08.23.14
The cost of labor in China is going up, so Chinese manufacturers are moving to Africa, and they’re playing all the angles.
HONG KONG — Sun Qiaoming is a trader from Jiangsu. He operates his import-export business on the Eastern coast of China, where there is plenty of space for a man with his drive and skills to prosper. Already fairly successful, he recently set his sights beyond his country’s borders. “There’s been much talk about the Chinese Dream in the past few years, but I have an African Dream.” he said. “African gold will fill my next bucket of gold.”
He wasn’t referring to the natural resources that President Obama recently hinted as the reason for China’s presence on the African continent. After all, Sun is a private entrepreneur, and receives no direct support from the government in his business endeavors. His “gold” is the labor in Africa—cheap, trainable, abundant, and ready to work. They may not have the decades of know-how that the Chinese developed during their meteoric rise in global production, but Sun is confident that with time and proper training, they will be able to match the efficiency and productivity of workers in China.
With rising labor and energy costs, as well as tightening environmental restrictions, it is becoming increasing difficult for Chinese industrialists to churn out cheap goods at a massive scale in their own country. Even as fresh university graduates suffer a high unemployment rate, few want to take jobs on factory floors. “The post-90s generation wants office jobs, not blue collar work,” Sun explains. “It’s understandable. Life is much easier now. Factory work is stable but I want my children to have other options.”
The result is an exodus of Chinese manufacturing to places where labor is cheaper and financial incentives like capital subsidies are offered to foreign-owned factories.
But vibrant industry requires solid infrastructure, which is where the Chinese government enters the equation. Last year, over 214,000 workers were posted in Africa to build highways, bridges, dams, and power plants. That’s about a quarter of all Chinese workers who are sent abroad to work for state-owned enterprises.
“As much as I want to work there,” says a Chinese entrepreneur, “I can’t look for a wife—marrying an African is marrying down—so I will need to do that here.”
For decades, the Chinese government has had a foothold on the African continent. During the Mao era, the Chinese government funded and executed massive infrastructure projects like a railway connecting Tanzania and Zambia, reaping benefits on multiple levels. Not only does China have access to the wealth of natural resources in a multitude of African countries, the support from those nations was necessary for the People’s Republic of China to gain membership to the United Nations, opening up a plethora of opportunities in international diplomacy and trade.
Chinese support in Africa has been on a steady rise in the past 25 years. Trade between China and Africa rose by 700 percent in the 1990s. China’s foreign direct investment in Africa has increased by over 50 percent per year since 2001. Aside from the highly visible presence of state-owned enterprises that take on massive projects, privateers like Sun Qiaoming have been carving out their own commercial fiefdoms as well.
In the early 2000s, an acquaintance told Sun about the possibility of doing business in Ethiopia. At the time, Ethiopians still relied on imports from Western Europe for many commodities, most of which were costlier than goods produced in China. As a test, Sun shipped over a container stuffed with apparel made in his home province. After it reached Ethiopia, the contents were distributed and sold out in under two weeks. That marked the beginning of a fruitful long-term relationship with his Ethiopian clients. By utilizing those existing connections, and partnering with another entrepreneur from his hometown, he is in the final stages of planning for a new textile factory near Addis Ababa, joining other Chinese industrialists who have made the move.
Even though Sun and his partner plan on using materials and equipment imported from China, all of his factory staff will be Ethiopian. “It’s about adding value locally,” he explained. “Once we hit the 20 or 30 percent mark, our clothes will officially be ‘Made in Ethiopia.’ Then it will be easier for us to sell to the US and EU.” The west puts limits on commodity imports from China. Production relocation to Africa and South America have allowed Chinese enterprises to circumvent trade caps.
Sun is one of a small segment of Chinese businessmen willing to take the risk to establish new businesses in far-off lands, but prejudice is still an issue. “My family thinks all of Africa is the same. Just because Libya was evacuated and West Africa is dealing with Ebola, it doesn’t mean business is affected everywhere else,” he said. “But then, as much as I want to work there, I can’t look for a wife—marrying an African is marrying down—so I will need to do that here.”
It took a long time for the US government to realize that it is falling behind China when it came to economic engagement with Africa, whether between governments or private enterprises. Eager to catch up, President Obama hosted the recent US-Africa Leadership Summit, but positive attention on cooperation and renewed ties was overshadowed by statements suggesting that China was the elephant in the room.
Last week, during an interview with NPR’s Morning Edition, National Security Advisor Susan Rice attempted to point out the differences in how Americans and Chinese do business in Africa, suggesting that Chinese (state-owned) businesses bring in their own workers for projects in Africa, while American enterprises give those opportunities to locals and builds their capacities to maintain the infrastructure once construction is complete. However, Howard French, author ofChina’s Second Continent, contested those words and pointed out that American engagement on the ground in Africa is nearly absent, bringing up examples of American construction projects in Africa that were outsourced to a Chinese firm.
As the spin continues, it seems like the scales are tipped in China’s favor. The nation’s investment in Africa polishes its soft power image, and the improved infrastructure benefit the African nations and the many Chinese businessmen they host. Sun is confident about his new venture, and genuine enthusiasm and excitement are packed into his words when he speaks of his upcoming journey. “I love spicy food, and my friends tell me that Sichuan hotpot has become very popular in Addis Abeba,” he said. Even with new beginnings, he won’t be missing some of the comforts of home.
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