Economic relationship between China and Tanzania

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Introduction

The People’s Republic of China is known as the world’s second largest economy in the world after the United States of America. China is famously known to operate in a socialist market economy and it is also considered to be amongst the world’s fastest growing economies. In addition, according to the International Monetary Fund (IMF), China is believed to be the largest exporter and the second largest importer of goods in the global economy. (Eckstein, Alexander 1976) China is also considered to be a developed country on the basis of its dominant economy. On the other hand, Tanzania is a developing African country which has taken significant steps in liberalizing its economy. Back in time, Tanzania’s economy was similar to China’s socialist economy although with various factors coming into play, the Tanzanian governments since 1986 have encouraged both foreign and domestic private investment into the economy. (World Bank) The government of Tanzania adopted the structural adjustment programs with an aim of dismantling the ‘Ujamaa’ economic policies. With its economic woes, Tanzania has still remained a developing economy thereby making Tanzania a third world country.

The relationship between China and Tanzania dates back in the 1960 during which China established strong diplomatic relationship with Tanganyika and Zanzibar on December 9, 1961 and December 11, 1963 respectively. It was a historical moment when the two, Tanganyika and Zanzibar merged to become Tanzania on April 24, 1964. Naturally, the diplomatic ties extended with the union (Starr, John (2001). It is further clear as will be expounded later on in this paper, that the diplomatic ties by extension involved the social-political, economic and military ties.

However, this paper is categorical and it will be focusing on the China- Tanzania economic ties with emphasis being laid on the historical and contemporary economic ties between the two nations.

History of the economic relationship between China and Tanzania

The economic history between the two nations date back in the 1964 when Tanzania’s first president Mwalimu Julius Nyerere visited China almost five times during his tenure. In most of these visits, China and Tanzania signed treaties of bilateral cooperation in all the fields of economy in addition to trade, health and cultural aspect of relationship. In return, Tanzania joined the list of countries that supported China in its quest to return to the United Nations. At a United Nations General Assembly in 1971, Tanzania supported a resolution advocating for the restoration of China’s legitimate rights as a member of the world organization. The impact of their political relationship has since the past had a positive correlation with their economic ties in the sense that the two have always enjoyed better times economically when their political relationship is in a better state.

Tanzania is considered to be the largest aid beneficiary from China in the whole of Africa. Tanzania has enjoyed loans and grants from the Chinese government in addition to various support programs in various sectors of its economy such as transport, mining, agriculture, education, health and security among others. Examples of such benefits to Tanzania included: the ‘Tazara’ railway which connected Tanzania and Zambia, Friendship Textile Mill, Kawira Coal Mine, Mahonda Sugar Cane Factory and Mubarali rice farm among others. (Powell, Simon (1991). An example of a mutually beneficial cooperation between the two countries is the China Friendship Textile Co. Ltd which was formed through a subsidized preferential credit provided by the government of China on the basis of their ties.

There are around over forty Chinese companies providing labor contracts and services in Tanzania which have operated since the 1980s. This has acted as among many steps of China- Tanzania mutually beneficial cooperation. The Government of Tanzania has promoted and encouraged Chinese foreign investments in the country in a bid to be boosting their economic growth and development. These ties have overlapped the economic sector, and by extension, other sectors of the society has benefited equally. Most notably is the fact that China and Tanzania have signed a number of treaties/ agreements which include but not limited to the following: (China Development Gateway Magazine 2010)

The Agreement on Economic and Technical Cooperation between the People’s Republic of China and The United Republic of Tanzania. (June 1964)

The Trade Agreement between the People’s Republic of China and The United Republic of Tanzania. (February 1965)

The agreement between the People’s Republic of China, the United Republic of Tanzania and the Government of Republic of Zambia on the construction of the Tanzania Zambia railway line. (September 1967)

The Barter Trade protocol by the People’s Republic of China and the United Republic of Tanzania. (March 1984)

Joint Economic and Trade Commission of August 1985 between the People’s Republic of China and the United Republic of Tanzania and:

The Framework Agreement between the People’s Republic of China and the United Republic of Tanzania on the provision of an interest subsidized credit by China to the Tanzanians.

