China expert advises some caution on Xi’s pledge
Prominent China expert Deborah Bräutigam has cautioned that Chinese President Xi Jinping’s pledge of US60 billion in assistance to Africa might not be all that enthusiastic African officials believe it to be.
Brautigam, professor of international political economy and director of the China Africa Research Initiative at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, was responding to Xi’s announcement at the opening of the Forum for China-Africa Co-operation summit (Focac) in Johannesburg on Friday.
International relations and co-operation department director general Jerry Matjila welcomed Xi’s pledge as “Christmas”, saying that the day before Chinese officials had indicated Xi would pledge US50 billion. Trade and Industry Minister Rob Davies said it had “pressed all the right buttons”.
Brautigam’s analysis was more measured. She noted that the much larger part of the US60 billion would be credit rather than grants, and expressed doubt that many African countries would be able to afford to repay the loans, especially because of the fall in commodity prices.
Brautigam noted first that Xi had announced that China would construct an unspecified number of regional vocational training centres and “capacity-building colleges” and would offer vocational training and education to 200,000 Africans. Xi had given no time frame for doing this but she expected it would take six years.
“Shipping Chinese trainers to Africa has not gone over all that well in the past. Ethiopia had to bring in Germans to replace the Chinese instructors at its Chinese-built vo-tech college. Let’s hope that someone in Beijing is thinking strategically about how to build up the African expertise for teaching all these students ‘how to fish’.”
Brautigam also queried the pledge to support the construction of five “Jiao Tong” (communications) universities in Africa.
“Will these be like the prestigious Shanghai Jiao Tong University, known for its quality research across a number of disciplines? Or are these going to be efforts to steer the training of journalists in more China-friendly directions?
“To fund these and other programmes, China will provide US5 billion in grants and zero-interest loans, and US35 billion in a combination of preferential loans and [non-preferential] export credits and concessional foreign aid loans.
“He also pledged to add another US5 billion to the China-Africa Development Fund (CAD-Fund) (so it will now be expected to eventually reach US10 billion) and increase the China Development Bank-funded African Development Special SME (small and medium enterprise) Loans by another US5 billion (this was originally set up at US1 billion).
“Finally, he seemed to pledge to set up a new China-Africa Co-operation Fund with US10 billion.”
And she noted that Xi had pledged to cancel the overdue portion of interest-free loans provided to low-income African countries.
She warned that this was not a broad debt cancellation for all Chinese loans to low-income countries. “This refers only to a special category of ‘zero-interest’ foreign aid loans. Since 2000, the Chinese have regularly cancelled overdue zero-interest loans that countries are unable (or simply unwilling) to pay. The bottom line here is a pledge of US60 billion in various kinds of support (not all ‘aid’) – US5 billion that is clearly official development assistance, US35 billion that is a mix of export credits (which may be commercial or subsidised) and concessional (subsidised foreign aid loans), and what seems to be an additional US5 billion in a credit line for SME finance.
“The CAD-Fund finance will be different – it’s for equity investment. And we don’t yet know the nature of the China-Africa Co-operation Fund. Will it be grants, loans, or investment? We can compare this with the specific 2006 pledges of US5 billion in preferential/concessional loans, and a further US5 billion for the CAD-Fund, from US10 billion in financial commitments to US60 billion over just nine years.
“Frankly, I did not expect to see this level of serious loan funding (US35 billion), although I don’t think Xi Jinping put a specific timeline on any of these pledges, so it could take a while to roll them out.
“My sense is that a lot of countries are having trouble absorbing the Chinese loans on offer over the past three years. With lower prices for their exports, these loans will be harder to repay. Perhaps Chinese commodity forecasters see rosier numbers starting five years down the line, when the grace periods for the first loans will start to expire?” - ANA
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