China’s mixed record in developing Africa holds lessons for Pacific

China’s rise as a great power will be one of the defining challenges of the next few decades. While China’s security deal with Solomon Islands has raised concerns about its military ambitions in the Pacific, China’s economic expansion into our region is just as important.

Chinese companies are active in the Pacific building ports, in logging and fishing, in construction and exporting Chinese consumer goods. This week Chinese firm Huawei signed a $100 million deal with Solomon Islands to build 100 mobile phone towers.

Because China’s investment in the region is relatively new, the Herald on Thursday started a series that tries to understand Beijing’s motives and methods by looking at how Chinese business works in Africa, another developing region where it has been investing heavily for some time.

Over the past decade, China has become Africa’s largest creditor and the single largest financier of African infrastructure, supporting one in five projects and constructing one in three, according to consultancy Deloitte.

However, the experience of Chinese investment in Africa has been mixed at best. China says it is investing not just for profit or geopolitical advantage but to help lift Africa out of poverty.

But the experience of Australian company Cassius Mining Limited in Ghana suggests that often Chinese companies use their power with little regard for locals.

In a small community in northern Ghana, dozens of miners have died in accidents in a gold mine run by Chinese state-linked firm Shaanxi. Cassius alleges that the same mine stole millions of dollars of its gold by digging underneath its adjacent mine. Local villagers have fought in vain for compensation and safer working conditions. They allege the Chinese miner has used corrupt practices to block their campaign for justice.

Shaanxi denies the allegations but this is not an isolated example. Chinese companies have been accused of flouting occupational health and safety rules, destroying local environments, bribing local officials and undermining the rule of law. Chinese government-linked banks have loaned money to finance poorly designed megaprojects which have failed and saddled countries in Africa and elsewhere with unsustainable debts. They sometimes rely heavily on imported Chinese workers rather than giving jobs to the local labour force.

In the interests of fairness, it is important to acknowledge that many western businesses, including Australian ones, have a mixed record in developing countries, too. They have historically taken advantage of weak governments to cut corners. For instance, BHP was a 50-50 partner in a Brazilian company called Samarco responsible for the disastrous collapse of a tailings dam in 2015 that killed 19 people.

But China lacks many checks and balances which constrain Australian firms. The close links between Chinese companies and the Chinese Communist Party can give them an unfair advantage and they are not used to outside scrutiny by the media.

Australia cannot and should not try to stop Chinese investment and trade in our region. It is up to the Pacific countries themselves to work out their relations with China and Chinese business offers benefits such as technology and employment.

But Australia should support our island neighbours in getting a good deal when they do business with China.

Australia must push Chinese firms to respect basic norms in areas such as market access and environmental standards and fighting against corruption.

While we do not have the financial capacity to match every Chinese investment, Australia can offer technical advice and alternative forms of finance and trade in key areas.

Most importantly, Australia can support democratic institutions in the Pacific which will allow countries in the region to stand up against China Inc. in the interests of their own people.

Bevan Shields sends a newsletter to subscribers each week. Sign up to receive his Note from the Editor.