of Kamwala, the city's oldest trading place. The Zambian traders

complain that Chinese retailers have brought in cheaply-priced garments which have

lured customers away from the Zambian manufactured apparel.15

Conclusion

14 Negi, Rohit; Beyond the "Chinese Scramble": The Political Economy of Anti-China Sentiment in Zambia, African Geographical Review; 2008, Vol. 27, p41-6315 Pros and cons of China-Zambia relations, African Business; Feb2008, Issue 339, p53-53

Measured in some ways, Zambia’s economy is booming. Copper prices have

soared from 75 US cents a pound in January 2003 to more than USD 3 a pound this year,

driven in large part by Chinese demand. That demand has pushed Zambia’s long-dormant

copper mines into record production.

When China’s president, Hu Jintao, visited Zambia in February 2010, he received

the usual red carpet treatment from his Zambian host, President Levy Mwanawasa, but

the reception from many ordinary Zambians was nasty. A trip to the site of the infamous

Chambishi mine, China’s big investment, had to be scuttled entirely because of fears of

unrest, and the circumstances of the industrial disaster there are still not entirely

understood.16

Based on the information and discussion presented above and comparing it with

Rana’s definition of Economic Diplomacy, it appears that China is benefiting more that

Zambia from its investment in Zambia. The effects of China’s economic diplomacy

initiatives seem lop-sided and may not hold good in the long run. The opposition party in

Zambia, the Patriotic Front, coming to power could prove a hindrance to the present set

up of Sino-Zambian bilateral ties. If China were to focus more on upliftment of the

civilian population in Zambia, than it has been focusing on until now, it can produce

positive opinions about China in the minds of the Zambians.

16 New York Times http://www.nytimes.com/2007/08/21/world/africa/21zambia.html?pagewanted=print Accessed Date: 27th November 2010