China has become a world power, but there is too little debate about how it happened and what it means. Many believe that China is exporting its development model and imposing it on other countries. But Chinese companies are also expanding their presence by partnering with local players and institutions, adapting and absorbing local and traditional forms, norms and practices.
Thanks to many years of generous funding from the Ford Carnegie Foundation, it operates in seven regions of the world—Africa, Central Asia, Latin America, the Middle East and North Africa, the Pacific, South Asia, and Southeast Asia. Through a combination of research and strategic meetings, the project explores these complex dynamics, including how Chinese companies are adapting to local labor laws in Latin America, and how Chinese banks and funds are exploring traditional Islamic finance and credit products in Southeast Asia and Central Asia. East, and Chinese actors help local workers improve their skills in Central Asia. These adaptive strategies of China, which adapt to and function in local realities, are especially ignored by Western politicians.
Ultimately, the project aims to greatly expand understanding and discussion of China’s role in the world and generate innovative political ideas. This could allow local actors to better channel Chinese energies to support their societies and economies, provide lessons for Western engagement around the world, especially in developing countries, help China’s own political community learn from the diversity of learning from the Chinese experience, and possibly reduce friction.
The business talks between Benin and China show how both sides can navigate the dynamics of business relationships in China and Africa. In Benin, Chinese and local officials engaged in protracted negotiations over an agreement to set up a commercial center aimed at deepening business ties between Chinese and Benin businessmen. Strategically located in Cotonou, the main economic city of Benin, the center aims to promote investment and wholesale business, serving as the center of Chinese business relations not only in Benin, but also in the West African region, especially in the vast and growing region of the neighboring market of Nigeria.
This article is based on original research and fieldwork conducted in Benin from 2015 to 2021, as well as drafts and final contracts negotiated by the authors, allowing for parallel comparative textual analysis, as well as pre-field interviews and follow-ups. -up. Interviews with leading negotiators, Beninese businessmen and former Beninese students in China. The document shows how the Chinese and Benin authorities negotiated the establishment of the centre, in particular how the Benin authorities adapted Chinese negotiators to local Benin labor, construction and legal regulations and put pressure on their Chinese counterparts.
This tactic meant that negotiations took longer than usual. Cooperation between China and Africa is often characterized by fast-paced negotiations, an approach that has proven to be detrimental in some cases as it can lead to vague and unfair terms in the final contract. The negotiations at the Benin China Business Center are a good example of how well coordinated negotiators can take the time to work in coordination with various government departments and can help achieve better results in terms of high quality infrastructure and compliance with existing building, labor, environmental and business regulations. and maintaining good bilateral relations with China.
Studies of commercial relations between Chinese and African non-state actors, such as merchants, merchants and merchants, usually focus on how Chinese companies and migrants import goods and goods and compete with local African businesses. But there is a “parallel” set of Sino-African business relationships because, as Giles Mohan and Ben Lambert put it, “many African governments consciously see China as a potential partner in economic development and regime legitimacy. look at China as a useful source of resources for personal and business development.”1 The presence of Chinese goods in Africa is also increasing, partly due to the fact that African merchants buy goods from China that are sold in African countries.
These business relationships, especially in the West African country of Benin, are very instructive. In the mid-2000s, local bureaucrats in China and Benin negotiated the establishment of an economic and development center (locally known as a commercial center) aimed at developing economic and commercial ties between the two parties by providing a range of trade facilitation services, activities. development and other related services. The Center also seeks to help formalize business relations between Benin and China, which are mostly informal or semi-formal. Strategically located in Cotonou, Benin’s main economic center, close to the city’s main port, the center aims to serve Chinese businesses in Benin and throughout West Africa, especially in the large and growing market of neighboring countries. Promoting the growth of investment and wholesale business. in Nigeria.
This report examines how the Chinese and Benin authorities negotiated the terms for the opening of the Center and, in particular, how the Benin authorities adapted the Chinese negotiators to local labor, construction, legal standards and regulations of Benin. Chinese negotiators believe the longer-than-usual negotiations are allowing Benin officials to enforce regulations more effectively. This analysis looks at how such negotiations work in the real world, where Africans not only have a lot of free will, but also use it for significant influence, despite the asymmetry in relations with China.
