China will cut the amount of money it supplies to Africa over the next three years by a third in a sign of Beijing’s growing caution over the continent’s indebtedness.
In a video address to the triennial Forum on China-Africa Cooperation being held in Senegal, Chinese president Xi Jinping pledged $40bn to African countries in investment, credit lines, trade finance and special drawing rights.
While this represents a cut from the $60bn pledged at the previous two Focac summits, Xi emphasised his commitment to what he called a “win-win” relationship.
In addition, China’s president promised 1bn Covid-19 vaccine doses, although he provided no timeframe. He also pledged to step up co-operation on solar, wind and other renewable investments and to simplify procedures in order to increase agricultural imports from African states.
Chidi Odinkalu, senior manager for Africa at the Open Society Foundations, said the reduced financial pledge showed that Beijing no longer had to try so hard in Africa. “China’s strategic objective was to get a foot in the door. Now that it’s in the door, it can choose to dictate the terms,” he said.
He criticised some African governments for relying too heavily on loans from Beijing. “The volume of credit that some of them have binged on makes them dependent beyond any sensible notion of sovereignty,” he said.
Carlos Oya, an expert on China-Africa relations at Soas, University of London, said Xi’s vaccine pledge was significant given the failure of western initiatives to supply the continent. “A billion doses of vaccine is a big pledge,” he said. “If they pull that off that would make the rest of the world look awful.”
Oya agreed that the cut in proposed finance signalled “concern about the ability of African countries to absorb that much debt”.
The IMF categorises more than 20 African countries as being at high risk of debt distress or already in debt distress, a list that has grown because of the Covid-19 pandemic.
Chinese loan commitments to Africa peaked in 2016 at $29.5bn, but dropped to $7.6bn in 2019, the latest available data, according to the Chinese Loans to Africa Database, compiled by scholars at Johns Hopkins University.
“In the past, lots of African countries borrowed money to grow the economy, they believed they could service the debt if the economy kept growing,” said Kai Zhu, head of the China-Africa corridor at South Africa-based Absa bank. “Covid brought fundamental change to the base case and we have seen some debt restructuring and debt-relief discussions.”
Last year, Zambia, which has borrowed heavily from China as well as from commercial lenders, became the first African country to default on its eurobond loans. João Lourenço, president of Angola, the biggest African borrower from China, recently told the Financial Times that Beijing was unlikely to make more concessions after agreeing relief on about $20bn of debt. Ethiopia, another big recipient of Chinese loans, has seen its economic prospects dim after descending into civil war. It has also sought debt relief.
A white paper from the State Council, China’s cabinet, published on the eve of the Focac meeting, confirmed the Chinese government’s shift of focus.
“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,” it said. It pledged to carry over Chinese public health assistance during the pandemic into longer-term co-operation to improve public health systems in Africa.
Despite signs of caution, China remains the biggest bilateral lender to the world’s poorest countries, including many in sub-Saharan Africa, where it accounts for about a fifth of all lending.
China has also been the biggest bilateral participant in the G20’s debt service suspension initiative, launched last year to help poorer countries fund their pandemic response. But critics, including David Malpass, president of the World Bank, accuse it of a lack of transparency in debt contracts.
China has also been accused by some, including in Africa, of seeking to ensnare governments in a debt trap. Beijing has dismissed such claims, saying that it has never sought to transform debt into ownership of particular African assets.
Additional reporting by Jonathan Wheatley in London
Source: Economy - ft.com
