China’s Business and Politics in South Sudan

Engineers Luo Minhai, 48, and Sun Xinfa, 44, grew up in Heilongjiang Province, China, but a few months ago, they arrived in Khor Wolyang, a neighborhood in Juba, South Sudan, not far from the barracks of the presidential guard. They are supervising the building of a ten-foot wall for the South Sudanese Ministry of Defence and Veterans Affairs as it expands its soldiers’ living quarters.

Since the project requires demolishing parts of the neighborhood, however, some residents are less than pleased and have taken it out on the Chinese workers. Neither Luo nor Sun speaks Arabic or more than a few words of English, but no words were needed when a local South Sudanese man barricaded the street that Luo takes to work. Luo simply handed the man 200 South Sudanese pounds, about $6.50, and he was allowed to continue on his way.

“These people don’t like us,” Luo told me as he swatted flies from his sweaty face. Behind him, South Sudanese workers slathered cement onto large concrete bricks and then stacked them one by one onto the half-built wall. The finished parts stretched down through the dusty village for 2,500 meters and will be 3,000 meters when complete. Luo’s company, China Railway No. 10 Engineering Group, a subcontractor of the Chinese state-owned enterprise Norinco, is among a growing number of Chinese firms working in South Sudan, especially in construction and infrastructure. But the South Sudanese do not see them as building the country up, at least not in Khor Wolyang. “They think China is robbing, not helping, them,” Luo told me.

A few yards from the construction site, Khor Wolyang’s local leaders sat hunched together in a dirt yard behind a wooden fence. Two of the councilmen, Tabu Samson Awii and Elhag Okidi, looked warily over their shoulders in case government soldiers approached, because they could be kicked out of their homes anytime now. “They say we have to leave by the end of May,” Awii told me at the beginning of May. Everyone living behind the wall and within 100 yards beyond it will have their homes destroyed, according to local leaders, even though they have documents certifying their ownership of the land and its residential zoning. In March, some 200 civilians protested against the project, but the government sent three pickup trucks full of soldiers who beat and arrested some of the demonstrators.

When I asked if the locals had sought help from police, people laughed. “There is no place to report these things,” said Councilman Okidi. “If you report, you’re reporting to the same people”— the ones who beat them. Councilman Awii added, “This is the military. If we resist them, they will demolish us.”

Khor Wolyang is one of the Juba neighborhoods that was most heavily affected by the civil war that broke out in 2013. While it has mixed tribes, the neighborhood is predominantly Nuer, the group targeted by Dinka soldiers supporting President Salva Kiir (also a Dinka). In December 2013, Kiir fired his former vice president, Riek Machar, a Nuer, accusing him of staging a coup (a charge Machar denied). When Kiir called for the Dinka soldiers to disarm their Nuer counterparts, fighting erupted at the military barracks just next to Khor Wolyang, and thousands of Nuer civilians fled the killings that followed. Some found asylum at the UN compound for the Mission in South Sudan. Since then, Dinka soldiers have occupied the emptied homes in Khor Wolyang—some of which are now being incorporated into the expanded presidential guard barracks.

China’s relationship with southern Sudan dates back to the Second Sudanese Civil War, which began in 1983 and ended in 2005. Chinese oil companies became a major stakeholder in the country, taking over the southern petroleum fields that were first discovered by U.S. companies such as Chevron, then abandoned after Washington enacted sanctions against Khartoum for human rights violations. By the late 2000s, the China National Petroleum Corporation and Sinopec had become major players, alongside Malaysian and Indian companies in consortiums such as the Greater Nile Petroleum Operating Company (GNPOC) and the Dar Petroleum Operating Company (DPOC). Chinese state-owned enterprises hold a 40 percent share in GNPOC and a 47 percent share in DPOC, compared with Malaysian Petronas’ 30 percent and 40 percent shares, respectively, and Indian Oil and Natural Gas Corporation’s 25 percent stake in GNPOC. But China is the undisputed biggest buyer of crude oil. In 2013, it imported 49,000 barrels per day from Sudan and 65,000 barrels per day from South Sudan, accounting for 86 percent of Sudan’s and South Sudan’s total exports.

