China, which recently indicated it would cut the amount of money allocated to African countries, has rejected allegations that it lured African governments into debt to trap them into unequal relationships and seize control of their assets when they fail to repay.
The allegations against China are aimed at containing the Asian nation and smearing its intentions among its African partners, Zhiou Yuxiao, China’s ambassador for the Forum on China—Africa Co-operation (FOCAC), said during a Business Day Dialogues webinar on Wednesday. Chinese loans are meant to facilitate development within the continent, he said.
“We believe that African development is not as fast as we expected to be because there is lack of infrastructure and lack of funds and lack of qualified personnel. These are the bottlenecks of Africa’s development. We can help you by first building infrastructure, second at lend you loans and thirdly help by accepting students to study in China.”
Lending to African states by China and its finance institutions has come under fire as Covid-19 continues to wreck havoc among African nations that cannot repay their loans. The lack of transparency on lending agreements between China and Africa has also been criticised by the World Bank and International Monetary Fund, which require a clear picture of a country’s credit exposure before considering a lending programme.
This was one of the major stumbling blocks as Zambia negotiated a settlement with holders of its Eurobonds after its economy was hit by Covid-19, leading to it missing a coupon payment in November 2020. Private lenders were left in the dark about how much Zambia owed China and whether the “haircuts” they suffered would end up subsidising the country’s biggest creditor.
Lack of transparency on China-Africa lending agreements also creates a problem in determining the full extent of Africa’s debt to China, making it hard for potential lenders to assess the creditworthiness of African countries. Johns Hopkins University research put total debt owed to China at more than $143bn (R2.26-trillion) in 2018. Angola and Ethiopia are among countries that have sought debt relief, according to the Financial Times. Angola is Africa’s biggest borrower from China. The economy of Ethiopia, another huge debtor, was plunged into crisis by civil war,
Yuxiao said China is often the biggest loser when African countries default. China’s intention with the loans is “100% good but it is perceived like we [China] are doing this to dig a trap for you [Africa] to fall in”.
At a recent FOCAC meeting in Senegal, China pledged altogether $40bn to Africa in investment, down from the $60bn it pledged in 2018 at the previous summit, indicating that the Asian nation may be increasingly concerned about African debt.
Yuxiao, however, played down the plunge in investment, saying the Chinese government encouraged its private-sector players to invest in Africa.
“It’s not the Chinese government’s concern or intention to reduce investments... There might be a possibility that investments are going down but that is temporary with a more stabilised situation [regarding the] Covid-19 pandemic, it [investments] will go up,” he said.
“With regard to loans, we [China] are under very heavy pressure to extend new loans at this moment ... but if the investment environment is improving in Africa then [investments] definitely will go up.”
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