AAS Annual Meeting

China and Inner Asia Session 712

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Session 712: South-South dynamics and changing geographies of International Political Economy: comparative analysis of China’s engagement in developing regions.

Organizer: Ana C. Alves, University of the Witwatersrand, South Africa

Chair: George T. Yu, University of Illinois, Urbana-Champaign, USA

Featuring as one of the most outstanding traits of China’s international relations over the past decade, China’s growing engagement in the African continent has drawn a great deal of scholarly attention in recent years. In Contrast, China’s economic interaction with other developing regions, which have also expanded at an impressive pace - namely with South America and Central Asia, remain much under-researched and cross country / regions analysis are even more scarce. Although China’s renewed interest in these regions is apparently being fuelled by similar motivations (namely, seek out new markets for its products, playground to internationalize its enterprises, search for natural resources and political dividends) anecdotal evidence suggests that Chinese interaction with these regions is actually following diverse paths, a phenomenon that requires further research. The proposed panel will have a particular focus on China’s engagement patterns and its economic and socio-political impact in Africa and Latin America (the so called ‘new diplomatic frontier’), with the final aim of contributing towards a better macro-understanding of China’s interaction with the South. By bringing together scholars and researchers with extensive empirical knowledge on various aspects of China’s engagement in the southern hemisphere, this panel proposes to fill in this gap by comparing and analyzing similarities and differences of Chinese economic presence across countries and regions. All papers shall be posted online prior to the conference and each presentation shall be limited to10 minutes to allow more time to discuss the topic with the attendants.

Learning wisdom from failure: China’s trials in their overseas oil investments
Susana Moreira, Johns Hopkins University, USA

Risk management is of paramount importance to the economic consequences of investments particularly in oil and gas industry where such investments are in the millions of dollars, and take many years to complete. As Chinese companies expand their presence overseas, their risk management skills have been put to the test with mixed results. Political risk poses particular challenges to Chinese companies because of their (at least initial) lack of exposure to an unstable political environment. Unsurprisingly, Chinese companies were at a loss when they started encountering difficulties due to changing political circumstances especially in countries where they felt originally welcomed. The present paper looks at how Chinese companies, especially oil companies, have been dealing with political risk and how their response has varied throughout time and across continents. The paper starts with an overview of the instances in which Chinese oil companies’ interests were undermined due to political risk. From this analysis, it becomes apparent that Chinese companies have endured the largest losses in the Western Hemisphere and in Africa. Two particular cases stand-out: the collapse of the Orimulsion deal in Venezuela and the blockage of the CNOOC/SINOPEC deal for a 20 percent share in block 32 in Angola. A more detailed look at these cases will allow us to see how Chinese companies were blindsided by the local governments and also how they reacted to it. Key here is whether there were lessons learned and if they have since been applied by Chinese oil companies in other instances and across the world.

The economic and socio-political impact of China’s trade and investment activity in developing countries: A comparison
Alexandra Wang, Independent Scholar, China

China appears as a regional and global actor since the domestic economy has been stable and prosperous enough to expand and seek for scarce commodities beyond borders. Most notably, China has become a major trading partner and investor for the Southern Region of the world. At the same time, China’s engagement in developing countries makes up for a significant part of her foreign trade and outbound investment activities. African and Latin American countries share some of the patterns in their relationship with China as they are primarily targeted at trade and investment in the primary sector. Central Asia and South East Asia, however, are to be seen in closer historical, geographical, and political proximity to China. Domestic political tension (border security, the fear of separatism, s. Xinjiang) is a relevant issue in the observation of China’s alliances with Central Asian States. The implementation of the ASEAN-China Free Trade Area in 2010 marks the expiration of ASEAN as the Asian opposition to China. China’s trade and investment initiatives have shown impacts on developing and emerging countries in respect of their trade and investment schemes, the development of infrastructure, to some extent the achievement of economic diversification, and phenomena such as urbanisation and migration. The presented paper outlines the core differences of China’s South-relations. It concludes with a comparison of the socio-economic impacts originating from China’s engagement on the African continent, in Latin American countries, Central Asia/Russia and South East Asia.

