Quote Originally Posted by JMA View Post
Well you are not an African President.

A loan from Beijeng can be directly diverted into a a Swiss bank account and the only thing the Chinese want is a lock onto the particular natural resources they have a strategic interest in. The Chinese are not interested in all that human rights and 'good governance' stuff.

So your African President signs a deal with the Chinese to allow them exclusive access to exploit a certain range of natural and mineral resources for the next 50 years in exchange for the Chinese to build a showpiece sports stadium (and quietly make a deposit into a certain Swiss bank account). And the Chinese will import their own (trustworthy) labour to do most of this work.

You may not like it but there is nothing you or anyone can do about it.
A loan from Beijing might allow for some corruption, and not benefit the local companies (as the workforce and expertise is brought from China), that's not the issue and i don't deny it.

The Namibian example is very revealing: http://www.telegraph.co.uk/news/worl...ion-probe.html

Now, look at the economics of a deal in Africa:
"Profit = Sales - Taxes (almost non existent) - Corruption money. "
You can easily conclude that Corruption is a diverted form of Tax (instead of benefiting most, it benefits only a few but for the payer, it makes no economic difference). Additionnaly, corruption is an unstable, secret potentially ever increasing tax because unregulated.

Countries going greedy on taxes (or corruption) tend to scare investors away.

Let's make two distinctions here: African Countries with little ressources and with huge ressources.

Little ressources: For countries with little ressources like Namibia, Rwanda,... with little attractivity to investors, high taxes or corruption further reduce already meager potential benefits for the investor. It just decreases the interest of investing in those country.

Lots of ressources: For countries like DRC or Angola, with lots of ressources, again the corruption tax reduces their attractivity but the potential gains of investing there far outweight the losses due to corruption. So What ? Anti-corruption laws in most western countries are making it increasingly difficult for western companies to sweeten their deals but China has different standards. Again, the Electronic Herd is the mitigating factor: THE VERY FACT that you mention the link between China and Corruption is part of the solution. China is investing around the world. It can hardly continue disreguarding "good governance" practice for long if it gives it a bad name.

Let me give you an example: The Milk scandal. Chinese corrupt officials killed many by using improper milk. http://www.chinadaily.com.cn/china/2...nt_5421631.htm
The Chinese authorities had to hit hard on those companies to avoid other Chinese food companies to loose all their markets abroad.

My conclusion being, China will learn, as we did, that bad practice by our companies in Africa bring short term advantages but long term disadvantages:
* Bad image in main client markets ( i mean the real big ones-EU, US),
* Corruption feeding leads to more corruption untill benefits are outweight by disavantages
* Companies that tend to use corruption abroad import it back to their homeland.

In both cases, China's dealing with corrupt governments will have to change, on the short term for the less juicy countries, on the long term for the most juicy countries.

Fedding corruption to gain market shares is a great entrance strategy but rapidly it becomes a huge liability.