Is China the next ‘Saviour’ of Africa?

By Song Yinyin

Fig.1 The FOCAC in session1

Unlike the cacophonous and grumble-filled first ever no-deal Asia Pacific Economic Cooperation meeting that broke off earlier November2, the ministerial meeting of the Forum on China-Africa Cooperation (FOCAC) held in Beijing in September was more than prolific. The vast majority of 55 Presidents of the African continent attended the meeting to trumpet their faiths in globalization and world trade. They applauded Chinese President Xi Jinping for making a new pledge of $60bn financial commitment which comprises of $15bn grants, interest-free loans, and concessional loans; $20bn credit lines; a $10bn special fund for development financing; another $5bn special fund for boosting Chinese imports from China and the last $10bn private sector investment.3 Though same in total amount, the 2018 $60bn pledge has a different structure from the $60bn commitment pledged in 2015 during the last FOCAC meeting. This re-structuring reflects China’s attempts to shed accusations of setting ‘debt traps’ for African states and practicing neocolonialism

 

Fig 2. Comparison of 2015 and 2018 $60bn pledges4

 

A Blessing Trap in Disguise?

Since the first FOCAC in 2000, Chinese investments and loans to the African states presented a more favorable alternative to traditional Western loans and aids, which had political strings attached. In contrast, the Chinese promised respect for African state sovereignty and non-interference in domestic affairs. 5

However, the Sub-Saharan African economic system has been notorious for its indulgence in unsustainable debt accumulations. According to a World Bank report, the amount of public debt in these countries has increased to an average of 56% of their GDP in 2016, with more than two-thirds of the countries experiencing a growth of more than 20%.6 Yet, in the meantime, China is increasing the amount of developmental commitment to a debt-distressed Africa. Many African states are developing a progressive dependency on this easily available, lassie-faire source of loan, rendering themselves trapped in the unsustainable cycle of relentless borrowing from China. For instance, the small African country of Djibouti, the harbor of the first Chinese overseas naval base, owes 82% of its external debt to China by 2016, and this amount is expected to be repaid “in cash or in kind”.7 Evidently, these countries are unable to repay these huge amounts in cash in the medium term. Thus, they will be required either to reciprocate with becoming part of China’s diplomatic clout in international negotiations or to compensate with a “debt-for-equity swap”.7 According to the critics of Chinese loans, neither form of repayment is unsustainable for the African countries in the long run. They will be unable to extricate themselves from this debt relationship and eventually lapse into toxic debt crises.

On the contrary, statistics seem to show another side of the story. From 2000 to 2016, China is far from rising to become one of the largest creditors of the continent. More than 60% of African debt is owed to private lenders and international organizations including the World Bank. Only 1.8% of the total debt can be accounted for by Chinese loans.8 Judging from the mere minute portion of the unsustainable debt problem that can be attributed to China, the Chinese has its justifiable counterstatement against the barrage of allegations.

Neocolonialism or Brotherhood?

Despite China touting itself as an amiable friend of Africa and announcing to establish a “China-Africa Community with a Shared Future”,9 it is still the target of Western criticism of pursuing ‘neocolonialism’. This accusation originates from the trade relationship between China and Africa. China’s trade with Africa peaked at $221.6bn in 2014, before sharply falling in 2015 and 2016 due to a reduced need for commodities from Africa.10 In addition, the trade relationship changed in orientation from 2014 onwards—from an African-oriented trade surplus with China to a Chinese-oriented trade deficit with China.

 

 

 

 

 

 

 

 

 

 

 

 

Fig 3. 2006 to 2017 China’s trade with Africa10

 

 

 

Critics compared this relation to the trade relations between European colonial masters and their colonies of African states. Both extracted low-value raw materials from Africa while exporting value-added manufactured products back to the continent, leaving African states out of the progress of modernization.

However, mocking China as being a neocolonial master appears to be unjust at least, when economic capacity building and improved economic development framework are solidly in place. A McKinsey Report in 2017 showed that Chinese-owned businesses employed millions of Africans and offered skills training or apprenticeship11 to transfer skills to the local population and improve their general employability. Why should any African countries reject such a reliable partner who proves to be willing to invest in African labours?

Fig 4. Chinese companies employing Africans11

 

A New Outlook?

Notwithstanding, the strengthened Sino-African relationship is indeed mutually beneficial for both parties. Apart from Africa harnessing Chinese political influence and support in leveraging its bargaining power in international affairs, it has benefited economically as well. Most of the paramount infrastructures in Africa are installed and built with Chinese investments by Chinese firms, including the majestic African Union Headquarter.

