The Next Asian Miracle

Democracies are peaceful, representative -- and terrible at boosting an economy. Or at least that’s the conventional wisdom in Asia, where for years growth in India's sprawling democracy has been humbled by China's efficient, state-led boom. But India’s newfound economic success flips that notion on its head. Could it be that democracy is good for growth after all? If so, China better watch its back.

Consider the experiences of the following two Asian countries. In 1990, Country A had a per capita GDP of $317; Country B's stood at $461. By 2006, Country A, though 31 percent poorer than Country B only 16 years earlier, had caught up: It enjoyed a per capita GDP of $634, compared with Country B's $635. So, if you had to guess, which of these two Asian countries would you assume is a democracy?

You might be tempted to conclude that the better-performing country is authoritarian China and the laggard is democratic India. In reality, the faster-growing country is India, and the laggard is the occasionally autocratic Pakistan. This fact certainly belies the commonly held notion that -- especially among Asian countries -- authoritarian states have an advantage in growing an economy compared with their democratic counterparts, who are forced to reckon with such pesky trappings as labor standards and political compromises.

But surely, the familiar China-India comparison would support an authoritarian edge, right? The conclusion seems so obvious: China is authoritarian, and it has grown faster; India is democratic, and it has grown more slowly. For years, Indians have defended their democracy with a sheepish apology -- "Yes, our growth rate is terrible, but low growth rates are an acceptable price to pay to govern a democracy as large and as diverse as India."

There is no need to apologize now. India has ended the infamous 2 to 3 percent annual "Hindu rate" of growth and begun its own economic takeoff. Recent Indian success is not only impressive in terms of its speed -- growing at the "East Asian rate" of 8 to 9 percent a year -- but also in terms of its depth and breadth. The Indian miracle is no longer confined to the much vaunted information-technology sector; its manufacturing is taking off. Even the historically lackluster agricultural sector is beginning to grow.

So where does this leave the "authoritarian edge" that China’s economy has supposedly enjoyed for years? The emerging Indian miracle should debunk -- hopefully permanently -- the entirely specious notion that democracy is bad for growth. And the emerging Indian miracle holds substantial implications for China's political future. As Chinese political elites mark the 30th anniversary of economic reforms this year, they should reflect on the Indian experience deeply and absorb the real reason behind their own miracle.

The idea that there is a trade-off between economics and politics is ingrained in the minds of many policymakers and business executives in Asia, as well as the West. But that idea has never been systematically proven. If India, with its noisy, chaotic, and lumbering political arrangements, can grow, then no other poor country must face a Faustian choice between growth and democracy. A deeper look at the two countries shows that they have succeeded and failed at different times for remarkably similar reasons. Their economies performed when their politics turned liberal; their performances faltered when their politics slid backward. Now, as many poor countries grapple with similar political and economic choices, we must understand this dynamic. It is high time to get the China-India story right.


That story doesn't begin in 2008. It's a horse race that goes back decades, and one that tells us much about the relationship between democracy and growth, governance and prosperity. From an economic perspective, it is not the static state of a political system that matters, but how it has evolved. The growth India enjoys today sped up in the 1990s as the country privatized TV stations, introduced political decentralization, and improved governance. And contrary to the conventional wisdom, India stagnated historically not because it was a democracy, but because, in the 1970s and 1980s, it was less democratic than it appeared. To understand just what is happening in India's economy today -- and how it relates to the country’s political system -- we must travel as far back as the 1950s.

Many scholars blame India’s first prime minister, Jawaharlal Nehru, for adopting a development strategy that caused India to stagnate from 1950 to 1990. But this view is unfair to Nehru, and it shifts the blame from the real culprit -- Indira Gandhi, Nehru's daughter and prime minister during much of the period from 1966 to 1984. Nehru's commanding-heights approach was the reigning ideology in many developing countries, some of which, like South Korea, were quite successful. The issue is not how harmful Nehru's economic policies were, but why India intensified and persisted in this model when it was clearly not working. To answer this question we have to understand the lasting damage that Indira Gandhi inflicted on Indian democracy.

Patronage became her electoral strategy as she undermined a vital institution in a functioning democracy -- the party system. Gandhi weakened the Congress Party, once a proud catalyst of the independence movement, by sidestepping many of its well-established procedures, reducing its grass-roots reach in the states, and appointing party officials rather than allowing rank-and-file members to elect them. The shriveling of the Congress Party meant that Gandhi had to use other means to get reelected: crushing political opposition, pandering to special interests, or offering political handouts.