African business leaders are playing a key role in deepening and developing economic ties between Benin and China, ensuring that Chinese companies are not the only beneficiaries of their active involvement on the continent. The case of this business center provides valuable lessons for African negotiators involved in negotiating commercial deals and related infrastructure with China.
In recent years, trade and investment flows between Africa and China have increased dramatically. Since 2009, China has been Africa’s largest bilateral trading partner. 3 According to the latest Global Investment Report of the United Nations (UN) Conference on Trade and Development, China is the fourth largest investor in Africa (in terms of FDI) after the Netherlands, the UK and France in 20194. $35 billion in 2019 to $44 billion in 2019. 5
However, these spikes in official trade and investment flows do not really reflect the scale, strength and speed of expanding economic ties between China and Africa. This is because governments and state-owned enterprises (SOEs), which often receive disproportionate media attention, are not the only players driving these trends. In fact, the increasingly complex players in Sino-African business relationships include a large number of private Chinese and African players, especially SMEs. They work in the formal organized economy as well as semi-formal or informal settings. Part of the purpose of establishing government business centers is to facilitate and regulate these business relationships.
Like many other African countries, Benin’s economy is characterized by a strong informal sector. As of 2014, almost eight out of ten workers in sub-Saharan Africa were in “vulnerable employment,” according to the International Labor Organization. 6 However, according to an International Monetary Fund (IMF) study, informal economic activity tends to severely limit taxation in developing countries, which most need a stable tax base. This suggests that the governments of these countries are interested in measuring the extent of informal economic activity more accurately and learning how to move production from the informal to the formal sector. 7 In conclusion, participants in the formal and informal economy are deepening business relations between Africa and China. Simply involving the role of government does not explain this chain of action.
For example, in addition to the large Chinese state-owned enterprises operating in Africa in areas ranging from construction and energy to agriculture and oil and gas, there are several other key players. China’s provincial SOEs are also a factor, although they do not have the same privileges and interests as the large SOEs under the jurisdiction of the central authorities in Beijing, especially the State Council Commission for Supervision and Management of State Assets. However, these provincial players are increasingly gaining market share in several key African industries such as mining, pharmaceuticals, oil and mobile communications. 8 For these provincial firms, internationalization was a way to avoid growing competition from large central SOEs in China’s domestic market, but entering new overseas markets is also a way to grow their business. These state-owned enterprises often operate largely autonomously, without any of the central planning mandated by Beijing. 9
There are other important actors as well. In addition to Chinese state-owned enterprises at the central and provincial levels, large networks of Chinese private enterprises also operate in Africa through semi-formal or informal transnational networks. In West Africa, many have been created across the region, with many more in countries such as Ghana, Mali, Nigeria and Senegal. 10 These private Chinese companies are playing an increasingly important role in trade relations between China and Africa. Regardless of the size of the companies involved, many analyzes and comments tend to highlight the role of these Chinese players, including private companies. However, the African private sector is also actively deepening the network of commercial relations between their countries and China.
Chinese goods, especially textiles, furniture and consumer goods, are ubiquitous in African urban and rural markets. Since China has become Africa’s largest trading partner, the market share of these products has now slightly exceeded that of similar products in Western countries. eleven
African business leaders are making an important contribution to the distribution of Chinese goods in Africa. As importers and distributors at all levels of the relevant supply chain, they supply these consumer products from various regions of mainland China and Hong Kong, and then through Cotonou (Benin), Lomé (Togo), Dakar (in Senegal) and Accra (in Ghana), etc. 12 They play a central role in the increasingly dense commercial network between China and Africa.
