The Economist - UK (2022-05-28)

TheEconomistMay28th 2022 SpecialreportChinainAfrica 5

seeminglybenevolentrhetoric.Chinamaynotbea duplicitous
negotiator—butitisruthlesslyself­interested.LastyearAidData,
a researchgroupatWilliam&MaryUniversityinVirginia,exam­
ined 100 contractsbetweenChineseentitiesanddevelopingcoun­
tries.Theauthorsnoteda “muscular”approach,withstrictconfi­
dentialityclauses,requirementsthatChinaberepaidaheadof
othersandtheuseofescrowaccounts.“Oneneedstogobackto
the19thandearly20thcenturytofindsimilarsecurityarrange­
mentsinsovereignlendingonthescalethatweobserveinour
Chinesecontractsample,”theyconcluded.Ina follow­uppaper,
AidDatafoundthata dealtoexpandEntebbeairportinUgandare­
quiredthatallrevenuesgeneratedbytheairportfor 20 yearsbe
usedtopaybacktheloan.

Untransparent
Opacity is a big problem. A paper in 2019 co­written by Sebastian
Horn and Carmen Reinhart of the World Bank estimated that 50%
of Chinese lending to poor countries was “hidden” from the bank
and the imf, partly because loans between parastatals may not ap­
pear on public balance­sheets. Chinese creditors are increasingly
fragmented. The Export­Import Bank of China and the China De­
velopment Bank, both state­backed, once dominated lending, but
more recently they have been just two entities among many.
This has made it harder for governments to resolve debt crises.
Under Zambia’s former president, Edgar Lungu, finance ministers
were sidelined when contracts were agreed by his office. After Ha­
kainde  Hichilema  replaced  Mr  Lungu  last  year,  a  study  by  cari
found that the debt Zambia owed China was twice previous esti­
mates. It included debts to at least 18 different Chinese lenders.
When China renegotiates debts, it prefers pushing back repay­
ment  dates  to  taking  “haircuts”  on  the  principal.  Angola,  which
has  borrowed  more  from  China  than  any  other  African  country,
has been granted a three­year stay, says Vera Daves de Sousa, its fi­
nance minister. China was “very open” about extending the term,
“but very reluctant to adjust the payments”. Mr Horn and Ms Rein­

hartarguethatChina’scan­kickingriskshobblingAfricanecono­

mies,muchasWesterngovernmentsdidinthe1980sand1990s.

Achapterin“BankingonBeijing”,co­writtenbyBradleyParks

ofAidData, suggests that the average Chinese project raised

growthby 0.41­1.49percentagepointsaftertwoyears—a large

boost.Theauthorsfindthatinareasarounda projectnight­time

light(asignofeconomicactivity)increasedby8%.Oftenthemost

effectiveprojectsareunglamorous,suchasa roadlinkingNairobi

tonearbyThika.Yetwhethertheloanscouldbeputtobetteruseis

anotherquestion.Chinapridesitselfona “demand­driven”ap­

proach:doingwhatAfricanleaderswant,tohellwithtechnocrats

infinanceministries.InCongothe“dealofthecentury”signed

withJosephKabilain 2007 swappedminingrightsforinfrastruc­

tureprojects.InEthiopiaChinahelpedMelesZenawi’spushfor

industrialisation.InKenyaChinasupportedUhuru Kenyatta’s

“Vision2030”,notablyviathestandard­gaugerailway(sgr),its

largestinfrastructureprojectsinceindependence.

AfricanleaderssayChinaworksataspeedtomatchtheir

needs,atleastelectorally.AbdoulayeWade,a formerpresidentof

Senegal,claims“Acontractthatwouldtakefiveyearstodiscuss,

negotiateandsignwiththeWorldBanktakesthreemonthswhen

wehavedealtwithChineseauthorities.”Theaverageinfrastruc­

tureprojectintheBeltandRoadInitiative(bri), which 43 African

countrieshavesigned,takes2.8years,roughlya thirdofthetime

neededbytheWorldBankortheAfricanDevelopmentBank.

YetindulgingAfricanpoliticiansdoesnotalwaysproduceopti­

maldealsforcitizens.Thesgr“willneverpayforitself”,says

KwameOwino,ofKenya’sInstituteofEconomicAffairs,a think­

tank.Chineseprojectsfavourleaders’politicalbases,notes“Bank­

ingonBeijing”.AprovincefromwhichanAfricanleadercomes

typically receives 70% more funding from China than one that has

no such luck. In election years it gets 134% more. World Bank pro­

jects show no such bias. 

China also facilitates corruption. The “deal of the century” in

Congo was reported to include millions of dollars for the family of

Mr Kabila. The mix of venal African politicians and Chinese mon­

ey can often be malign. In Zambia, say two sources, Chinese con­

tractors  have  identified  road  projects  with  politically  connected

figures and inflated the cost to boost profits and kickbacks. That

has affected the quality of the work. “You have the road,” says Ca­

leb Fundanga, a former central­bank governor, “but not the road

you wanted at the beginning.” 

In a paper in 2018 Ann­Sofie Isaksson and Andreas Kotsadam

looked at opinion­survey data from Chinese projects in 29 African

countries.  They  found  that  local  residents  reported  increases  in

corruption, which did not happen with World Bank schemes. The

finding  “seems  to  signify  that  the  Chinese  presence  impacts

norms,” concluded the authors.

Africans see their governments as responsible for corruption.

“I  blame  ourselves  for  choosing  bad  projects;  I  don’t  blame  the

Chinese,” says David Ndii, a Kenyan economist. Yet a Western dip­

lomat reckons China has caused the “institutional degradation” of

African  countries.  Mr  Parks  of  AidData  suggests  that  “There  is  a

tension between efficacy and safety in Chi­

nese  development  finance,  and  some

countries are more effective than others at

managing these risks and rewards.”

Since a peak in 2016 China has reduced

lending  to  Africa.  In  2020  just  $1.9bn  in

loans  went  to  African  governments,  the

lowest since 2004. This partly reflects the

pandemic. But it also shows how both Chi­

na and Africa now placemore emphasis on

other parts of their economic relationship:

trade and investment.n

Infrastructure kings
Africa

Sources:ChineseLoanstoAfricaDatabase,BostonUniversityGlobalDevelopmentPolicyCentre;
OECD;CarnegieEndowmentforInternationalPeace;ZainabUsman;ChinaAfricaResearchInitiative

*Ocialdevelopmentassistance †DevelopmentAssistanceCommittee

50

40

30

20

10

0
2000 05 10 15 20

Chinese loans and selected ODA* receipts, $bn

United States

ODA*

German

British

French

Chinese loans

OECD†

China

0 25 50 75 100

Distribution of aid and loan commitments by sector, 2005-1, %

Action relating

to debt

Humanitarian aid

Unallocated Programmeassistance

Production sectors Socialinfrastructure & services Multisector Defence

Economic infrastructure and services

China may not

be a duplicitous

negotiator—

but it is ruthlessly

self-interested