Or cancellations of elections altogether. Indira Gandhi imposed emergency rule in June 1975 and cancelled the general election scheduled for the following year. It was no isolated event. As early as 1970, she postponed or cancelled Congress Party elections. In addition, she moved very far to replace federalism with her own centralized rule. One telling statistic, as shown by political scientists Amal Ray and John Kincaid, is that between 1966 and 1976 the Gandhi government invoked Article 356 of the constitution -- which empowers the federal government to take over the functions of state governments in emergency situations -- 36 times. The government of Nehru and his successor (1950–65) resorted to this measure only nine times. From 1980 to 1984, she invoked this power an additional 13 times. The misuse of the extraordinary power vested in the executive damaged an important institution of Indian democracy.

The cumulative effect of Gandhi's actions is that the Indian political system, though still retaining some essential features of a democracy, became unaccountable, corrupt, and unhinged from the normal bench marks voters use to assess their leaders. In a functioning democracy, voters punish those politicians who fail to deliver at the ballot box. Not in India. Both the 1967 and 1971 reelections of the Congress Party followed a decline of per capita GDP the year before. It was not democracy that failed India; it was India that failed democracy.

The economic consequences of this period of illiberalism were long lasting. Because Gandhi's political fortunes depended on patronage, she felt no compulsion to invest in real drivers of economic growth -- education and health. The ratio of teachers to primary-school students throughout the long Gandhi years stubbornly hovered around 2 percent. After her rule, in 1985, only 18 percent of Indian children were immunized against diphtheria, pertussis, and tetanus (DPT), and only 1 percent were immunized against measles. Even today, India is still paying for her neglect. The low level of human capital remains the single largest obstacle to that country's developmental prospects.

The good news is that India is shedding this harmful legacy. As Indian politics became more open and accountable, the post-Gandhi governments began to put welfare of the people at the top of the policy agenda. For example, the adult literacy rate increased from 49 percent in 1990 to 61 percent in 2006. In due time, these social investments will translate into real dividends.


The story of China's rise seems, on the surface, quite different. A communist and closed regime undertakes an efficient, massive, and rapid embrace of the global economy -- and sends its country into overdrive. It appears to be a far cry from the common understanding that democracy promotes growth because it imposes constraints on rulers and reassures private entrepreneurs of the safety of their assets and fruits of their labor. The idea that China grew because of its one-party rule stems from a mistaken focus on a single snapshot in time at the expense of an understanding of shifting trends. China did not take off because it was authoritarian. Rather, it took off because the liberal political reforms of the 1980s made the country less authoritarian. Like India, when China reversed its political reforms and saw governance worsen in the 1990s, citizens' well-being declined. Household income growth slowed, especially in the rural areas; inequality rose to an alarming level; and the gains of economic growth accruing to ordinary people fell sharply. China even underperformed in its traditional areas of strength: education and health. Adult illiteracy rose. Immunizations fell. The country's GDP might have been booming, but it was also hazardous to your health.

The real Chinese miracle began back in the 1980s -- when Chinese politics was most liberal. Personal income growth outpaced GDP growth; the labor share of GDP was rising; and income distribution initially improved. China accomplished far more in poverty reduction in the 1980s without any of the factors (such as foreign direct investment) now viewed as essential elements of the China model. In four short years (1980–84), China lifted more of its rural population out of poverty than in the 15 years from 1990 to 2005 combined. If India became less democratic under Indira Gandhi, China became less authoritarian under the troika rule of Deng Xiaoping, Hu Yaobang, and Zhao Ziyang in the 1980s. Therein lies the key insight into China’s economic takeoff.

One of the first acts by the reformist leaders was to signal an improving environment for private property. In marked contrast to today’s massive land grabs, the Chinese government in 1979 returned confiscated bank deposits, bonds, gold, and private homes to those former "capitalists" the regime had persecuted. The number of people affected by this policy was not large, around 700,000. But symbolism mattered for a country still reeling from the Cultural Revolution. There were also other symbolic acts designed to elicit the confidence of private entrepreneurs in the new political environment of a post-Mao era. In 1979, two vice premiers visited and personally congratulated an entrepreneur who was granted the first license to operate a private restaurant in Beijing. As early as 1981, a Communist Party document signaled a willingness to recruit its members from the private sector, a well-publicized gesture. The widely held view that the party only began to recruit capitalists late in the Jiang Zemin era is simply incorrect.

