In a 4x4 vehicle arranged by a local group that monitors Mozambique's forests, I travel to Maganja da Costa in the once-heavily-wooded Zambezia province, the country's poorest. Maganja is a tiny district, a five-hour drive along tortuous, dusty roads — traveled by villagers on bicycles with huge bags of firewood on their heads — from Quelimane, one of the country's main port cities. Quelimane was journey's end for Livingstone on his trek from the Atlantic to the Indian Ocean in 1856. But it is the start of my trans-African journey. My destination is a field office of Madeiras Alman, a unit of a Taiwanese conglomerate and one of the largest exporters of timber from Mozambique back to mainland China.
The office turns out to be nothing more than an unmarked trailer in the middle of a forest. A hand-painted sign nailed to a nearby stick reads Alman. The trailer is vacant, but within minutes of arriving, I am surrounded by dozens of angry locals demanding to be paid. "They think you're the Chinese owner," explains Gil, a forest technician acting as my guide. After explaining through my translator that I'm not the owner, or even Chinese, I manage to calm the men down. They say they'd been stiffed for work performed — a common complaint in the forestry trade here. They'd each been promised $120 for three months of backbreaking labor — lifting logs the size of girders by hand onto trucks, in a forest littered with land mines left over from a civil war — but were paid only $25. They've been showing up every day for months in a futile search for managers who never appear.
They are short men, under 5 feet tall, and wear ripped clothes that are likely Chinese knockoffs. A man named Pedro sports a Sean John shirt, another an orange David Beckham tee, while a third reads Vogue Paris. One man's cap informs me that This is the closest thing to a handyman this family's got. Many are barefoot, with bloodshot eyes and missing teeth, flies moving in and out of their mouths.
One man identifies himself as Pinto, the chief, and says they are from the Alukadi tribe, which has been in the region for centuries. They never signed any paperwork with their Asian bosses, he tells me, but they yell and scream, promising to "go to war" unless they are paid. "We have the power to remove this office," one man shouts. In fact, they have no power at all.
"Let China sleep," Napoleon famously remarked, "for when she awakes, she will shake the world." Today, China is not only roused, she is devouring the world for breakfast. In just a few years, it has become the world's top consumer of timber — as well as zinc (with 30% of global demand), iron and steel (27%), lead (25%), aluminum (23%), and copper (22%), along with nickel, tin, coal, cotton, and rubber. The entire sub-Sahara currently uses one-twentieth the amount of steel China does. And although China is the planet's second-biggest consumer of oil, behind the United States, it's gaining fast.
One-fifth of humankind lives in China, and an increasing number of those people are seeking a consumerist version of xiaokang, or "well-being." If their per capita GDP (now about $6,500) approaches South Korean levels in the next 20 years, as it is on track to do, Chinese consumption of aluminum and iron ore will increase fivefold; oil, eightfold; and copper, ninefold. As Sunter, the author and futurologist, puts it, "China is putting 1.3 billion people through an industrial revolution with neither colonies nor substantial indigenous resources besides coal. The only way it can do this is by establishing long-term supply contracts with resource-rich countries."
In sub-Saharan Africa, the Chinese seem to be everywhere: clearing trees in Mozambique, drilling for oil in Sudan, digging in copper mines in Zambia, opening textile factories in Kenya, prospecting for uranium in Zimbabwe, buying cobalt in the Congo, laying expressways in Angola. They have launched a satellite from Nigeria and built phone networks in rural Ghana and a dozen other countries. Hospitals, water pipelines, dams, railways, airports, hotels, soccer stadiums, parliament buildings — nearly all of them linked, in some way, to China's gaining access to raw materials. A $5 billion, 50-year government fund to encourage Chinese companies to invest in Africa. A $9 billion loan package for Congo. A $5.6 billion stake (20%) in Standard Bank, the biggest on the continent. And in April, $40 billion — plus in export-credit guarantees to help fund investment in Nigeria, Africa's biggest oil producer.
At any given time, roughly 800 Chinese state-owned or state-controlled corporations are operating in Africa, with China's Export-Import Bank funding more than 300 projects in at least 36 countries. Tens of thousands of small private companies and entrepreneurs are also on the ground. In tiny Lesotho, nearly half the supermarkets are owned and run by Chinese. Mauritius, home to many Chinese-owned factories, just added the Chinese language to the national school curriculum. The value of Chinese aid in Africa — a closely guarded secret — is now thought to have overtaken World Bank assistance.
