China is not alone in “tying.” Some Japanese loans are tied. Enjoying this article? In Africa and around the world, much more needs to be done to confront Chinese debt diplomacy. In 2012, the IMF found that China owned 15% of Africa’s external debt, and hardly three years later roughly two-thirds of all new loans were coming from China. South China Morning Post Publishers Ltd. All rights reserved. The continent will also face additional costs due to climate change of $20 to $30 billion per year. For example, China’s “tied aid” for infrastructure usually favors Chinese companies (especially state-owned enterprises), while its loans are in many cases backed by African natural resources. This means that a loan signed in 2020 may not be fully disbursed until 2027 (at which point the commitment becomes the same as the debt). While six African countries are already AIIB members – and more are interested – they can’t access it, as the AIIB currently only covers Asia. Sure. Second, when African countries can get non-Chinese loans, for some projects the average wait is a lengthy nine years. Chinese-Built Angolan "Ghost Town" Wakes Up? [18] Yang Fei, “People Should Rationally Understand the USD 20 Billion Assistance Loans to Africa,” [对“200亿美元援非贷款”应理性看待], China Radio International, March 29, 2013, http://gb.cri.cn/27824/2013/03/29/2165s4069180.htm. [2] He Wenping, “China to Africa: Gives It Fish and Teaches It Fishing,” [中国对非洲：授其以鱼，更授其以渔], JinRongBaoLan, May 6, 2013, http://finance.sina.com.cn/money/bank/bank_hydt/20130506/200915363934.shtml. But not always. According to the China-Africa Research Initiative (CARI) at John Hopkins University, “Angola is the top recipient of Chinese loans, with $43.1 billion disbursed over 17 years”. As a result of this, African countries are finding it hard to extricate themselves from the grip of Chinese debt. Therefore, to count the full amount of the loan in 2012 would be to overestimate Nigeria’s debt to China by USD 391 million. If not, the U.S. will pay a heavy price in its commercial and national security interests. The last summit was held in December 2015 in Johannesburg, South Africa, where Chinese President Xi Jinping announced $60 billion in funding support for infrastructure development in Africa. Rather, it shows the 30 countries with the highest Chinese debt to GDP ratios. [10] The principles include: China always bases itself on the principle of equality and mutual benefit in providing aid to other nations; China never attaches any conditions or asks for any privileges; China helps lighten the burden of recipient countries as much as possible; China aims at helping recipient countries to gradually achieve self-reliance and independent development; China strives to develop aid projects that require less investment but yield quicker results; China provides the best-quality equipment and materials of its own manufacture; in providing technical assistance, China shall see to it that the personnel of the recipient country fully master such techniques; the Chinese experts are not allowed to make any special demands or enjoy any special amenities. If African stakeholders don’t like the lack of transparency that comes with Chinese loans, they need to negotiate better terms. Much Chinese financing to Africa is associated with securing the continent’s natural resources. The debate is partially motivated by the rapid growth of China’s economic presence in Africa: for example, Chinese investment in Africa grew from USD 210 million in 2000 to 3.17 billion in 2011. In some cases, the entire process to approve and complete a project can take just two years. The loan for the hydroelectric project in Zungeru is another good example. Furthermore, decisions are made quickly. This practice is problematic in that many of the resource-rich African countries with which China works also suffer from serious political problems, such as authoritarianism, poor governance, and corruption. The intention of China’s aid to Africa is benign but not altruistic. If this new fund looks like the AIIB, or is somehow linked or managed by the AIIB, it could be transformational. Some projects move even more slowly, with disbursements beginning years after loan signing. In recent years, China’s economic presence in Africa has led to a heated debate, some of it well-informed and some of it not, about the nature of Chinese involvement and its implications for the continent. Here's Why the U.S. Should Be Worried. Congress allocated $60 billion to the new Development Finance Corporation, but this sum is to be used is worldwide. This fact is privately acknowledged by Chinese government analysts, although Chinese literature constantly blurs the distinction between the two categories. Since China’s top economic interest is Africa’s natural resources, aid decisions are inevitably skewed toward resource-rich countries while others receive less favorable consideration.