The reformist leaders also began to embark on meaningful political changes. As scholar Minxin Pei has noted, every single important political reform—such as the mandatory retirement of government officials, the strengthening of the National People's Congress, legal reforms, experiments in rural self-government, and loosening control of civil society groups—was instituted in the 1980s. The Chinese media became freer in the early reform era. The timing here is critical. This "directional liberalism" of China's politics either preceded or accompanied China’s economic growth. It was not a result of economic success.

This liberalism mattered the most for growth in rural China, where the majority of Chinese citizens live. Private access to capital eased in the 1980s. Private entrepreneurship and even some privatization became widespread, especially in poorer parts of the country that needed them most. Of 12 million rural businesses classified as township and village enterprises, 10 million were completely private. The change in direction of China's politics was sufficiently credible to encourage millions of entrepreneurs to go into business for themselves.

But in the 1990s, the Chinese state completely reversed the gradualist political reforms that the leadership began in the 1980s. This assessment comes from a well-placed insider, Wu Min, a professor at the Party School under the Shanxi Provincial Party Committee. In a 2007 article, Wu revealed that the political reform program adopted at the 13th Party Congress in 1987 implemented some substantial changes. The congress abolished the party committees in many government agencies and explicitly delineated the functions of the party and the state. After 1989, there was no progress on the political reform front, especially in reducing and streamlining the power of the Communist Party.

The political reforms of the 1980s were designed to enhance the accountability of the government by creating some checks and balances over the power of the party and by fostering intraparty democracy. Wu cites one specific measure in the 1990s to derail the reforms of the 1980s. According to Wu, in the 1990s China instituted explicit provisions prohibiting the National People's Congress (NPC) from conducting evaluations of officials in the executive branch and the courts. Wu comments, "This is obviously a step backward."

Just how far did this step set back China? How about nearly 30 years? Consider China's track record when it comes to industrial fatalities. In 1979, in the aftermath of the capsizing of an oil rig that resulted in 72 deaths, the NPC held hearings at which officials in the Ministry of Petroleum Industry were called to testify. The minister was determined to have been negligent and was sacked. But since the mid-1990s, there have been hundreds of explosions and industrial accidents in China's coal mines. Thousands of people have lost their lives. No hearings have been held, and not a single official at the rank of minister or provincial governor has ever been held explicitly responsible.

Like Indira Gandhi in the 1970s and 1980s, the Chinese state greatly centralized its economic management in the 1990s. It was another reversal from the promising reforms of a decade earlier, the gist of which was delegating decision-making to those best informed about local situations. In 1994, the central government increased substantially the shares of tax revenues going to the central coffers and abolished one of the most innovative Chinese reforms -- fiscal federalism. A less well-known development in the 1990s was that the Chinese state centralized the budgetary and other functions of villages. So, even though people were voting in village elections, the officials elected exercised very little power.

The economic consequences of these reversals were substantial. The 1990s saw depressed growth in household incomes relative to GDP, which means that the average Chinese person was losing ground. The employee share of GDP -- the income going to the general population -- peaked in 1990, at 53.5 percent. By 2002, it had declined to 45 percent of GDP. At 45 percent, the Chinese economy in 2002 was benefiting its people less than it was in 1978, when its employee share of GDP stood at 48 percent. Similarly threatening for the poorest Chinese is a development that has garnered almost no attention: The country is backsliding on literacy. On April 2, 2007, the state-run China Daily published an article with an unusually frank title, "The ghost of illiteracy returns to haunt the country." It reported that the number of illiterate Chinese adults increased by 30 million between 2000 and 2005. In 2005, there were 115.7 million illiterate Chinese adults, compared with 85 million in 2000. The roots of the problem began in the 1990s. Consider how literacy is defined -- the ability to identify 1,500 Chinese characters by the age of 7 to 9. An adult reaching into the illiterate group by 2005 received all his or her primary education in the mid-1990s. In addition, immunization rates against DPT and measles -- rising throughout the 1980s -- began to decline in the 1990s. In time, China will pay dearly for these colossal failures.

