China’s Africa debt deals guided by transparency

By Zhou Pingjian More by this Author

Kenya’s largest creditor? Not China. Kenya owes less than 10 percent of its public debt, or, less than 20 percent of its foreign debt, to Chinese creditors. Labelling China as the main creditor of Kenya is clearly an overstatement.

Western investors, often in the forms of multilateral financial institutions and commercial creditors, are the largest creditors of African countries such as Kenya. According to the World Bank’s 2022 International Debt Statistics, 28.8 percent of Africa’s external debt comes form multilateral financial institutions and 41.8 percent from commercial creditors. Together they account for nearly three-fourths of Africa’s total debt.

Development takes financing support, internal or external. Following their political independence, African countries have made tireless efforts toward national development and economic revitalisation. In this process, a shortage of funds for development and the need for external financing are problems that African countries have to face.

China-Africa financing cooperation has provided Africa with new options to break the bottleneck of insufficient funds for development.

Since the beginning of the 21st century, China and other emerging markets and developing countries have actively supported Africa’s economic development. We have provided Africa with new financing channels different from the traditional Paris Club to help the continent build capacity for self-generated development.

Take China-Kenya financing cooperation for instance. All the loans from China are project-specific based on equal-footed consultation and mutually beneficial cooperation. The fruitful and tangible outcomes of our cooperation are there for all to see.

Africa’s debt situation is in nature an issue of development. The solution lies in ensuring the effective use of funds and loans. Fact is, financing from Western countries mainly focuses on non-manufacturing sectors, and often comes with political strings attached, such as reforms in human rights, law and other areas. Instead of truly helping Africa to advance economic growth, generate more tax revenues, and increase exports and earn foreign exchange for improved balance of payments, such financing is used as a means to remold the continent.

China always respects the wishes of the African people and its financing to Africa mainly focuses on infrastructure and manufacturing-related sectors to meet the region’s real needs.

To date, by putting various funds to use, Chinese companies have helped African countries build and upgrade over 10,000 kilometres of railway, around 100,000 kilometres of highway, 1,000 bridges, 100 ports, and many large-scale power plants, hospitals and schools. Such financing support has boosted economic growth, increased tax revenues, created jobs, and improved people’s lives in relevant countries, bringing tangible benefits to the African people.

On transparency, China-Africa financing co-operation always follows customary business practices and respects African countries’ sovereignty, will, and domestic legal procedures.

There is no interference or covert maneuver. In addition, China has never attached any political strings to debt agreements, never forced any African country to take out loans, and never pressed for debt service by any African country.

Not a single African country slid into debt predicaments or has been forced to mortgage its ports, mines or other strategic resources to China just because it has financing cooperation with China. Tarnishing the transparency of China-Africa cooperation is an insult to the governance of African countries and the wisdom of the African people. Such attempts themselves, I am afraid, are driven by the least transparent of intentions.

Not a single developing country has ever fallen into the so-called “debt trap” because of Chinese loans. In fact, the so-called “debt trap” is a narrative created by those who wish to forever plunge Africa into a “poverty trap” and “backwardness trap”. It cannot be said that only the loans provided by Western countries in the past were development aids, while these from China now are called “debt traps”.

China is truly committed to supporting Africa’s development and revitalisation, and has always been dedicated to easing Africa’s debt pressure.

China is fully implementing the G20 Debt Service Suspension Initiative for Poorest Countries (DSSI): it has put off more debt payments than any other G20 member, signed agreement or reached common understanding on debt relief with 19 African countries, and engaged in the case-by-case debt treatment of Chad and Ethiopia under the G20 Common Framework.

Unfortunately, commercial creditors as Africa’s main lenders only have limited participation in the G20 DSSI, and multilateral financial institutions have even refused to adopt debt relief measures under the Common Framework for Debt Treatments beyond the DSSI.

To resolve Africa’s debt problems requires a systematic plan, which includes both stopgap measures such as debt relief and solutions to step up Africa’s capacity for independent and sustainable development.

China calls on the international community to beef up support to Africa, respect its will, heed its voice, and help African countries realize independent and sustainable development at an early date.