Gary Bourgeault has owned and managed several businesses and has been a financial adviser. In his spare time, he loves writing about music.
China and Africa Economic Partnership
When China Accelerated Its Economic Presence in Africa
When China accelerated its economic presence in Africa, it was during the banking crisis, with most countries focusing on their domestic issues rather than other nations.
Now that the smoke has cleared and attention is once again on the African continent, there are concerns in some quarters that China is colonizing Africa, with some saying it could result in anywhere from 100 million to 300 million Chinese moving to live and work there.
Of particular note has been the "Belt and Road Initiative," which originated with China, and is reportedly meant to improve connected infrastructure and trade between countries and continents—from Asia to Africa.
Included in the corridor will be approximately 65 countries that account for 62 percent of the global population, 75 percent of known energy reserves, and 30 percent of global GDP, according to the World Bank Group.
As it relates to Africa, the recent major concern has been the use of Chinese loans and the accompanying debt to essentially take over many sovereign projects that have been funded by China. It is thought this will result in a "peaceful" colonization of Africa.
Over the longer term, it could also be a factor in Asian countries embracing the easy terms of China which come allegedly “with no strings attached.” That may be true at the political level, but actions being taken by China when countries fail to meet their loan obligations suggests something much different.
As the study by the China-Africa Research Initiative at the Johns Hopkins School of Advanced International Studies found, China has lent about $143 billion to 56 African nations, primarily via the Export-Import Bank of China and the China Development Bank.
Approximately a third of the loans were used for transport projects, 25 percent for power, and another 15 percent for mining.
Chinese Loans to Africa
Conquest Using Debt as a Strategy?
Recently, the media and some Western countries, including the U.S., have pointed out that China is using debt as a means of controlling key African infrastructure by taking it over if payment isn't made.
For example, in December 2018, China was looking to take over the Mombassa port if Kenya defaulted on its loan related to the Kenya Railways Corporation. Another in the region was Angola, which had to enter into an oil-for-loan settlement with China in order to service burgeoning infrastructure debt, which reached $43 billion in 2017, about 35 percent of Angolan GDP.
An IMF study in April 2018 found that, at the end of 2017, close to 40 percent of Sub-Saharan African nations were in debt distress or at significant risk of debt distress.
Along with Kenya and Angola, five other countries, including Cameroon, Ethiopia, Republic of the Congo, Sudan, and Zambia, accounted for about 66 percent of all borrowing in 2017 from China. I assume they are among the leading African contenders for debt distress going forward, and are in danger of losing some of their sovereignty to China.
This is highly probable because China has forced other countries into making deals when they couldn't service the loans. Sri Lanka and Pakistan both have turned over control of ports in order to pay back debt.
While the focus of this article is on Africa, it's apparent China is engaging in a strategy to engage in similar activity along the "Belt and Road Initiative" with other countries.
Chinese Investment Offers in Africa
Does Africa Love or Hate China?
There are increasingly two views of how Africa views China, with most Africans, or at least African leaders, expressing public support for the partnership, while others, mostly those that look more to the West for finance, tend to consider it more of a negative economic relationship.
Western nations like the U.S. have expressed concern over the above-mentioned debt issue, and secondarily, have pointed out the fact there are no strings attached to the loans. This is partially a reference to pushing democracy on the nations and some political leaders dipping heavily into the funding.
Another major criticism has been that China hasn't invested in things like education and health care. The problem there is history has proven that type of so-called investment hasn't worked in Africa.
I like the fact China is focusing on long-lasting infrastructure projects, finance, manufacturing, electricity production and construction.
In my view when those parts of the economy are invested in and personal income starts to rise, things like education and healthcare start to improve on a sustainable basis.
Book: The Specter of Global China: Politics, Labor, and Foreign Investment in Africa
For those wanting to pursue the topic of China and its economic engagement with Africa, a good place to start would be The Specter of Global China: Politics, Labor, and Foreign Investment in Africa.
What is compelling about the narrative is it deals with both sides of the issue in regard to whether or not China is more of a benevolent partner or one that has ulterior motives.
Also valuable is it differentiates between financing coming from the Chinese state and private capital from other regions of the world.
Most important to me is China is ramping up its African investment, and it is now impossible after a number of years to disentangle the relationship between Africa and China. For better or worse, Africa will almost certainly grow in alignment with Chinese investment.
Again, this book gives a good overview of the subject by someone that spent six years in Africa observing firsthand what was really going on.
When doing a lot of reading on the economic relationship between China and Africa, it's obvious there are pros and cons about how they work together. While many nations appreciate the fact China doesn't tie its loan packages to similar things the West has in the past, the fact remains they still have conditions attached to them, such as taking control of vital infrastructure or getting streams of income from ports if they don't pay off their loans.
US National Security Adviser John Bolton asserted this:
"China uses bribes, opaque agreements, and the strategic use of debt to hold states in Africa captive to Beijing's wishes and demands.
"Such predatory actions are sub-components of broader Chinese strategic initiatives, including 'One Belt, One Road' - a plan to develop a series of trade routes leading to and from China with the ultimate goal of advancing Chinese global dominance."
My thought is China recognizes Africa, at this time, doesn't have the training or expertise to run much of its infrastructure effectively, and has measures in place to protect their investments. The West failed to do that in the past, which is why it has significantly cut back on investment in Africa. China, in my opinion, doesn't want to do the same.
After all, it's best for the economic growth to be sustainable in Africa, not just another program that throws money at temporary needs that never deal with the long-term challenges of Africa.
The bottom line to me is of course China is looking out for its own interests, but at the same time it's also doing a lot to improve the economic conditions in Africa for the long term.
No one can do that in the short term, and China is known for taking the long view when engaging in various economic building projects. It won't be perfect, but over time, it has a solid chance of changing Africa for the better over the a long period of time.
Where there is a major concern is if China does send 100 million or more of its citizens to Africa in order to relieve its own population and environmental problems. If it reaches more than that number, there will be countries in Africa that are dominated by the Chinese, and effectively taken over by them. Whether or not that will be good for Africa remains to be seen.
This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.
Ashutosh Joshi from New Delhi, India on January 11, 2019:
Americans built military bases around the world to establish hegemony now the Chinese are using debt bases or what intellectuals call the 'debt trap'.
I am not a Chinese fanboy, but I don't appreciate how the 'conflict of interest' notion clearly gets sidelined when US or the like mindeds in the block pursue ambitious projects or extend credit lines.