In the 1990s, the nature of China’s growth was fundamentally altered. In the 1980s, growth was broad-based and positive for the poor; since then, the percentage of people benefiting from growth has narrowed, and social performance has deteriorated. The impact of this great reversal is strongest in the silent and less visible rural areas of China.


Of course, understanding the origins of India's and China's separate paths to development is just half the story. What's more telling is how these two countries enacted and reacted to reforms -- and what that says about the relationship between political liberalization and economic growth.

After the Soviet collapse, Chinese political elites converged on the view that China avoided the same fate because China had not reformed its politics. The truth is precisely the opposite. The single most important reason why China survived the 1989 Tiananmen crisis is because its rural population was content. In the 1980s, rural China experienced the most radical economic and political reforms. It was reform that saved the Chinese Communist Party.

Political reforms contributed to Indian growth as well. Take the media. During the long Gandhi era, though the print media were free, the government controlled the TV stations -- a more important source of information for a country with high illiteracy. The privatization of the stations in the 1990s not only enriched the quality of entertainment for the average Indian but also added transparency to Indian politics. Many corruption and bribery scandals were first exposed on TV, the effects of the exposures being magnified by the vivid images of politicians receiving cash in shady hotel rooms. That is the right way to fight corruption.

As China tightened its political grip on rural affairs in the wake of the Soviet collapse, India moved in the opposite direction. In 1992, India amended its constitution to strengthen a reform with long and deep implications -- village self-government. This panchayati raj phenomenon promises to transform an urban-centered, elitist system to one that is Tocquevillian in character and is empowering women along the way. The auxiliary institutions of Indian democracy, so atrophied under Indira Gandhi, have been renewed. World Bank indicators show a notable improvement in key areas of Indian governance during the period of high growth since the mid-1990s.

In fact, India leads China in a number of important areas of reform. Throughout the 1990s, India reduced state controls on the banking sector, allowed the entry of private domestic and foreign banks, and abolished government interference in setting the equity pricing of initial public offerings on the stock exchange. China is nowhere near India in terms of pace and depth of financial reforms.

Would democracy galvanize opposition to reforms? Many progressive reformers in China hold this view, but this is a hypothesis long on fear and short on facts. Consider the following fact about Indian politics: All the reforms have been carried out by a coalition of multiple parties rather than by a single-majority ruling party. This is true of the Congress Party in the early 1990s, the Bharatiya Janata Party between 1998 and 2004, and the Congress Party today.

What about building infrastructure? Even liberals in India sometimes wish for a dose of authoritarianism here. A powerful government in China is able to sidestep all the political and legal complications and build world-class railroads, highways, water systems, and other networks overnight. Surely, authoritarianism has an edge when it comes to public works projects. But no. Building infrastructure has followed -- not preceded -- Chinese growth. In 1988, China had roughly 91 miles of expressway. That did not begin to change until the late 1990s, when the country poured massive resources into infrastructure. Only in the past eight to 10 years could the country claim to have infrastructure rivaling that of developed countries.

Many foreign investors think that infrastructure explains the different pace of growth between China and India. No such evidence exists. In the 1980s, India started with some infrastructural advantages over China. It had a longer system of railways, for example. Although we can debate today which country is performing better, there is no doubt that China outperformed India in the 1980s. It was reforms and social investments that propelled Chinese growth, not fancy airports and skyscrapers.

One justification for building those massive infrastructure networks is to attract FDI. For years, Western economists and business analysts have chided India for not following China's lead in this area. But that criticism puts the cart before the horse. Like infrastructure, FDI follows GDP growth rather than precedes it. In the 1980s, China received very little FDI, and yet the country grew faster and more virtuously than its later growth. FDI is a result of growth, and the first order of the policy business is how to grow the economy -- not how to attract FDI. As long as India can grow in the 8 to 9 percent range, even without superior infrastructure, it can easily triple or even quadruple its FDI inflows from its current level of $7 billion a year. Growth can self-finance the infrastructure truly needed for business and economic development.

China has built critical networks, such as power stations and transportation links, but since the mid-1990s, unconstrained by public voice, media scrutiny, and private land rights, Chinese leaders have wasted massive resources on urban skyscrapers that have no economic benefits. Many of them are government buildings and are extraordinarily expensive, costing more than $100 million in some cases. And the financial costs of these projects do not even begin to approach their opportunity costs -- those investments in education and health China has failed to make. That a country constructed nearly 3,000 skyscrapers in Shanghai and added 30 million illiterate Chinese during the same decade is truly remarkable.

