China-Africa trade reached 220 billion in 2014 and is
estimated to be about $300 billion in 2015. At the Forum on China-Africa Cooperation
(FOCAC) , hosted in Johannesburg in December China’s President Xi Jinping
pledged $60 billion to African states. What does that mean exactly? Large
figures like $60 billion require cautious analysis. This isn’t aid in the traditional sense. Most of the
announced $60 billion will come in loans and export credits. Only $5 billion is
to arrive as grants and interest-free loans. Outsiders know very little about the
other $55 billion. China has announced the general outline of its commitments.
For instance, $35 billion will go towards preferential loans, export credits,
and concessional loans. Another $5 billion will go to the China-Africa
Development Fund, a private equity and venture capital investment arm of the
China Development Bank that has a lot of problems finding bankable
projects.There’s $5 billion for the Special Loan for the Development of African
SMEs, another financial vehicle implemented by the China Development Bank that
operates on a commercial basis. Finally, $10 billion will create and offer the
initial capital for the China-Africa production capacity cooperation fund,
which might be an entirely new project — but we are not completely sure.
Announcements at FOCAC summits usually outline three years’
worth of money—but no dates were announced. It might not all be new capital.
Often, the figure includes projects already initiated. FOCAC’s financial goals
are often reached well before the end of three years — or conversely, it may
take longer than three years to allocate all the funding.
So China is investing a lot in Africa? Not really. Most of
these large China-Africa deals are carried out via loans financed by Chinese
policy banks. They are not foreign direct investment, in which a company or
entity from one country invests in another country’s company or entity, and has
the foreign investor owning at least “10% of the voting power of the direct
investment enterprise.” Unlike other investments, such as portfolio
investments, FDI includes investors actively looking to influence how the
enterprises are managed. China recently announced that its cumulative foreign
direct investment into Africa from 2000 to 2014 is $30 billion. As of 2012,
China has been investing a little more than $2 billion annually into Africa. That
may be a lot — but it’s less than the U.S.’s annual investments in Africa.
Furthermore, last year’s 40 percent drop in official Chinese investment in the
first half of the year is not that significant because the base amount is low. not
all FDI is registered and catalogued with their respective government. For
these unofficial flows, China is investing $6 billion in Africa compared to $8
billion from the U.S. These figures are tough to parse. Ministry of Commerce
actually does try to release accurate data, but not every Chinese enterprise
will register with MOFCOM.
It’s not clear whether China’s official accounting includes
investments from Hong Kong and Macau, which have some autonomy from Beijing but
often serve to channel both official and unofficial Chinese finance back into
mainland China to take advantage of tax benefits, a process called round
tripping. China invests less than 5 percent of its FDI stock, which is the
cumulative level of FDI at any given time, in Africa, and exact figures are
hard to pin down.
Essentially most Chinese money in Africa is in the form of
loans – but there is no real correlation between aid and other resources.
OECD-defined Chinese aid into Africa is a little over $2 billion a year, while
U.S. aid is around $8 billion. President Xi announced $156 million in emergency
food aid in his speech at FOCAC, and before that at the United Nations he
pledged $100 million in military aid to the African Union, but those sums are
far less than the billions in project financing offered by Chinese policy
banks. Although the FOCAC action plans outline cooperation projects
multilaterally – that is, among China and several African states – China
delivers on the projects bilaterally. This means that FOCAC summit
announcements do not actually detail who gets what. For instance, we know in
general that Xi announced that “China will train 200,000 technical personnel,”
but we do not know which countries will get these training opportunities. China
also announced partnerships between 10 Chinese and 10 African agricultural
institutes, aimed at modernizing African agriculture. The action plan does not
actually specify which countries will be in the partnerships or receive one of
the “100 programs on clean energy, wildlife protection, environmentally
friendly agriculture and smart city construction.”
That means African state
leaders and other stakeholders will be competing for these sums of money.
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