This phenomenon is historically connected. In the 1960s and 1970s, some post-independence West African countries established diplomatic relations with the Communist Party-led People’s Republic of China, and Chinese goods poured into the country as Beijing’s overseas development cooperation program took shape. These goods have long been sold in local markets and the proceeds generated are recycled for local development projects. 13
But apart from African businesses, other African non-state actors are also involved in these economic transactions, especially students. Since the 1970s and 1980s, when China’s diplomatic relations with the governments of several West African countries led to the granting of scholarships to African students to study in China, some African graduates of these programs have established small businesses that export Chinese goods to their countries in order to compensate for local inflation. . fourteen
But the expansion of imports of Chinese goods into African economies has had a particularly strong impact on French-speaking Africa. This is partly due to fluctuations in the value of the West African version of the CFA franc (also known as the CFA franc), a common regional currency that was once pegged to the French franc (now pegged to the euro). 1994 After the devaluation of the Community franc by half, the prices of European consumer goods imported due to the currency devaluation doubled, and Chinese consumer goods became more competitive. 15 Chinese and African businessmen, including new companies, benefited from this trend during this period, further deepening commercial ties between China and West Africa. These developments are also helping African households offer African consumers a wider range of Chinese-made products. Ultimately, this trend has accelerated the level of consumption in West Africa today.
Analysis of business relations between China and a number of West African countries shows that African businessmen are looking for a market for goods from China, because they know their local markets well. Mohan and Lampert note that “Ghanaian and Nigerian entrepreneurs are playing a more direct role in encouraging a Chinese presence by purchasing consumer goods, as well as partners, workers, and capital goods from China.” in both countries. Another cost-saving strategy is to hire Chinese technicians to oversee the installation of equipment and train local technicians to operate, maintain and repair such machines. As researcher Mario Esteban noted, some African players are “actively recruiting Chinese workers … to increase productivity and provide higher quality goods and services.”17
For example, Nigerian businessmen and business leaders have opened the Chinatown mall in the capital city of Lagos so that Chinese immigrants can see Nigeria as a place to do business. According to Mohan and Lampert, the purpose of the joint venture is to “engage Chinese entrepreneurs to further open factories in Lagos, thereby creating jobs and supporting economic development.” Progress. Other West African countries including Benin.
Benin, a French-speaking country of 12.1 million people, is a good reflection of this increasingly close commercial dynamic between China and West Africa. 19 The country (formerly Dahomey) gained independence from France in 1960 and then wavered between diplomatic recognition of the People’s Republic of China and the Republic of China (Taiwan) until the early 1970s. Benin became the People’s Republic of China in 1972 under President Mathieu Kerek, who established a dictatorship with communist and socialist features. He tried to learn from the experience of China and imitate the Chinese elements at home.
This new privileged relationship with China opened up the Benin market to Chinese goods such as Phoenix bicycles and textiles. 20 Chinese businessmen founded the Textile Industry Association in 1985 in the Benin city of Lokosa and joined the company. Benin merchants also travel to China to buy other goods, including toys and fireworks, and bring them back to Benin. 21 In 2000, under Kreku, China replaced France as Benin’s largest trading partner. Relations between Benin and China improved significantly in 2004 when China replaced the EU, solidifying China’s leadership as the country’s largest trading partner (see Chart 1). twenty two
In addition to closer political ties, economic considerations also help explain these extended trading patterns. The low cost of Chinese goods makes goods made in China attractive to Beninese traders despite high transaction costs, including shipping and tariffs. 23 China offers Beninese merchants a wide range of products in various price ranges and provides fast visa processing for Beninese merchants, unlike in Europe where business visas in the Schengen area are more convenient for Beninese (and other African) merchants Difficult to obtain. 24 As a result, China has become the preferred supplier for many Beninese companies. In fact, according to interviews with Benin businessmen and former students in China, the relative ease of doing business with China has contributed to the expansion of the private sector in Benin, bringing more people into economic activity. 25
Benin students are also participating, taking advantage of the easy acquisition of student visas, learning Chinese, and acting as interpreters between Benin and Chinese businessmen (including textile companies) between China and Benin’s return. The presence of these local Beninese translators helped to partially remove the language barriers that often exist between Chinese and foreign business partners, including in Africa. Beninese students have served as a link between African and Chinese businesses since the early 1980s, when Beninese, especially the middle class, began receiving scholarships to study in China on a large scale. 26
Students are able to take on such roles, in part because the Benin Embassy in Beijing, unlike the Chinese Embassy in Benin, is mostly made up of diplomats and technical experts who are mostly in charge of politics and less involved in commercial relations. 27 As a result, many Beninese students are hired by local businesses to informally provide translation and business services in Benin, such as identifying and evaluating Chinese factories, facilitating site visits, and conducting due diligence on goods purchased in China. Benin students provide these services in a number of Chinese cities including Foshan, Guangzhou, Shantou, Shenzhen, Wenzhou, Xiamen and Yiwu, where dozens of African businessmen are looking for everything from motorcycles, electronics and building materials to sweets and toys. Suppliers of various goods. This concentration of Beninese students has also built bridges between Chinese businessmen and other businessmen from West and Central Africa, including Côte d’Ivoire, the Democratic Republic of the Congo, Nigeria and Togo, according to former students interviewed separately for this study.
