- - Wednesday, January 23, 2019

LILONGWE, Malawi — Justice Dapalaba once scratched out a living selling secondhand clothes in Wovwe, a small town near the Tanzanian border. But he closed up his modest shop last year because of intense competition from an unexpected source: China.

“Things have been getting tough for me since the Chinese opened their shops at the trading center,” he said. “People stopped buying from us and started flooding the Chinese shops.”

He is now among many Malawians who are angry over Chinese merchants, whom they accuse of monopolizing local small businesses. Malawi’s experience is being replicated in countries across Southeast Asia, South Asia, the Middle East, Africa and even South America, where a once-welcomed gusher of Chinese public and private investment has led to rising concerns that the price exacted for those investment funds — financially and politically — was far higher than anticipated.

Chinese funding has flooded into Malawi since 2008, when the small, landlocked southeast African country cut its economic ties to Taiwan and opened its doors to investors from Beijing.

Chinese companies promptly launched a building boom, constructing the house of parliament and presidential residence, an enormous national stadium, highways and other big projects. In return, Chinese mining companies began extracting minerals and timber.

Now Chinese entrepreneurs are dominating the local economy by selling cheap clothes, household goods and liquor, and by running restaurants, hotels and other ventures.

“They practice unfair and noncompetitive trade practices intended to kill local businesses,” said Steve Simsokwe, a clothing merchant and activist with the Karonga Youth for Justice, an organization spearheading a campaign against the Chinese traders in rural areas in Malawi. “We can no longer enjoy more customers as we used to do because most people are flocking to the Chinese shops.”

Under Malawian laws designed to protect local entrepreneurs, Chinese traders can operate only in larger cities such as Lilongwe, the capital, and regional hubs such as Blantyre, Mzuzu and Zomba.

“We don’t want them here because they are not legally allowed to run small-scale businesses in rural areas,” said Mr. Simsokwe, who estimates that 1,500 domestic business owners belong to his campaign. “We demand the government to enforce the law.”

Malawian vendors recently staged protests against Chinese businesses and executives across the country. Workers in Chinese-owned firms joined the demonstrations, saying their bosses were often abusive but authorities rarely took action on their complaints.

The Chinese closed their shops for a few days but eventually reopened.

“We have tried to express our grievances on the matter to government for its intervention, but our voice can’t be heard,” said Mike Mlombwa, president of the Indigenous Business Association of Malawi.

Reluctant to offend

But like many other governments that both covet and worry about Chinese direct investment, Malawian officials are reluctant to offend Beijing while trying to respond to local complaints.

The government was doing everything possible to promote and protect local businesses, Labor Minister Grace Chiumia said.

“We empower and promote different entrepreneurship activities by Malawians by creating a conducive business environment and protect them from exploitation by foreign investors,” she said.

Ms. Chiumia declined to discuss the protesters’ grievances about Chinese traders in rural areas, however.

Paul Mvula, who runs social programs at the Church of Central Africa Presbyterian, said officials can’t challenge the Chinese because they owe Beijing too much.

“How do you expect the government to bite the finger that feeds it?” he asked.

In response to rising discontent, Chinese Ambassador to Malawi Liu Hongyang released a statement last year to the local media detailing how Malawi had benefited from its trade relations with China.

“China will continue to work closely with like-minded countries including Malawi to deepen the practical cooperation in all areas, so as to bring more tangible benefits to the peoples of the two countries and push the bilateral relations to a new high,” Mr. Hongyang wrote.

Jackson Msiska, a South African-based analyst at Yale University’s Jackson Institute for Global Affairs, said the government’s temporizing reflects the challenges facing African countries that are now questioning the Chinese investment they once welcomed.

“Malawi and other African governments seem to have been overexcited by the infrastructure and other development projects implemented by China,” said Mr. Msiska. “They should at the same time assess the impact of China on the local citizens.”

The Trump administration, in the battle for influence and contracts in Africa, has sounded a similar warning about Chinese foreign investment practices. Secretary of State Mike Pompeo and National Security Adviser John R. Bolton have issued stark warnings to small countries lured by Beijing’s investment promises.

“China uses bribes, opaque agreements and the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands,” Mr. Bolton said in a speech last month to The Heritage Foundation. “Its investment ventures are riddled with corruption.”

Zambia concerns

In Malawi’s western neighbor, Zambia, local vendors also have complained about disruptions posed by Chinese competitors.

“They have dominated most small-scale businesses here in Zambia, including timber production,” said Chama Banda, who sells timber in Kitwe in central Zambia. “Vendors are threatening to [forcibly remove] the Chinese traders because they are killing businesses for locals.”

Zambian Justice Minister Given Lubinda has complained to Chinese Ambassador to Zambia Li Jie in an extraordinary show of defiance that reflects the discontent in the country.

“Investors should come to provide jobs and build the economy beyond what the Zambian people can do, and not come to Zambia to sell chickens and roast maize,” Mr. Lubinda told the envoy, according to local media.

In Wovwe in Malawi, Mr. Dapalaba is now selling tomatoes and other vegetables, mangos and potatoes — locally grown foodstuffs that Chinese don’t produce or sell.

“I can at least have customers for these goods because I have no foreign competitor,” he said.

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