Speaking at the opening of a major conference with African leaders, Chinese President Xi Jinping proposed $60 billion in financing for projects in Africa in the form of assistance, investment and loans. Xi also said that Beijing is willing to write off Chinese interest-free loans due by the end of 2018 for the most impoverished African nations as China furthers the effort to complete the “One Belt, One Road” initiative on the continent, or as others called it “new colonialism.”
China’s ambitions for Africa are hardly new, and were discussed here over 6 years ago for the first time in “The Beijing Conference”: See How China Quietly Took Over Africa“
And while back then few noticed, this time the western media was quick to label the latest round of Chinese financing a “debt trap”, to which a top Chinese official responded on Tuesday saying Beijing is helping Africa develop, rejecting criticism it is loading African countries with unsustainable financial burdens.
Over the last five years, China’s outreach for economic development in Africa has created new trade routes, investments, and increased political ties. More recently, many African counties have asked China to restructure their debts, which has served as a wake-up call for Beijing.
“If we take a closer look at these African countries that are heavily in debt, China is not their main creditor,” its special envoy for Africa, Xu Jinghu, told a news conference Tuesday, she added, “it’s senseless and baseless to shift the blame onto China for debt problems.”
As Xi completes his grand vision of the “One Belt, One Road” initiative, China pledged billions of dollars of infrastructure investment in countries along the old Silk Road, linking it with a network of countries in Europe, Asia, and Africa. Jinghu said China would use feasibility studies to select new projects that aid African countries the most and steer clear of debt or financial woes.
“We need to take into account the fluctuations of the international economic situation, which has raised the cost of financing for these African countries, and most of them depend on exporting raw materials, the price of which, on the international market, has been falling,” said Xu, adding that the toxic debt buildup in Africa is part of a much larger trend somewhat separate from China.
Xi made no mention of the political and debt concerns that overshadow some BRI projects. But Chinese officials previously have rejected accusations that projects leave host countries too deeply indebted to Chinese lenders.
“China’s investment in Africa comes with no political strings attached,” Xi said. “China does not interfere in Africa’s internal affairs and does not impose its own will on Africa.”
The Xinhua News Agency also published an op-ed denying claims that China was an “economic predator” in Africa, plundering natural resources and dragging it into a debt crisis, were “as false as they are sensational.”
“Chinese loans to Africa have a lower interest rate and longer repayment period compared to the market average, and these concessional loans are primarily used to build infrastructure.”
During a speech at the summit South African President Cyril Ramaphosa on Monday delivered a stinging rebuttal to criticism of China’s development aid in Africa. Mr Ramaphosa said the meeting “refutes the view that a new colonialism is taking hold in Africa, as our detractors would have us believe”.
Deborah Brautigam, an expert on China-Africa relations at the Johns Hopkins School of Advanced International Studies in Washington, said the total loans Xi pledged this year is equivalent to 2015’s total loan value. Brautigam said loan values are smaller this year, as there is more concessionary assistance than before.
“(China’s) debt relief policies have not changed,” she said in a note, adding that the write-off covered a modest part of Chinese finance in Africa.
Former Chinese deputy commerce minister Wei Jianguo, published a piece Tuesday for the China Going Global Thinktank — indicating that Washington seeks to constrain China as the country continues to expand “One Belt, One Road” initiative in Africa — threatening the Western world.
“I hope that in the next five years China-Africa economic and trade cooperation will overtake China-U.S. trade. This is totally achievable.”
In another complication to China’s ambitions, we recently reported that trade infrastructure project along the “One Belt, One Road” could be hitting significant bottlenecks as some countries have sounded the alarm regarding massive debt loads their governments are incurring for infrastructure projects.
The Center for Global Development, a nonprofit think tank based in Washington that focuses on international development, discovered “serious concerns” about the sustainability of the sovereign debt in eight countries receiving infrastructure project funds from Beijing. Those were Pakistan, Djibouti, Maldives, Mongolia, Laos, Montenegro, Tajikistan and Kyrgyzstan.
For example, a $6.7 billion China-Laos railway project represents almost half of the Southeast Asian country’s GDP, according to the study.
Five-years into China’s debt-fueled economic expansion initiative across many countries in the Eastern Hemisphere, it seems that African countries along the “One Belt, One Road” could be running into a debt jam similar to countries in Asia.
In a major blow to China’s “colonial” ambitions, Malaysia recently canceled Chinese-financed projects worth more than $20 billion, saying they were unnecessary and would create an unsustainable debt burden. Deeply indebted Pakistan is also reportedly reconsidering some projects in the multi-billion dollar China-Pakistan Economic Corridor that is a key link in the BRI.
Which begs the question: if China can’t achieve close economic and geopolitical integration with key trade partners and sources of commodities using the carrot of cheap debt, how long until it takes out the stick?
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