[20]. Because in Africa and elsewhere, governments have secured massive loans from Beijing using strategic assets—such as oil, minerals, and land rights— as collateral. He said the support would be managed by the African Export-Import Bank (Afreximbank), in collaboration with its counterpart in China. Does the public still approve of the government’s approach? [19] In this sense, China’s financing to Africa, including aid, creates business for Chinese companies and employment opportunities for Chinese laborers, a critical goal of Beijing’s Going Out strategy. As African leaders head home from the Beijing Summit, the right question is not whether China’s loans are good or bad, but what the leaders will do to demand what Africans need, and how everyone – not just China – can raise their game to meet those needs. Under this logic, the inclination is to allocate the aid budget to countries that offer China the greatest number of commercial opportunities and benefits. Most directly, China’s crafty negotiations and seizure of strategic assets can limit U.S. influence and access overseas. Are IMF Loans Being Used to Counter China in Africa? [11] “African Expert Interprets the 55 Years of Sino-African Relations,” 《非洲专家解读中非关系55年》, China Talk, Feb 23, 2011, fangtan.china.com.cn/2011-02/21/content_21965753.htm. [4] “Official Development Assistance: Definition and Coverage,” OECD, http://www.oecd.org/dac/stats/officialdevelopmentassistancedefinitionandcoverage.htm. The figure does not show the 30 top recipients of Chinese loans as of 2017. This year, China’s President Xi Jinping announced $60 billion in various types of aid and loans to the continent. But loans from China do need improvement. Updated 24 hours a day by human editors. Furthermore, because the World Bank’s Debtor Reporting System data used by HRT are not publicly available, we are not able to independently verify discrepancies between DRS data and our own estimates of aggregate commitment amounts. "China is committed to taking the lead in benefiting African countries after the research and development of the new crown vaccine is completed and put into use," he said. Africa has recorded more than 259,000 Covid-19 cases and over 7,000 deaths, according to the Africa Centres for Disease Control and Prevention. [7] Toh Han Shih, “China to Provide Africa with US$1 trillion financing,” November 18, 2013, South China Morning Post, http://www.scmp.com/business/banking-finance/article/1358902/china-provide-africa-us1tr-financing. The upcoming Forum on China-Africa Cooperation is sure to include an eye-popping announcement of billions of dollars more in Chinese financing to build infrastructure across the continent. Observers say that while -Beijing has, in the past, written off most interest-free loans extended to African nations, they accounted for less than 5 per cent of Africa's total financial debt to China, with the rest covered by concessional and commercial loans. He also urged Chinese financial institutions such as Export-Import Bank of China and the China Development Bank "to conduct consultations with African countries on commercial sovereign loan arrangements". But there is a third possibility, and surprisingly it also comes from China and the new FOCAC announcements. Thanks to Chinese loans, Djibouti’s debt-to-GDP ratio surged from 50 to 85 percent between 2014 and 2016. Based on our calculations, the outstanding balance of Nigeria’s debt stock to China was USD 1.94 billion, which almost perfectly matches Nigeria’s self-reported figure of USD 1.93 billion. [9] China’s policy toward Africa is pragmatic, and aid has been a useful policy instrument since the early days of People’s Republic of China. In their view, political considerations should be the most important criteria in aid decision-making. Most countries don’t have money to give us!” he declared in a somewhat annoyed tone. China has become one of Africa's largest creditors in recent years, lending hundreds of billions of dollars to governments to build roads, railways and ports. [14] Zhang Changbing, “Opportunities and Challenges in Exploring and Developing African Oil Resources,” [勘探开发非洲石油资源的机遇与挑战], Guo Ji Jing Ji He Zuo, 2008, Volume 3, http://waas.cass.cn/upload/2011/06/d20110619154331656.pdf. On the other hand, however, these short-term benefits should not form a cover-up for the potential long-term negative consequences associated with neglecting issues of governance, fairness and sustainability. By the mid-1980s, China’s generous assistance had opened the door to diplomatic recognition with 44 African countries. Sacha Baron Cohen: We Must Save Democracy From Conspiracies, Donald Trump's COVID-19 Diagnosis Is Forcing Him to Face His Personal—and Political—Vulnerability, Here Are the Favorites to Win the 2020 Nobel Peace Prize, You can unsubscribe at any time. Timothy S. Rich, Madelynn Einhorn, Andi Dahmer, and Isabel Eliassen, About If borrower nations find themselves unable to repay the loan, China can claim the strategic asset. China cancelled interest-free loans to African borrowers amounting to US$3.4 billion between 2000 and 2019. People may not like the Chinese, they may not like the terms of Chinese loans and they may not like the debt they’re taking on but at the end of the day Nigeria, and Africa writ large, doesn’t have any other choice. A carefully curated selection of the day’s most important China-Africa stories. Indeed, African countries seem to be stuck between a rock and a hard place; unable to access favorable loans from others, and tied loans from China. Since the beginning of China’s reform and opening up, especially after 2000, Africa has become an increasingly important economic partner for China.