In the 1980s and 1990s, trade and commercial relations between China and Benin were mainly organized along two parallel tracks: official and formal government relations and informal business-to-business or business-to-consumer relationships. Respondents from the Benin National Council of Employers (Conseil National du Patronat Beninois) said that Benin companies not registered with the Benin Chamber of Commerce and Industry have benefited most from growing relations with China through direct purchases of building materials and other goods. 29 This nascent relationship between Benin’s business sector and established Chinese players has been further developed since China began sponsoring major intergovernmental infrastructure projects in Benin’s economic capital, Cotonou. The popularity of these large-scale construction projects (government buildings, convention centers, etc.) has increased the interest of Beninese companies in purchasing building materials from Chinese suppliers. thirty
By the late 1990s and early 2000s in West Africa, this informal and semi-formal trade was complemented by the growing establishment of Chinese commercial centers, including in Benin. Commercial centers initiated by local merchants have also sprung up in the capital cities of other West African countries such as Nigeria. These hubs have helped African households and businesses expand their ability to buy Chinese goods in bulk and have enabled some African governments to better organize and regulate these commercial relationships, which are organically separated from official economic and diplomatic relations.
Benin is no exception. He also created new institutions to better organize and regulate business relations with China. The best example is the Center Chinois de Développement Economique et Commercial au Benin, established in 2008 in the main business district of Gancy, Cotonou, near the seaport. The center, also known as the China Business Center Benin Center, was established as part of a formal partnership between the two countries.
Although construction was not completed until 2008, ten years ago, during Krekou’s presidency, a preliminary memorandum of understanding was signed in Beijing in January 1998, mentioning the intention to establish a Chinese business center in Benin. 31 The main objective of the Center is to promote economic and business cooperation between Chinese and Benin entities. The center is built on 9700 square meters of land and covers an area of 4000 square meters. Construction costs of US$6.3 million were covered by a blended financing package arranged by the Chinese government and provincial Teams International in Ningbo, Zhejiang. Overall, 60% of funding comes from grants, with the remaining 40% funded by international teams. 32 The Center was established under a Build-Operate-Transfer (BOT) agreement that included a 50-year lease from the Government of Benin held by Teams International, after which the infrastructure would be transferred to Benin’s control. 33
Originally proposed by a representative of the Chinese Embassy in Benin, this project was intended to be a focal point for Benin businesses interested in doing business with China. 34 According to them, the business center will provide representatives of Beninese and Chinese companies with a central platform to expand trade, which could eventually lead to more informal businesses being officially registered with the Beninese Chamber of Commerce and Industry. But besides being a one-stop business center, the business center will also serve as a nexus for various trade promotion and business development activities. It aims to promote investment, import, export, transit and franchise activities, organize exhibitions and international business fairs, wholesale warehouses of Chinese products, and advise Chinese companies interested in bidding for urban infrastructure projects, agricultural enterprises and service-related projects.
