China’s flagship economic cooperation program is bouncing back after a lull during the COVID-19 pandemic, with Africa a primary focus, according to a Reuters analysis of lending, investment and trade data.
Chinese leaders have been citing the billions of US dollars committed to new construction projects and record two-way trade as evidence of their commitment to assist with the continent’s modernization and foster “win-win” cooperation, but the data reveal a more complex relationship, one that is still largely extractive and has so far failed to live up to some of Beijing’s rhetoric about the Belt and Road Initiative, Chinese President Xi Jinping’s (習近平) strategy to build an infrastructure network connecting China to the world.
While new Chinese investment in Africa increased 114 percent last year, according to the Griffith Asia Institute at Griffith University in Australia, it was heavily focused on minerals essential to the global energy transition and China’s plans to revive its own flagging economy.
Those minerals and oil also dominated trade. As efforts falter to boost other imports from Africa, including agricultural products and manufactured goods, the continent’s trade deficit with China has ballooned.
Chinese sovereign lending, once the main source of financing for Africa’s infrastructure, is at its lowest level in two decades and public-private partnerships (PPPs), which China has touted as its new preferred investment vehicle globally, have yet to gain traction in Africa.
The result is a more one-sided relationship than China says it wants, one that is dominated by imports of Africa’s raw materials and that some analysts argue contains echoes of colonial-era Europe’s economic relations with the continent.
“This is something late-19th century Britain would recognize,” said Eric Olander, cofounder of the China-Global South Project Web site and podcast.
China rejects such assertions.
“Africa has the right, capacity and wisdom to develop its external relations and choose its partners,” the Chinese Ministry of Foreign Affairs wrote in response to Reuters’ questions. “China’s practical support for Africa’s path of modernization in accordance with its own characteristics has been welcomed by an increasing number of African countries.”
China’s engagement in Africa, a focus of the Belt and Road Initiative, grew rapidly in the two decades before the COVID-19 pandemic. Chinese companies built ports, hydropower plants and railways across the continent, financed mainly through sovereign loans.
Annual lending commitments peaked at US$28.4 billion in 2016, according to the Global China Initiative at Boston University, but many projects proved unprofitable. As some governments struggled to repay loans, China cut lending. The COVID-19 pandemic then pushed it to turn inward and Chinese construction projects in Africa fell.
A rebound in sovereign lending is not expected.
Policymakers in Beijing have instead been pushing Chinese companies to take equity stakes and operate infrastructure they build for foreign governments. The aim is to help companies win higher-value contracts and, by giving them skin in the game, ensure the projects are economically viable, China analysts say.
Lending to Special Purpose Vehicles (SPVs), perhaps the most common means of PPP infrastructure investment, has been growing as a proportion of China’s overseas loans, according to figures shared exclusively with Reuters by AidData, a research center at US university William & Mary.
The US$668 million Nairobi Expressway, a PPP built and run by state-owned China Road and Bridge Corp (CRBC), could be proof of concept for the model in Africa. Since it opened in August 2022, the toll road has been allowing commuters to speed above the Kenyan capital’s notorious traffic snarls, beating revenue and usage targets.
Daily average use in March was already 57,000 vehicles, exceeding a 2049 target of about 55,000 set by CRBC in a 2019 presentation on the project’s economic viability seen by Reuters, but few companies are following CRBC’s example in Africa. While globally about 45 percent of Chinese non-emergency lending was to SPVs from 2018 to 2021, the most recent year for which AidData figures are available, it was only 27 percent for Africa.
Analysts point to a number of likely reasons, including a lack of legal frameworks for PPPs in many African nations and the view among some Chinese companies — many of them relative newcomers to PPPs — that African markets are risky.
The Chinese foreign ministry did not directly address a request for comment on the lower SPV figures for Africa, but it said the government encourages Chinese companies to “actively develop new modes of cooperation,” such as PPPs, to bring more private investment to Africa.
The Griffith Asia Institute put China’s total engagement in Africa — a combination of construction contracts and investment commitments — at US$21.7 billion last year, making it the largest regional recipient.
Data from the American Enterprise Institute, a Washington-based think tank, showed investments hitting nearly US$11 billion last year, the highest level since it began tracking Chinese economic activity in Africa in 2005.
About US$7.8 billion of that went to mining, such as Botswana’s Khoemacau copper mine, which China’s MMG Ltd bought for US$1.9 billion, and cobalt and lithium mines in nations including Namibia, Zambia and Zimbabwe.
The hunt for critical minerals is driving infrastructure construction as well. In January, for example, Chinese companies pledged up to US$7 billion in infrastructure investment under a revision of their copper and cobalt joint venture agreement with the Democratic Republic of the Congo.
Western and Gulf powers are also racing to lead the world’s energy transition, with the US and European governments backing the Lobito Corridor, a rail link to bring metals from Zambia and Congo to Africa’s Atlantic coast, but African leaders have struggled to raise financing for some other priority projects.
Despite the success of the Nairobi Expressway, for example, work on several Kenyan roads stalled when the government ran out of money to pay the Chinese construction firms.
During a visit to Beijing in October last year, Kenyan President William Ruto asked for a US$1 billion loan to complete the projects.
Chinese Ministry of Foreign Affairs spokesman Wang Wenbin (汪文斌) said discussions about the request were ongoing. The Kenyan National Treasury did not respond to a request for comment.
The final phase of a railway line intended to traverse Kenya from its main port to the border with Uganda has been in similar limbo since Chinese financing dried up in 2019. Uganda canceled the contract for its portion of the line in 2022, after Chinese backers pulled out.
When asked about the decline in lending for African infrastructure, Chinese officials pointed to a pivot to trade and investment, arguing that Belt and Road Initiative-generated trade boosts Africa’s wealth and development.
Two-way trade reached a record US$282 billion last year, according to Chinese customs data, but at the same time, the value of Africa’s exports to China fell 7 percent, mainly due to a decline in oil prices, and its trade deficit widened 46 percent.
Chinese officials have sought to assuage the concerns of some African leaders.
Xi at a summit in Johannesburg in August last year said Beijing would launch initiatives to support the continent’s manufacturing and agricultural modernization — sectors African policymakers consider key to closing trade gaps, diversifying their economies and creating jobs.
China has also pledged to increase agricultural imports from Africa.
Such efforts, for now, are coming up short.
With one of Africa’s largest trade deficits to China, Kenya has been pushing to increase access to the world’s second-largest consumer market, recently gaining it for avocados and seafood, but cumbersome health and hygiene regulations mean Chinese consumers remain out of reach for many producers.
“The Chinese market is a new one,” Avocado Society of Kenya chief executive Ernest Muthomi said. “It was a challenge because you have to install the equipment for fumigation.”
Of the 20 billion Kenyan shillings (US$153 million) of avocados exported last year, just 10 percent went to China.
Overall, Kenyan exports to China fell more than 15 percent to US$228 million, Chinese customs data showed, as a decline in titanium production led to a drop in shipments of the metal — a key export to China — but Chinese manufactured goods kept coming.
That is not sustainable, said Francis Mangeni, an adviser at the Secretariat of the African Continental Free Trade Area.
Unless African nations can add value to their exports through increased processing and manufacturing, “we are just exporting raw minerals to fuel their economy,” Mangeni said.
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