According to Reuters analysis of lending, investment, and trade data, China’s flagship economic cooperation program is bouncing back after a lull during the global pandemic, with Africa as a primary focus. For instance, the program has led to the construction of major infrastructure projects, which has significantly boosted trade between China and Africa.
Chinese leaders have reiterated their commitment to Africa’s modernisation, underscoring the billions of dollars committed to new construction projects and record two-way trade. This substantial investment is a testament to China’s dedication to fostering ‘win-win ‘ cooperation, ensuring mutual benefits for both China and Africa.
However, a closer look at the data reveals a relationship that is far more intricate than it appears on the surface. While China’s Belt and Road Initiative, President Xi Jinping’s strategy to build an infrastructure network connecting China to the world, has been touted as a game-changer, the reality is it has failed to live up to Beijing’s rhetoric.
The Griffith Asia Institute at Australia’s Griffith University has reported a staggering 114% surge in new Chinese investment in Africa last year. This substantial increase was primarily directed towards minerals crucial for the global energy transition and China’s economic rejuvenation. However, the dominance of minerals and oil in Africa’s trade with China, overshadowing other imports such as agricultural products and manufactured goods, has led to a significant trade deficit. This underscores the urgent need for diversification in Africa’s trade portfolio.
Chinese sovereign lending, once the primary source of financing for Africa’s infrastructure, is now at its lowest level in two decades. Furthermore, public-private partnerships (PPPs), which China has been promoting as its new preferred investment vehicle globally, have yet to gain momentum in Africa. This has led to a more one-sided relationship than China claims to desire, with a heavy reliance on Africa’s raw material imports. The situation has drawn comparisons to the economic relations between Europe and Africa during the late 19th-century colonial era. As Eric Olander, co-founder of the China-Global South Project website and podcast, succinctly puts it, ‘This is something late-19th century Britain would recognise.’
However, China rejects such assertions.
A pivot with potential?
China’s involvement in Africa, a central pillar of the Belt and Road Initiative (BRI), began to gain momentum well before the COVID-19 pandemic. Chinese companies spearheaded the construction of a diverse range of infrastructure, including ports, hydropower plants, and railways, spanning across the continent. These ambitious projects were primarily financed through sovereign loans. The Global China Initiative at Boston University reveals that annual lending commitments reached a peak of $28.4 billion in 2016.
However, the pandemic brought about unforeseen challenges. Many projects, despite their potential, proved unprofitable. As some governments grappled with loan repayments, China was compelled to reduce lending. The impact of COVID-19 was felt globally, and it pushed China to focus on its domestic needs, resulting in a decline in Chinese construction projects in Africa.
The American Enterprise Institute’s data reveals a significant surge in Chinese investments in African economic activities, reaching nearly $11 billion in 2023, the highest level since tracking began in 2005. Impressively, $7.8 billion was allocated to mining, with notable acquisitions such as China’s MMG Ltd purchasing Botswana’s Khoemacau copper mine for $1.9 billion and investments in cobalt and lithium mines in Namibia, Zambia, and Zimbabwe. This pursuit of critical minerals is also driving substantial infrastructure development. Chinese companies pledged up to $7 billion in infrastructure investment in a revised joint venture agreement with the Democratic Republic of Congo, signalling a deep commitment to the region’s growth and development. Furthermore, amid the global energy transition race, the Lobito Corridor, backed by the United States and European governments, is set to play a pivotal role. This railway link will facilitate the transportation of metals from Zambia and Congo to Africa’s Atlantic coast, positioning these regions at the forefront of the energy evolution.
Team BharatShakti (with Reuters inputs)
