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THE BOTTOM LINE

China strengthens Africa ties with US$60b financing aid

LAST week, China played host to 53 African countries and unveiled its latest triennial aid plan for the continent: US$60 billion, the same as in 2015, but with some differences.

Chinese President Xi Jinping, in his keynote address on Monday, said that "China, the world's largest developing country, and Africa, the continent with the largest number of developing countries", form "a community with a shared future".

The summit was part of a triennial event of the Forum on China-Africa Cooperation, or FOCAC, set up by China in 2000. Since then, it has met in China or Africa every three years.

Many African countries were in Beijing to lobby for specific projects. President Mokgweetsi Masisi of Botswana, for instance, disclosed that China had agreed to an unspecified loan for rail and road infrastructure. In addition, China cancelled US$8.3 million in debt and offered US$31 million in grant aid.

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In the last decade, China has at each session dramatically increased its offer of financing to Africa, beginning with US$5 billion in 2006, doubling this to US$10 billion in 2009, redoubling it to US$20 billion in 2012, then tripling it to US$60 billion in 2015.

This year, the headline figure remained at US$60 billion, but there were some changes to the package.

As President Xi put it: "The US$60 billion will include US$15 billion of grants, interest-free loans and concessional loans, US$20 billion of credit lines, the setting up of a US$10 billion special fund for development financing and a US$5 billion special fund for financing imports from Africa." In addition, the Chinese government would "encourage Chinese companies to make at least US$10 billion of investment in Africa in the next three years".

So the government will only be responsible for US$50 billion, with US$10 billion to come from corporations. Of the US$50 billion, the first component, US$15 billion of "grants, interest-free loans and concessional loans" represent aid. China has not disclosed how much of it will be in grants, but the bulk is likely to be in loans.

According to calculations by the China Africa Research Initiative (CARI) at Johns Hopkins University, "this means that China is providing official concessional assistance to Africa of US$5 billion per year, the highest level ever".

Concessional loans are made by China Eximbank and are given an interest subsidy by the Chinese Ministry of Commerce, so the borrower pays lower than commercial rates.

Despite such highly publicised Chinese financing activities, CARI points out that the US remains Africa's largest donor, having disbursed US$12 billion just to sub-Sahara Africa in 2017, and US$250 million more to North Africa.

In his address, Mr Xi talked about China and Africa being part of one family. Mr Xi said that since 2015, FOCAC had welcomed three new members, the Gambia, Sao Tome and Principe and Burkina Faso, all of which had severed diplomatic ties with Taiwan. In fact, eSwatini, formerly Swaziland, is the only African country that retains diplomatic ties with Taiwan.

This year, with all the talk about "debt traps" to recipients of Chinese loans and charges of colonialism, Beijing no doubt knew that African financing was highly sensitive, too sensitive, even to allow its own media to report on it.

As a result, there was the unusual phenomenon of four top Chinese newspapers led by the official People's Daily publishing identical front pages, covered with stories on the FOCAC meeting.

Each headline began with the name "Xi Jinping". The only photograph at the top of the page was of Mr Xi meeting with the South African leader, Cyril Ramaphosa.

The money and effort that China has devoted to Africa has clearly made a difference. From the trade standpoint, Chinese trade with Africa stood at US$10.5 billion in 2000, when FOCAC was formed, while US trade with the continent was US$38.6 billion.

But by 2013, China's trade with Africa had soared to US$200 billion, dwarfing American trade, which stood at US$85 billion, making China, not the US, Africa's biggest trading partner.

In 1971, when the People's Republic of China won a vote in the UN General Assembly and gained the China seat, replacing Taiwan, it was done with overwhelming support from African countries. Mao Zedong observed that China had been carried into the UN on the backs of African countries. Since then, China has deepened and widened its ties with Africa.

No wonder that the Pew Global Attitudes survey for 2015 showed that 70 per cent of Africans had a positive view of China, much higher than respondents in Europe, Asia and Latin America.

The US, despite its more substantial aid, is being overshadowed by Chinese loans.

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