The economic dividends of political reform don't appear overnight, which skews the timeline and confuses the cause. But by using nearly every metric, political liberalization has spurred rather than stunted growth in both China and India.

After a long hiatus, China's leadership has rhetorically returned to a vision of the 1980s -- that political reforms should be a priority. Rural China has begun to recover from the neglect of the 1990s, and rural income has grown the fastest since 1989. All this is good news. But consolidating these achievements will require a more substantial undoing of the illiberal policies of the 1990s. How India managed to emerge from its own long shadow of illiberalism offers some valuable lessons. In the past, China taught India the importance of social investments and economic opening. It is time for today's China to take a page from India -- and from the China of the 1980s -- that political reforms are not antithetical to growth. They are the keys to a healthier and more sustainable foundation for the future.


When China Met Africa

It seemed a perfect match: A growing country looking for markets and influence meets a continent with plenty of resources but few investors. Now that China has moved in, though, its African partners are beginning to resent their aggressive new patron. What happens when the world's most ambitious developing power meets the poverty, corruption, and fragility of Africa? China is just beginning to find out.

"Ni hao, ni hao." I had been walking along a street in Brazzaville only 10 minutes when a merry band of Congolese kids interrupted their ballplaying to greet me. In Africa, white visitors usually hear greetings like "hello, mista" or "hey, whitey," but these smiling kids lined along the street have expanded their repertoire. They yell "hello" in Chinese, and then they start up their game again. To them, all foreigners are Chinese. And there's good reason for that.

In Brazzaville, everything new appears to have come from China: the stadium, the airport, the televisions, the roads, the apartment buildings, the fake Nikes, the telephones, even the aphrodisiacs. Walking through this poor capital city in West Africa, a visitor could be forgiven for assuming he was in some colonial Chinese outpost.

No one knows more about China's reach in Congo than Claude Alphonse N'Silou, the Congolese minister for construction and housing. In fact, in Brazzaville, the Chinese are building more than a thousand units of housing designed by N'Silou, who is also an architect. They are also building the minister's house, a Greco-Roman palace that makes the U.S. Embassy next door look like a small bunker. I meet the minister at nightfall in the habitable part of his construction site, while, outside, Chinese workers from the international construction company WIETC have turned on spotlights so they can keep making concrete and hammering in scaffolding.

"Have you seen how they work?" N'Silou says jovially, gripping the arms of his leather chair while a servant serving French sparkling water glides along the marble floor in slippers.

"They built the Alphonse Massamba Stadium for us, the foreign ministry, the television company's headquarters. Now they are building a dam in Imboulou. They have redone the entire water system of Brazzaville. They built us an airport. They are going to build the Pointe-Noire to Brazzaville highway. They are constructing apartment buildings for us. They are going to build an amusement park on the river. All of it has been decided. Settled! It's win-win! Too bad for you, in the West, but the Chinese are fantastic."

The story of China's quick and spectacular conquest of Africa has captured the imagination of Europeans and Americans who long ago considered the continent more charity case than investment opportunity. From 2000 to 2007, trade between China and Africa jumped from $10 billion to $70 billion, and China has now surpassed Britain and France to become Africa's second-largest trading partner after the United States. By 2010, it will likely overtake the United States as well. The Export-Import Bank of China, the Chinese government's main source of foreign-investment funds, is planning to spend $20 billion in Africa in the next three years -- roughly equal to the amount the entire World Bank expects to spend there in the same period. For the Chinese and the Africans, the partnership does seem to be "win-win": China gains access to the oil, copper, uranium, cobalt, and wood that will fuel its booming industrial revolution at home, and Africa finally sees the completion of the roads, schools, and other keys to development it desperately needs. Most analysts think it is only the beginning. With its basic but reliable technology, its ability to mobilize thousands of workers to building sites anywhere, and its phenomenally large foreign-cash reserves, China has the opportunity to assume a leadership position in Africa and to transform the continent profoundly. And why not? The Chinese have created a true economic miracle at home, so they more than anyone should be able to pull off the same magic in a place where the rest of the world has failed.

