China lent an estimated $28.4 billion to Africa in 2016. Less than a decade later, in 2022, lending commitments dropped to under a billion dollars. As Africa’s largest bilateral trading partner for the past 15 consecutive years, as well as its most generous lender, China’s decreased lending may signal more than just shifting economic policies. Decreased lending may also indicate a more permanent shift in the relationship between the two countries, tipping the scales from a supposed mutually beneficial relationship to one with broader geopolitical ramifications. In its current state, it is difficult to predict whether this partnership will prove to be a beacon of opportunity or a new form of economic dependency.
A Shift in China’s Economic Engagement with Africa
China has been lending to African countries since the 1960s, but it is only in the past two decades that annual flows to Africa begin increasing rapidly. In 2013, President Xi Jinping announced the Belt and Road Initiative (BRI), aimed at enhancing regional connectivity and economic cooperation. Due to Africa’s geographical position, Africa acts as a pivotal link in facilitating trade between China and Europe and the Middle East. Along with its abundance of natural resources, Africa became one of China’s priority investment partnerships . From 2001 to 2022, China provided more than $170 billion in credit, loans, and grants to African nations. In 2016, Chinese lending commitments to Africa peaked at an estimated $28.4 billion. The combination of Africa’s high demand for infrastructure development and China’s willingness to provide financing as part of the BRI lay the groundwork for increased lending, especially in large-scale infrastructure and mining projects.
However, in recent years, there has been a stark decline in lending commitments, totalling $1.22 billion in 2021 and $994.48 million in 2022. Although those two years coincide with the pandemic, researchers believe that these trends signal a more permanent shift in China’s lending policies to Africa.
In fact, a restructured lending policy between China and Africa has been inevitable in recent years. Many of the high cost infrastructure projects in Africa resulted in underwhelming returns than those projected. One notable example is Kenya’s Standard Gauge Railway (SGR). The SGR was intended to connect the port of the city of Mombasa to the capital, Nairobi, and eventually extend to neighboring countries. China loaned $3.6 billion to finance the project. Despite significantly improving in transportation infrastructure, the railway has underperformed in profitability due to its high operational costs and low freight volumes. The SGR has now become a large financial burden to Kenya’s economy.
Over the past decade, Africa’s debt has grown significantly, with 20 African countries either bankrupt or at high risk of debt distress. With concerns over debt sustainability in African nations, China reevaluated their risk and sought a new method of providing financial support that would be less costly and more sustainable.
Small is Beautiful
In 2023, President Xi Jinping introduced the “small is beautiful” model, a shift in China’s lending policy towards all 151 BRI partner countries. This new approach represents a strategic shift from mega infrastructure projects to less risky and more profitable projects. Researchers believe that this approach will be characterized by smaller, more frequent loans of under $50 million, designed to have an immediate impact on local communities. Some examples include enhancing water supply systems or building renewable energy installations. More importantly for China, this would reduce the financial risks associated with traditional loans and provide a safety net in case partner countries are unable to repay in a timely manner.
Still, critics worry that the “small is beautiful” model has adverse effects on Africa. For one, this new approach will deprioritize Africa’s significant large-scale infrastructure needs. Experts believe that infrastructure development is key to driving economic growth in Africa and improving the quality of life for communities by stimulating investments and jobs at scale, incomparable to smaller projects. Thus, although smaller projects are beneficial at the grassroot level, African countries face the challenge of finding alternative solutions to fill the financing gap left on large infrastructure projects. This means that some important projects may be stalled until further funding is available, or worse discontinued. Zambia’s hydropower projects illustrate this problem. Although backed by Chinese investments initially, in 2019, China scaled back on its financial commitments. Now, Zambia faces difficulties in securing additional Chinese loans for other planned hydropower projects, crucial for maintaining Zambia’s power production.
Doubling Down on the Mining Industry
As African leaders face additional challenges to fund key initiatives, Africa’s mining industry has been largely unaffected. . For China, a crucial advantage to its partnership with Africa is access to Africa’s rich minerals — now especially prevalent in light of China’s commitments to green technology. In recent years, Chinese mining companies have invested $4.5 billion in lithium mines, securing what experts believe to be one-third of the world’s lithium mining capacity by 2025.
However, investing in the mining industry may actually be more harmful to African countries than it is beneficial. Child labor, worker safety violations, and reports of discrimination have been prevalent in Chinese-operated mines in the Democratic Republic of Congo and Zimbabwe. Chinese mining activities often result in soil erosion and air pollution, reducing the agricultural productivity in surrounding areas.
Although a large percentage of exports from Africa to China are from the mining sectors, it is reasonable to wonder if stimulating Africa’s economy truly justifies jeopardizing the quality of life of individuals and communities. Take the Democratic Republic of the Congo, for instance. Chinese companies have invested up to $7 billion in the DRC’s mining infrastructure. Still, the DRC is among the top five poorest nations in the world. Of course the situation in the DRC is more complex, involving political instability and authoritarian rule, but it is worth reconsidering whether mining exports are truly as effective of a growth driver as believed.
Africa’s Trade Deficit with China
One glance at the annual total trade volume, and it appears that Chinese investments in Africa are equally beneficial for both countries. However, the trade deficit must be considered. In 2023 alone, trade between the two countries totaled a record of $282.1 billion. Yet, in the same year, Africa’s trade deficit with China widened significantly to $64 billion. This means that at the same time China’s exports to Africa rose 7.5% to $173 billion, imports from Africa decreased 6.7% to $109 billion. This is partly because of the export composition — Africa predominantly exports raw materials to China such as oil, minerals, and agricultural products, which are generally lower in value compared to manufactured goods exported to Africa from China, such as electronics and textiles.
China is also relying less on Africa for their oil, now sourcing more of their crude oil from the Gulf Cooperation Council Countries. It is also notable that Chinese investments in Africa often focus on infrastructure and resource extractions, which perpetuates the export of raw materials, whereas for African countries, economic developments do not immediately enhance their manufacturing capabilities nor export diversity.
Is China Taking Over Africa?
African countries are no stranger to colonialism. In previous times when the world’s superpowers have intervened, the treatment of African countries was extractive and colonial. Thus, it is no surprise that China’s involvement comes with concern.
Critics scrutinize China’s lending practices for putting African countries into a “debt trap” — a situation in which they become overly dependent on China for financial support and therefore feel pressured to align with Chinese geopolitical interests. This is especially relevant in international forums such as the United Nations, where Africa has a voting bloc of over 50 countries. Perhaps, unironically, African countries have proven to stand with China in decisive votes.
In 2017, China built its first overseas military base in Djibouti in Africa. Although, officially, China describes the base as a logistic facility to support anti-piracy operations and humanitarian efforts, it is staffed with over 1,000 personnel and seems like a direct counter to the United States’ military base in Djibouti. Despite concerns raised by global powers, the United States has not shown Africa the same support economically and socially as China has demonstrated.
Still, the relationship between China and Africa is more complex than a strict David-Goliath relationship. China often allows Africa their autonomy and promises to not interfere with the internal politics of the projects they loan to — a practice not mirrored by Western countries. Additionally, advocates of China-Africa relations argue that the debt distress of some African countries cannot be fully blamed on Chinese loans, as the COVID-19 pandemic, high interest rates, and the invasion of Ukraine all play a significant role in exasperating loans. They also argue that the new lending policy disproves the “debt trap” accusation by significantly decreasing loan amounts — although some may say that it is too little too late.
At present, the future of China’s investment in Africa remains uncertain. However, as the situation evolves, stakeholders and observers alike will watch closely to see whether this alliance serves as a model of international cooperation or a cautionary tale of unfulfilled promises.
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