Stars and Dragons: The EU and China - European Union Committee Contents


Examination of Witnesses (Questions 280 - 299)

THURSDAY 30 APRIL 2009

Dr Chris Alden and Mr James Keeley

  Q280  Lord Jones: And you are soon publishing Land Grab or Opportunity—Agricultural Investment.

  Mr Keeley: Yes. This is a report that IIED are doing for the Food and Agricultural Organisation and the International Fund for Agricultural Development—FAO and IFAD—and that will be coming out in June 2009.

  Q281  Lord Jones: Are they targeting?

  Mr Keeley: We are trying to take a balanced assessment for what the evidence is, not just in relation to China but across the board on land grabs. It does raise a serious set of issues that the EU might want to engage on in terms of supporting civil society capacity to scrutinise land deals and host governments' own ability to ensure that investors really do have the capacity to deliver what is promised in particular land and agricultural development deals and to scrutinise some of the issues around water abstraction, impacts on local land rights, the sustainability of agriculture and so on.

  Q282  Chairman: Why would China buy farms that just operate normally and sell into their domestic markets anyway? What is the point?

  Mr Keeley: Many of these farms are part of the state farm agri-business corporation, which is part of the Ministry of Agriculture. It is a bureau that used to manage reclaimed land which was farmed as state farms, many in the northeast of China. There are State Farm Bureaus; there is a national one in China and then each province has one—some of them have now disbanded. Most of them now have to generate their own revenue so going overseas to farm has been one strategy to do this and they typically contract out the farm to Chinese farmers agricultural technicians who have to meet an income target and then they are essentially farming for profit. I think it is also a way of demonstrating a Chinese model. The other point is that China has a "Going Out" strategy as well, to encourage Chinese firms.

  Q283  Lord Anderson of Swansea: You have talked about China general. Are we talking about the Chinese National Government; are we talking about provinces; are we talking about semi-state institutions? What is the profile of the investment overall by China into Africa?

  Dr Alden: Things have moved very quickly over the last decade within China itself—the introduction officially of private property, for instance, and the official ending, closing down tens of thousands of state-owned enterprises and privatising them and the like. If we were discussing this ten years ago or even five years ago the answer to that question differs. The going out strategy is a government strategy; it has targeted a select number of state-owned enterprises in particular sectors that they are encouraging to invest overseas, the initial ones that Africa's experience resolved with the energy firms. They provide a less directive way of encouraging this sort of investment through China XIAMEN Bank, China Development Bank, which provide financial incentives for Chinese actors, be they state-owned enterprises, be they provincial actors, to look into exploring new markets, to broaden the economic outreach of the Chinese economy and Chinese actors. The thing that we have to capture here is that we talk often about China but in fact there are many Chinas we refer to. We refer to increasingly, in the African context in the last five years or so, private actors. I was thinking of some of these Chinese farms—some of them were just Chinese farmers who have taken up positions within the African context to serve—what do they call it?—the truck farm; you are in the periphery of the city and you are providing vegetables and what have you. So they are very different to the local market; there are different scales of who China is. I think the growth area would be to look at the provinces as actors in this thing. The Chinese Government remains significant in key sectors—energy sector with a state-owned company; but even the mineral sector is much more played at a provincial or even private level.

  Q284  Lord Anderson of Swansea: One of your publications was Chinese Multinational Corporations in Africa. Do they have an identity?

  Dr Alden: Some of them are bone fide recognised multinationals, others are parastatal and others have listings on the Hong Kong Stock Exchange and what have you, and they have been encouraged to do so; yet the state retains the bulk of the shares and control within these organisations. So that is at the high end, the big firms, but again we have small or medium enterprises which may have evolved from this privatisation of state-owned or provincial enterprises which are increasingly behaving as private actors.

  Q285  Lord Anderson of Swansea: And enterprising people who seize the opportunity.

  Dr Alden: Absolutely.

  Q286  Lord Crickhowell: We now have the notion for the point I was about to put to Mr Keeley. I was struck by his reference to the produce going to the local markets and he then cited Zambia. On the couple of visits that I have made in the recent past to Zambia I was struck by the scale of the farming enterprise around Lusaka and some of that is China, but a great deal of the produce is of course going to the European and British markets—the vegetable markets and so on. So presumably these Chinese farms are actually not as private and trading with the local market but they are actually trading in the supermarkets of this country as well. Presumably they tend to be privately owned enterprises, or not?

