Angola and China
June 4, 2008
Indira Campos and Alex Vines, research assistant and head of the Africa Program at Chatham House, conducted extensive in-country interviews to examine the perceptions and impact of China's engagement in Angola in a CSIS comissioned case study.
In their analysis they describe a largely pragmatic relationship between Angola and China, which the Angolan government has leveraged to meet the country’s urgent reconstruction priorities. Angola has benefitted from large quantities of Chinese financing when concessional funding from international institutions, like the IMF, was not available. Chinese financial and technical assistance has kick-started over 100 projects in the areas of energy, water, health, education, telecommunications, fisheries, and public works enabling Angola to become one of the most fast-growing economies in sub-Saharan Africa in a span of five years. The China-Angola relationship is unique in the China-Africa context in that Angola inconsistently runs a large trade surplus with China, owing to the rapid rise of Chinese oil importation.
In Angola there is a clear quid pro quo: China’s desire for natural resources as against Angola’s stark development needs. Crude oil represents over 95 percent of all Angolan exports, and it is also China’s main Angolan import. Over the last six years, China has been the second-largest importer of oil from Angola behind the United States, consuming roughly 9.3 to 30 percent of Angola’s total oil exports. Despite the U.S. lead in the imports of Angolan oil, since 2002 Angola oil exports to China have increased seven-fold, compared to only 3.5 times to the United States. However, Angolan oil production is still dominated by Western companies such as ChevronTexaco, Total, BP, and Exxon Mobil.
Despite rising Chinese investment, Angolan officials insist that China is only one of several major external partners, and they remain wary of becoming beholden to any single external partner or resource. This pattern is visible when looking at the origins of Angola’s imports over the years: China’s share has increased significantly, but so have the shares of India, South Africa, and Brazil. Similarly, Angola exports over the years have significantly diversified.
Angola is acutely aware of many of the challenges it faces in its relationship with China. It acknowledges that it is often unable to utilize local capacity to fill the mandated 30 percent Angolan workforce quota for infrastructure projects under Chinese credit lines. It has established a mechanism whereby it reinvests 5% of its oil proceeds into the non-oil sector. It seeks to improve its relations with Western institutions by agreeing to pay, on an accelerated basis, the bulk of its debt of $2.5 billion owed to Paris Club creditors and seeks greater foreign direct investment by claiming to have eased its investment laws. It has also responded to Western criticisms of opaqueness in its Chinese credit lines by issuing a statement in Luanda in October 2007 clarifying the Angolan terms for use of those funds. Although this is a welcome development, Vines and Campos argue that more disclosure on the part of the Angolans is needed.
As Angola continues developing its relationship with China, controversial issues such as local content and employment may intensify over time, and tensions may rise over the slow pace of implementation and relative decision-power in the relationship. However, Angolan officials appear confident that their efforts to diversify donors and diversify investment into non-oil sectors will succeed in the long-term.