But while the Chinese actor may have come up with the commercial center, that’s not the end of the story. Negotiations took longer than expected as the Beninese actor set expectations, made his own demands and pushed for tough deals that Chinese players had to adjust to. Field trips, interviews and key internal documents set the stage for negotiations and how Benin’s statesmen can act as proxies and persuade Chinese actors to adapt to local norms and commercial rules, given the country’s asymmetric relationship with a stronger China.35
Sino-African cooperation is often characterized by rapid negotiations, conclusion and implementation of agreements. Critics argue that this rapid process has led to a decline in the quality of infrastructure. 36 In contrast, the negotiations in Benin for the China Business Center in Cotonou showed how much a well-coordinated bureaucratic team from various ministries can achieve. This is especially true when they are pushing the talks by insisting on a slowdown. Consult with representatives of various government departments, offer solutions to create high-quality infrastructure and ensure compliance with local building, labor, environmental and business standards and codes.
In April 2000, a Chinese representative from Ningbo arrived in Benin and set up a construction center project office. The parties started preliminary negotiations. The Benin side includes representatives from the Construction Bureau of the Ministry of the Environment, Housing and Urban Planning (appointed to lead the Benin government’s urban planning team), the Ministry of Foreign Affairs, the Ministry of Planning and Development, the Ministry of Industry and Trade and the Ministry of Economy and Finance. The participants in the talks with China include the Chinese Ambassador to Benin, the director of the Ningbo Foreign Trade and Economic Cooperation Bureau, and representatives of an international group. 37 In March 2002, another Ningbo delegation arrived in Benin and signed a memorandum with the Benin Ministry of Industry. Business: The document indicates the location of the future business center. 38 In April 2004, the Minister of Trade and Industry of Benin visited Ningbo and signed a memorandum of understanding, beginning the next round of formal negotiations. 39
After official negotiations for the business center began, the Chinese negotiators submitted a draft BOT contract to the Benin government in February 2006. 40 But a closer look at this preliminary draft shows it. A textual analysis of this first draft (in French) shows that the initial position of the Chinese negotiators (which the Beninese side subsequently tried to change) contained vague contractual provisions regarding the construction, operation and transfer of the Chinese business center, as well as provisions regarding preferential treatment and proposed tax incentives. 41
It is worth noting a few points related to the construction phase in the first project. Some will ask Benin to bear certain “fees” without specifying how much those costs are. 42 The Chinese side also asked for an “adjustment” in the wages of the Beninese and Chinese workers in the project, but did not specify the amount of the adjustment.43 The proposed paragraph on China also requires that pre-feasibility studies and environmental impact studies be conducted only by the Chinese side, noting that representatives of the Research bureaus (research bureaus) conduct impact studies. 44 The vague wording of the contract also lacks a schedule for the construction phase. For example, one paragraph said in general terms that “China will provide feedback based on the results of technical studies”, but did not specify when this would happen. 45 Similarly, the draft articles do not mention safety protocols for local workers in Benin.
In the draft section on the activities of the center, among the provisions proposed by the Chinese side, there are also general and vague provisions. The Chinese negotiators demanded that the Chinese business operators operating in the business center be allowed to sell wholesale and retail goods not only in the center itself, but also in the local markets of Benin. 46 This requirement runs counter to the Centre’s original goals. The businesses offer wholesale merchandise that Beninese businesses can purchase from China and sell more widely as retail merchandise in Benin and throughout West Africa. 47 Under these proposed terms, the center would also allow Chinese parties to provide “other commercial services,” without specifying which ones.48
Other provisions of the first draft were also unilateral. The draft proposes, without specifying the meaning of the provision, that stakeholders in Benin are not allowed to take “any discriminatory action against the Centre”, but its provisions appear to allow for greater discretion, namely “to the greatest extent possible”. Endeavor to provide jobs for local residents in Benin, but did not provide details on exactly how this would be done. 49
China’s Contracting Parties have also made specific exemption requirements. The paragraph requires that “the Benin Party shall not allow any other Chinese political party or country in the sub-region (West Africa) to establish a similar center in the city of Cotonou for 30 years from the date the center was put into operation. “50 contains such dubious terms that highlight how Chinese negotiators are trying to stifle competition from other foreign and other Chinese players. Such exceptions reflect how Chinese provincial companies attempt to compete with other companies, including other Chinese companies51, by acquiring a privileged, exclusive business presence.
