Risk of China investment in PH is probably overstated


Ben D. Kritz

THE Western narrative on China’s ambitious efforts to finance development across the globe goes something like this: China is practicing a form of neocolonialism, unfairly gaining influence in places like Africa and South Asia with predatory lending, land grabbing and exporting Chinese labor, instead of providing job opportunities for client countries.

Although the rhetoric has heated up to almost hysterical levels under the current administration of US President Donald Trump, it has been the official, more or less, American viewpoint for at least the last 10 years, and is largely shared by most of Europe. Last Thursday, International Monetary Fund (IMF) Director Christine Lagarde struck a blow for gender equality by demonstrating that women, too, are capable of displaying more balls than tact, telling Chinese officials at a Beijing forum on the country’s signature Belt and Road initiative that they should not saddle other countries with a “problematic increase in debt.”

The same concerns about China’s involvement in the Duterte administration’s ambitious infrastructure development plans for the Philippines have been raised here, more strenuously of late given Duterte’s unambiguous favor toward the big red neighbor to the north. Incurring a large and unmanageable debt that will force the government to make political concessions, such as backing down from claims on the South China Sea or the Benham Rise, or force a handover of control of key infrastructure like ports, highways, or power plants, is the biggest worry. There is some precedent for it: Sri Lanka was recently obliged to grant a long-term lease to its strategically important Hambantota Port to China as part of a debt restructuring.

Sri Lanka’s case, however, seems to be the exception rather than the rule if one does not take the assertions of IMF’s Lagarde or America’s Cheeto Mussolini regime at face value, and actually subjects the outcomes of Chinese development investment to objective analysis. A number of researchers have done exactly that, primarily focusing on Chinese activity in Africa. Even though there have been some dubious outcomes, the studies found that these were a small minority of projects with Chinese involvement, and that in the main China’s activities have been aboveboard and generally beneficial.

The issue that causes the most concern, Chinese lending to developing countries, is the most complicated by virtue of its sheer scale. The China-Africa Research Initiative (CARI), which is a project of the Johns Hopkins University School of Advanced International Studies, maintains a database of Chinese loans dating back to the year 2000. In a 15-year period, or from 2000 through 2015, the Chinese government, banks, and contractors extended a total of $94.4 billion to African governments or state-owned enterprises; about a fifth of that total ($19.2 billion) went to Angola, with the other top recipients being Uganda, Kenya and Senegal.

Writing for the Washington Post, CARI director Deborah Bräutigam pointed out that 70 percent of the loans were used for power generation and transmission or transport infrastructure, both areas where African countries lag behind the rest of the world. While she acknowledged that some of the projects did turn out to be white elephants – “African presidents, like others, love to cut ribbons and leave legacies of big buildings,” she wrote – the vast majority of projects could be considered reasonable by any standards. “And we found that Chinese loans generally have comparatively low interest rates and long repayment periods,” she added.

As for the accusations of “land grabbing,” something that has caused some worry in the Philippines with suggestions of Chinese interest in agriculture projects, other researchers have found that the claims are almost entirely baseless. CARI enlisted the aid of Johns Hopkins’s International Food Policy Research Institute to investigate 57 cases where the Chinese government or Chinese corporations were alleged to have acquired, or otherwise negotiated, long-term control over large parcels (500 hectares or more) of land in Africa.

These cases were specifically cited by either the US or German governments. If true, the total amount of farmland in these cases would have been more than 6 million hectares, about 1 percent of all the agricultural land in Africa. The researchers found, however, that about a third of the stories were patently false, and that the others represented legitimate investments, most involving no substantial acquisition or control of the land. In projects where Chinese investors did acquire land or gain control of it through long-term leases, the total amounted to only about 240,000 hectares – or about 0.04 percent of Africa’s farmland.

Similarly, CARI found that claims that Chinese-backed projects do not generate local jobs are completely baseless; employment surveys consistently show that more than 75 percent of the workers on projects or in Chinese businesses set up in Africa are local residents. Even without the specific data, the charge that China is exporting labor frankly makes no sense. With rising wages in China, Chinese companies are simply doing what American and European businesses did before them, outsourcing manufacturing to countries with cheaper labor. The jobs may be low-wage according to Western or even domestic Chinese standards, but relative to local economic standards they are a marked improvement in workers’ welfare and opportunities.

The subtext in all the research is that where problems have arisen, they are almost due to mistakes or questionable intentions on the part of local leaders, rather than Chinese businesspeople or government agencies.
The Philippine government should by no means take shortcuts in due diligence or proper cost-benefit assessment of any project involving China. If anything, those are areas in which the Philippines needs to practice continuous improvement in general – but it need not approach Chinese involvement and investment in development with as much skepticism as many believe is necessary.



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