Most of these agreements went hand in hand with treaties in other sectors such as education, health, culture and military affairs. The exchanges and cooperation in these fields further consolidated the strong economic bonds between these two countries. However, since Tanzania was majorly on the receiving end financially, China in return gained the loyalty from Tanzania who not only propagated their socialist ideology but also ensured part of Africa’s market to the Chinese. The Chinese Government provided these aids to Tanzania for various reasons but majorly as a way of consolidating their dominance in Africa but most importantly, to galvanize their economic and political ambitions. Tanzania’s relationship with China took different perspectives during the different times between the pre and post-cold war eras in which two dominant ideologies and opposing powers engaged each other in winning allies and consolidating their dominance politically, economically or otherwise. Interestingly, China- Tanzania relationship has been improving with time.

Summary of trade imports and exports between China and Tanzania

Exports from China to Tanzania Exports from Tanzania to China

Clothing and textile,

Electronics, motorcycles, batteries and accumulators Oil and gas, iron and steel, diamond, tobacco,

A rough glimpse of the above table demonstrates that Tanzania’s exports are majorly raw materials with China concentrating more on the manufactured / finished products. All in all, both countries benefit in the context of earning foreign exchange during trading. It is also important to note that besides the table, both countries seek to find better markets for their products in which case both have different markets for their exports. Until the recent five year economic plan of China, China has always emphasized on exporting most of its products. However, with the unveiling of the economic plan, the People’s Republic of China has embarked on enhancing consumption of domestic products.

Economic objectives and developments of China-Tanzania relations

The two countries have had both better and bad times in terms of their relations. Through history from the time the two countries entered bilateral ties to the present age, their economic objectives and developments have shifted although their respective national interests have been constant. However, it is quite evident that in as much as relationships come and go, one major factor remains dominant in virtually all relationships, which is national interest. In pursuit of their national interests, the two countries have always been guided by their economic agenda/ economic blueprint. Both countries have in place concrete manuals which drive their economic goals/ objectives which by extension influence their relationships/ ties in all divides- politically, economically, socially and culturally among other national aspects.

China for instance has had a master agenda for economic development which entails strategies to achieving national economic objectives. In March 2011, China unveiled its 12th five year plan which set out a master economic development agenda which entails guidelines for growth of key sectors of the China’s economy which include infrastructure, telecommunications, and education and health sectors among others. In its economic objective, China strives to rebalance her economy through emphasizing more of domestic consumption model of growth over its current export-led model of growth. (Park, Jung-Dong (1997) In addition, China has had a dramatic strategy of ensuring that all its foreign investments are secured at all costs so as to boost its economic might and global dominance. Its foreign investments are in the form of Chinese companies located in various parts of the world. In this context, China has invested most of its resources in Tanzania; in fact, Tanzania commands a majority of Chinese investment in Africa. The Chinese foreign investment objective lays in its export oriented operations alongside partnerships with the hosts’ governments. China has thus consolidated its ties with Tanzania so as to ensure that its economic interests are protected.

Majority of multinational corporations in Tanzania for instance are Chinese owned. These Multinational Corporations have galvanized their interest through the economic and political ties mobilized by the Chinese government in Tanzania. China has therefore been able to secure a favorable economic climate for most of its investments. In this way, progress has been made in ensuring that Chinese foreign economic investment objectives have been secured. Moreover, China has dominated the economy of Tanzania not only with its goods and services but also with a number of expertise. These has been in the health and construction sectors in which the Chinese have shared their technical know-how to the local experts thereby improving service delivery in the respective sectors (Park, Jung-Dong (1997)

Tanzania on the other hand has had its economic objective embedded in its Vision 2025 manuscript which has spelt out its economic agenda and development guideline. This is considered to be Tanzania’s economic bloodline. The economic blueprint provides targets such as: high quality of livelihood, good governance and rule of law and a strong and competitive economy among other targets which are in line with its national objective. Tanzania has a number of driving forces which are meant to steer its economic plans to reality. These include: Political and economic pluralism, cost effective ways of enhancing access to quality social services, transforming its national economic structure to shift in line with the global economy and embracing technological advancements in line with economic development. (Tanzania development vision 2025) Other strategies for the attainment of economic objectives for Tanzania include having a sound microeconomic policies, infrastructural development, promotion of science, technology and education, promotion of information, communication and technology (ICT), and effective utilization of domestic natural resources.

In a bid to achieving both country’s economic agendas and development, it has been in both countries’ interest to negotiate and partner with each other where relevant and pursue these interests mutually. Apparently, China has focused on galvanizing its foreign investments in Tanzania. On the other hand, Tanzania has cooperated with China so as to ensure that its economic plans and strategies for the present and the future are supported financially or otherwise. The two countries have therefore collaborated and engaged in various economic treaties and negotiations to achieve the immediate and long term economic strategies.