Influence of that magnitude threatens to wipe out a decade's worth of efforts by global institutions to push African governments to improve human rights and government transparency. As Sahr Johnny, the Sierra Leonean ambassador in Beijing, once said about China's projects in Africa: "They just come and do it. We don't hold meetings about environmental-impact assessment, human rights, bad governance and good governance. I'm not saying that's right. I'm just saying Chinese investment is succeeding because they don't set high benchmarks."
China's influence threatens to wipe out a decade's worth of efforts to improve African human rights and government transparency.
Clem Sunter ran the gold-and-uranium unit ofin the 1990s, and today oversees its social-responsibility fund. In 2006, he was invited to Beijing to do scenario planning with members of the Communist Party elite, a rare invitation for a foreigner. To grasp why Africa is China's "continent of choice," as he puts it, one must first appreciate how desperate China's leaders are for what the sub-Sahara has to offer. China is on track to surpass America as the world's largest economy within a few decades, and it needs to maintain that fantastical rate of growth in order to avoid adding 25 million people to the unemployment ranks each year. That is nothing short of a crisis: Unaddressed, it could lead to the undoing of the Communist Party. China is already facing 80,000 social protests per year, and the figure is rising fast. So the dragon must be fed. As bureaucrats in Beijing like to say, "China is like an elephant riding a bicycle. If it slows down, it could fall off, and the earth might quake."
Africa is one of the only places in the world where so many resources are still up for grabs. It holds 90% of the world's cobalt, 90% of its platinum, 50% of its gold, 98% of its chromium, 64% of its manganese, and one-third of its uranium. Its forests are still considered the most pristine in the world. It is rich in diamonds, has more oil reserves than North America, and is estimated to have 40% of the world's potential hydroelectric power. It already supplies a third of the oil fueling China's economic boom.
Sino-African trade hit $73 billion in 2007, a staggering thirty-fold increase in less than a decade. China recently passed France to become the sub-Sahara's second-largest trading partner, and will likely pass the United States by 2010. In terms of cumulative direct investment, America still reigns at about $19 billion, virtually all of it concentrated in oil and in a few countries. But at $2 billion and growing fast, China is gaining ground, while spreading its investments across many resources and infrastructure projects, from Angola to Zimbabwe. China today has the largest number of embassies, consulates, and diplomats in Africa, and hardly a week goes by without the announcement of a new deal or project. As the famed Hong Kong contrarian investor Marc "Dr. Doom" Faber has put it: "There is no continent better suited to China than Africa."
On the long drive back to Quelimane from Alman's forest outpost, we approach the town of Nicoadala, the only real checkpoint before timber is loaded onto container ships. A few miles before the checkpoint, a lumber truck we've followed for miles suddenly stops beside the highway. A man climbs down and vanishes into a white residential house hidden behind some landscaping. He emerges 30 minutes later and the truck continues to the checkpoint, where a man who identifies himself as João Mário Mafundisse — an agronomist and part-time forest cop — approaches our vehicle. We expect him to chase us away, but he instead unleashes a torrent of frustration. "The Chinese pay the control man here," he says, jabbing a finger at the checkpoint office. "It's a bad problem. The Chinese give money to the Mozambique people to cut too much and take the logs to Asia, and the Mozambique people never have development. Government controls are not effective because of corruption."
Multiply that workaday scene a hundred-thousand times or so, and you begin to get a sense of how the game is played here — by all parties, from the East and the West. As one Western money-laundering investigator told me, "Every project in Africa has to have a politician involved. In big ones, it has to be the president or foreign minister. I don't know a country in Africa that doesn't have that, except maybe South Africa."
In Beijing's checkbook diplomacy, African governments receive multibillion-dollar deals in return for mining, timber, or oil rights. (The Chinese aren't interested in owning the land itself, only what lies within or on top of it.) The money is offered as a mix of cash, investment, cheap credit, and aid; some of it is earmarked for infrastructure projects — dams, airports, bridges, power plants, pipelines. Significantly, much of that infrastructure is crucial to China's ability to operate effectively in the country, but it can also provide a much-needed stimulus to the local economy. Of course, China's closed books make it impossible to see where the money actually goes, opening the door to all manner of inducements to local and national officials. These cash-heavy "no strings attached" offers make China's projects very hard to imitate for public companies from the West — and all but irresistible to the cliques sitting atop most sub-Saharan countries.
