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One African nation put the brakes on Chinese debt. But not for long.
[DAKAR, Senegal] The new international airport in Sierra Leone was supposed to be a shiny welcome centre for travellers — a symbol showing that after a devastating civil war and an Ebola epidemic, the nation was finally open for business.
But last month, the government decided that the multimillion-dollar price tag was too high, so it cancelled the financing that made construction possible: a more than US$300 million loan from China that Sierra Leone might have struggled to repay.
President Julius Maada Bio was soon hailed by analysts for putting the brakes on a project that could have deeply indebted his nation, already one of the poorest in the world.
It seemed that Sierra Leone was heeding the hard-earned lessons of other developed nations that have found themselves owing enormous amounts to China.
Yet only a few days after his announcement about scrapping the deal, Mr Bio appeared on state-owned Chinese television to make clear that he was not backing away from China after all. In fact, he was seeking its help to build a more than US$1 billion bridge and was also open to renegotiating the airport loan.
"We are a developing nation," Mr Bio told the interviewer, "and we look forward to nations that want to help us develop."
Across sub-Saharan Africa, governments like Sierra Leone's are opting to overlook glaring examples of developing countries teetering toward economic distress after borrowing heavily from China.
Forty per cent of countries in the region are close to falling into debt crisis, the International Monetary Fund has cautioned. And many of those are still seeking loans from Beijing for help to finance airports, highways, railways, dams and power projects.
The warning signs of taking on too much debt from China appear across the globe, as in Sri Lanka, where after struggling to make their payments, officials recently turned over to China a port and 15,000 acres of land for 99 years.
But Chinese-backed ventures have also hit snags closer to home in Africa.
Kenya has now borrowed far more from China than from any other country. But it has also come to depend on a flood of Chinese manufacturing imports, a trade imbalance that makes it harder to raise foreign currency to pay off debt. Kenya's trade with China has grown eightfold in the past decade, according to President Uhuru Kenyatta, who complained at a conference earlier this month in Shanghai that the trade was skewed in favor of China.
The IMF has flagged Djibouti, site of a large Chinese military base with live-fire exercises in the desert, as having potential problems with mounting debt, most of which is owed to the Chinese government's Export-Import Bank, according to a report earlier this year from the centre for Global Development. Yet Djibouti shows no signs of limiting new borrowing for projects and it's unclear whether these will earn enough revenue to pay off their debts.
In Nigeria, Chinese projects have been dogged by accusations of corruption, poor decision-making and in some cases shoddy construction. Yet the nation is still turning to China to build a coastal railway and myriad other projects.
Chinese debt has become "the methamphetamines of infrastructure finance: highly addictive, readily available and with long-term negative effects that far outweigh any temporary high," according to a recent article by Grant T Harris, who was president Barack Obama's White House director for Africa from 2011 to 2015.
The added fact that China has flooded African markets with low-cost manufactured goods means that many African factories have been driven out of business, making it harder for African countries to raise the hard currency — mostly dollars — that they need to repay loans from Beijing.
China has extended lines of credit to nations rich in natural resources like oil, bauxite, iron and other metals. So even if a resource-rich developing country has trouble repaying its loans for a while, the thinking goes, it can pay with natural resources sooner or later. China also gains politically by extracting promises of support for the Beijing government over Taiwan as a condition of eligibility for a loan.
At the China-Africa Forum for Cooperation summit in Beijing this month, China announced that it had set up a US$60 billion fund for African infrastructure projects to strengthen ties with the continent.
Numerous analysts and experts, including the former Secretary of State Rex Tillerson and Christine Lagarde, the managing director of the IMF, have warned nations to be cautious about taking on too much Chinese debt.
Angola, the Republic of Congo and Zambia were some of the nations that Moody's listed this month among the most indebted to Chinese creditors. A report from the financial research company said interest payments in Ghana, Angola, Zambia, and Nigeria already absorbed more than 20 per cent of government revenue.
This month, vice-president Mike Pence, speaking at the Asia-Pacific Economic Cooperation summit, accused China of using "debt diplomacy" to expand its global influence. But Chinese officials have repeatedly disputed any notion that its loans are creating so-called debt traps for African nations.
"On the contrary, cooperating with China helps these countries raise independent development capabilities and levels, and improves the lives of the local people," said Hua Chunying, Chinese Foreign Ministry spokeswoman, in a statement responding to Mr Pence.
China has promised to forgive some of its loans to some of Africa's poorest nations. But it was unclear which countries would benefit and the promise applied to only interest-free loans.
China is strengthening ties in new areas on the continent, specifically in West Africa where it is adding more African countries to the list of nations in its so-called Belt and Road initiative, which envisions major infrastructure projects backed by the Chinese government around the world.
One of the new Belt and Road countries is Senegal, which was part of president Xi Jinping's four-country visit to the continent this summer. During a ribbon-cutting ceremony in Senegal's growing capital city, Mr Xi handed keys to a new wrestling stadium built by the Chinese to President Macky Sall.
Across the country, billboards line the roads touting Mr Sall's "Emerging Senegal" plan to transform the economy with a new city, a new commuter rail link and other projects. Chinese loans are paying for a highway to the city of Touba and part of an industrial park.
The agreements benefit both governments. Mr Sall is facing re-election next year and eager for his vision to be completed. And Senegal, along Africa's westernmost coast, is of particular geographical importance to China as a base for manufacturing and exports.
The same is true on the opposite side of the continent, in Mozambique, where Chinese loans are paying for bridges and numerous other projects. It's part of a plan to double down on places that have strategic importance, said Anna Rosenberg, sub-Saharan Africa director at Frontier Strategy Group, an emerging markets advisory firm.
"For Africa this is not a bad thing," she said. "They need the infrastructure. They can't wait for aid to come from the West. They need it fast, and the Chinese government has realised that."
For nations like Sierra Leone that are eager to put years of political instability behind them, the lure of Chinese deals can be irresistible. With more than half of the population living under the poverty line and an economy struggling to get back to the levels reached before the Ebola outbreak, it has few other options.
During his election campaign, Bio decried the new airport project, calling it a "sham that is clouded with secrecy" and unnecessary for a nation that had no more than 40,000 travelers passing through each year. The IMF had also warned against the deal. Canceling the loan was one of the first splashy moves Mr Bio made after taking office this year.
But on Chinese television, Mr Bio backpedalled, explaining that he was negative about only the terms of the airport deal, and that the cancellation was not intended as a sweeping indictment of dealing with China. He went on to praise a Chinese health centre and other aid the nation has given to Sierra Leone.
Sierra Leone is home to one of the largest iron ore deposits in the world and its economy is dominated by a China-backed mining project that exports ore for use in Chinese steel mills. Government officials declined to comment on plans for more loans from China.
Analysts caution that African governments need to get better at negotiating loans with China, taking care to haggle over interest rates and adding clauses requiring full-time employment for local citizens.
"The Chinese seem to know what they want from Africans, in particular when it comes to commodities," said Ibrahima Cheikh Diong, a former member of the Senegalese government who scrutinised deals between China and Senegal. "The question is, is that the same for Africans?"