Authors: Duncan Miriri and Laurie Chen
NAIROBI/BEIJING (Reuters) – China has rejected debt relief sought by many African countries this week but has pledged to provide 360 billion yuan ($50.7 billion) over three years in credit lines and investments.
The Forum on China-Africa Cooperation (FOCAC), which was established in 2000, rose to prominence after President Xi Jinping launched the Belt and Road Initiative (BRI) in 2013, which aims to recreate the historic Silk Road for the world’s second-largest economy and Africa’s largest bilateral lender.
“China is once again taking the lead in terms of investing capital abroad in emerging markets,” said Hasnain Malik of Tellimer, adding that it had not yet reached pre-COVID-19 levels.
China is also seeking to utilize FOCAC to counter growing competition in Africa from the United States, the European Union, Japan and others.
In Beijing, diplomats and delegates from around the world met at the Great Hall of the People in Tiananmen Square, and leaders of more than 50 African countries and Chinese officials led by Xi Jinping took a group photo.
The recent financial pledge is higher than what Beijing promised at the last FOCAC meeting in 2021, but lower than the $60 billion in 2015 and 2018, when lending to Africa under the Belt and Road Initiative peaked.
In those peak years, Beijing funded the construction of roads, railways and bridges. But the drying up of funds since 2019 has left Africa with construction projects on hold.
China said the recent funds would go towards 30 infrastructure projects aimed at improving trade links, but did not provide details.
The continent, home to 54 countries and more than a billion people, is struggling with an estimated $100 billion annual infrastructure funding shortfall. Transport links are needed to make the creation of a giant recent pan-African trading bloc (AfCFTA) a reality.
Beijing has in recent years restricted funding for such projects, focusing on “small and beautiful” projects, mainly due to economic problems at home and rising debt risks among African countries.
Asked how the recent commitments fit into China’s current cautious foreign lending strategy, a foreign ministry spokesman said there was no contradiction.
“Cooperation between China and African countries, including the concrete implementation of projects, is discussed and decided by both sides,” Mao Ning, a spokesman for the Foreign Ministry, told a regular news conference on Friday.
CURRENCY SWAP
China also said it had launched 30 spotless energy projects in Africa, offered cooperation on nuclear technology and addressed the power deficit that has been holding back industrialization efforts.
“The FOCAC Summit results provide a boost to green projects, especially renewable energy projects,” said Goolam Ballim, head of research at South African bank Standard Bank.
China has become a world leader in wind and solar power, Ballim said, by controlling critical supply chains and driving down production costs.
Others were skeptical.
“The problem is not so much the size of the investment, but the lack of transparency around the terms of the debt,” said Trang Nguyen, global head of emerging market credit strategy at French bank BNP Paribas (OTC:).
Success was not as clear for countries that owed a significant portion of their debt to China. China did not offer any specific assistance to those struggling to repay.
Beijing instead called on other creditors “to participate in the management and restructuring of African countries’ debts in line with the principle of collective action and fair burden-sharing.”
African leaders, counting on major benefits for their countries, had to settle for less spectacular announcements.
Ethiopia and Mauritius announced recent currency swap lines with China’s central bank. Kenya said it had made progress in talks to reopen lending channels for key projects such as a state-of-the-art railway linking the region.
Still, some were hopeful, welcoming China’s increased engagement on African security, humanitarian challenges and other non-financial issues.
“After nearly 70 years of hard work, China-Africa relations are at their best ever,” Tanzanian President Samia Suluhu said on her X account.
(1 dollar = 7.0844 renminbi)
