Will African conflicts threaten China’s business as usual approach?

(scmp.com)

“In all three cases, China quickly moved to protect its nationals by evacuating them from the Tigray region of Ethiopia and urging them to stay out of harm’s way and suspend activities in Sudan and Guinea,” said Shinn, a former US ambassador to Ethiopia.

“China did not take sides in the civil war in Ethiopia and, so far, has maintained a neutral position on the military coup in Sudan.”

But Beijing opposed the military coup in Guinea and called on the new military government to release immediately the elected civilian president, Alpha Condé.

“It is not clear if China will follow its traditional policy of political neutrality in these cases or take a strong position as it did in Guinea. While China has occasionally offered to mediate African disputes, it has rarely actually done so.”

China also has major investments in other countries affected by civil conflict, including Mozambique, where it has interests in the country’s gas industry; Chad, where China’s largest oil producer China National Petroleum Corp has an operation; and Niger, where it has growing trade ties in areas such as uranium exploration and mining.

China reportedly continued to do business with Sudan during the Darfur war as other countries such as the United States imposed economic sanctions on the country.

But firms operating there are now facing an uncertain future after the Chinese embassy in Khartoum ordered them to recall workers from the field in response to the worsening security situation after the military arrested prime minister Abdalla Hamdok and other civilian leaders in an apparent coup, dissolved the transitional government and cut off the internet and mobile networks.

China’s Ministry of Foreign Affairs said it would “follow the developments and take necessary measures to ensure the safety and security of Chinese institutions and people in Sudan”.

For decades, Sudan was a key source of China’s petroleum, but it lost most of the country’s oilfields in 2011 when South Sudan became independent after decades of civil war.

However, state-owned China National Petroleum Corporation remains the largest stakeholder in the oil consortiums operating in Sudan and South Sudan and Beijing is still a key financier and contractor in Sudan, particularly in infrastructure projects.

Luke Patey, a senior researcher at the Danish Institute for ­International Studies, said “many Chinese companies may appear to be risk-takers compared to their Western counterparts, but they have their limits too”, and mid- and long-term confidence in investments in conflict zones will take a hit even when stability returns.

“Many Belt and Road Initiative projects caught in the middle of insecurity in these countries will grind to a halt,” he said.

Patey said Chinese embassies would recommend their citizens lie low at first, “but if conflicts threaten Chinese nationals directly expect Beijing to call for evacuations ”.

He said China’s naval base in Djibouti put its military in a better place to respond.

“These conflicts may also feed the ambitions of the Chinese military to expand their footprint in Africa and build new bases in West Africa. Depending on the situation, direct Chinese military intervention may come one day, but China will lean on domestic security forces in African countries first,” he said.

In Guinea, the military seized power in a coup that overthrew Condé in September.

China is a key player in the Guinean economy, buying most of its bauxite, and its companies also have a stake in the country’s iron ore reserves, which it hopes will help reduce its reliance on Australian imports at a time of growing political tension with Canberra.

Its investments include the world’s largest iron ore project, the Simandou mine, which even before the recent coup had been stalled for years over disagreements about who should develop it, corruption, political uncertainty and lack of funding.

Chinese firms have backed a Guinean-Singaporean consortium that aims to start production at the mine’s first two blocks by 2025 – a decade later than initially planned.

The Aluminium Corporation of China also holds a 39.95 per cent stake in blocks 3 and 4, along with Anglo-Australian multinational Rio Tinto, which holds 45.05 per cent, and the Guinean government, which has the remaining share.

Yun Sun, director of the China programme at the Stimson ­Centre in Washington, said internal instability, military coups and civil wars had an immediate effect on Chinese projects on the ground – particularly infrastructure projects because of their scale and fixed locations.

“The bigger issue related to their future is will the new government resume the projects or demand nationalisation or renegotiation? Will they assume the loans?” Sun said.

She added that one thing China could rely on was that no matter who was in control, it would remain a major source of finance, which “gives China some advantage, but it’s still complications that are not preferred”.

Lina Benabdallah, a specialist in China-Africa relations at Wake Forest University in North Carolina, said Chinese companies and contractors were very aware of the risks.

“So far, some of their risk-taking attitude has paid off but we are seeing some slowing down in terms of Chinese banks financing mega projects in some conflict-prone areas,” Benabdallah said.

She said China had long been involved in mediation talks in South Sudan, but it did not want to impose its own political will on the country and its efforts had so far largely been symbolic and had not yet yielded concrete results.

Patey added: “In Sudan it is also maintaining a low profile, albeit undoubtedly staying connected to the various power sources in Sudan’s political and military elite to maintain links to any future government. Pragmatism rules in Beijing’s behaviour.”