China’s
ministry of commerce has confronted claims that overseas investment is
saddling developing countries with unsustainable levels of debt with
explanations
that mounting debt was already commonplace before incursion of China.
ministry of commerce has confronted claims that overseas investment is
saddling developing countries with unsustainable levels of debt with
explanations
that mounting debt was already commonplace before incursion of China.
This
is coming as Beijing prepares to host a major gathering of African
leaders to discuss development priorities for the next few years.
is coming as Beijing prepares to host a major gathering of African
leaders to discuss development priorities for the next few years.
About
40 presidents and thousands of business leaders will congregate in the
Chinese capital for the triennial Forum on China-Africa Cooperation
(FOCAC) on Monday
and Tuesday next week, at which a raft of new China-backed projects
across the continent are likely to be announced.
40 presidents and thousands of business leaders will congregate in the
Chinese capital for the triennial Forum on China-Africa Cooperation
(FOCAC) on Monday
and Tuesday next week, at which a raft of new China-backed projects
across the continent are likely to be announced.
China’s total commitments are expected to exceed the $60 billion that President Xi Jinping pledged in Johannesburg in 2015.
Yet
worries over high debt levels associated with Chinese-backed projects
have been in the spotlight in the recent weeks, particularly after
Malaysian Prime
Minister Mahathir Mohamad’s visit to Beijing earlier this month, in
which Chinese projects worth of tens of billions were left “canceled for
now” over debt concerns.
worries over high debt levels associated with Chinese-backed projects
have been in the spotlight in the recent weeks, particularly after
Malaysian Prime
Minister Mahathir Mohamad’s visit to Beijing earlier this month, in
which Chinese projects worth of tens of billions were left “canceled for
now” over debt concerns.
Controversy
also came in December when the state-owned China Merchants Holdings Co.
Ltd. gained control of the Sri Lankan port of Hambantota on a 99-year
lease
as the government sought to negotiate spiraling debts to Chinese
creditors.
also came in December when the state-owned China Merchants Holdings Co.
Ltd. gained control of the Sri Lankan port of Hambantota on a 99-year
lease
as the government sought to negotiate spiraling debts to Chinese
creditors.
In
April, International Monetary Fund President Christine Lagarde
cautioned that foreign partners should not consider Chinese-backed
infrastructure projects
a “free lunch,” and last month a U.S. development official told Reuters
that Chinese projects were leaving African countries saddled with
unsustainable debt.
April, International Monetary Fund President Christine Lagarde
cautioned that foreign partners should not consider Chinese-backed
infrastructure projects
a “free lunch,” and last month a U.S. development official told Reuters
that Chinese projects were leaving African countries saddled with
unsustainable debt.
Chinese
Commerce Vice Minister Qian Keming looked to parry concerns over
Chinese projects in Africa in a news conference (link in Chinese) on
Monday, arguing
that debt issues in Africa long preceded the rise of Chinese investment
there, and that challenges facing African economies were global in
nature.
Commerce Vice Minister Qian Keming looked to parry concerns over
Chinese projects in Africa in a news conference (link in Chinese) on
Monday, arguing
that debt issues in Africa long preceded the rise of Chinese investment
there, and that challenges facing African economies were global in
nature.
“The
world economy has been in a difficult recovery, global trade and
investment have been sluggish, and commodity prices have fluctuated at a
low level,” he
said.
world economy has been in a difficult recovery, global trade and
investment have been sluggish, and commodity prices have fluctuated at a
low level,” he
said.
Qian
nevertheless suggested that this year’s China-Africa Forum on
Cooperation will see greater emphasis on the sustainable nature of
Chinese investment in Africa
than in previous gatherings.
nevertheless suggested that this year’s China-Africa Forum on
Cooperation will see greater emphasis on the sustainable nature of
Chinese investment in Africa
than in previous gatherings.
“China
will unswervingly support Africa’s development, including providing
funds, and we will focus our funds on projects that are more sustainable
and can promote
economic growth, job creation, and economic efficiency,” he told
reporters.
will unswervingly support Africa’s development, including providing
funds, and we will focus our funds on projects that are more sustainable
and can promote
economic growth, job creation, and economic efficiency,” he told
reporters.