Impact of economic relations between China and Tanzania

The economic relationship between the two countries has had tremendous impact on both societies. This has been both positive and negative but all in all, the benefits that have come alongside the relations far much more outweigh its negative impacts. Various analysts have given their respective interpretations on the impact of these relations and therefore the analysis of the relations between China and Tanzania vary. Worth noting is the fact that the west who are perceived to be China’s economic and political rivals have always viewed China and the East to be opportunists who have never had Africa’s interest at heart. Most important though is the ability to analyze these relations with a sober mind and on an objective mind.

Positive impacts of economic relations between China and Tanzania

Both countries have had their positive share from these relations. Tanzania has benefited majorly from their interactions since its economy has improved tremendously. China on the other hand has furthered its ambitions of being an economic force to reckon. Tanzania’s economy has improved with an expected growth of ten percent this year from $13 billion in 2012.

Apparently, this was after China replaced the United States as an economic powerhouse investing in East Africa. (Alon, Ilan, ed. (2003). In an interview in Dar es Salaam with Raymond Mbilinyi, the acting Executive Director Tanzania Investment Center, he explained that China was regarded an emerging dominant foreign investor not only in Tanzania but the entire African continent. He compared China’s investment with the United States and noted that China contributed $1.4 billion way beyond the $950 million which the United States contributed.

These investments have been pumped in various sectors of the Tanzanian economy such as infrastructure, agriculture, mining and education among others. It is through such investments that Tanzania has been able to become the second biggest economy in East Africa. In addition to Tanzania’s benefits, a $1.2 billion a 500-kilometer (311-mile) gas pipeline from Mtwara to Dar es Salaam was built in a bid to develop the energy sector of the economy. Moreover according to Mbilinyi, more projects were expected pick up in the manufacturing, infrastructure and agriculture under the Chinese support. Most of these investments have gone a long way to empower the Tanzanian population not only economically but also in other opportunity. .

Tanzania has further benefited in the most important aspect which is not only an economic pillar but also a social and cultural cornerstone to a nation- Education. Tanzania has enjoyed educational assistance whereby a number of Tanzanian students have secured scholarships and exchange programs with the Chinese educational institutions since the bilateral relations began. Statistically, around six hundred Tanzanian students have studied in China with around seventy students in 2008 selected to pursue their studies in Chinese universities. Educational benefits have been of great importance to the Tanzanians since most have gained proper expertise thereby improving the quality of Tanzania’s human resource. (Christina (2008).

Furthermore, in July 2001, Tanzania enjoyed a debt amnesty from the Chinese Government. In their bilateral ties, the Chinese Government agreed to exempt Tanzania from the legal obligation of repaying its debt plus the interests thereof. Specifically, Tanzania was exempted from paying fifteen batches of interest of about 19.2 million dollars. This was a great relief to Tanzania since this accounted for one third of Tanzania’s total debt to China (Burke and Corkin (2006)

Moreover, Tanzanians have benefited from the China- Tanzania relations in terms of employment by the Chinese owned firms. It is evident that Tanzanians have earned a living from the relations of these two countries but also that in terms of working conditions and remuneration, the Chinese Companies have provided a standard to the employers. In a research conducted by Corkin in 2006, the local Tanzanians who were in the construction companies and other sectors such as the service industry confessed that they received sufficient wages from the Chinese companies. Furthermore, the levels of safety and health standards complied with the country’s labor laws. These companies also had training programs in skill and technology. They also used a majority of local workers in their endeavors. This ensured that the local labor was not only empowered skill wise through the training but also that the unemployed population got an employment opportunity. (Burke and Corkin (2006) the Chines investments have created more than 80,000 job opportunities for the local people. And it is bound to increase. An expert projection estimates that this will increase to more than 100,000 job opportunities at the end of the year. The Chinese Government has further supported the military of Tanzania on technical and financial terms. These and many more benefits that Tanzania has enjoyed has been due to the economic bilateral ties between China and herself.

The People’s Republic of China is considered to be the fastest growing economy in the world growing at an average of nine percent per annum in the last twenty five years. Consequently, to support this rapid economic growth and development in China, its energy consumption has shot high to the extent of exceeding the domestic energy production. It is in light of these needs that China engaged African countries in a bid to source for more sources of energy. (The China Monitor, August 2006, pp. 6).

