Chinese Development Finance and the African State: A Capacity-Legitimacy Trade-Off?

In early 2009, the government of Liberia signed a 25-year, $2.6 billion contract granting China Union Investment Company the rights to revive Bong Mines, a large iron ore mine destroyed in the Liberian civil war. In addition to building an iron ore refinery, China Union pledged to construct new roads, schools and hospitals in the area, as well as a hydroelectric power plant. The company expected to employ some 3,000 Liberians within five years of the project’s initiation. The deal constituted the largest investment in Liberia’s history and a landmark achievement for Liberian President Ellen Johnson-Sirleaf. In February of this year Sirleaf celebrated the first shipment of 50,000 tons of iron ore worth around $1 million in royalties, $2.5 million in tax revenue and $3.5 million in social contributions, according to China Union officials.

The Bong Mines project has not been without controversy. Just four months earlier, in October 2013, the Emergency Response Unit of the Liberian National Police was deployed to disperse striking Liberian workers who had occupied the China Union compound to protest abusive labor practices and low pay—conditions they described as a form of “modern slavery.” Residents, too, complained of polluted drinking water and a lack of basic social services around the mine. Notably, the target of their grievances was not just China Union, but also the Liberian government itself, which they lambasted for failing to protect the welfare of Liberian citizens. Bong Mines has continued to be a source of unrest, with the Liberia Peacebuilding Office reporting multiple incidents of violence over the past year (see, for example, here, here and here).

China Union’s investment in Bong Mines has presented the Liberian government with a trade-off. On the one hand, the investment has strengthened the state’s infrastructural capacity and provided much-needed revenue through taxes and royalties. On the other hand, it has provoked months of civil strife, eroding the state’s legitimacy among residents and workers who complain of exploitation by China Union and neglect by the government.

The conflict at Bong Mines is emblematic of the debates and controversies that have surrounded China’s expanding presence across sub-Saharan Africa. Critics argue that China is a “rogue” donor whose assistance will create “a world that is more corrupt, chaotic, and authoritarian.” Advocates—including some African heads of state—counter that Chinese projects are implemented quicker and at lower cost than their Western counterparts, and with fewer conditionalities that erode state sovereignty. Opponents respond that speed and low cost come at a price—poor quality.

Empirical evidence is all but non-existent on both sides of this debate, and the existing evidence is often contradictory. With support from the International Institute for Education (IIE) and the US Agency for International Development (USAID) via its Democracy Fellows and Grants Program, we plan to systematically assess the effects of Chinese aid and investment on recipient states at both the national and sub-national levels. We begin from the intuition that Chinese assistance may have complex and perhaps contradictory effects on African states. Unlike many Western donors, China typically builds large-scale infrastructure projects that are essential for state capacity, but rarely imposes good governance conditions and—as the conflict at Bong Mines suggests—is often perceived as predatory or exclusionary in its hiring practices. Our working hypothesis is that this combination of characteristics produces a capacity-legitimacy trade-off: even as Chinese assistance increases the capacity of recipient states, it simultaneously decreases their legitimacy in the eyes of citizens.

Select Chinese investment and development projects (CIDPs) in Liberia and proposed survey sites in Bong, Lofa and Nimba Counties

Select Chinese investment and development projects (CIDPs) in Liberia and proposed survey sites in Bong, Lofa and Nimba Counties

We plan to test this hypothesis through a combination of macro- and micro-level research designs. At the macro level, we merge data from AidData’s “Project on Tracking Chinese Development Finance” with publicly-available datasets on state capacity and legitimacy. We then use this merged dataset to estimate the effects of Chinese aid and investment across all countries in sub-Saharan Africa, applying several different strategies to mitigate selection bias and improve causal inference. At the micro level, we combine surveys, survey experiments and behavioral games to measure the effects of Chinese assistance on those most directly affected—workers and residents. Our micro level component will begin in Liberia, focusing on the capital city of Monrovia and three rural counties (Bong, Lofa and Nimba). The map above shows select Chinese investment and development projects in Liberia and the proposed survey sites. We’ll then proceed to Tanzania and the Democratic Republic of the Congo, pending additional funding. Data collection will start this fall.

Stay tuned for preliminary results from this study. In the meantime, you can learn more about Chinese aid to Africa at china.aiddata.org.

Phil Roessler is an Assistant Professor of Government at the College of William and Mary and a member of the AidData Research Consortium. Robert Blair is a Ph.D candidate in the Department of Political Science at Yale University and a Research Associate at AidData.

Tags: China in AfricaChinaLiberia