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Chinese Government-Sponsored Economic Support to Africa
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| Chinese Government-Sponsored Economic Support to Africa The Chinese government began giving financial support to African countries in the s. At the outset, the objectives of support were largely ideological in nature—to demonstrate China’s solidarity with the developing world. With the advent of its economic reforms in 1978, China’s government stepped up its aid to Africa and such assistance began to serve multiple purposes, including economic objectives. In the last several years the Chinese government has dramatically boosted its economic support to Africa. At the same time, the assistance has become both more sophisticated, in terms of instruments utilized, and more geographically diverse. In the s, China’s government provided much of its economic aid in-kind— in the form of building large non-commercially oriented projects, such as sports stadiums and government office buildings, such as those in The Gambia and Sierra Leone, among other countries. In the s, support began to shift from in-kind to grants. Today, the provision of in-kind and grant support is a decreasing proportion of China’s aid to Africa, with loans accounting for the vast majority of Chinese government-sponsored African assistance. China’s Export-Import Bank, which was established in 1994 as a state poli- cy-bank directly under the leadership of the State Council (China’s Cabinet, is the sole state-owned entity the Chinese government uses to dispense official economic aid worldwide, including to Africa. The Ex-Im Bank indicates it provides not only concessional loans—akin to those provided by the multilateral aid institutions, such as the World Bank or the African Development Bank—but also “non-concessional” loans—support given on terms that are more inline with commercial lending. The Ex-Im Bank also provides export credits international guarantees on-lending of foreign governments and financial institutions and other functions. Data on the precise nature and extent of the Chinese government’s aid to Africa—including loan duration and interest charges—are not generally available. The last officially reported flows are for 2002. For that year, China’s government reported that it provided $1.8 billion in economic support to all of Africa (that is, support pertaining to countries on the African continent regardless of whether or not they are Sub-Saharan). Although a systematic 05-Chap5:05-Chap5 10/10/06 11:14 AM Page 274 “ BETWEEN - THE - BORDER ” FACTORS IN AFRICAN - ASIAN TRADE AND INVESTMENT 275 breakdown of how much of this support was in the form of concessional versus non-concessional loans is not known, it is generally believed, based on anecdotal evidence, the bulk was in the form of non-concessional loans. The recent explosion of China’s official economic support to Africa has been largely in the form loans by the Ex-Im Bank. The Ex-Im Bank indicates that, as in earlier years, most of these loans are made on non-concession- al rather than concessional terms (although the specifics of the terms are not disclosed. The Ex-Im Bank reports that as of end, its concessional loans to the African continent covers 55 projects in 22 countries, with an accumulated commitment of $800 million. China is also using debt relief to assist African nations, effectively turning loans into grants. Since 2000, Beijing has taken significant steps to cancel the debt of 31 African countries. That year China wrote off $1.2 billion in African debt in 2003, it forgave another million. Beijing’s new “China’s Africa Policy white paper, released in early 2006 foresees more debt relief as part of the country’s economic assistance strategy with the continent (see chapter 3). Preliminary estimates compiled from public sources by World Bank staff suggest that total China Ex-Im Bank loans to Sub-Saharan Africa—that is, non- concessional as well as concessional loans—amounts to over $12.5 billion as of mid in the infrastructure sector. These loans finance projects in the power, telecom, transport, water and sewerage sectors, but exclude projects in the petroleum and mining sectors. These loans are highly concentrated in five countries Angola, Nigeria, Mozambique, Sudan and Zimbabwe, which account for over 80% of the total. Moreover, support to the power sector makes up about 40% of total commitments, followed by general or multiple sector commitments (24%), transport (20%), telecom (12%), and lastly water (4%). However, without knowing what proportion of these loans is made on concessional versus non-concessional terms, let alone the duration and interest rates for these loans, it is difficult to compare meaningfully these China Ex-Im Bank financing commitments to Sub-Saharan Africa’s infrastructure to more traditional forms of such aid. Overseas Development Assistance (ODA) from OECD countries to Sub-Saharan Africa’s infrastructure which generally is made on concessional terms—amounted to just over $4 billion in 2004, the most recent date for which data are available. Sources World Bank staff estimates, China Export-Import Bank website and Eisenman and Kurlantzick (2006). 05-Chap5:05-Chap5 10/10/06 11:14 AM Page 275 |