China Pledges Another $51 Billion For Debt-Distressed Africa - A Debt Trap?

Chinese President Xi Jinping today pledged to step up China's support across the debt-distressed African continent with funding of nearly $51 billion, backing for more infrastructure initiatives and a promise to create at least 1 million jobs.

The commitments were made at the Forum on China-Africa Cooperation Summit in Beijing.

Beijing, the world's biggest two-way lender, also promised to carry out three times as many infrastructure projects across resource-rich Africa, despite Xi's new preference for "small and beautiful" schemes based around selling advanced and green technologies in which Chinese firms have invested heavily.

"China is ready to deepen cooperation with Africa in industry, agriculture, infrastructure, trade and investment," Xi told delegates from more than 50 African nations gathered in Beijing for the ninth meeting of the three yearly forum.

After the opening ceremony, delegates adopted the Beijing Declaration to build an "all-weather China-Africa community with a shared future in the new era," as well as the Beijing Action Plan for 2025-2027, China's state media said.

Xi Jinping delivers a keynote speech at the opening ceremony of the ninth Forum on China-Africa Cooperation Summit

Xi also called for "a China-Africa network featuring land-sea links and co-ordinated development," as he told Chinese contractors to return to the one-billion-strong continent, after the lifting of COVID-19 curbs that disrupted its projects.

"China and Africa account for one-third of the world population. Without our modernisation, there will be no global modernisation," Xi told the summit.

The Chinese leader committed 360 billion yuan ($50.70 billion) in financial assistance, but specified that 210 billion would be disbursed through credit lines and at least 70 billion in fresh investment by Chinese companies, with smaller amounts provided through military aid and other projects.

At the 2021 China-Africa summit in Dakar, China promised at least $10 billion in investment and the same again in credit lines. This time, the financial assistance would be in yuan, in an apparent push to further internationalise the Chinese yuan.

Xi did not mention debt in his speech, despite Beijing being many African states' biggest bilateral lender, but the Action Plan for 2024-2027 included terms for repayment postponements and called for the establishment of an African rating agency to bring about "a new rating culture".

United Nations Secretary General Antonio Guterres told the summit African countries' inadequate access to debt relief and scarce resources was a recipe for social unrest, while proposing fresh reforms to the international financial architecture.

SHARED FUTURE OR DEBT DIPLOMACY?

The Forum on China-Africa Cooperation Summit chalks out a three-year programme for China and every African state bar Eswatini, which retains ties to Taiwan.

In addition to 30 infrastructure connectivity projects, Xi said, "China is ready to launch 30 clean energy projects in Africa," offering to co-operate on nuclear technology and tackle a power deficit that has delayed industrialisation efforts.

But the Chinese leader did not reiterate his pledge at the 2021 forum in Dakar for the Asian giant to buy $300 billion worth of African goods, pledging only to unilaterally expand market access.

Analysts say Beijing's phytosanitary rules for market access are too strict, making China unable to meet that promise.

But Africa continues to receive more Chinese financing instead. Last year, China approved loans worth $4.61 billion to Africa, in the first annual increase since 2016.

"I'm here to see how best we can foster our relationship with China," Princess Dugba, Sierra Leone's fisheries and marine resources minister, said to the summit's sidelines.

"China is getting us a fish harbour, which is one of the first of its kind," she added.

Xi Jinping also said China was "ready to assist in the development of the African Continental Free Trade Area, and deepen logistics and financial co-operation for the benefit of trans-regional development in Africa."

China has been accused of having "hidden agendas" in its "debt diplomacy". Nations dealing with China have often faced the dangers of unaffordable debt via unsustainable financing, which, as highlighted by India at the United Nations, leads to a "vicious cycle of debt traps".

($1=7.0976 Chinese yuan renminbi)