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

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY DAVID PILLING, FT AFRICA EDI­TOR

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

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