For the outside world, Beijing markets its efforts with flowery rhetoric — reminiscent of Mao Zedong's in Africa in the 1960s — touting China as a "selfless friend" intent on fostering a "harmonious" relationship. But China doesn't hesitate to create more lasting symbols of its benevolence: parliament buildings in Uganda and Congo, a presidential palace in Sudan, the Supreme Court in Namibia, an entirely new administrative capitol rising in Equatorial Guinea — and lavish soccer stadiums everywhere. These monuments not only distract restive local populations but are also, as one of the continent's best-known businessmen sees it, part of a subtler "psychological strategy: When the people are recreating, they will automatically revere the Chinese. And when the parliament is sitting, they will automatically revere the Chinese."
In a pinch, China's leaders revert to invoking the memory of "colonial aggression" and their common history with Africans as the subjects of outside oppression. China will never, Beijing constantly reminds them, "impose its will" on another country — a welcome relief after years of Western loan offers inconveniently premised on good governance and respect for human rights, and spending directed to alleviate poverty. In reality, there are often other strings attached. In December, for example, Malawi promptly cut diplomatic ties with Taiwan after 41 years, in exchange for an expected billion-dollar package from Beijing. And, just like projects from U.S. government agencies, the big PRC projects in Africa are "tied" — meaning that mainly Chinese companies, materials, and labor are to be used.
Few would argue that the sub-Sahara doesn't need all the big projects it can get. But with the exception perhaps of South Africa, the region is so desperate and defeated, and the forces of globalization so severe, that China undoubtedly has the upper hand in its deals. During a stopover in Johannesburg, I met with George Nicholls, who runs Pasco Risk, the largest Africa-exclusive corporate intelligence agency. Nicholls says he has studied 30 Chinese deals in Africa over the past two years, hopping from country to country, looking for a pattern. "The question is, What is the Chinese endgame in Africa?" he says over our traditional dinner of steak and boerewors (farmer's sausage) at Nelson Mandela Square. "My guess is they are trying to opt out of the international system for commodity prices. They are saying, 'Instead of the Western way, we'll go direct to the source and get it cheaper and more easily.' Western companies fight to own 20-year concessions. But it is irrelevant to the Chinese who owns the concessions — they want the commodity, the offtake, and will do whatever they can to get it."
"Chinese corporations and crime syndicates have been accused of bribery, smuggling, counterfeiting, corruption, and dumping," Nicholls says. "By the time the Americans come to the party, the Chinese will have taken it. That's the risk the West runs." Nicholls knows his "clients want to outsmart the Chinese," but the Chinese are "opaque, they go everywhere, they operate outside the international system. And they are thinking 50 to 100 years out." As to where China's role in Africa will lead, Nicholls suspects it is "analogous to the colonial drive for assets and territory. Chinese policies may ultimately do nothing to develop Africa in anything other than the short term."
Mozambique's is a sad story. At its independence from Portuguese rule in 1975, the country was one of the world's basket cases. It still is. Soaring violent crime and growing organized-crime networks. Systemic corruption. A police force as crooked as the crooks they chase. Little or no government transparency. A devastating AIDS crisis. Annual flooding of entire provinces. Years of socialist mismanagement and a brutal 16-year civil war that killed a million people before it ended in 1992. More than 70% of Mozambique's 20 million citizens live on less than $2 a day, and only 8% have electricity.
The Bush administration nevertheless lavishes Mozambique with praise (and a recent $500 million aid package) for making progress on economic freedom, good governance, and transparency. And the World Bank recently called it "one of the greatest success stories anywhere in the world." Yet U.S. companies largely ignore the place. The country remains one of the most difficult in the world in which to do business, according to the World Bank's own annual index.
The Chinese, though, are suddenly omnipresent. Trade between the two countries has expanded sixfold since 2001. Steel factories. Textiles. Shoes. Motorbikes. Auto products. Hotels. Banking. A $2.3 billion soft loan for a controversial dam the World Bank deemed too risky to fund. A new soccer stadium. A glittering convention center. A parliament building. A state-of-the-art airport makeover. The humongous headquarters of the Ministry of Foreign Affairs, perhaps the most modern structure in the capital city of Maputo.
