Effectiveness of China's Loans to Africa

 Peking University published in October 2023 a report titled "A Study on the Effectiveness of China's Sovereign Financing in Africa."

From 2000 to 2020, China provided $160 billion in loans for 1116 projects in 49 African countries.  Based on a study of select projects from this list, Peking University concluded that China's loans have a generally positive impact on the economic growth of African nations, and improve the livelihood of the African people.  The loans have had a significant impact on education and improved the hard infrastructure of education facilities and the literacy rate.  The study also shows that loans generate a positive impact on manufacturing job creation, infrastructure development, and globalization.  However, the results indicate a negative impact on agricultural  job creation, which could be explained as the result of moving people from agriculture to industries.

The authors noted that the study was limited by the reliability of the data and discrepancy in the accuracy, time dimension, and the statistical caliber of loan data collected among institutions.

Economist Intelligence Unit Predicts New Direction in Africa-China Relations

 The Economist Intelligence Unit (EIU) has just released a thoughtful report titled "A New Horizon for Africa-China Relations."

It concludes that the new themes in the Africa-China relationship suggest a more balanced approach to Chinese engagement in Africa during the decade ahead.  EIU argues that China intends to expand its engagement with Africa over the coming decade through increasingly diversified trade; additional investment in target sectors and trade-facilitating infrastructure; projects that address Africa's environmental, social and governance issues; and a more hands-on and interventionist approach to regional diplomacy.

EIU says China's food security issues and enormous food import requirements could drive large trade and investment flows in African agricultural products and production.  African-located manufacturing ventures will increasingly serve as an export base for industries that connect with Chinese value chains and target Chinese markets.

Citing the hosting by China in June of a Horn of Africa Peace Conference in Addis Ababa, EIU foresees an increase in political engagement in the subregion but without a fundamental shift in Chinese foreign policy away from its long-standing principle of non-interference in the affairs of other countries.

The trajectory of China-Africa ties will remain more focused on deepening still relatively shallow trade and investment links, rather than more active diplomatic mediation or more formal security arrangements.  

EIU offers a cautionary note.  The Chinese economy is slowing, and this will directly impact Africa in the short to medium term.

Comment:  I would add three other cautionary notes.  While China-Africa trade has resumed and reached a new high in 2021, it has since 2013 become increasingly unbalanced in favor of China with China maintaining a significant trade surplus with Africa.  This is good for China, but not so good for Africa, and will likely lead to growing concerns in those African countries experiencing large and persistent trade deficits with China.

EIU suggests Africa may play a more important role in exporting agricultural products to meet China's increasing need.  This may occur over the long term, but Africa remains a net importer of food products and is not well positioned over the short and medium term to fulfill this need.

EIU also suggests Africa may benefit from the shifting of manufacturing capacity from China to Africa.  So far, however, most of the manufacturing that has left China has not gone to Africa but to other lower cost destinations in Southeast and South Asia.   

China's Foreign Aid and Africa

 The Stockholm International Peace Research Institute published in May 2022 a study titled "China's Evolving Approach to Foreign Aid" by Jingdong Yuan, Fei Su, and Xuwan Ouyang.

Africa is a key destination of Chinese development aid with almost half of it going there since 1950.  This paper analyses the evolving perspectives, structure, and practices of Chinese aid.  

China's Overseas Development Finance on Decline

 The Boston University Global Development Policy Center posted on 2 December 2020 an analysis titled "Tracking China's Overseas Development Finance" by Rebecca Ray and Blake Alexander Simmons.

The China Overseas Development Finance Database tracks lending commitments by China's two major policy banks, the China Development Bank and the China Export-Import Bank from 2008 to 2019.  During this period, China's overseas development finance totaled $462 billion.  China's development finance grew significantly from 2011 to 2016 and then fell precipitously.

Just 10 countries made up 60 percent of the total borrowing between 2008 and 2019 with the largest borrower--Venezuela--making up more than 10 percent of the total.  African countries accounted for $104.5 billion of the $462 billion or about 23 percent of the global amount.  Angola was by far the largest African borrower followed by Kenya and Ethiopia.  

The Diplomat published on 12 December 2020 an analysis titled "China's Policy Banks Are Lending Differently, Not Less" by Tristan Kenderdine, Future Risk, and Niva Yau, OSCE Academy in Bishkek. 

This account questions the methodology of the Boston University Global Policy Center analysis, although it uses examples from Central Asia.   

African Economic Outlook 2016

The African Development Bank (AfDB)has published its "African Economic Outlook 2016."

It is useful to compare this report with the International Monetary Fund (IMF) report posted below on 25 August. AfDB covers all of Africa while the IMF looks only at Sub-Saharan Africa (SSA). Both reports agree that Africa's growth rate in 2015 was about 3.5 percent, but the AfDB is more optimistic about the growth rate in 2016. The IMF says the SSA growth rate will be about 3 percent while AfDB says for all of Africa it will be about 3.7 percent. Including North Africa in the AfDB number does not account for the different projections.

How Partner Countries Are Gathering Chinese Development Cooperation Information

The United Nations Development Programme published in June 2015 a study titled "Demand-Driven Data: How Partner Countries Are Gathering Chinese Development Cooperation Information."  As China becomes one of the major development partners, there is increasing demand from partner countries for more information on China's financial flows.  This report looks at 9 countries, including the DRC, Madagascar, and Senegal. 

Major Study on Somali Piracy

The World Bank, UN Office on Drugs and Crime and Interpol recently published a book length study titled "Pirate Trails: Tracking the Illicit Financial Flows from Pirate Activities off the Horn of Africa."  The study estimates that between April 2005 and December 2012, pirates claimed an estimated $339 million to $413 million in ransoms.  This massive study looks at the role of criminal networks, distribution of the proceeds, moving the proceeds, investing the proceeds, and makes a series of recommendations for countering the issue of financial flows. 

For journalistic accounts of the report, see "The Horn of Plenty: How Piracy Became a $413m Business" by Nick Kochan in the 4 November 2013 The Independent and "Somali Piracy: More Sophisticated Than You Thought" in the 2 November 2013 The Economist.