The boon of China’s entry into Africa comes with a warning
Beijing’s loans build ports, airports and roads but they are often overpriced
More than 40 African leaders trooped last month to Beijing for the triennial Forum on China-Africa Cooperation. A Kenyan woman joked that, rather than giving them more loans, Xi Jinping, China’s president, should keep all the leaders indefinitely in China instead
More than 40 African leaders trooped last month to Beijing for the triennial Forum on China-Africa Cooperation. A Kenyan woman joked that, rather than giving them more loans, Xi Jinping, China’s president, should keep all the leaders indefinitely in China instead. The continent, she said, would be better off without them. In the end, Mr Xi went for option number one: he gave them more money. Over the next three years, he announced, China would offer $60bn in new funding.
The issue of Africa’s supposed debt addiction to China has become the subject du jour — or remen huati, as they say in Mandarin. In copper-rich Zambia, which is heavily indebted to Beijing, China has been accused of using loans to inveigle itself into staterun entities, including the electricity utility and state broadcaster. The Zambian government denies the claims.
Africa’s vibrant civil society has become more alive to the topic of China’s supposedly neo-colonialist ambitions. Beijing is routinely accused of getting African countries in hock so that it can control resources and manipulate political systems. A typical take, by South African cartoonist Zapiro, shows Mr Xi trundling along with a shopping cart into which he has casually thrown the entire African continent. It is captioned “Chinese Takeaway”.
The idea of China’s supposedly nefarious African actions has gained credence in Washington. Legislation that would double funding for the US Overseas Private Investment Corporation to $60bn is being sold to Donald Trump specifically as countering China’s supposed “debt trap diplomacy”. Ray Washburne, president of Opic, told the Financial Times that China was engaged in “economic warfare”.
In an open letter, 16 senators sounded the alarm. China, they said, had already parlayed loans to Sri Lanka into a 99-year lease on Hambantota port. In Africa, Beijing had got its hooks into Djibouti. Some 80 per cent of the country’s external debt is owed to China, a situation senators said made the geostrategic country, on the Red Sea, vulnerable to Chinese meddling.
China does indeed have global ambitions. But the demonisation comes in the context of an escalating US trade war with Beijing. As much as anything, the alarm in Washington is an acknowledgment that China’s development strategy has been working. While the US has been sleeping, China, particularly in Africa, has stolen a march by using relatively modest sums to gain outsized influence.
Many of the claims made against China are exaggerated. According to the China Africa Research Initiative at Johns Hopkins University, which tracks Chinese loans to Africa, the World Bank consistently lends more to the continent than China’s Eximbank. Although Chinese loans lack transparency, it says, its best estimate is that they are not a major contributor to African debt distress.
Indeed, many African governments have gone on eurobond borrowing sprees, meaning they are in debt as much to Wall Street and the City of London as to Beijing. Researchers at Johns Hopkins found that only in Zambia, Djibouti, and possibly Congo-Brazzaville, were loans from Beijing the major cause of debt distress.
If China is weaponising capital — using loans to create countries in its own image — then the west did exactly the same in the 1970s and 1980s when it made massive and unsustainable loans to Africa through multilateral institutions such as the World Bank and IMF.
When those loans turned sour, the same institutions pushed through their favourite medicine: hated structural adjustment programmes that eviscerated the state — and from which many countries are arguably still recovering.
Certainly, there have been problems with Chinese finance too. Angola’s government took over last year only to find that loans made under the previous regime to Sonangol, the state oil company, were far more expensive than advertised. Chinese-financed projects often lack strict environmental safeguards and can be shoddy. Most worrying of all, easy money, with few strings attached — until the bill comes due anyway — has fostered corruption in countries from Kenya to Nigeria. Yet on balance, China’s entry into Africa has been a boon, providing the ports, roads and airports without which no development push can get started. None of this means that Africa should ignore the warnings about Chinese loans. Civil society is right to keep a close watch on infrastructure projects that are too often overpriced and unable to generate sufficient income to pay back the underlying loan.
China has presented African leaders with an opportunity to jump-start development. If they squander it, they really do deserve to be locked up in Beijing.
Doraleh port in Djibouti: about 80 per cent of the country’s external debt is owed to China © AFP