And yet, there are cracks in the facade. China's profits and influence may be on the upswing in Africa, but China is beginning to run into the same obstacles the West has faced for years: financial and political corruption, political instability, lack of interest -- even resistance -- from the local population, and sometimes a simply miserable climate. Several of the head-spinning contracts the Chinese signed throughout the continent have been canceled. Those cheap sneakers the Chinese are sending in by the shipload are infuriating the local manufacturers and storeowners they undercut. And the Chinese, with their laissez-faire attitude toward workers' rights, may be earning themselves more enemies than they realize. What's more, China, unlike its Western counterparts, is attempting to operate in a region that is, by and large, more democratic than it is. What happens when the world's most enterprising business people run up against the hard truths of a continent that has known more poverty than profits? Might China be just another mortal investor, subject to the same problems, inefficiencies, and frustrations every other global power has faced in Africa? If so, it may mean that, for Africa, the Chinese "miracle" is nothing more than another lost opportunity.


It isn't hard to see why Chinese immigrants would be attracted to Africa. With wages rarely exceeding $150 a month on the farms and in the factories of China's remote provinces -- and with the eastern cities becoming overrun with migrant labor -- Africa looks like a promised land. According to Huang Zequan, vice chairman of the Chinese-African People's Friendship Association, there are now 550,000 Chinese nationals in Africa, compared with 100,000 French citizens, and 70,000 Americans. Beijing sent some of them to build dams, roads, and railroads. Other Chinese simply hope to get rich in some of the poorest countries on the planet.

For many African governments, China's interest in the continent is most welcome. African leaders have not hesitated to hand over the responsibilities of public office to China. It's China that these leaders turn to when they want schools, housing, or hospitals -- often just before elections in order to gain as much profit as possible from these projects. They rely on the efficiency and ambition of the Chinese in hopes of having their own shortcomings forgotten.

"The Chinese are incredible," says Omar Oukil, an advisor to the Algerian Ministry of Public Works. "They work round the clock, seven days a week. It would be good for us if a little bit of their rigorous work culture rubbed off on us." I was politely shown the door when his workday came to a close at 4 p.m. The hallways of the ministry were empty when I left. At the same time, on the Mitija plain in southern Algeria, Chinese workers from the Chinese construction firms CITIC and CRCC were putting night crews in place. They would have a little more than 3 years to build a large portion of a 750-mile highway full of tunnels and viaducts. To do so, they had to bring 12,878 workers from China to Algeria.

But these immense projects also highlight the competing interests of Chinese-African cooperation. Take, for example, the dam being built at Imboulou in Congo. Officially, it's a huge success: It's expected to help double national electricity production by 2009. Ten years ago, the World Bank had deemed the country too indebted to warrant financing of the project. China, however, dedicated $280 million to it in 2002. Congo plans to pay that sum back in oil.

"The Chinese drive me crazy," says an engineer from Fichtner, the German company that oversees the work. They are building the dam at a discount, and he worries it might not hold up very long. He claims that the quality of the cement being used is sub-standard, that the Congolese workers are so poorly paid that none of them stays longer than a few months, and, above all, that the drilling has been so poorly done that half of the dam sits on a huge pocket of water that continually floods the site and could cause it to collapse one day.

It's difficult for Wang Wei, the Chinese engineer in charge, to respond to these accusations, and not only because he's been knocked out by a bout of malaria. "It is my first trip to Africa," he says, his eyes shimmering with fever. It is also the first time that his company, CMEC, has built a dam. Its previous business had only involved importing and exporting construction vehicles. Wang blames the company's problems on the sub-Saharan climate. "The rainy season is too long here," he says. "We have gotten a little behind, but we will emerge victorious from our battle with nature." The Chinese boss is particularly angry with the workers he pays three to four dollars a day. "They treat the site like a school. They have hardly learned something before they go somewhere else to use it." He would like to ask the Congolese government to make some prisoners available to him so he could be sure his workers wouldn't flee.

Angola, long held up as China's most spectacular success in Africa, is also beginning to question China's commitment to the country. In 2002, after 27 years of civil war that brought the country to its knees, Western countries refused to organize a conference of donors, citing a lack of transparency and the disappearance of billions of dollars in oil revenues. The government turned to China, which offered between $8 billion and $12 billion of credit to rebuild the country (and to make Angola its main supplier of oil, ahead of Saudi Arabia and Iran). At least, that was the plan. But you have to expect some surprises when you attempt to rebuild a railway connecting the coastal city of Lobito with the inland border of the country formerly known as Zaire. This vital artery of colonial Angola was entirely destroyed during the war. The Chinese promised to rebuild it by September 2007. By November, however, they had abruptly dismantled their base camps along the line.

