China's Silent Army
Page 10
The fact is that Zhang Qi is something of an institution in both the Chinese and non-Chinese world of the Democratic Republic of Congo (DRC), probably the country with the most turbulent colonial past in Africa as well as some of the world’s greatest reserves of natural resources. Originally from Ningbo, Zhang Qi has lived for twenty-five years in this country where, he remembers, he arrived “at twenty-three years of age, single, with a master’s degree in finance and without a single word of French.” At that time, only around a hundred of his compatriots lived in the country, most of them either embassy staff or doctors sent by Beijing as part of the aid package that China has offered to the continent since 1960.50 Zhang recalls that in those days Zaire—as the country was then known—was, as it still is today, a hostile place for businesses, with a labyrinthine bureaucracy and extremely strict laws. This is why his uncle—the only member of the Zhang family who managed to emigrate to Hong Kong with part of the family’s fortune before the Communists took it all away in 1949—had sent him to open a saucepan factory in the capital in 1986. His task was to control production and sales both in the local market and in neighboring Congo-Brazzaville.
“My uncle was the investor, but he was never here. In twenty years of production, I only remember him coming here once or twice. I took care of everything. We employed 750 local workers and 28 Chinese workers, who were the technicians and the cook. We stayed open 24 hours a day and made 150,000 dollars per year,” he recalls as he fiddles with his three mobile phones, which keep going off throughout the course of the meeting. “To begin with I knew nothing about business. I had to work twenty-hour days, seven days a week. I lost seven kilos in barely three months. In just under half a year I spoke a bit of French and began to understand how things work in this country.”
Understanding the world of business in the Congo means, for example, that it is impossible to make any kind of profit without the involvement of the authorities. “We had to give part of our shares to one of the men closest to the president, because in the 1990s the law was extremely complicated and strict. It was practically impossible to make a profit through the legal route. In other businesses we even went into partnership with the president. They didn’t do anything, of course: they made no contribution either in terms of capital or experience. But we gave them a percentage and that helped us,” explains Zhang. A guanxi—the Chinese term used to refer to networks of relationships—continues to this day which, he tells us, has helped him to become “more important than the Chinese ambassador here.” “When the Chinese embassy has a problem they call me. I know everyone here, all of the generals. I’m different because I’m always talking to the top people here. When I talk to one particular business partner it’s like I’m talking to the president. And I have a good relationship with the president’s son. We’re close friends: we go to China together; we go to the nightclub together. I feel so free.”
In 1991, after five years in the country, Zhang got married. It was then that he and his wife—his greatest business ally—set out to conquer the Congolese market. In September 1991 they took advantage of the opportunity that arose in the aftermath of the economic collapse caused by looting soldiers in Kinshasa and the country’s other major towns.51 “It was very dangerous. People were going to all the white people’s houses to take things. I have never seen the Congolese people so hard or so strong. They destroyed shops and homes and brutalized white women. They attacked everyone who wasn’t black: Chinese, Indians, Westerners,” he recalls. “By then I already knew everyone in the country. I asked a Chinese friend to lend me 250,000 dollars and I brought fifty-two shipping containers into the Congo: fifty of them were filled with shoes and trainers, with a total of 3 million pairs. The other two contained textile products, mostly dresses for women.” All these products came from the “factory of the world.”
The small Belgian and French investors had left the country after their supermarkets and shops were looted, and Zhang took advantage of the gap they left in order to win a share of the market. It was a chance to become the “Number One” in the retail sector, he recalls. He began traveling more frequently to China to buy directly from footwear factories and organize the logistics of the business, and he soon began to make his fortune. In just three months he was able to return the money he had borrowed—“it was 250,000 US dollars, which at that time was worth the equivalent of 2 million dollars today”—and he continued to expand his economic activities throughout the country. In less than a year his business had doubled and he began to import 100 containers at a time. He also created a network of shops alongside Indian and Portuguese business partners to distribute his goods throughout the DRC, from Lubumbashi in the far south to Kananga in the center of the country. “I opened four shops in Kinshasa. I began to import more goods and I became the principal supplier of merchandise for other businesses as well. Some factories in China were producing goods just for me. Soon the other Chinese people in the country began to copy me and tried to flood the market. But I reacted quickly by changing my products and looking for goods with a greater profit margin.”
In no time at all he had opened around fifteen shops throughout all the major urban centers and was managing to keep them fully stocked with a constant supply of goods, an immense challenge in the world’s twelfth largest country where the roads and other infrastructure are in a disastrous state of disrepair. To control his empire he flew the entire length of the country in a light aircraft, miraculously surviving an accident in the north. “I make sure that there is a Chinese worker in every shop to take control of my money. I know that they cheat me and steal some of the earnings, and that they increase the price that I’ve marked on products and don’t give me everything they owe. They also tamper with the sales figures, but it doesn’t bother me. They live in remote areas with no television, electricity or social life. Life is very hard there and my only choice is to accept it. I make a lot of profit, so does it really matter if you lose 5,000 dollars when you make 100,000?”