Throughout the civil war, Sudan supplied China with roughly 40 percent of China’s African oil imports, or some nine percent of its total imports. The revenue helped sustain the government of Sudanese President Omar al-Bashir, leading international critics to condemn China for undermining sanctions and indirectly funding a regime committing genocide in Darfur. China dismissed the accusations and insisted that it had adhered to the “five principles of peaceful coexistence”—chiefly, noninterference. Meanwhile, Sudan and China’s oil trade kept flowing. Between 1999 and 2001, government oil revenues increased by 875.7 percent, from $61 million to an estimated $596 million. Up to 80 percent of this increase was spent on weapons, according to a former Sudan People’s Liberation Army official I spoke with. China also became Sudan’s largest arms supplier at this time, with transfers of military weapons and small arms from China to Sudan increasing from $1 million in 2002 to $23 million in 2005, according to UN Comtrade.

But in 2011, when South Sudan gained independence, China quickly established diplomatic relations. Most of the oil fields are located in South Sudan, even though Sudan oversees the pipelines and the processing facilities for exporting the oil. In 2012, South Sudan completely shut down its oil production while disputing high pipeline transit fees that Sudan had enacted. Production didn’t begin again until April 2013, after 15 months of negotiations to agree on a flat pipeline rate of approximately $25 per barrel.  War erupted in December that year, killing more than 50,000 South Sudanese and displacing millions. Many of those oil fields were destroyed, and South Sudan’s oil production dropped to about 150,000 bbl/d in the first half of 2014, down from unified Sudan’s average of almost 490,000 bbl/d in 2010.

According to Ma Qiang, the Chinese ambassador to South Sudan, China’s policy has not changed. Ma served previously in Jordan, in Libya, and as chief of political affairs for the Chinese embassy in Khartoum in the 1990s. He defines China’s engagement in the peace process and UN peacekeeping not as interference but as a contribution to a multilateral peacemaking initiative. “People in South Sudan can’t even eat,” Ma told me in an interview, so they were pushing not for regime change but for stability. “How can you talk about democracy now? We support African nations [finding] their own way. We don’t push so-called values of Western democracy.”

When I asked Ma about arms sales to Khartoum, which supports Kiir in the South Sudanese civil war, he admitted that there was a contradiction between China’s economic activities and its supposed desire for peace. But Ma explained that the sale had been finalized before the conflict broke out and that China had halted Norinco’s shipments once it became clear the country had fallen into civil war. “We were implementing a contract,” said Ma. “But we stopped it. If you have a ship full of weapons, you need to put it together and ship it over. That takes a long time. When the conflict broke out, that shipment was already on the way. We could have stopped it if we’d known. But most of the stuff was logistics equipment, not artillery and tanks. Business is business, and it’s separate from diplomacy.”

But can the two really be separated when business is tied to major infrastructural and development projects? According to an embassy official, China registered $33.4 billion in investments in South Sudan, mostly in the oil sector, just before South Sudan’s independence in 2011. The Export-Import Bank of China had set up a cooperation mechanism with the South Sudanese government to provide loans for infrastructure projects that would be repaid with future oil. Plans under that setup included roads, the Juba airport, and digital television development, but they were halted because of the war. “It’s coming back very slowly because of the security risk,” an embassy official explained.

Although the largest Chinese enterprises—state-owned oil companies—stopped operating during the conflict, private firms have not. A number of Chinese businessmen have set off for South Sudan looking for opportunity outside of China’s saturated market, and several Chinese I met in Juba believe that South Sudan has been wrongly stigmatized by the war.

“This is what America always says to the world, bad things about South Sudan and instability,” a banker at the Ebony National Bank in South Sudan named Anthony Wong told me during a dinner for Chinese entrepreneurs. “It’s not true. This is a good place. We’re doing well. We are making money. We have faith in South Sudan. You think the business environment is not good, but if you know what you’re doing in Juba, it’s safer than Hong Kong.” The men toasted to their financial prospects over a table laden with pork ribs, prawn noodles, thousand-year eggs, and clams with tofu. One of them, an investor from Guangzhou, said that this week they were hosting the grand opening of a VIP club in Juba just for Chinese businessmen.

According to the Chinese embassy, approximately 3,000 Chinese citizens are living in South Sudan, largely concentrated in Juba. UN peacekeepers and diplomatic corps aside, the Chinese work in for-profit hospitals and medical clinics, hotels, restaurants, construction, infrastructure development, or private small businesses. At the lunch table, many of the Chinese told me that they’d come to Africa with state-owned enterprises but found it more lucrative to start their own independent projects. Their fields of work ranged from used-car sales, electric appliances, and telecom to private security, construction, and import/export logistics. “China developed late, so we can only find opportunity in Africa,” He Xuefei, head of the Juba Chinese Businessmen’s Association, told me. “It’s hard to succeed in America or Europe, but we can develop here. Chinese people work hard. We have perseverance for business in any country.”