From the U.S. Government Accountability Office, www.gao.gov Transcript for: China's Engagement in Sub-Saharan Africa Description: Audio interview by GAO staff with David Gootnick, Director, International Affairs and Trade Related GAO Work: GAO-13-199: Sub-Saharan Africa: Trends in U.S. and Chinese Economic Engagement Released: February 2013 [ Background Music ] [ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. It's February 2013. Since 2001, China has rapidly increased its economic engagement with Sub-Saharan African countries. A team led by David Gootnick, a director in GAO's International Affairs and Trade team, recently reviewed that engagement and how it compares to U.S. policies and approaches in the region. GAO's Jeremy Cluchey sat down with David to talk about what they found. [ Jeremy Cluchey: ] Your team looked at China's approach to economic engagement in Sub-Saharan Africa; what forms did you find this engagement typically takes? [ David Gootnick: ] Right. Well for both China and the U.S., we looked first at trade, both imports and exports; second, at investment activities of both U.S. and Chinese firms; and third, at government financing through loans and grants, including development assistance. And right away, we observed that the Chinese government's goals and policies in Sub-Saharan Africa differ in some regards from the U.S. So three key attributes of China's approach are first, the concept of mutual benefit or mutual development between China and Sub-Saharan Africa; a second, China's policy on non-interference with African Nations' internal affairs; and third, on opening up with African markets for Chinese goods and services. [ Jeremy Cluchey: ] And how does this approach compare to the approach that the United States has taken through engaging in this region? [ David Gootnick: ] Well, in contrast to China, the pillars of the current U.S. strategy for Sub-Saharan Africa are first, strengthening democratic institutions--building support for human rights, civil society, independent media; a second, spurring economic growth through trade and investment; third, advancing peace and security--so bolstering regional security, cooperation, conflict prevention, support for the United Nations, peacekeeping, and the like; and fourth, promoting development, including public health, food security, increased opportunities for women and girls. [ Jeremy Cluchey: ] Can you talk about any trends you've identified in terms of U.S. and Chinese economic engagement here? [ David Gootnick: ] Well, three key points here, first on trade. Over the past decade, both U.S. and China have seen a dramatic increase in their trade with Sub-Saharan Africa, but China's trade has grown much faster. Since 2009, China pulled ahead of the U.S. as the region's largest trading partner. Both countries primarily import petroleum, but China also imports ore's, metals, and minerals from the region--copper's a good example. And China's exports, particularly the manufactured goods, have really skyrocketed. Manufactured goods and machinery have surged in the past decade. China's exports have increased well over tenfold. Second, on private investment. Data on Chinese foreign direct investment is limited but what's available indicates that both U.S. and Chinese firms are mining in petroleum extraction. However, unlike the United States, Chinese firms are also invested heavily in manufacturing and construction. [ Jeremy Cluchey: ] Your team looked in particular at three Sub-Saharan nations: Angola, Ghana, and Kenya. What did you find there? [ David Gootnick: ] Well, we chose these three case study countries with varied geography, varied income levels, and economic activity among other things. And by drilling down in these individual countries, we're able to get better quantitative data and tell a richer story. So for example in Angola, both countries are major importers of crude oil. However, the U.S. firms have a leading role in Angola's oil production in that industry and the Chinese firms aren't yet a match in terms of technological capabilities for offshore oil operations. In all three case study countries, we observed that Chinese government loans well exceed U.S. loans and the Chinese provide significant share of these loans for infrastructure construction--so roads, railways, schools, hospitals, sports stadiums, and other types of physical infrastructure. And in many cases, these loans directly support Chinese construction firms who've been quite successful in winning these construction contracts. [ Jeremy Cluchey: ] Finally for U.S. taxpayers interested in global engagement in the region which is playing an increasingly important role in the world economy, what's the bottom line here? [ David Gootnick: ] Well, I think a couplefold. Sub-Saharan Africa has great potential for economic growth and development. The fact that China has surpassed the U.S. as its largest trading partner is really significant. And the U.S. government's recent focus on commercial involvement reflects the region's strong prospects. However, at the end of the day for many U.S. firms, Africa's really still viewed as a high-risk and high-cost place to invest. [Background Music] [ Narrator: ] To learn more, visit GAO.gov and be sure to tune in to the next episode of GAO's Watchdog Report for more from the congressional Watchdog, the U.S. Government Accountability Office.