I realized this after receiving a thoughtful note from reader Eddie C., in response to last week’s piece, “China, Congo and the New Race for Africa.”

Sir,

As far as I can see, China is doing a real good job to these under-developed countries such as Congo. She put in her hard-earned capital to open up these countries, whether be they in Africa or Asia. It is a win-win situation. Where is the human rights violation?

The Chinese did not force these countries to buy opium at gun-point by a cohort of Western countries as what had happened to a weak China in the last century… they did not colonize countries like India or Malaya and treat their citizens as second class servants.

Your prediction that China would gain $400 billion out of a $4 billion investment is grossly exaggerated. Even if it is true, the profit will be shared by the people of Congo (as it is a joint-venture). Aren’t the US and the Europeans doing the same thing? Why pick on China?

…Please be fair and truthful.

Eddie C.

Dear Eddie,

I understand where you’re coming from. Let me make clear I wasn’t trying to bash China in regard to what they’re doing in Africa. In fact, I have a strong measure of respect for what they’re doing. What country wouldn’t want to act in its own long-term interests? What country wouldn’t want to leverage the power of wise investments today to supply their own vital resource needs tomorrow?

No, what China is doing in Africa is very smart.

You also point out that Africa will benefit from these investments. I don’t disagree. Odds are that Africa’s level of benefit could be very strong, especially in comparison to the disaster of Western aid — the hundreds of billions that have gone to waste in the past. When rich governments write checks to poor governments, all too often the cash winds up in the pockets of thieves and thugs.

Even charitable gifts can do more harm than good, as some African locals have lamented. When second-hand T-shirts and sweatshirts show up in poor countries by the truckload, they often wind up being sold on the black market. The net result is profit for bandits and a total block on any type of textile industry. (While local clothing makers can compete with cheap imports, they can’t compete with free.)

In contrast to all this, what China is doing is like night and day. Opening mines, building hospitals, paving roads… all these activities require training and infrastructure and jobs, and that’s a great thing. It’s a means by which Congo (and other countries) can benefit, not to mention the shared benefits of resource deals. I don’t want to take that away from China at all.

Valid Concerns

I still think Peter (the Congolese journalist) has reason to be concerned, though, because with China there are still valid human rights questions to ask. There is a lot of good that comes out of a bluntly pragmatic stance, but there is danger, too. In places like Sudan, China has shown its willingness to look the other way when atrocity occurs. Money flow from resource deals can wind up supporting that kind of atrocity.

There are also fair questions to ask about how resources are extracted and local land is used. When it comes to metal mining and oil and gas production, for example, we know there are better and worse ways to do it from an environmental standpoint.

The lowest-cost way to rip a resource from the ground is often the one that leaves that ground denuded by chemicals and all but stripped bare. So there are valid questions in regard to how Congo’s water and soil and sky might look in 20 years’ time.

As far as what the West did in the 19th and 20th centuries, and how to think about that — I can’t argue with you there. The history you point out is indeed a matter of record.

A Hard Question

This all leads to the question stated earlier: How to think about China? For many in the West, this question is still unresolved.

Some, like legendary investor Jim Rogers, embrace China as the next great nation and the rightful heir of the 21st century. Others, quite frankly, view China as an environmental black hole, an ongoing human rights disaster, and a large-scale military conflict waiting to happen.

Which view is correct? As global investors, we here at Taipan lean much more toward the Jim Rogers view. But, as with many things in life, the answer is not black and white. Instead there are many shades of gray.

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From TFN by Today’s Financial News