China’s engagement patterns in resources sectors in Africa and South America: a comparative study of Angola and Brazil
Ana C. Alves, University of the Witwatersrand, South Africa

Even though China’s political alignment with the developing world can be traced back to the early days of the PRC, its economic engagement with this part of the globe only began to take shape in the late 1990s. Notwithstanding, in less than a decade the fast expansion of economic ties with these regions granted Beijing a significant economic foothold in the southern hemisphere. Within this framework, and due to its geographical distance, Beijing’s growing interaction with Africa and Latin America have attracted special attention since this is seen as an important feature of China’s rise at the world stage. A closer look at bilateral trade and investments flows reveals that access to resources play an important role in Beijing’s renewed interest in these region. Indeed, economic flows are to a very large extent dominated by Chinese imports of strategic resources, namely oil and ores. Nonetheless, China’s economic engagement in both regions presents meaningful differences. Although bilateral trade with Latin America progressed at a faster pace (from US$11bn in 2000 to US$140 in 2008) than with Africa (from US$11bn to US$ 108bn over the same period), Chinese enterprises actual engagement in resources sectors have clearly made stronger inroads in Africa than in Latin America. Based in the author’s doctoral dissertation and extensive fieldwork conducted in Brazil and in Angola, China’s major trading partners in each region, this paper proposes to map out the differences and similarities in China’s engagement patterns in resources sectors in both regions, uncover the variables that explain these disparities and analyse in what ways this is affecting China’s economic statecraft towards each of this regions.

A Report of China's Outward FDI 2010: in Sub-Sahara Africa and Latin America
Duanyong Wang, Shanghai International Studies University, China

Since the enforcement of the Going-Out Strategy in 2000 China’s outward FDI has been developing so fast that it has rapidly became the biggest overseas investor among all developing countries. Nonetheless, outward FDI represents only a tiny proportion of China’s economic structure. In 2008 China’s outward FDI flows amounted to 2.93% of its exports and 0.97% of its GDP. Those two figures are lower than the average level for developing countries. Moreover, China’s overseas investment represented a very small share (only 2.25%) of global outward FDI in 2008, and ranked No.13 in the global ranking. This means that China’s outward FDI does not occupy yet a significant place in the global FDI picture and in fact it is much behind other major economic powers. Even so, it remains a very interesting phenomenon that China’s outward FDI has received a great deal of attention in recent years, even fierce criticism, and especially so in what concerns China’s investments in sub-Sahara African and Latin American countries. This paper proposes to analyze the status quo and characteristics of China’s outward FDI in sub-Sahara African and Latin American countries in 2010. Based on a quantative analysis, It will study these issues as follows: (1) the causes of China’s outward FDI, (2) internal institutions and mechanisms to support China’s outward FDI, (3) the trend of geographical and industrial distribution of China’s outward FDI, (4) main risks faced with by China’s outward FDI in host countries, and (5) national risks index of China’s outward FDI in sub-Sahara African and Latin American countries. This paper draws on the second report on China's Outward FDI Series written by the author.

Triple-S development cooperation: towards a win-win-win situation for emerging and developing countries?
Sanne van der Lugt, Independent Scholar, South Africa

China's involvement in Africa changed the international trend in development assistance to Africa using new terms and distinct concepts: "donors" and "recipients" are rather termed as "partners", and "aid" and "charity" are hardly used. Instead, Chinese actors speak of "investment" and "win-win situations" as well as "relationships of mutual benefit". Labeled as an 'emerging economy' China is currently in an ambivalent position between developed and developing states, creating interesting dynamics in Chinese development cooperation with African countries. South Africa is in a similar ambivalent position to China, also being a provider as well as recipient of development aid on the African continent. This paper will discuss the characteristics of the respective cooperation policy of these 'emerging donors', explore the potential possibilities for them to cooperate in their development assistance to Africa and explore the potential impacts on recipient countries, the third party in this new trilateral partnership. More specifically, it will explore in which aspects China and South Africa differ from traditional donors. What are the opportunities and challenges of this new situation in which both providers and receivers are originating from the South? On the one hand, this international development can mean alternative choices for recipient countries and therefore increased agency over their own development path. On the other hand, new, additional strategies can reinforce the inconsistency and inefficiency and a lack of coordination apparent in international development assistance. These issues will be discussed in the light of trilateral relation theory and also taking into account the changes in the images of and the roles in international relations of both China and South Africa.