China has managed to satisfy such energy demands through its economic ties with Tanzania. The African country is endowed with vast resources including coal and gas. Most recently, oil was also discovered in Tanzania. It is these and many other energy sources that China has managed to secure from Tanzania and this has boosted its rapidly growing economy. The Chinese have been quick to identify these opportunities in Africa and take advantage fast enough before the west managed to grab these opportunities.

In addition, the Chinese have also had a rapid industrialization era in which case, there has been an industrial overproduction of goods in the Chinese economy. This has led to the need of finding sufficient market for their products. In effect, China has managed to secure Tanzania as part of its African market in which she exports her manufactured goods. Such goods include automobiles and telecommunication gadgets such as computers, mobile phones, laptops and digital electronics among others. Tanzania has proved to be both a potential market for Chinese products and a source of raw materials required by China. China has further benefited tremendously since it has managed to displace its economic and political rivals majorly the west led by the United States of America. (Wei Ge (1999).

The US has for a long time been a dominant foreign investor in the East African region, however, this has changed since the emergence of China as a rapidly growing economy. China managed to secure the economic hub through a series of investment in the region with Tanzania being an entry point based on its strategic location next to the Indian Ocean which is a key entry point to international trade.

Challenges in China- Tanzania economic relations

Although China and the People’s Republic of Tanzania have enjoyed warm relations, these relations have their own share of challenges since the nature of their relationships make challenges inevitable. In addition, these challenges have been observed to emerge from both within and without. China which has and still is an economic and political giant has various opponents who have also participated in enhancing their challenges in a bid to weaken their grip on economic and political dominance. The United States for instance has been a major critique of China’s investments in Africa; this by extension has been a stumbling block in their relations with African states including Tanzania. (Wei Ge (1999).

The United States of America has for a long time now been an arch rival of China. Upon being displaced from their dominant position, they have fought back through criticizing Chinese bilateral ties with African governments. The US has labeled China as pursuing national interest without considering their interests in return. They have further identified specific investments in which China has faulted even in attaining international trading standards, in fact, according to the US; there is no mutual benefit between the Chinese – African economic ties. For instance, the Chinese Government has been accused of damping of their substandard goods in Africa. This is a clear violation of the international trade ethics. China has been accused of transforming Africa into a dumping basket.

A specific example is the exportation of substandard electronic gadgets such as mobile phones, computers, fridges and non- electronic goods by China into Africa. This allegation has had a negative impact with a majority of African governments being extra cautious before signing any bilateral treaties with China. The Chinese government has consequently had to mend its image in the international domain to reinstate its goodwill in the eyes of potential African trading partners among them being Tanzania.

In as much as China has always adhered to Tanzania labor laws and has absorbed a majority of the unemployed population in Tanzania, their investment has never been in good faith since Tanzania has in most cases expatriated a huge chunk of the foreign investment back to their own country. This is a great challenge since the aspect of exploitation has been demonstrated by the Chinese Government. (Eckstein, Alexander (1976). In essence, the Chinese Government has been draining African resources for the benefit of China.

Specifically, by expatriating the cash inflows from its foreign investments back into their country is one way of exploiting Tanzania’s natural resources and plowing back the proceeds into their country. In a nut shell, this challenge has again tainted China’s image and consequently, its relations with Tanzania has had to devise means of ensuring that the mutual benefit is truly mutual. Proper legislations ought to be in place to regulate foreign investments in order to curb such unfair trade/ economic relations. In addition to the challenges, there has been an outcry from a cross-section of the international community which has given their responses regarding China and Tanzania’s economic relationship. Such notable responses include those from the western nations, western institutions and the western media regarding China’s involvement in Africa and by extension Tanzania. The west has raised various concerns on the way in which China has been conducting its business in the African continent.

A number of allegations have come into play with concerns of protection of human rights and observing international trade protocols being pertinent issues regarding their ties with the African continent. The west have also observed that China is notorious in practicing an irresponsible global leadership in the sense that it has pursued predatory foreign policy consequently grabbing Africa’s resources without factoring in at least any moral obligation towards her. China is considered to be a hypocrite in when it comes to economic dealings (Starr, John (2001). In addition, a number of corruption allegations by these Chinese firms investing in Tanzania have worsened the global image of China. These corruption cases have been in the procurement and tendering processes of various construction projects in Tanzania. In addition, the Chinese companies in Tanzania have been known to mobilize political support from the elite class in Tanzania in a bid to evade corporate tax obligations and other trade formalities within the country. China has further managed to use its dominance to manage such legal challenges and have their way at the end of the day. (Alon, Ilan, ed. (2003)

The dependency effect of Tanzania on China

The economic relationship between China and Tanzania is well known as an imbalanced one. In as much as various analysts have tried to prove that they have a mutual economic relationship, the contrary is true owing to the difference in economic status between the two countries. The dependency factor has played a major role in shaping the economic relationship between the two states. Depending on how one perceives it, dependency has either improved or worsened the economic relations between the two countries.