  Mr Keeley: I do not have good information on whether they are actually trading with Europe. The farms I visited—and these were some of the largest Friendship Farms—were only selling in the regional markets.

  Lord Crickhowell: But some of the Zambian trade is into the British market.

  Chairman: I suspect that Tesco has more land grab in Africa than China does but maybe that is another inquiry! Lord Inge.

  Q287  Lord Inge: We have touched to a certain extent on peace and security but I am still not clear what China's approach now is to peace and security in Africa, in peacekeeping. Is it on a country by country basis or is it country specific? Actually we talk about the European Union approach to Africa but in terms of security a lot of that is done on individual nations dealing with African nations. Does that also mean that some of the regimes they are supporting are regimes that we would consider undemocratic, repressive and dictatorial? It is quite an easy question to answer, is it not!

  Dr Alden: Generally a yes or no question! Peace and security, there is an official position always in favour of it, etcetera, etcetera. I think their interest in Africa is stability, first and foremost. As they become more deeply involved and their investments are more exposed to the African environment, it could be said more generally that they are beginning to recognise some of the insights and experiences of longstanding actors, hence their change of position on questions of intervention, but with some key caveats—the intervention has to be accepted by the host government and obviously has to pass through African scrutiny, be it probably the African Union but also the UN Security Council if it is brought to the Security Council. I think they are looking currently—and in a way it comes to your question about Chinese security for its own interests and investments—at emphasising multilateral means of sustaining their interests and promoting stability. They see that as the avenue in Africa for doing that, as opposed to intervention, of course, which they would not favour. So that is their general policy. It is country by country. Sudan has experienced a very different change from, say, 2003—the position of the Chinese to the contemporary position. De facto they do support—this non-intervention policy does support repressive and dictatorial regimes. The western interventionalist policy none the less manages in certain instances to happily work alongside the same sorts of regimes. I am not an apologist for the Chinese in this but I do recognise that there are some hypocrisies at play in this.

  Q288  Lord Inge: Does that also affect arms' sales and things like that?

  Dr Alden: Chinese arms' sales?

  Q289  Lord Inge: Yes.

  Dr Alden: SPRI—the Swedish Peace and Research Institute—has put together some work on this recently but the bulk of Chinese arms' sales have been small arms. They have gone to primarily the Horn of Africa. They have found their way into the DRC. Again, how much of this is state policy or how much of this is the policy of the arms producing industry, which is increasingly active in seeking out new markets itself. The arms to Zimbabwe that came around the period of the election, looking at that closely these were deals that were done with perhaps a nod and a wink on the part of the government, but certainly between Chinese firms and the Zimbabwean counterparts the Chinese diplomats, once this hit the press, were as upset about it because it went against their own interests. This is about this diversity of interests.

  Q290  Lord Inge: Are you saying that the Chinese Government has no control over its companies?

  Dr Alden: No, I am saying that as far as I know that China is seeking to gain market share in the arms industry in Africa; that it is a very, very minor player with a few exceptions that I have mentioned; that probably Norinco and other companies would like to take up a larger position in that. I know in South Africa they have been unable to do so, probably the South Africans are in the same business themselves, and the degree of which that is conformed to as a closeness to Chinese policy generally, I cannot answer that particular question.

  Q291  Lord Inge: There seems to be a conflict between what we think the European Union and the UK should be doing about Darfur and what China is doing. Do you think that the European Union therefore ought to engage in a more robust discussion with China about what is happening in Darfur?

  Dr Alden: I do not think China is the key any longer to solving the Darfur problem; I think China is actually on side. The current debate of course is around al-Bashir and the International Criminal Court. They have a different position which they draw from their own outlook but also they draw from the African governments which, on the whole, have been critical of this. I think that engagement is already there.

  Q292  Lord Inge: Are you saying therefore that the European Union and China, as far as that is concerned, are on the same path?

  Dr Alden: No. I am saying that on most areas they are; they still have some debates around things such as the question of al-Bashir and the criminal court, but coming to my very first comment on this set of questions the Chinese recognise that stability is a prerequisite to securing their interests and in general terms they would like a stable Africa and for those reasons they have changed their viewpoint on the Darfur question.

