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Chinese investment boosts Africa’s sustainable development: Expert

By Wu Lejun (People's Daily)    12:07, June 04, 2018

Statistics provide strong evidence that it’s groundless to say China is “pillaging” Africa and increasing debt burden in the region, said a Chinese expert who has been engaged in the research on China’s investment to Africa and African economy for many years.

Unlike Western media reports, China’s investment in Africa covers a wide range of areas instead of focusing only on the resources and energy sector, said Liu Qinghai, head of the Center for African Economic Studies at the Institute of African Studies at Zhejiang Normal University and visiting scholar of the China-Africa Research Initiative at Johns Hopkins’ School of Advanced International Studies.

China’s outward direct investment (ODI) in Africa had reached $39.9 billion in total by the end of 2016. The top 5 largest sectors for Chinese capital were construction, mining, manufacturing, finance, scientific research, and technology services, according to the 2016 Statistical Bulletin of China’s Outward Foreign Direct Investment (OFDI).

Over the same period, China’s investment in Europe totaled $87.2 billion, while the mining, manufacturing and finance ranked the top three most invested industries.

According to statistics from the US Department of Commerce, the top 3 sectors in US OFDI in Africa at the end of 2015 were mining, holding companies (non-banking) and manufacturing at 66 percent, 14 percent and 7 percent, respectively.

It’s clear from the data that mining occupies a major share of the US’s direct investment into Africa, a higher percentage than that of China.

Between 2000 and 2014, the top four African business sectors receiving Chinese loans were transportation (28 percent), energy (20 percent), mining (10percent), communication (8percent), according to research from the China-Africa Research Initiative at the Johns Hopkins School of Advanced International Studies (SAIS-CARI).

In 2015, the top 3 sectors financed by Chinese loans were transportation ($4.6 billion), power ($4.5 billion), and industry ($ 70 million). Mining didn’t receive any Chinese financing. It’s also worth noting that more Chinese loans went to Ethiopia, Kenya, Uganda, Senegal, Djibouti and Cameroon, which are not resource-rich countries.

As a resource-poor country, Ethiopia was Africa’s 2nd largest recipient of Chinese financing. Between 2000 and 2016, Ethiopia received $13.3 billion in Chinese loans, 35 percent of which went to transportation and 24 percent went to the energy sector.

China provided loan assistance to Ethiopia for the construction of industrial parks such as Eastern Industry Zone and Huajian International Shoe City.

The country has also carried out a series of human resource development projects in Africa since the 1950s, and relevant projects saw a substantial growth after the Forum on China-Africa Cooperation was founded in 2000, said Liu.

The number of African students studying in China rose from 2,000 in 2003 to 61,594 in 2016, an over 30-fold increase, according to China’s Ministry of Education. In 2014, China became the second most popular destination for overseas studies in Africa after France.

“China gave priority to infrastructure and human resources development rather than exploring the mineral resources as some imagined. The Chinese investment has promoted Africa’s sustainable development,” said Liu.

“It is unfair to accuse China of ‘pillaging’ Africa’s natural resources, and it is even groundless to say the country has increased debt burden in Africa,” she added.

Liu said that conclusion can be supported by the proportion of China’s loans to Africa to the latter’s total external debt, the influence of the loans on Africa’s GDP and the scale of the latter’s debts

Africa’s debt has been increasing after the sovereign bonds were issued in 2006.

Statistics by the World Bank show that Africa’s external debt has reached $ 6.01 trillion by 2016.

The debt from China was estimated to total $114.4 billion between 2000 and 2016, accounting for 1.8 percent of Africa’s total external debt, according to SAIS-CARI.

Some African countries’ foreign debt had exceeded half of their gross national income by the end of 2016. A total of 13 African countries were in heavy debt, among which only the Republic of Congo and Ghana received more loans from China.

However, Congo’s debt from China only accounted for 9.4 percent of its total foreign debt of $38.3 billion. Ghana’s debt from China was less than 1.5 percent of its total foreign debt of $213.9 billion.

Angola, Ethiopia and Kenya, which received the most loans from China, had a lower debt burden compared with other African countries.

In fact, the Chinese loans have boosted the African countries’ GDP growth in multiple ways, said Liu, adding that the loans were mainly used in Africa’s infrastructure construction and the manufacturing industry.

China mainly offers concessional loans with low interest rates to Africa. The Chinese infrastructure enterprises provide high-quality service at a reasonable price, go through approval process quickly, and are able to guarantee the quality of construction projects while finishing them on time.

In that way, they have helped the African countries reduce costs in infrastructure construction and create many jobs for the local people, Liu explained.

She added that through improving infrastructure, China’s investment has promoted Africa’s economic growth. Major Chinese infrastructure projects, which are usually related to Africa’s industrial projects, have advanced Africa’s industrialization and boosted its GDP growth.

“The Chinese loans to Africa account for a very small share of the region’s total foreign debts,” noted Liu, “With the infrastructure in Africa improved, the money from China has played a positive role in reducing debts of African countries, and promoting the GDP growth. Obviously, it’s ill-founded to say China added to Africa’s debt burden.” 

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