Yet, African leaders, under domestic pressures, have pushed Beijing to retain a more ‘strategic relationship’ rather than one that tilts towards Chinese favors.12 The Chinese authority is well aware of Western criticism and native African frustrations. Consequently, they have set forth a cooperative and trustworthy image by reflecting their proactive changes in the restructured $60bn financial pledge and the Eight Initiatives of the Beijing Action Plan. The Eight Initiatives focused on economic capacity building and skills and technology transfer to African people through means including industry partnering and education and human resource development.3 Moreover, the $5bn fund specifically designated to improve China’s non-resource imports from Africa will see China’s efforts to offshore its own manufacturing services to Africa and incorporate them into the value-add global manufacturing chain, so as to diversify African exports and to eventually revert the trade deficit with China.

All in all, the outcome of the FOCAC proves to be the best opportunity available to Africa in the next three years amidst the protectionism and isolationism triumphed by the US administration and the internal disputes and identity crisis of Europe.

 

 

 

 

 

 

 

 

 

References:

  1. Shaban, Abdur Rahman Alfa. “Handful African Presidents Not Attending 2018 FOCAC Summit in China.” Africanews. September 3, 2018. Accessed November 28, 2018.

http://www.africanews.com/2018/09/03/handful-african-presidents-not-attending-2018-focac-summit-in-china/

 

  1. Murphy, Katharine. “APEC Leaders Unable to Agree on Communique amid US-China Trade Tensions” The Guardian. November 18, 2018. Accessed November 28, 2018.

https://www.theguardian.com/world/2018/nov/19/apec-leaders-unable-to-agree-on-communique-amid-us-china-trade-tensions

 

  1. China Ministry of Foreign Affairs, Forum on China-Africa Cooperation Beijing Action Plan (2019-2021), September 12, 2018, MFA. Accessed September 29, 2018.

https://focacsummit.mfa.gov.cn/eng/hyqk_1/t1594297.htm

 

  1. Heever, Claire Van Der, Ms. “How Much Is China’s $60-billion Really Worth?” Mail & Guardian. September 7, 2018. Accessed September 30, 2018.

https://mg.co.za/article/2018-09-07-00-how-much-is-chinas-60-billion-really-worth

 

  1. The Chinese Government’s Eight Principles for Economic Aid and Technical Assistance to Other Countries,” January 15, 1964, History and Public Policy Program Digital Archive, Zhonghua renmin gongheguo waijiaobu and Zhonggong zhongyang wenxian yanjiushi, eds., Zhou Enlai waijiao wenxuan (Selected Diplomatic Papers of Zhou Enlai) (Beijing: Zhongyang wenxian chubanshe, 1990), 388.

 

  1. World Bank Group. 2018. Africa’s Pulse, No. 17, April 2018. Washington, DC: World Bank. © World Bank.

https://openknowledge.worldbank.org/handle/10986/29667 License: CC BY 3.0 IGO

 

  1. Djibouti risks dependence on Chinese largesse”. The Economist. July 19, 2018. Accessed September 29, 2018.

https://www.economist.com/middle-east-and-africa/2018/07/19/djibouti-risks-dependence-on-chinese-largesse

 

  1. Chen, Xi. “Why Fears of China’s Neocolonialism in Africa Ring False in the Face of Numbers That Tell a Different Tale.” South China Morning Post. September 25, 2018. Accessed November 29, 2018.

https://www.scmp.com/comment/insight-opinion/united-states/article/2165489/why-fears-chinas-neocolonialism-africa-ring

 

  1. China Ministry of Foreign Affairs, Beijing Declaration-Toward an Even Stronger China-Africa Community with a Shared Future, September 12, 2018, MFA. Accessed September 29, 2018

https://focacsummit.mfa.gov.cn/eng/hyqk_1/t1594324.htm

 

  1. China-Africa Relations Move Forward.” The Economist Intelligence Unit. September 6, 2018. Accessed September 25, 2018.

http://country.eiu.com/article.aspx?articleid=77117991&Country=Angola&topic=Economy&linkId=100000003425959

 

  1. Jayaram, Kartik, Omid Karssiri, and Irene Yuan Sun. “The Closest Look Yet at Chinese Economic Engagement in Africa.” McKinsey & Company. June 2017. Accessed November 29, 2018.

https://www.mckinsey.com/featured-insights/middle-east-and-africa/the-closest-look-yet-at-chinese-economic-engagement-in-africa

 

  1. Hornby, Lucy, and David Pilling. “Africa Seeks China Deals That Will Bring Jobs and Skills.” Financial Times. September 1, 2018. Accessed September 29, 2018.

https://www.ft.com/content/fad52f40-acce-11e8-94bd-cba20d67390c