China is providing science equipment to the country's main university and helping build a satellite campus. Its embassy here is a sprawling gated complex of six huge yellow buildings that dwarfs its sleepy American counterpart. China's government blithely calls its relationship with Mozambique a "win-win" situation by two undeveloped countries that have endured similar abuses, a sentiment echoed by Mozambique's government, at least publicly. "Mozambique has a socialist past," a Western diplomat based in Maputo points out, "so it is closer to China politically than other countries. And [Mozambicans] say they remember that 'the Chinese were with us' when they were fighting for independence."
Rafique Jusob heads the Mozambican government's center for promoting investments. "China treats us like a peer," he insists. "They have a culture of respect for other people. They don't interfere, they don't invade countries. Americans? They don't even know where Mozambique is. And you [Americans] are trying to export morals which even in your own country didn't work."
Many observers, however, see China's deals here as emblematic of the imbalance of power between the two countries, what the head of the African Development Bank recently described as Africa's lack of "capacity to negotiate." That sentiment is echoed by Jim LaFleur, senior economist for Mozambique's largest business association and a longtime American resident of Maputo. "The Chinese are building things in exchange for mining rights, timber rights, fishing rights, and these are absolutely bad deals," LaFleur complains. "We've lost an asset, and in exchange we got a ministry building, which is just an opportunity cost for China." Stellenbosch University's Corkin is more categorical still: "China is very clear about what it wants from Africa," she says. "Africa has absolutely no idea what it wants from China."
In some cases, China's extractive work is clearly orchestrated and paid for by its central government or leading state-owned institutions; in others, it's more amorphous, driven by Chinese private operators — but with government-funded sweeteners or incentives. Some of the activity is legal and some clearly not. Chinese-made counterfeit products proliferate, cannibalizing embryonic local industry — or aborting it altogether. Illegal fishing along the 1,500-mile coastline is done mainly by the Chinese; Mozambique's authorities, with just 10 patrol boats, can't even begin to make a dent. And then there is the timber problem.
China introduced widespread logging bans at home in 1999, after deforestation was blamed for soil erosion and severe flooding. Now China is staging a virtual holdup on the rest of the planet's wood. It is the world's largest importer of unprocessed logs and tropical timber; of every 10 tropical trees traded in the world, 5 are destined for China. And its exports of wood products such as furniture and flooring are growing at a faster clip than domestic consumption, with the United States by far its best customer.
Few industries are as murky as the black market in wood. The World Bank estimates that 40% of China's timber imports from Russia — its largest source — are illegally harvested. In 2005, Greenpeace investigators chronicled the log trade from Papua New Guinea to China and found that 90% of it was illegal. As Chinese operators push deeper into the forests of Mozambique and other sub-Saharan countries, it's likely that most of that product — maybe the chair you're sitting in, or the flooring beneath your feet — is tainted as well. "Most logs imported into China are effectively stolen," says the Smithsonian Institution's William Laurance, one of the world's foremost tropical biologists. For the past year, the U.S. International Trade Commission has been probing China's logging practices (its report is due this month).
Timber is vital for the future of Mozambique's economy, but you wouldn't know it by the assault on its forests, which cover 70% of the nation. Mozambique is now China's leading source for wood in East Africa, and most of this timber leaves the country as raw, unprocessed logs, essentially subtracting its value from one of the world's poorest economies and adding it to what is becoming one of the richest. The best hardwood species are being obliterated, without replanting, and experts predict the forest's commercial value could be lost in as little as five years. Mozambique doesn't even have a functioning plywood industry; meanwhile the wood-products industry in China is skyrocketing, feeding local demand as well as the West's.
A 2006 report funded by the U.S. Agency for International Development describes log exporting from Mozambique as an exploitative "gold rush." And with one cop for every 125,000 acres, local enforcement is a fantasy. "A timber mafia" has arisen, concludes Catherine Ann Mackenzie, a highly regarded forestry expert who has spent months trekking across Mozambique studying the problem. Massive conflicts have arisen between the public duties and private interests of some government officials and party members, she notes. "They manipulate forest regulations, statistics, and technical information; accept bribes; and are personally involved in logging and benefiting from this Chinese takeaway."