China
has risen rapidly to become Africa’s largest trading partner and
investor in the 18 years since FOCAC was established, with China-Africa
trade rising 14%
last year alone to $170 billion, according to China’s Ministry of
Commerce.
has risen rapidly to become Africa’s largest trading partner and
investor in the 18 years since FOCAC was established, with China-Africa
trade rising 14%
last year alone to $170 billion, according to China’s Ministry of
Commerce.
China
has also supported or is supporting a number of major infrastructure
projects across the continent, including a $6.5 billion railway line in
Nigeria, a
$3.5 billion free trade zone in Djibouti, as well as substantial
investments in the continent’s mineral resources.
has also supported or is supporting a number of major infrastructure
projects across the continent, including a $6.5 billion railway line in
Nigeria, a
$3.5 billion free trade zone in Djibouti, as well as substantial
investments in the continent’s mineral resources.
China-backed
projects in Africa have led to the construction of 30,000 kilometers
(18,640 miles) of highways, 20,000 megawatts of new power generation and
around
900,000 jobs, according to the Ministry of Commerce.
projects in Africa have led to the construction of 30,000 kilometers
(18,640 miles) of highways, 20,000 megawatts of new power generation and
around
900,000 jobs, according to the Ministry of Commerce.
Yet
China now accounts for 14% of all debts of sub-Saharan countries
excluding South Africa, according to Standard Bank, and Chinese
investment continues to
grow. Chinese-contracted projects in Africa were worth $76.5 billion
last year alone, the bank said, leading to “concern that African
countries’ debt-service ability will soon dissolve.”
China now accounts for 14% of all debts of sub-Saharan countries
excluding South Africa, according to Standard Bank, and Chinese
investment continues to
grow. Chinese-contracted projects in Africa were worth $76.5 billion
last year alone, the bank said, leading to “concern that African
countries’ debt-service ability will soon dissolve.”
Some
of the debt concerns may nevertheless be overblown, at least for the
moment, according to a recent paper from the John Hopkins China Africa
Research Initiative.
It notes that overall Chinese loans are not a major contributor to
African countries’ debts, with China accounting for roughly more than a
fifth of countries’ debt share in just nine African countries and
Chinese loans only contributing significantly to debt
troubles in three of those — Zambia, Djibouti and the Republic of
Congo.
of the debt concerns may nevertheless be overblown, at least for the
moment, according to a recent paper from the John Hopkins China Africa
Research Initiative.
It notes that overall Chinese loans are not a major contributor to
African countries’ debts, with China accounting for roughly more than a
fifth of countries’ debt share in just nine African countries and
Chinese loans only contributing significantly to debt
troubles in three of those — Zambia, Djibouti and the Republic of
Congo.
Jeremy
Stevens, the China economist for Standard Bank Group, calls for a more
nuanced view of African countries’ debts with China, rather than seeing
it as a
monolithic problem. “Not all countries have a debt problem,” he said.
“However, all countries should be aware of who does.”
Stevens, the China economist for Standard Bank Group, calls for a more
nuanced view of African countries’ debts with China, rather than seeing
it as a
monolithic problem. “Not all countries have a debt problem,” he said.
“However, all countries should be aware of who does.”
Overseas
Development Institute Research Fellow Linda Calabrese largely agrees.
She said debt growth “is not uniquely related to Chinese finance. Many
African
and Asian countries have taken loans from Chinese and other foreign
institutions to develop much-needed infrastructure’’.
Development Institute Research Fellow Linda Calabrese largely agrees.
She said debt growth “is not uniquely related to Chinese finance. Many
African
and Asian countries have taken loans from Chinese and other foreign
institutions to develop much-needed infrastructure’’.
“But
governments receiving these loans don’t always consider whether the
project will generate economic growth and whether the debt can be
serviced.”
governments receiving these loans don’t always consider whether the
project will generate economic growth and whether the debt can be
serviced.”
