Chinese diplomats take exception to any labelling of Chinese loans to Africa as constituting a "debt trap". After all, according to China’s ambassador for the Forum on China-Africa Co-operation (Focac), Zhou Yuxiao, his country’s own trajectory out of poverty was by way of loans.
"Africa’s development is not as fast as we expected it to be because there is a lack of infrastructure, a lack of funds, and a lack of qualified personnel," he said at a Business Day Dialogues webinar following the Focac summit in Dakar, Senegal, in late November.
Still, China believes it can help by "building infrastructure for you to help you", by lending money to help African governments afford this and by inviting African students to study technology in China.
"Our intention is 100% good," Zhou said. But when countries can’t repay their loans, it is China that loses out. Zambia, for example, owes China $6.6bn.
At this year’s Focac summit, China for the first time in two decades reduced its financing pledges — from $60bn each in 2015 and 2018 to a total of $40bn. Its actual lending already started falling in 2019, to $7bn from a high of $28bn three years before, according to research by the China-Africa research initiative at Johns Hopkins University.
In part, that’s the result of the pandemic’s pinch on China’s economy: its GDP growth dropped from 6% in 2019 to 2.3% last year.
But the cuts also reflect the country’s growing risk aversion, says Gert Grobler, former ambassador and senior research fellow at the Institute of African Studies at Zhejiang Normal University.
China has become a strategic partner for Africa’s private sector
— Folashadé Soulé
The "debt trap" allegations that arise when countries struggle to repay loans have cast China in a bad light. An Afrobarometer survey in 19 countries, for example, has shown increasing concern among citizens that their governments can’t repay loans from China, or are paying too much for them.
"There are also corruption issues on the continent in some of the countries where China’s state-owned entities and companies are involved, such as recently in the Democratic Republic of Congo [DRC]," says Grobler, "while conflicts in Ethiopia, Sudan and the DRC, where China has a large vested interest, moved the Chinese authorities to take a more cautious stance with financial support and loans."
Grobler believes China wants to be seen as a responsible international citizen that keeps to multilateral rules. This is especially true for China’s involvement in the UN and its agencies, the World Trade Organisation, the World Health Organisation and other world bodies such as the G20.
Because of this, China’s economic and financial involvement in other countries "will increasingly be done in a more careful, calculated, transparent and sustainable way", Grobler says.
On the whole, he thinks Beijing is genuinely committed to multilateralism. "A good example of this is President Xi Jinping’s proposed global development initiative, a concept that the international community should take to heart."
Xi first flighted the concept during the UN General Assembly’s session in September, in a call to the international community to speed up implementation of the UN 2030 Agenda for Sustainable Development.
However, China doesn’t intend scaling back in Africa, according to Zhou. "Actually, China believes that Africa is the continent with full potential, and the future will be brighter for Africa when we look at Africa as a rising star," he said. "So there might be a possibility that investment is going down, but that is temporary."
Analysts have suggested that China’s relations with Africa could be shifting from the traditional model of infrastructure and construction investment towards private sector-led development, as is evident in Xi’s nine-point plan.
China’s state council information office for the first time published a white paper on the subject, "China and Africa in the New Era: A Partnership of Equals", a few days before the conference. It lays out Beijing’s new vision as follows: "China is promoting a new development paradigm with domestic economy and international engagement providing mutual reinforcement and the former as the mainstay. China’s development will create more opportunities for Africa’s development."
Kenyan development economist Anzetse Were told an SA Institute of International Affairs webinar last month that there is appetite on both sides for a local development approach in sectors such as construction, agriculture, renewable energy, digitisation and innovation and manufacturing.
And the African Continental Free Trade Agreement, too, can be leveraged to promote trade between Africa and China.
"The reality and the perception of Africa-China relations will [in future] be a triangle of state-to-state relations, civil society organisations and private sector engagements," Were said.
Folashadé Soulé, senior research associate in the global economic governance programme at Oxford University’s Blavatnik School of Government, agrees that "China has become a strategic partner for Africa’s private sector".
To many African businesspeople, "China has also become an African business", says Soulé, due to the supply of, for example, construction materials, textiles, furniture and motorcycles. But she warns about the trade imbalance between the continent and China.
China’s imports from Africa in 2020 accounted for $72.7bn, mostly in raw materials; its exports to Africa were valued at $114.2bn.
The shift in China’s approach to Africa is also reflected in its intention to provide credit to African financial institutions to support the development of local companies, rather than to African governments to fund Chinese projects. This could shield China from being accused of setting debt traps for African governments.
Most African countries, including SA, want China’s involvement in Africa to continue. President Cyril Ramaphosa — a proponent of development through trade — said in his address to the summit that Focac is "an engine for progress", and that the continent should work with China "to improve liquidity in our respective countries so that they have the necessary fiscal space to recover".
Africa should, however, ensure it takes advantage of China’s private sector approach and improve its products on offer, says David Monyae, director of the Centre for Africa-China Studies at the University of Johannesburg.
"We can’t keep taking raw bananas to China," he says. "We need to compete with other countries in Asia who are selling more or less the same products to China. We need this to be a two-way project."
The next three years
In his video address to the recent Forum on China-Africa Co-operation, President Xi Jinping laid out China’s commitment to Africa over the next three years.
The programme sees a steep cut in investment pledges and a reduction in planned activities compared with the previous commitment in 2018.
- China is to provide 1-billion doses of vaccines to Africa. It will undertake 10 medical and health projects on the continent and send 1,500 health workers and experts.
- China will undertake 10 poverty reduction and agricultural projects for Africa, and send 500 agricultural experts. It will also encourage Chinese institutions and companies to build “demonstration villages” to showcase co-operation.
- It will provide “green lanes” for agricultural exports to China, and add more products to the list of zero-tariff goods. The aim is for $300bn in total imports from Africa. Beijing will provide $10bn in trade finance, and build a zone in China to promote trade and economic co-operation with Africa. It will undertake 10 connectivity projects and form an expert group on economic co-operation with the African Continental Free Trade Area’s secretariat.
- Chinese businesses will be encouraged to invest $10bn in Africa, and a platform will be established for private investment promotion. China will undertake 10 industrialisation and employment promotion projects, provide credit facilities of $10bn to African financial institutions and support African SME development. It will write off some debts due in 2021 and channel into Africa $10bn from its share of the International Monetary Fund’s new allocation of special drawing rights.
- China will undertake 10 digital economy projects and support the development of joint laboratories, partner institutes and innovation co-operation bases. A marketing campaign will showcase 100 African stores and 1,000 African products on e-commerce platforms.
- China will contribute to the Great Green Wall project in the Sahel with 10 green development, environmental protection and climate action programmes. It will build African centres of excellence on low-carbon development and climate change adaptation.
- China will help build or upgrade 10 African schools and invite 10,000 African professionals to seminars and workshops. Chinese companies will be encouraged to create at least 800,000 jobs in Africa.
- Chinese tourists will be encouraged to travel to Africa and there will be film festivals and China-Africa women’s and youth forums.
- China will undertake 10 peace and security projects for Africa, continue to deliver military assistance to the AU and support regional security and antiterrorism efforts.
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