Marcelo Mosse, too, is on the front lines, as one of only a handful of investigative reporters in Mozambique. At a meeting in his well-guarded office in Maputo, he holds up a book he co-wrote — a biography of his friend, investigative reporter Carlos Cardoso, who was murdered in 2000 for prying too deeply into bribery and influence peddling. "We don't have a political will in Mozambique to fight corruption, even though our president says it every time he speaks publicly," Mosse says. "Many Chinese companies come here and don't follow the rules we have in forestry because they have partnerships with ministers and politically connected people."
The Mozambican parliament passed a new anticorruption law in 2004, but there's no sign that anyone has been charged under it. Last year, the country's then — attorney general insisted to local reporters that there are cases before the courts, but that "it's inelegant" to name those accused. In fact, says Mosse, "You can expose corruption but you won't see any follow-up by judicial institutions. There's been no bribery case investigated or prosecuted."
Most of the country's timber operators own what's called a "simple" license, available only to Mozambican nationals. The $15,000 fee for the license gives them a specific area and a specific amount they can cut per year. But many can't afford the license, let alone pay for equipment and trucks. Enter the Chinese timber buyers, who are all too happy to issue credit for everything, letting Mozambicans front for them. That might be fine if this were as far as the deals went. But basically anything goes in Mozambique: overcutting; mislabeling species before export; undermeasuring; underinvoicing to avoid taxes; bribery of government, customs, and forestry officials.
The trade is sometimes dangerous. Simple license holders "come inside our forest to steal logs," complains Carlos Silva, a top manager of Grupo Madal, one of the country's largest timber operations. Every few months, license holders fight with Modal's guards. Industry reformers have also received threats, among them, Carlos Serra Jr., a forestry expert with the country's Ministry of Justice. By day, Serra trains judges in environmental law; by night, he is an activist, raising awareness of what Chinese loggers and their sponsors are doing. "People from the government are involved, and the private sector, and the political class," he says during an interview at the office of Justiça Ambiental (Environmental Justice), a local NGO. "And they warn you to shut up and don't investigate because there are powerful people in the business whose backs are protected. It's known as costas quentes ['hot back']."
For ordinary Mozambicans, desperate for any form of income, a simple license has been a road to success, no matter how they got hold of one. Four years ago, Claudia Palha, a 40-year-old in Quelimane, approached a Chinese buyer who lent her funds for a license and equipment on a 12,000-acre plot. She would pay him back in timber. Within two years, she had 15 employees and was selling 10 truckloads a day. Palha expresses concern that Mozambique's precious resources are being shipped off to China but shrugs it off as a "paradox." She wants "the timber from our province to stop going away," but her family needs the money. "This country has many resources," she says, "but many schools here have no desks, no chairs, and children are sitting on the floors."
The government of Mozambique has taken some steps recently to try to stanch the bleeding in its forests. A national ban on the export of certain popular species has technically been in effect since last June. But cynics say the Chinese (and their powerful protectors) inevitably maneuver around such limits. Indeed, a recent amendment to the ban allows the export of "planks" with no edging required. In plain speak, this means "the Chinese can buy a log, put two cuts through it, and clear it for export," says Mozambique-born Nicolas Kassimatis, one of Zambezia province's largest sawmill operators. "The crooked politicians destroy any law that comes out."
To make matters worse, the Mozambican government recently stopped issuing new simple licenses — sparking massive local protests — and is instead pushing "concessions," which few locals can afford. These are larger tracts of land available also to foreigners; they are issued for a period of 50 years, with requirements that they have a sawmill operation (to spur local processing) and a management plan for sustainable cutting. But those rules, too, are easily skirted. In Zambezia province, Kassimatis estimates that as much as 90% of conceded land is now held by Chinese interests. "To someone driving in, it's a great big forest," he says. "To someone who knows, there's nothing left in it. It's too late."
Blaming China for all of this is easy, but China is following an economic model that has long worked in the West's favor. Everyone knows the earth's forests are shrinking, but few realize the net loss is now 12 million acres a year, roughly the size of England, according to the UN. Even fewer people know just how much China has utterly transformed the timber business — or how America benefits.
"Personally, I think the Chinese are bad," says Alima Abdul Kadir Issufo, the head of Mozambique's Forest Department, in her office in Maputo. "I'm not happy with the way they do things. They are — how can you say it? — thirsty?" She laughs. But then her tone turns grave: "To understand others, you have to understand you, America. If you stop buying Chinese products made from our wood, then we can conserve our timber more. You will make a difference. We are all part of the problem."
A version of this article appeared in the June 2008 issue of Fast Company magazine.