"The Chinese spent months getting their camp together and bringing in brand-new bulldozers," says a security guard at Alto Catumbela, an old industrial center in the Angolan plateau that was devastated by the war. "Then, instead of beginning to repair the line, they dismantled it all, ate their dogs, and left." You can still see the spot in the middle of the big field where the sheds used to be. The vegetable plots where the Chinese cooks grew cabbage and other vegetables are still visible. But, except for a few antimalarial tablets on the ground, everything has vanished.

In Lobito, the assistant director of the Benguela Railway Company confirms that 16 Chinese camps were dismantled and reveals that the $2 billion contract has been canceled. "I don’t know anything else about it; the negotiations are taking place at a very high level," he says.

This very high level, on the Chinese side, is a mysterious holding company in Hong Kong called the China International Fund (CIF). Its job is to coordinate funds and projects in Angola, as well as deal with reimbursements in oil. Its Internet site boasts about 30 gigantic projects, none of which appears to have broken ground. On the Angolan side, the very high level is the National Reconstruction Office, headed by Gen. Manuel Helder Vieira Dias. He is considered a possible successor to the president. Neither side agreed to respond to questions, but there are numerous signs of a major crisis brewing between the two countries: A $3 billion contract for an oil refinery in Lobito was canceled by the Angolans, and $2 billion allegedly disappeared into Chinese accounts.

It all brings a smile to the faces of the 20 or so Western diplomats in Luanda who send cryptic messages to their capitals detailing the Chinese-Angolan dispute, even as they try to make up ground in a country thought to have been lost to China.

"The Chinese promised an awful lot, [and] the Angolans demanded an awful lot," says a Western diplomat. They were both "out of kilter with reality." Says another: "The Chinese do not have enough experience in Africa. They did not realize that the kickbacks in Angola would be so high." A European diplomat sticks the knife in deeper: "We say to our Angolan friends, 'It's great that you're taking a little walk with the Chinese. Enjoy yourself. But when you're ready to play in the big leagues, pay your debts and come and see us.'"


Despite the arrogance and condescension in such words, they do reflect some hard truths. China may be a willing partner to many of the regimes and countries the rest of the world won't touch, but that hardly means Africans are always satisfied with their arrangements. In a country like Angola, which has raked in $100 billion in five years and has posted one of the highest growth rates in the world since 2002, newfound economic success often means they can begin to dictate the terms of their own deals. And often, those new deals don't include the Chinese. Ironically, because of early help from the Chinese, Luanda may now have the means to avoid getting trapped in a relationship with a partner as voracious and demanding as China. The oil refinery in Lobito is expected to be awarded to the American firm KBR, and the regime of José Eduardo dos Santos has just reconciled with France after an eight-year tiff.

And Angola isn't the only country beginning to feel comfortable saying no to China. In Nigeria, an April 2006 agreement in which China would have paid $2 billion for first access to four oil blocks was canceled. A similar agreement that involved CNOOC, the state-owned Chinese oil company, fizzled out. In Guinea, a billion-dollar financial package involving a bauxite mine, an aluminum refinery, and a hydroelectric dam was called off.

In some cases, such contracts have been canceled or failed to materialize as a result of a deliberate strategy on the part of African rulers. Spectacular announcements of Chinese contracts have been made with the intention of frightening Western partners into offering better terms. In meeting after meeting with African officials, I heard the following plea: "Write in your magazine that the Chinese do not have a monopoly here, and we would love to have the French or anybody else doing work here, if they make a competitive offer." Niger, for instance, dangled uranium rights in front of Chinese companies and even went so far as to expel an official from the French nuclear concern Areva in an apparent effort to persuade it to increase its bid for a mine in Imouraren, which has one of the world's largest untapped deposits of uranium in the world. Areva signed the contract in January 2008, and it was considered a triumph for the regime of President Mamadou Tandja.