  Q293  Lord Jay of Ewelme: I was very interested in what you were saying at the beginning of your answers to this set of questions about the degree of some flexibility and the Chinese approach and the extent to which as they get more involved they listen to perhaps or learn a little bit from others and that may open up some questions of how we negotiate or how we talk to them, which we are coming to in a moment. You also said, I think, that they preferred a multilateral approach; could you say a bit more about that? With whom and over what?

  Dr Alden: I think at this stage in so far as there are conflicts, as they become more exposed to the African environment, and particularly that their biggest investment is in resources and the resources are in countries where political instability is either current or just completed a phase and they have moved out of that, they are looking to multilateral institutions—in Somalia, into multilateral initiatives. They do not want to be taking action as the Chinese State in thee things; they want in a sense the cover, if you like, of having international support, African support for any actions that would be directed towards gaining stability and resolving problems of conflict and the like.

  Q294  Lord Jay of Ewelme: Let us take Somalia, for example. Who would they be looking for in that case as the cover? Are we talking about the African Union; are we talking about some kind of UN organisation? Who are we talking about?

  Dr Alden: They took the lead when they were President of the UN Security Council to authorise action on the Somalia case. They look to the United Nations and/or the African Union, since it happens to be in Africa—there is the Peace and Security Council and the like. I think they are quite careful and systematic about making sure that they subscribe to the recognised political institutions that go to their bias for governments as opposed to civil society and other forms of actors.

  Lord Jay of Ewelme: It seems to me this is a rather interesting set of issues because we started off by talking about China being rather exceptionalist in its approach and we are coming round to China actually wanting to work with others in finding solutions to some of these issues, so it has nuanced as the discussion has developed.

  Q295  Chairman: Do you think that is a trend that will continue—that engaging more in that sort of structure is going to be something that China will do?

  Dr Alden: I think it is almost inevitable. It is a process of taking an observer status on the DAC and participating or discussing extractive industries, the transparency initiative. All these are debates within the Chinese Government, the degree to which they should conform to and subscribe to. I think there are certain red lines though. I have heard the Chinese say more than once, quite emphatically, "We are not going to join the DAC committees; we do not want to be seen in a committee of ex-colonial donor states; that is a step too far. But what we will do selectively on certain policy areas, we will change and play along," particularly if they get African pressure. I think the key that we often forget is African governments can set the agenda for China and Africa. We under emphasise that, maybe because it is a difficult terrain; but they respond to Africa and they have said it very explicitly.

  Chairman: It is an important point.

  Q296  Lord Jay of Ewelme: I have heard it said that the Chinese have said that they would not wish to join any multilateral organisation in which they did not have a veto. Do you think that is true?

  Dr Alden: I think that they make lots of statements and they then weigh each particular case individually.

  Lord Anderson of Swansea: You have mentioned the tentative moves towards a political dialogue; are there any examples where China has involved itself in international financial or industrial competition? Are there examples where Chinese are main contractors or subcontractors along with western firms, or do they put a totally Chinese project before the applicants?

  Chairman: I think we come on to that quite strongly in question 8; so if I could leave that to then, Lord Anderson, and maybe add into that? Perhaps we could move logically to Chinese corporations and Lord Crickhowell.

  Q297  Lord Crickhowell: We have already touched on the question of how far the Chinese Government has control or influence over Chinese corporations in Africa. Do Chinese corporations in Africa respect human rights and environmental standards? Is there scope for dialogue with the EU on these questions? I am aware that China is not always very responsive to the EU telling them how to conduct human rights questions and so on, but there are doubts. We referred to the paper on the Congolese situation and there are fears expressed in that paper about the lack of transparency about some of the conditions and the reports of poor treatment of workers and so on. How do you see these issues and the Chinese relationship, particularly with Europe? This is a European Committee; is this area where Europe can talk profitably or is it just going to be normal?

