Bloomberg Businessweek - USA (2020-07-27)

◼ ECONOMICS Bloomberg Businessweek July 27, 2020

29

DATA:

CHINA

AFRICA

RESEARCH

INITIATIVE

AT
JOHNS

HOPKINS

UNIVERSITY,

WORLD

BANK

Liberia’sformerministerofpublicworksandnow

a seniorfellowattheCenterforGlobalDevelopment

inWashington.“Whenpeoplecomplainabout

Chineseloans,it’snotasif mostAfricancountries

havea plethoraofoptions.”

It’shardtomissChina’sfootprintinAfrica.

IntinyGuinea-Bissau,theexitsignsina govern-

mentbuildingarewritteninChinesecharacters.In

Mozambique,Chinesemoneypaidfora 2-mile-long

suspensionbridge,thelongestonthecontinent.

ChinahelpedfootthebillforSenegal’sMuseumof

BlackCivilizations—whichuntilrecentlyincluded

Chineseartinitsexhibits.It’sbecomethelargest

financierofinfrastructureinAfrica,withthelikes

oftheChinaExport-ImportBankandtheChina

DevelopmentBankfundinga fifthofbigprojects,

accordingtoconsultingfirmDeloitte.Toguarantee

a quarterofthatdebt,Africancountrieshaveeffec-

tivelymortgagedfutureearningsfromexportsof

commoditiessuchasoil,cocoa,andcopper.

Whileloansbyprivateinvestorsfromaround

theworldstillmakeupmorethanhalfofAfrica’s

externalpublicdebt,Germany’sKielInstituteforthe

WorldEconomysaysChinahaslentmorethanthe

InternationalMonetaryFund,theWorldBank,and

wealthycountriescombined.Andmanyloansaren’t

madepublic,promptingsuspicionsthatAfrica’s

debttoChinaisbiggerthanestimated.TheKiel

groupsaysuptohalfofChineselendingtodevel-

opingcountries,orabout$200billion,hadn’tbeen

reportedtotheIMFandWorldBankasof2016.The

Chineseloanshavedrawnparallelstothelending

boomofthe1970sthatledtoa cripplingdebtcrisis

acrossthedevelopingworlda decadelater.“We’ll

seea waveofdefaults,”saysChristophTrebesch,

anauthoroftheKielstudy.“It’sjusta questionof

whetherit willbea hugewaveora smallwave.”

Nondisclosureclausesmeanmanyloansescape

publicscrutiny,raisingfearsofmoneyendingup

inthepocketsofcorruptofficialsormiddlemen.

“Ifthereis somuchsecrecyaroundChineselend-

ing,theremustbesomethingillegal,”saysKhelef

Khalifa,anactivistdemandingtheKenyangovern-

mentprovidedetailsondebtfromChinausedto

funda raillinkfromtheportofMombasatothecap-

ital,Nairobi.

A HongKongbusinessmanknownasSamPa

(hehasatleastsevenaliases),believedtohavebro-

keredvariousmultibillion-dollardealsinAfrica,was

detainedin 2015 aspartofananticorruption cam-

paign in China. Pa’s opaque business empire, in part

financed by Chinese state-run banks, is still being

unwound by prosecutors.

The Trump administration has accused China

of loading poor countries with unpayable debt to

snatchupprizedassetsandboostitscloutwith

vulnerable governments. But some researchers say

fears of predatory lending are exaggerated. China

hasn’t seized property or used courts to enforce

debt payments, according to a study by the China

Africa Research Initiative at Johns Hopkins. The

study’s authors say an oft-cited example of what

awaits developing countries that default on Chinese

loans—SriLanka’s 2017 saleofa majoritystakeina

porttoa Chinesecompany—wasa privatizationand

nota debt-for-equityswapassomemediareported.

Facedwithgrowingcriticismanda slowingecon-

omy,Chinahasbecomemorecautious.Its“Beltand

Road”initiative,aimedatexpandingcommercial

tiesaroundtheworld,hastightenedoversightof

projects,andit nowgaugesa country’scapacityto

repaybeforeapprovingcredit.Annualloancommit-

mentshavefallenfroma peakofalmost$30billion

in 2016 to$8.9billionin2018,JohnsHopkinssays.

ChinesePresidentXiJinpinghasvowedtocancel

a smallportionofloanstogovernmentsinAfrica

andcalledonstate-runbankstoreworkcommer-

cialdebtowedbyborrowersintheregion.

It maybeeasierforcountriestogaindebtrelief

fromChinathanfromcommercialbondholders,

says Deborah Brautigam, an author of the Johns

Hopkins study. While private investors have sued

countries over defaults and workouts can take years,

Chinese lenders don’t have a lot of leverage over bor-

rowers, and there’s little evidence of penalties for

nonpayment. China has written off $3.4 billion and

restructured or refinanced about $15 billion of debt

in Africa in the past decade, Brautigam says. “We

don’t see a lot of options for Chinese lenders,” she

says. “They can’t send in gunboats.”

Even with some relief, Africa, facing its worst

recession ever and with few other sources for fresh

loans, will likely remain deeply indebted to China

for decades. Zambia still hasn’t paid off the Mao-

era Tazara railway, built in the 1970s to haul copper

to the port of Dar es Salaam in Tanzania. The rail-

way—intended to circumvent White minority-ruled

Rhodesia and South Africa—is in deep disrepair,

operating at a fraction of its original capacity, with

few working locomotives. That, says Patel, the for-

mer minister, should serve as a note of caution, as

the railway never met its goals and paid back on the

investment. “You would have thought the govern-

ment would have learned from that lesson,” he says.

“If you borrow for projects that have hardly any eco-

nomic return, then it becomes a liability.” �Alonso

SotoandMatthewHill,withFumbukaNg’Wanakilala

▼ Debt payments due

from May to December,

from the 73 poorest

countries

China

$7.2b

Other

creditor

countries

$5.0b

THE BOTTOM LINE Growing numbers of African activists are

questioning the deluge of Chinese credit to the region, which

exploded from $100 million in 2000 to some $150 billion in 2018.