With his personal courage and extensive web of contacts, Zhang prides himself on being “a very strong guy,” having stayed in the country during successive outbursts of violence. This includes even the nightmarish summer of 1991. “I sent all my Chinese workers to Hong Kong, but I didn’t have any choice: I had to stay. The factory belonged to my uncle and I had to take care of it. I locked myself inside the factory along with the Chinese cook to protect it. The soldiers came to my factory but I had eight soldiers with me and we did everything we could to shut them out. We managed to get rid of them right at the last minute. I was lucky, because two months before the looting I had the feeling that something was going to happen and so I ordered soldiers from the presidential guard to protect us.”
Today, aged forty-eight, Zhang is a millionaire. His import-export business for Chinese products is still going strong. The range of products he brings in from China has risen to 2,000 items and his distribution network reaches the four corners of the immense national territory. “My fortune is large enough for me and the next generation of my family to have a good life,” he admits, laughing. He has also diversified his investments into various different industries (mining, timber, property, energy) and has “secured” his fortune, as he puts it, to avoid any repeat of the events of 1949. “Chinese people don’t trust the government. Nobody knows whether at some point in the future they’ll do what the Communists did in 1949. That’s why my money is in Hong Kong.” He has also risen in terms of status, with a daughter studying at Columbia University and working in her spare time for the American business magnate Warren Buffett. However, Zhang’s passion for business, inherited from his ancestors,52 prevents any thoughts of retiring. “That is the question: I don’t know when I should retire. Because I think that there are still a lot of business opportunities out there and so I try to keep on working hard.”
REPRODUCING THE ECONOMIC MODEL OF COLONIAL EUROPE
Stories such as Zhang’s help illustrate a phenomenon that is clearly visible to any travele
r who now happens to set foot in Africa: the arrival of Chinese goods in every corner of the continent, from Cape Verde to South Africa via Senegal, Chad or Mozambique. In all these places, a good proportion of the 750,000 Chinese people officially living in Africa53 have gone into the retail business, setting up shops in all the urban hubs and conquering a sector which until recently was generally dominated by local businessmen or more traditional immigrants.
A good example can be seen in Dakar, where Chinese traders have taken over the main thoroughfare of the Senegalese capital with boutiques selling every imaginable kind of Chinese product, imported from China itself. The Dakaroises joke—with a certain amount of bitterness—about the Allée du Centenaire, which some of them refer to as “Boulevard Mao” since local and Lebanese retailers have found themselves forced out of the sector by “red” entrepreneurs, whose prices are simply unbeatable.54 Dakar’s over 2 million inhabitants represent a considerable target for Chinese traders, who began to arrive in the country two decades ago. However, the strength shown by the Chinese when it comes to setting up businesses has also led them to countries with less of a market, such as Cape Verde, the quiet former Portuguese colony which today is one of the most stable countries in Africa. In just fifteen years Chinese immigrants have opened over fifty shops in the eight habitable islands of the archipelago, which are home to barely half a million inhabitants.55
There is little doubt that the arrival of Chinese products in Africa—spurred on by China’s acceptance into the World Trade Organization (WTO) in 200156—has had positive effects on the African people, who now have access to low-cost Chinese goods that they would otherwise not be able to afford. China’s improved tariff conditions, a consequence of its entry into the WTO, have played a decisive role in the worldwide invasion of Chinese products, but it is not the only factor at play: China has also made effective use of its newly acquired WTO legal protection when it has been targeted by protectionist measures imposed on it by third-party countries. The United States was a driving force behind the negotiations because it hoped to flood China with its own products, since the Asian giant had no major businesses at that time and its competitiveness appeared limited. In fact, the opposite of what the Americans expected has now taken place: “Made in China” products have taken over world markets.
The macroeconomic figures clearly demonstrate this explosion in trade between Africa and China, which has now become the continent’s first trade partner, generating over $166 billion in 2011, sixteen times higher than it was in 2000, despite the economic impact on North African economies of the turmoil in countries such as Libya and Egypt. The Asian giant turns to Africa for supplies of oil, minerals, timber and other raw materials, while also taking advantage of African markets to off-load its manufactured goods. As such, the raw materials acquired by China in Africa serve as fuel for the factories and workshops which, along with the added value contributed by millions of available workers, create the finished products that China sells throughout the region.
Beijing draws on the “complementarity” of its economic dealings with Africa, Central Asia and Latin America as a justification for these economic relations. However, in reality the formula “my finished products for your raw materials” on which China bases its commercial ties with these regions inevitably brings to mind the colonial system that was formerly used by the West in order to establish its hegemony.57 This system was invented by the United Kingdom in the nineteenth century, when the Industrial Revolution transformed the country into the leading world power of the age. Adapted by Beijing today, the British model was based on the use of colonies both as suppliers of natural resources, such as cotton, and as a market for the products that were flying out of Manchester’s textile mills, the production of which greatly exceeded national demand.58 Unlike the British Empire in that era or twentieth-century Japan, China has no military control overseas. However, its objectives in Latin America and Africa are the same: to guarantee its supply of raw materials, to ensure new markets for its products, and to build its trade relations on this foundation. As Osvaldo Rosales, a senior official at the Economic Commission for Latin America and the Caribbean (ECLAC), convincingly told the Mexican news agency Notimex, “We are tied to China, the hub of economic development in the twenty-first century, with an export structure taken from the nineteenth century, fundamentally using basic products.” The director of ECLAC’s International Trade and Integration Division was criticizing the fact that 90 percent of Latin America’s exports to China are unprocessed or barely processed natural resources, while their imports are processed products. “The relationship is basically inter-industrial; in other words, we export raw materials and import manufactured goods. Furthermore, we export much less to China than we export to the rest of the world,” Rosales added. In 2011, the balance of trade between China and Latin America was $46 billion in China’s favor.