It is the difference in position that the two occupy in the global capitalistic economy that brings about the imbalance in their economic ties. Most evidently, China occupies/ falls in the core position of the global capitalistic economy whereas Tanzania occupies the periphery position. Due to this economic difference, Tanzania has had a disadvantage with China having a leverage thus when the two engage in negotiations be they economic or otherwise, Tanzania usually has to settle for less in so far as achieving the little that is offered by China is concerned, on the other hand, China settles for the best deal since it stands to lose little or nothing should the deal fail. Usually, the party which has an upper hand dictates most of the negotiation conditions and in this case, China has the upper hand. (Wei Ge (1999).

The dependency of Tanzania in her economic relationship with China has had numerous impacts on Tanzania as a nation both politically and economically. Politically, Tanzania has lost its absolute sovereignty. Tanzania’s foreign policy towards China for instance is not a pure foreign policy in terms of being guided by its national interest rather it is one which is informed by her (Tanzania’s) economic dependency on China. Tanzania therefore lacks the sole political authority to dictate its relations with China brought about by her economic ties and dependency on China. (Jonathan Holslag,2006) Dependency can be understood as the situation in which the growth and development of one economy is dependent on the growth and development of the other economy. Economically, the growth and development of Tanzania to some extent has depended on the growth and development of China which in this case, on a positive note, Tanzania has also experienced the spillover effects of Chinese’ rapid economic growth.

Tanzania has grown in various sectors which has received either direct or indirect support from the Chinese Government financially or otherwise. Such include the infrastructure, telecommunications, education and health sectors of the economy among many others which play a key role in developing an economy. (Jonathan Holslag, 2006) In the event that China has shared its growth strategies with Tanzania thereby enhancing its economic growth, Tanzania has benefited from the economic ties. However, the aspect of repatriating the foreign investment proceeds by China is a negative perspective although this form of injustice has thrived due to a number of factors which have galvanized the perpetrators of such economic vices from legal implications.

Dependency has further influenced the actions of Tanzania in international political and economic fora of various world organizations such as the United Nations. This factor comes into play when China requires passing certain resolutions in the General Assembly for instance. It mobilizes support of allied nations and Tanzania being one of them always supports these resolutions not because they are in Tanzania’s interest rather because Tanzania depends on China in pursuing her national interests. (Jonathan Holslag, 2006) A relevant case was when Tanzania joined other Chinese allies supported her in a bid to restore her position and legit rights as a member of the General Assembly.

Relationship between the China and Tanzania elites

The political class of both countries plays a vital role in the sense that they determine whether or not the economic ties between the two countries continue. It is considered that the economic relationship between the two nations is an economic interaction between the dominant class in China and the dominant class in Tanzania. It is perceived as an interaction between strong and weak bourgeois.

In further understanding the relationship between the two states, it can be interpreted as a situation in which the weak bourgeois protect the interests of the strong ones of course in return of resources which enable them maintain their dominant position in Tanzania. Most important however is to understand the fact that these political elites call the shots and thereby determine the direction in which these relations take. Although the political players change from time to time, the rules of the game has remained fairly constant.

References

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Starr, John (2001). Understanding China: A Guide to China’s Economy, History, and Political Culture. Hill and Wang.

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Park, Jung-Dong (1997). The Special Economic Zones of China and Their Impact on Its Economic Development. Greenwood Press

Alon, Ilan, ed. (2003), Chinese Economic Transition and International Marketing Strategy, Westport, Connecticut: Praeger Publishers

Alden, Chris and Alves, Christina (2008).’History & Identity in the Construction of China’s Africa Policy,’ Review of African Political Economy

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Wei Ge (1999). Special Economic Zones and the Economic Transition in China. World Scientific Publishing.

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15 Jonathan Holslag,2006. “China’s New Mercantilism in Central Africa”