China stops short of Africa debt relief as it pledges more cash

[September 07, 2024]  By Duncan Miriri and Laurie Chen

NAIROBI/BEIJING (Reuters) - China stopped short of providing the debt relief sought by many African countries this week, but pledged 360 billion yuan ($50.7 billion) over three years in credit lines and investments.

The Forum for China-Africa Cooperation (FOCAC) launched in 2000 took on an enhanced role after the 2013 inception of President Xi Jinping's Belt and Road Initiative (BRI), which aims to recreate the ancient Silk Road for the world's second largest economy and biggest bilateral lender to Africa.

"China is moving back on to the front foot in terms of overseas deployment of capital in the emerging markets," said Tellimer's Hasnain Malik, while adding it was not yet at pre-COVID levels.

China has also sought to use FOCAC to counter growing competition in Africa from the United States, the European Union, Japan and others.

In Beijing, diplomats and delegates from around the world mingled in the Great Hall of the People in Tiananmen Square as leaders from more than 50 African countries and Chinese officials led by Xi gathered for a group photo.

The new financial pledge is more than what Beijing promised at the last FOCAC in 2021, but below the $60 billion of 2015 and 2018, which marked the peak of lending to Africa under the Belt and Road Initiative.

During those peak years, Beijing bankrolled the construction of roads, railways and bridges. But a drying up of funds since 2019 has left Africa with stalled construction projects.
 

The new funds will go towards 30 infrastructure projects to improve trade links, China said, without giving details.

The 54-nation continent of more than 1 billion people has an annual infrastructure funding deficit estimated at $100 billion, and needs transport links to make a new giant pan-African trade bloc (AfCFTA) a reality.

Beijing has in recent years cut funding for such projects as it shifted focus to "small and beautiful" projects, mainly due to its own domestic economic pressures and an increase in debt risks among African countries.

Asked how the new commitments fit into China's current cautious overseas lending strategy, a foreign ministry spokesperson said there was no contradiction.

"The cooperation between China and African countries, including the specific implementation of projects, is discussed and determined by both sides," Mao Ning, a foreign ministry spokesperson told a regular news conference on Friday.

CURRENCY SWAPS

China also said it will launch 30 clean energy projects in Africa, offer co-operation on nuclear technology and tackle a power deficit that has delayed industrialization efforts.

Chinese President Xi Jinping applauds as he attends the opening ceremony of the ninth Forum on China-Africa Cooperation (FOCAC) Summit alongside Senegalese President Bassirou Diomaye Faye, Kenya's President William Ruto and other leaders, at the Great Hall of the People in Beijing, China September 5, 2024. REUTERS/Florence Lo/File Photo

"The outcomes of the FOCAC summit signal an impetus for green projects and especially for renewable energy installations," said Goolam Ballim, head of research at South Africa's Standard Bank.

China has become a global leader in wind and solar energy, Ballim said, controlling significant supply chains and reducing production costs.

Others were skeptical.

"The issue is not so much about the size of the investments, it's been about the lack of transparency around the terms of the debt," said Trang Nguyen, global head of emerging markets credit strategy at French bank BNP Paribas.

Success was less clear-cut for countries owing a large share of their debt to China, which made no express offer of assistance to those struggling with repayments.

Beijing instead urged other creditors "to participate in the handling and restructuring of African countries' debts under the principle of joint actions and fair burden-sharing".

African leaders hoping to bask in large deals for their countries had to settle for less splashy announcements.

Ethiopia and Mauritius announced new currency swap lines with China's central bank. Kenya said it made progress on talks to reopen the lending taps for key projects like its modern railway to link the region.

Still, there was optimism from some, as they welcomed China's increased commitments to Africa's security, humanitarian challenges and other non-financial affairs.

"After nearly 70 years of hard work, China-Africa relations are at their best in history," Tanzania's President Samia Suluhu said on her X account.

($1 = 7.0844 Chinese yuan renminbi)

(Reporting by Duncan Miriri and Laurie Chen in Beijing; Additional reporting by Joe Cash in Beijing and Libby George in London; Graphics by Sumanta Sen, Editing by Karin Strohecker and Alexander Smith)

[© 2024 Thomson Reuters. All rights reserved.]This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.