2000 China-Africa Relationship: The Beginning
* China Joins the WTO
* Belt and Road Initiative
* 2021 China-Africa Relationship: Where it is Now
* Next Decade
China – Africa ties have evolved over the past few decades, but the two have only become more intermingled as the relationship increasingly crossed economic and geopolitical lines. When China first entered the G20 around the year 2000, Africa was virtually untapped by Western cultures beyond relief programs. Of course, China also wasn’t the global giant it is now so at the time, the burgeoning relationship between China and Africa was a win-win. It started with Angola and Zimbabwe, but the rest of the African continent soon followed and now more than 20 years later, the relationship has only become increasingly complex and even more meaningful from a global perspective.
IN THE BEGINNING To explore the future of this relationship, we must first take a look back at how it all began. Pre-2000, the African continent was widely regarded as a continent in need. From widespread famine to disease (HIV-AIDS) to civil wars, the continent was struggling on many fronts and highly fragmented with over 50 territories or member states; in desperate need of any kind of assistance. And while NGOs may have had a presence, the continent needed far more in terms of investment to rebuild everything from infrastructure to fragile economies.
At the time, there was some European influence – most notably from Italy – but this was still an extremely expensive proposition for many European countries to invest in. China, on the other hand, was looking for ways to expand its global reach and Africa provided a fairly low risk entry point – low barriers to entry, low global competition and low political risk. With China’s entry into the World Trade Organization in 2001, this would only deepen China’s role in Africa and global affairs.
CHINA JOINS THE WORLD TRADE ORGANIZATION Quick side bar: President George H.W. Bush proposed, and later President Bill Clinton pushed, for Congress to admit China into the World Trade Organization (WTO) stating that allowing for free trade with China would drastically reduce tariffs on American Imports into China, while giving a large portion of the global population access to American goods and services. China did reduce tariffs, but forced American companies to share technology and IP, which has led to the contemporary set of challenges between USA and China.
With little external global influence, the spread of China’s influence from mainly state-sponsored government loans to spur development throughout the continent of Africa quickly became apparent in just a few short years. Anyone living in Africa could see China’s growing presence in everything from consumer goods, cars, trucks and even Chinese characters in billboards and signs everywhere as money from China took root. To build the critical infrastructure that many countries in Africa needed to strengthen the economy required tremendous capital and without access to foreign investment vehicles, China quickly became a dominant partner that provided capital without asking a lot of the hard questions - especially about local and national corruption. As China became a global manufacturing hub with a growing population, China’s leaders also began to recognize the importance of having access to limited resources and Africa, while under-developed, was very resource/commodity rich.
China began to gain a foothold on the global stage in the early 2000s as the relationship with Africa continued to deepen. With such entrenched ties, the Forum on China–Africa Cooperation (FOCAC) formed in 2000 between China and all the states of Africa (with the only exception of Eswatini) to formally discuss initiatives with top government officials from all of the participating member states. Since forming, there have been several ministerial conferences and summits held along the way over the years, resulting in tens of billions of dollars in loan financing and investments along with clean energy, agricultural, technology and additional scientific and research projects.
As expected, many countries in Africa quickly became in debt to China, with the Asian country now holding at least 20% of Africa’s total debt, with payments to China accounting for approximately 30% of Africa’s debt service. Angola alone accounts for almost a third of the total debt. By comparison, China holds $1.07 Trillion US Debt (15% total), with Japan holding the most US Debt at $1.25T, (17.6%). Johns Hopkins SAIS China-Africa Research Initiative (CARI) has documented some 1,000 loans totaling over $150 billion extended to 49 African governments and SOEs between 2000 and 2018.
Even when the 2008 global financial crisis hit, China benefited in being able to operate even more freely in Africa with global focus shifting to more pressing issues. The last FOCAC summit which was held in Beijing in 2018 took place after all African UN member states (again with the exception of Eswatini) recognized the People’s Republic of China as the only legitimate representative of China – a significant accomplishment in China’s global diplomatic positioning to discount Taiwan.
BELT AND ROAD INITIATIVE Another deepening of the relationship occurred in 2013 when Chinese leader Xi Jinping announced the Belt and Road Initiative (BRI) to address an infrastructure gap that would spur economic growth across Asia, Africa and Central/Eastern Europe and essentially create a unified market for the member nations involved. This initiative required hundreds of billions of dollars in infrastructure investments over many years. $730 billion has been directed to overseas investment and construction contracts in over 112 countries. In Africa, this has led to a substantial increase in external debt in Djibouti, Ethiopia, Kenya and the Maldives. For China, this initiative would serve to bond resource rich member nations for mutual trade and also further decrease dependency on the U.S. in particular. More recently, this initiative has hit numerous roadblocks with the global pandemic impacting the global economy and forcing a pullback from China in new loans and investments which could adversely impact approximately 30-40% of all BRI projects.
CHINA-AFRICA RELATIONSHIP TODAY Through the past two decades, Chinese banks have worked with African countries to restructure their debt and continue to do so, according to research at the CARI with proof in at least 16 cases of debt restructuring worth $7.5 billion in 10 African countries between 2000 and 2019. China also wrote off the accumulated arrears of at least 94 interest-free loans amounting to at least $3.4 billion. The way China handles debt seems to be very ad hoc and highly dependent on each lender – be it commercial banks or Chinese companies, etc. This has made the overall debt restructuring picture between Africa and China that much more complex and not entirely transparent.
When the pandemic hit, the G-20 (which includes China) moved quickly to suspend debt service for low-income countries in April 2020. This meant that many countries in Africa temporarily did not have to pay principal or interest on these existing loans. With 38 African countries owing approximately a combined $25 billion in 2021 repayments, 31 have requested relief. Since April 2020, at least $5 billion of debt service payments have been suspended and as of February 2021, Chinese financiers had finalized debt service suspensions for 16 countries in Africa.
It’s interesting that Western creditors have not joined the G-20’s debt relief efforts as yet and certainly China is not the only holder of debt in Africa, but China has made real efforts during this challenging time and seems to be in it for the long haul. For example, China Exim bank is providing debt relief to Angola under G-20 terms. Angola is expected to receive $6.9 billion in debt relief from 2020-2022, mostly from China.
NEXT DECADE The next step in this deeply entrenched relationship is very much in question as the capital inflow from China as a dependable development partner falters with a slow global economic recovery and other problems may begin to surface including some questionable loan conditions, corruption, negative social and environmental impacts and lack of transparency overall as it relates to BRI projects and the relationship in general. It may also change the dynamics of lending between the two with China demanding more of an equity stake (and more control) in many of its infrastructure investments. Without capital influx to mask many of these underlying issues, where this relationship goes will also depend on how other partners outside of the China–Africa relationship react.
That means not only the U.S., but the EU as well. Both regions are struggling with their own economic and political and social crises. With Africa having fared relatively well during the pandemic, perhaps that will also spur a desire to create more advantageous ties with other global partners – those focused more on addressing issues of inequality, fostering democracy, and combating climate change. Finland in particular has had a long presence in Africa and has expressed interest in expanding that relationship outside of pure development cooperation. For now, the world seems to be at a collective standstill waiting for the pandemic to be a thing of the past, but the future is still being shaped by the actions taken (or not taken) today.
Other Sources:
https://www.washingtonpost.com/politics/2021/02/26/pandemic-has-worsened-africas-debt-crisis-china-other-countries-are-stepping/
https://www.euromoney.com/article/b1lwrkkwwpxs0x/chinas-belt-and-road-initiative-can-africa-escape-a-debt-trap