  Mr Keeley: I think we can but we probably need the right starting point, which is to recognise that there have been issues around labour and Chinese contracts, and that there are projects where there appear to be negative environmental impacts, where there are ongoing environmental problems—damn projects are ones that are commonly cited. But notwithstanding these issues China is making serious efforts to develop environmental guidelines. The Ex-Im Bank has a set of guidelines which are published. The State-Owned Assets Supervision and Administration Commission, which is an extremely important body which is basically in charge of the state-owned enterprises has its own set of regulations as well; also the Ministry of Commerce, and some of those regulations I think encourage the use of local labour in construction projects and so on. So it is important to recognise that there is a positive trend towards trying to promote better impact assessment and more environmental responsibility amongst Chinese firms; and Chinese firms themselves, the large ones, are promoting CSR and publishing their own statements on CSR and so on. Yes, there is plenty of scope for dialogue, and one of the issues is whether China would really accept some of the OECD and World Bank standards on environmental governance. There seems to be some sort of sensitivity around that question.

  Dr Alden: I would just echo this. I think this is a constructive area for engagements actually. I think the background to this in some sense is that the state-owned enterprises aspire to be world class multinational firms and they recognise—and you can see it on their websites—they dipped a toe in the CSR process and the like. They look to western, European firms as the world class standard to which they hope to aspire. What worries me is another set of business actors—the small and medium enterprises. They are much more of the smash and grab variety and they are the ones in fact who have been withdrawing from Congo with the collapsed commodity prices. It is a classic that the juniors, if you like, in the mining industry, who come in, whose margins are much narrower, they flaunt labour standards, environmental standards and the like and they are the ones that are problem not just for—and I think here the Chinese I think would listen to Europe—the Africans and the like but they are a problem for the Chinese Government. The Chinese Government is being held accountable for private actors who break the standards and they are very worried about it; every embassy that has an economic council, you talk to them and they will tell you, "These guys do not register with us; we read about them in the press; we only hear about it when African labourers are killed or rights are violated," or whatever. So the Chinese Government, I think, would be quite responsive in this area.

  Lord Crickhowell: On the environmental issue, the growing interest of China and the whole question of the environment and so on, it is an obvious area where I think we would expect to talk. I get a sense which I find interesting. It is obviously much easier to talk to the Chinese about the human rights issues in the context of Africa than it is about in the context of China. If we talk about it in the context of China that is too close to home, but they may be quite happy to talk about these issues in the international context where they want, as you say, to measure up to world class standards. It is an interesting observation; thank you.

  Q298  Chairman: Mr Keeley, were you trying to come in at the end there?

  Mr Keeley: There is a human rights dialogue with China on Chinese human rights, and China would also have a perspective which emphasises a wide range of social and economic rights rather than just political rights. On the question of environmental impacts, forestry is another case, in Mozambique, particularly, where it has been very difficult for the Chinese Government to control some of these small operators who have been very seriously involved in the stripping out of tropical hardwoods. In fact the Ministry of Commerce invited the International Institute for Sustainable Development and IIED to develop some recommendations on how China might deal with some of these issues and promote a more sustainable forestry strategy, and there are a range of issues in there and the recommendations from that study which provide ground for taking these things forward.

  Q299  Chairman: Can I just clarify one thing? In the UK when we talk about small and medium sized enterprises we very specifically mean enterprises with less than 250 people unless it is covered by other definitions. Are we really talking about businesses in China that are as small as that and their interventions within Africa, or are we talking relatively?

  Dr Alden: When I used the term I was thinking of not China, not the leading firms. I did not put a break as to a particular definition. Can I just bring back the arms issue for a second? The thing that surprises me—and I continually talk about this in African cities—the FOCAC meeting, the very first one, the Forum for Chinese-African Cooperation, which we saw in Beijing in 2006, China signed on to a commitment to reduce small arms sales. Nobody ever talks about it any more but it was one of their first commitments in their very first meeting and it seems to me that this is an area that should be pursued, I would have thought; that the African Union and the like would have pursued this more readily—they have committed themselves to publishing what they trade and reducing that. That is just one observation. On the control of Chinese firms, the fact of the matter is that China does not control the behaviour of these smaller firms, however defined, in its own backyard. The flouting of regulations, the reasons there is so much flouting of regulations in local settings is one of the reason for the peasant uprisings. The township ventures are actually selling land that they do not have the right to sell under the feet of the peasantry and the government does not seem able to stop that. So one has to ask the question: the degree to which they would be able to control the same in a foreign country, a foreign setting.


 
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