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IMPACT AFRICA

China to Africa:

DEVELOPMENT-FINANCE OR AID?

hina’s economic engagement with Africa has skyrocketed over the past decade, leading to debates about the nature
of Chinese investment and aid to the continent. The reason? The level of China’s investment in the continent of
Africa has been increasing at a steady rate. At the 2018 China-Africa Cooperation Forum, China announced it would
Cbe providing $60 billion in financial support to Africa. The stakes in the latter are high due to the continent’s rich
abundance in raw materials.

What is China Aid?
Foreign aid from China is development assistance provided by the Chinese government. According to Chinese scholars,
China has provided almost 900 aid projects to African countries. These types of aid include the support of textile factories,
hydropower stations, stadiums, hospitals and schools, infrastructure projects given as gifts, concessional loans to fund
projects, disaster relief, student scholarships and other forms of assistance.
The financial muscle of China’s aid is mainly provided by large loans from China’s Export-Import Bank, the China Development
Bank (CDB), and the China Africa Development Fund (which is within the CDB). These loans given to Africa, are repayable and
long term. It is through these loans (worth 10MILLION USD) that China is able to finance Africa. ‘’By 2025, China will have
provided Africa with USD 1 trillion in financing, including direct investment, soft loans and commercial loans,” Announced the
head sovereign risk analyst of Export-Import Bank of China.
China’s economic presence contributes to the confusion between
development and aid. Though its goal is to ensure Chinese projects
meet local realities within the recipient country, it is still quite
confusing; is this project financing or does it qualify as aid? Paying
for the difference between the concessional loans provided to Africa
and commercial loans resulting in small difference interest rates is
what makes China-Aid.

Why is China Giving Aid to Africa?
Despite claims that their motive is selfish, the reality is far more
complex. China’s engagement with Africa has been a useful
instrument for decades. Africa has become an economic partner for
China with its rich natural resources and market potential.

China’s “tied aid” for infrastructure usually favors Chinese
companies (especially state-owned enterprises), while its loans
are in many cases backed by African natural resources, this is
associated with securing the continents natural resources. China
provides low-interest loans to nations who rely on commodities,
such as mineral resources, copper being an example, as collateral.
In such situations, the recipient countries usually suffer from low
credit ratings and have great difficulties obtaining funding from the
international financial market; but China comes ‘’to the rescue,”
making financing relatively available—with certain conditions. To
secure Africa’s natural resources, China also creates business
opportunities for Chinese service contractors in Africa, such as
construction companies, marking Africa as China’s second-largest
supplier of service contracts.
Hence Chinese aid combined with financing, opens doors for
the Chinese workers, creating open business opportunities and
employment in Africa, which serves a good advantage for both
parties - China and Africa.

Doubt and fear that China’s economic presence in Africa is a way
for China to “rule Africa’’, has been the greatest assessment and
every African observer’s nightmare. From infrastructural projects, to
quests for natural resources, all these are considered as a trap by
Africans.

33 The Africa We Want