China in Africa

I recently wrote a blog post about China's involvement in Venezuela. China has also lent large amounts of money to African nations.

Forbes (May 4, 2019) has the following:

“As a South African, I've seen China's activities on the continent up close,” says Ted Bauman, Senior Research Analyst at Banyan Hill Publishing. “It's clear that China's primary goal with foreign investment is geopolitical, not economic. The most consequential investments are undertaken by state owned companies, not by Chinese private capital. They tend to focus on infrastructure like highways, ports and dams, and on public networks like the electrical grid.”

The trouble is that “these investments help to bind countries to China politically, and through debt obligations,” explains Bauman.



National Interest (July 10, 2019) has this to say:

China is in Africa now not to advance Maoism, but to control its resources, people, and potential. From building railways in Kenya and roads in rural Ethiopia to running mines in the Congo, China has drastically changed the African economic landscape in the twentieth century. China lent nearly $125 billion to Africa between 2000 and 2006 and recently pledged $60 billion at the 2018 Forum on China-Africa Co-operation.

Chinese firms bring in their own drivers, construction workers, and support staff, denying these employment opportunities to Africans, and often live apart from the African societies in which they reside.

I think that last quote is interesting. Instead of providing skills to African workers, China is employing their own workers to complete projects. This seems to be opposite to what China is doing with the US where there is criticism that China is stealing America's intellectual property. Of course, it is also similar in that everything related to China is done by Chinese.

Bloomberg (July 19, 2019) has this:

Construction of what was intended to be a flagship infrastructure project for Eastern Africa was halted earlier this year after China withheld some $4.9 billion in funding needed to allow the line’s completion. 

But with concerns rising globally that Belt and Road was loading poorer nations with unsustainable debt, Xi signaled in April that Beijing would exert more control over projects and tighten oversight.

Beijing’s tighter scrutiny of Belt and Road projects comes as China shifts the program away from low-cost loans onto a more commercial basis involving its private sector. Clearer rules for state-owned enterprises and building overseas auditing and anti-corruption mechanisms were among other steps floated by officials at the time of the Belt and Road Forum in April.

The Bloomberg article appears to contradict the previous two articles. The Forbes article states that state owned companies are lending the money. National Interest is saying that China is increasing their lending. Meanwhile, the Bloomberg article indicates lending is shifting to their private sector and that China is tightening oversight. One might say that each article has different on-line print date; however, the Bloomberg example is from April.

One argument made for why China is being more careful with funding is because there are complaints that China is putting African countries into an unsustainable debt position. I wonder if the situation might be more complex. That they're feeling the impact of the trade war and are keeping money home. Also, the Bloomberg article is saying that there is a shift from low-cost loans. So is China just making sure they're getting a bigger bang from their lower levels of investment?

Also, I wonder what this means for Venezuela. On one hand, one could argue that China will eventually stop supporting Venezuela. The example would be the railroad situation mentioned in the Bloomberg article. I think a big difference between Venezuela and Africa, is that in Venezuela the US government is trying to oust Maduro. Due to that, I think China is unlikely to end their support for Venezuela even if it means they might never get their investment money back.