When China feels betrayed by African governments, it can't easily fall back on public opinion. Despite all its talk of brotherhood and lack of a colonial past, China remains unpopular. From Congo to Angola, taxi drivers, street sellers, even locals working on Chinese construction sites complain about the influx of Chinese. "They are like the devil," "They do not respect us," "They are here to take everything from us" are the common refrains. Perhaps the relationship is too recent -- and one that really only exists between officials -- to have given personal ties the chance to form. It's rare to see Chinese and African workers at the same construction site go and drink a beer together at the end of the day.

Grass-roots resistance to the Chinese has sprung up. In 2004, in Dakar, Senegal, the powerful lobby of Senegalese and Lebanese shopkeepersorganized several protests against the Chinese boutiques, whose prices they said were undercutting them. Shops were set on fire. President Abdoulaye Wade was given an ultimatum by the shopkeepers' union to kick all Chinese nationals out of the country. Although he didn't go that far, he forced through a near total moratorium on visas issued to Chinese citizens from his country's embassy in Beijing. He then finagled a more open policy toward visas from the Chinese Embassy in Dakar. This enabled Senegalese storeowners to establish connections in China and maximize their profit margin on Chinese imports to Senegal. In October 2007, China's state-owned news agency had to admit that "the Senegalese doing business in China far exceeds the number of Chinese doing business in Senegal."

Undoubtedly, though, the country with the most intense anti-Chinese sentiment is Zambia. When an April 2005 explosion in a Chambishi copper mine killed at least 50 people, the Chinese owners were accused of ignoring basic safety regulations. The miners demonstrated against their employer, and their protests struck a chord in the capital, Lusaka. Opposition leader Michael Sata made the Chinese the focal point of his presidential campaign in September 2006 by accusing them of destroying the country. He even charged the Chinese Embassy with supporting his opponent, incumbent President Levy Mwanawasa. Although he briefly led in the polls, his bid was unsuccessful (and likely the result of voter fraud). Five months later, while touring the continent, Chinese President Hu Jintao was forced to abandon plans to visit the "Copper Belt" due to fears that the workers would revolt again. Never before had a Chinese leader experienced such an affront in Africa.

Generally, China seems to have difficulty maneuvering in countries more democratic than itself. Zambia is not a perfect democracy, but, unlike in China, its press is relatively free, unions exist, and public opinion matters. During a major China-Africa summit in Beijing in November 2006, organizers at the Chinese press center distributed the short book, China and Africa 1956-2006, by historian Yuan Wu. It presents democracy as a scourge because it "exacerbates" tensions inside African countries. "Fortunately," the author concludes, "the wave of democratization has started weakening."


For all the tensions between Africa's need for development and democracy and China's need for resources and riches, however, there is one sector where the interests of both Africa and China seem to be in sync: oil. It's the most important commodity that China wants from Africa, and the oil-producing countries in Africa also happen to be the ones that receive the most Chinese investment. So, many experts consider oil to be the principal indicator of whether China will have succeeded or failed on the continent. And it's not the African oil that China buys at market price, which makes up around 20 percent of its imports, that's so important, but the oil that it manages to produce there. Oil-producing African countries have lured most of the Chinese investment, which was supposed to create "goodwill." So far, the harvest has been thin.

It has been a major handicap for Chinese companies that they lack almost any expertise in deep offshore oil production. It has prevented them from participating in bidding on the most attractive fields in the Gulf of Guinea. These companies have used Africa’s east coast as a fallback location, though deposits there have turned out to be much less abundant than those in the west. Because four of CNOOC's six oil blocks proved too difficult to explore, the company returned them to the Kenyan government, which graciously took them back last July.

As a result, the only real success that the Chinese have had with oil in Africa has come in Sudan. International companies had to leave Sudan in the 1980s because of civil war and U.S. sanctions. China took advantage of the situation and invested massively, building oil wells, a refinery, and a huge pipeline to Port Sudan. Thanks to China, Sudan has been able to export oil, and Khartoum is experiencing an economic boom that makes it seem like an African Dubai.

Of course, this situation captures perfectly the problems inherent in China's approach in Africa. On one hand, China has an interest in convincing Khartoum to put a definitive end to the massacres occurring in Darfur, so as not to sully its reputation as a peaceful power. On the other hand, China wants to keep political risks high enough to ensure that Chevron, Total, and Shell -- companies that once had operations in Sudan -- do not jump back in. All this is not quite a failure, but it's hardly a "miracle," either. It's proof that what's good for China may not be good for Africa, and what's good for Africa may be something no foreign power, even one as ambitious as China, is able to deliver.