Sino-African Relations: The Road to ‘Debt Trap Diplomacy?’

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Sino-African Relations: The Road to ‘Debt Trap Diplomacy?’
Michael Osiyale & Ellen Carpenter | 2019 - April to June | Africa
Reflections on trade and loan deals between Africa and China.

One of the most interesting developments in international politics over the past few decades has been the increasing influence of China in Africa, both economically and politically. Previously seen as the domain of the European colonial powers, and then the United States, China has now overtaken them as the African continent’s primary trading partner, with over $215bn worth of trade agreements in 2014.

Although new trade agreements may sound like good news for Africa, the balance of power is precarious; the issue of falling commodity prices in Africa, for example, means that exports from states like South Africa and Angola are outweighed by imports from China. So even if in 2017 the financial sums involved in bilateral trading agreements dropped to $148bn, affecting both parties, it is likely that China has not incurred quite the same losses as Africa.

China’s business approach to Africa is multifaceted. There are not only trade agreements, but investments in banking, notably in South Africa, and in mining; in this industry China has footholds in Zambia, South Africa and the Democratic Republic of Congo, with one serious workers’ uprising taking place in Zambia in 2012. The murder of a Chinese manager overseeing the African workers during this incident, and the allegations that China’s interest in the region constitutes a new form of colonial intervention, undoubtedly reflects both social tensions and mistrust surrounding business agreements at a local level among the African working classes. 

Foreign aid, contract engineering and construction projects and loans also feature in China and Africa’s business partnership. The issue of loans is particularly contentious. After decades of war, poor economic outcomes and poverty in some African states, money is undoubtedly needed to finance large scale infrastructure projects, including the construction of major ports, roads and railway lines, which China is willing to provide. However, critics of this financial relationship point to the large-scale debts that the African countries incur from such projects, questioning China’s motives in investing in Africa, and whether this debt could be used to wield influence over African governments, policies and resources if they default on their loans. 

Criticism for China’s lending practices come from various quarters. Some Western nations, who may feel threatened by China’s growing global influence, argue that Chinese loans lack the transparency of IMF backed ones. While there is some truth in this argument – take, for instance, the notorious Hambantota case, in which a Sri Lankan electoral candidate accepted large payments from a Chinese port company in return for favouring Chinese business - the outcomes of IMF lending to Africa in particular might also be called neo-colonialism by a different name, suggesting that the poorer African states are, as in epochs like the Cold War, once again finding themselves trapped in new ways between the competing interests of the world’s superpowers. 

Of equal significance is the fact that China is not in fact Africa’s largest loan provider – despite investing loans of, for instance, $42.8bn in specific countries like Angola, Africa is in general still far more likely to turn to the USA for this type of financial support.   

Whatever we feel about this contentious issue, it is clear that African leaders must learn from history if they to avoid being overwhelmed by the world’s superpowers. There is a need to forge new, independent and stable paths that do not leave countries like Angola, Zambia and South Africa vulnerable to excessive political influence or pressure, as in the colonial, Apartheid and Cold War eras. Foresight is needed to prevent any leveraging of their respective countries’ futures and rights through bad debt, in what, since the Hambantota scandal, has aptly been referred to by one Indian observer as ‘debt-trap diplomacy.’