China stops short of debt relief for African nations but pledges more cash

BEIJING – China stopped short of providing the debt relief sought by many African countries this week, but pledged US$51 billion (S$66 billion) over three years in credit lines and investments.

The Forum on China-Africa Cooperation (Focac), launched in 2000, took on an enhanced role after the 2013 inception of Chinese 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 Mr Hasnain Malik, head of equity research at tech firm Tellimer, while adding it is not yet at pre-Covid-19 levels.

China has also sought to use Focac to counter growing competition in Africa from the United States, 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 Mr 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 US$60 billion of 2015 and 2018, which marked the peak of lending to Africa under BRI.

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 a billion people has an annual infrastructure funding deficit estimated at US$100 billion, and needs transport links to make a new giant pan-African trade bloc 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, Ms Mao Ning, a foreign ministry spokeswoman, said there is no contradiction.

“The cooperation between China and African countries, including the specific implementation of projects, is discussed and determined by both sides,” she said at a news conference on Sept 6.

Currency swaps

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

“The outcomes of the Focac summit signal an impetus for green projects and especially for renewable energy installations,” said Mr Goolam Ballim, head of research at South Africa’s Standard Bank.

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

Others were sceptical.

“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 Mr 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 Hassan said on her X account. REUTERS