As with the conditions for the construction and operation of the Centre, the conditions relating to the possible transfer of the project to Benin’s control require Benin to bear all related costs and expenses, including attorneys’ fees and other expenses. 52
The draft contract also includes several clauses proposed by China regarding preferential treatment proposals. One provision, for example, sought to secure land on the outskirts of Cotonou, called Gboje, to build warehouses for Chinese companies associated with the mall to store inventory. 53 The Chinese negotiators also demanded that Chinese operators be admitted.54 If the Beninese negotiators accept this clause and then change their mind, Benin will be forced to compensate the Chinese for losses.
Among the tariffs and benefits offered, the Chinese negotiators are also demanding more lenient terms than those allowed by Benin’s national law, demanding concessions for vehicles, training, registration seals, management fees and technical services, and Benin’s wages. Chinese workers and business center operators. 55 The Chinese negotiators also demanded tax exemption on the profits of Chinese companies operating at the center, up to an unspecified ceiling, materials for the maintenance and repair of the center, and publicity and publicity campaigns to promote the center’s activities. 56
As these details show, the Chinese negotiators made a number of demands, often in strategically vague terms, aimed at maximizing their negotiating position.
After receiving the draft contracts from their Chinese counterparts, the Beninese negotiators once again initiated a thorough and active multi-stakeholder study, which led to significant changes. In 2006, it was decided to designate specific ministries representing the government of Benin to review and amend urban infrastructure contracts and to review the terms of such deals in coordination with other relevant ministries. 57 For this particular contract, Benin’s main participating ministry is the Ministry of Environment, Habitat and Urban Planning as the focal point for reviewing contracts with other ministries.
In March 2006, the Ministry organized a negotiating meeting at Lokossa, inviting a number of line ministries58 to review and discuss the project, including the Ministry of Trade and Industry, the Ministry of Labor and Social Services, the Ministry of Justice and Legislation, the General Directorate of Economics and Finance, budgetary responsibilities Directorate General and the Ministry of the Interior and Public Security. 59 Considering that the draft law may affect all aspects of economic and political life in Benin (including construction, the business environment and taxation, etc.), representatives of each ministry have a formal opportunity to review the specific provisions in accordance with the existing provisions in their respective sectors and carefully evaluate provisions proposed by China Degree of compliance with local regulations, codes and practices.
This retreat at Lokas gives the Beninese negotiators time and distance from their Chinese counterparts, as well as any potential pressure they may be under. Representatives of the Beninese Ministry who were present at the meeting proposed a number of amendments to the draft contract to ensure that the terms of the contract were in line with Beninese regulations and standards. By leveraging the expertise of all these ministries, rather than allowing one agency to dominate and command, Benin’s officials have been able to maintain a united front and push their Chinese counterparts to adjust accordingly in the next round of negotiations.
According to the Beninese negotiators, the next round of talks with their Chinese counterparts in April 2006 lasted three “days and nights” back and forth. 60 Chinese negotiators insisted that the center become a trading platform. (not only wholesale) goods, but Benin’s Ministry of Industry and Trade objected to this and reiterated that it was legally unacceptable.
Overall, Benin’s multilateral pool of governmental experts has enabled its negotiators to submit to their Chinese counterparts a new draft contract that is more in line with Benin’s rules and regulations. The unity and coordination of the Beninese government has complicated China’s attempts to divide and rule by pitting parts of the Beninese bureaucrats against each other, forcing their Chinese counterparts to make concessions and comply with local norms and business practices. The Benin negotiators joined the president’s priorities to deepen Benin’s economic ties with China and formalize ties between the respective private sectors of the two countries. But they also managed to protect the local Benin market from the flood of Chinese retail goods. This is significant as intense competition between local producers and Chinese competitors has begun to fuel opposition to trade with China from Beninese traders who operate in large markets such as Duntop Market, one of West Africa’s largest open markets. 61
The retreat unites the Benin government and helps Benin’s officials get a more coherent negotiating stance that China has had to adjust. These negotiations help to demonstrate how a small country can negotiate with a major power like China if they are well coordinated and executed.
Post time: Oct-18-2022