🔒 China pledges $60bn to Africa, waives some debt – The Wall Street Journal

JOHANNESBURG — As US president Donald Trump builds more walls than he pulls down around the country, it’s no surprise that China is bulldozing full steam ahead with projects in to Africa. It’s nothing new as China has taken the lead on the continent with investments, but one wonders if the door will be opened wider given Trump’s recent rhetoric looking in, rather than out. There are concerns with the Chinese footprint in Africa, with some countries potentially over-indebted while South African president Cyril Ramaphosa highlighted the trade imbalance as something that needs to be addressed. China’s president Xi Jinping, speaking at the summit in Beijing, has pledge a further $60 billion to the continent, alleviating some of the concerns by waiving some debt, but no details of with which countries. – Stuart Lowman

China’s Xi Pledges $60 Billion Toward Africa’s Development, Waives Some Debt

Concerns over a looming African debt crisis have simmered since the International Monetary Fund warned in May that 15 out of 35 low-income sub-Saharan countries face serious financial risks from heavy borrowing. Some Western officials have blamed China for exacerbating the problem – even accusing Beijing of pursuing colonial exploitation in Africa – by financing a slew of infrastructure projects through Mr. Xi’s signature Belt and Road initiative.

Cyril Ramaphosa, Xi Jinping, China, state visit
President Cyril Ramaphosa hosts China’s President Xi Jinping on a State Visit to South Africa, July 24, 2018.

Many recipient countries have cheered these efforts, though some have voiced concern over debt burdens from Beijing-backed loans. In Kenya, public disquiet has emerged over a $3.2 billion Chinese-built railway line that hasn’t generated expected revenues.

Speaking after Mr. Xi, African Union Commission Chairman Moussa Faki remarked on imbalances such as rising debt, saying there have been calls for Africa “to say no to outside help.” He noted, however, that China’s money is funding regional development in concrete ways.

This week’s summit offers a platform for Mr. Xi to assuage African concerns, said Chinese academics.

“China is now focusing on the quality of investments and moving away from the emphasis on quantity,” said Wang Yiwei, director of the Institute of International Affairs at Beijing’s Renmin University. This means stronger oversight on Chinese investments to minimise wasteful spending and curb corruption, he said.

The $60 billion in financing Mr. Xi pledged for Africa over the next three years matches the commitment he made at a previous summit in 2015, with a hefty chunk coming in the form of investment from businesses.

The new package includes $35 billion in grants, loans and credit lines, a $10 billion development-financing fund and $5 billion for boosting Chinese imports from Africa. Beijing will also encourage Chinese firms to invest $10 billion in the continent and help African financial institutions issue bonds in China, Mr. Xi said.

Nodding to the concerns over debt, Mr. Xi said China will also forgive certain interest-free loans – those maturing this year – extended to the continent’s poorest and most indebted countries. He didn’t specify which countries would benefit.

Speaking at a forum of Chinese and African business executives earlier Monday, Mr. Xi said Chinese resources are being directed at Africa’s “inadequate infrastructure” and are “not to be spent on any vanity projects.”

Chinese officials have rebuffed criticism of Beijing’s contributions to African debt. Vice Commerce Minister Qian Keming told a news briefing last month that “the majority of the debt burden [in Africa] isn’t necessarily created by China.”

Chinese lenders have provided some $136 billion in loans to African governments and their government-owned enterprises from 2000-2017, according to the China-Africa Research Initiative at Johns Hopkins University.

Even so, “Chinese loans are not currently a major contributor to debt distress in Africa,” CARI said in a recent report. Of 17 African countries in debt distress or facing high risk of distress, only three of them – Djibouti, the Republic of Congo and Zambia – count Chinese loans as the most significant contributor to their debt burdens, the report said.

Mr. Xi’s pledges are expected to provide some relief to these countries.

At Monday’s opening ceremony, African leaders acknowledged difficulties in their economic ties with Beijing, even as they welcomed Chinese largess.

South African President Cyril Ramaphosa, speaking after Mr. Xi, said work is needed to “balance the structure of trade between Africa and China,” referring to the continent’s yawning trade deficit with the world’s second-biggest economy.

Debt and unbalanced trade are widely understood legacies of China’s headlong push into Africa. The expectations from African leaders of continued, large-scale Chinese funding make it difficult for Beijing to promise less money, and it is easier to funnel the money into loans, rather than pressuring companies to move more factories to the continent.

“That’s the way China will make the most friends, creating jobs,” said Jeremy Stevens, the Beijing-based economist at South Africa’s Standard Bank Group. “How do you communicate that in a speech when everyone is waiting for a target?”

In his speech, Mr. Xi repeatedly referred to a “China-Africa community of shared destiny” when describing plans for future cooperation, a rhetorical shift from his keynote address at the 2015 summit, when he described what China “will” do in Africa.