Some voices from within the Chinese government openly acknowledge the disadvantageous nature of this situation. During an interview in Beijing with Liu Guijin, China’s special representative for African affairs, Liu acknowledged the problematic effects of this economic structure, particularly in Africa, from which “85 percent of imports to China are natural resources.” “We cannot remain as we are in terms of trade with Africa. Along with our partners in the United States and Europe [who also import mostly natural resources], we need to do something to address the problem, to diversify the trade structure … However, the greatest part of the responsibility rests with African countries, with their companies and governments. They need to use the revenues from the expanded trade with China properly in order to diversify their economy, to support small and medium-sized industries … They have to follow the Chinese model for development,” he told us, referring to the 1980s and 1990s, when China exported resources and used the income to create added value within its own domestic economy.
Although a brief overview of the situation shows that Chinese demand for natural resources has doubtless caused economic benefits for the region, China’s arrival as a business partner in Africa has also had inevitable side effects, as it has done elsewhere on the planet. This can be seen in countries with a certain level of industrial infrastructure in place—such as Morocco, Lesotho, South Africa and Nigeria—where the arrival of extremely competitive Chinese products has led to the collapse of some industries. This not only represents a loss of sales in the domestic market but also on an international level.
The classic example is seen in the case of the textile sector. The end of the Multi-Fibre Arrangement (MFA) in 2005, which imposed quotas to prevent countries such as China from flooding world markets with cheap textiles and unbeatable competitiveness, had grave consequences for African clothing producers, three-quarters of whose exports overseas went to the United States and Europe. Thousands of small, medium and large producers were forced to close their businesses, and hundreds of thousands of jobs were lost throughout the continent, from Swaziland to Kenya and Ethiopia, after these markets were taken over by China’s much larger and more competitive industry from 2005 onwards.59 A similar situation has arisen in Latin America, where exports from the region to the United States fell by 13.1 percent between 2001 and 2006 as a result of Chinese competition.60
Everything suggests that this trend will continue in the future, particularly when China begins to export products with a greater added value without losing its dominant position in highly labor-intensive industries.61 This means that China will not only continue to export cheap electrical goods, footwear, textiles and toys, but will also compete—as it is in fact already doing—in the markets for high-quality electronic appliances, machinery and renewable energies. An example of this is seen in the automobile sector, which is being developed at great speed in China. As well as aiming to compete with German, American and Japanese companies for the Chinese domestic market, where over 12 million cars are sold each year (the biggest market in the world), Chinese firms have thrown themselves into the task of ex
porting vehicles to Africa, the top destination—even ahead of Asia—for Chinese cars.62 Furthermore, China is breaking into hi-tech sectors previously reserved for the United States and Europe, such as aviation, electric vehicles and telecommunications.63 One undisputable example is that of the Chinese company Huawei, the world’s second largest producer of telecommunications products, which earns around 20 percent of its sales revenues in Africa.64
CHINESE SUPERMARKETS IN ARGENTINA
A decade after the financial crisis that swept away Argentina’s former wealth, Buenos Aires is still a marvelous city with an appearance somewhere between Madrid and the 5th Arrondissement in Paris. With cafés, bookshops and theaters on every street corner, the city has held on to the sense of glamour that guarantees the traveler to fall in love at first sight, despite the evidence of economic decline.
Here, Chinese immigrants are carrying out a successful strategy to take control of another form of selling Chinese products: the lucrative supermarket sector. The Chinese immigrant community in Argentina—estimated at around 75,000 people—began arriving in the 1990s, when it started to create what has become a modern-day phenomenon. These emigrants arrived in Argentina without two coins to rub together in search of new opportunities. The majority hailed from Fujian in southeast China, a province which is famous for being the origin of many emigrant communities that have settled all over the world. As tends to happen in the case of overseas Chinese communities, the new immigrants arrived in Argentina with the support of their compatriots already living in the country, who helped to arrange paperwork, provided financial support and helped them find jobs. In other words, the new arrival was quickly taken under the wing of his own people.
The same process continues to this day. The result has been the creation of an empire of over 8,900 supermarkets throughout Argentinian territory. These local shops have replaced the convenience stores that were controlled decades ago by Spanish or Italian immigrants. “We open twenty-two new shops every month,” explains Miguel Angel Calvete, secretary general of the Chamber of Shops and Supermarkets Owned by Chinese Residents (Casrech), which represents 7,000 of these supermarkets and has become an important lobby group within the country.