The Forum on China-Africa Cooperation (FOCAC) is the most important summit between China and African countries. In the year 2000, FOCAC’s first conference was held in Beijing. The president of the People’s Republic of China at the time, President Jiang Zemin, then vice-president Hu Jintao as well as various African heads of state and ministers attended this first conference, which is now held every three years and alternates its location between China and an African country. Since the first conference 16 years ago, FOCAC has seen the cooperation between China and Africa in a range of sectors and resulted in deals spanning billions of dollars.
China pivoting towards investment
The last FOCAC conference was held in December 2015, in Johannesburg, South Africa. The Summit, under the theme “China-Africa Progressing Together: Win-Win Cooperation for Common Development” was a historic meeting as it ushered a commitment of a record 60 billion USD from China for its engagement in Africa. “Ten Major China-Africa Cooperation Plans” also resulted form the meeting. These plans span a range of domains—from infrastructure to green development, from poverty reduction to education. For instance, China promised to train 200,000 African technicians in the following three years.1
Historically, China has doubled its financial commitments to Africa at each FOCAC meeting. Five billion was promised in 2006, then 10 billion in 2009 and then 20 billion in 2012. The 60 billion commitment in 2015 was three times the promise of 2012 and it is not just the amount that makes it unique. Unlike previous years, the commitment was broadly labeled as “investments” rather than being centered around concessional loans. For instance, back in 2009, the entire 10 billion USD commitment was for concessional loans, or loans with lower interests and grace periods. But in 2015, it was more diversified and includes investment-focused plans.
A meeting among almost a hundred African officials and top Chinese ministers in July 2016 provided proof that China is now more interested in investment-centered projects. This meeting, held in Beijing 7 months after the FOCAC summit in Johannesburg, was meant to be a follow-up to the FOCAC agreements and to iron out some details. In addition to the creation of new deals, it was announced at the meeting that in the previous 7 months, 50.7 billion USD worth of deals were already signed. Of the 50.7 billion USD in agreements, about 46 billion (more than 90 percent) was said to be consisting of direct investment and commercial loans from Chinese companies.
This is clearly a departure from before for two reasons.
- Firstly, China is de-emphasizing interest-free loans and aid. In fact, of the 60 billion USD that China promised at FOCAC, only 5 billion USD consist of aid and interest-free loans. Although grants and interest-free loans make up a rather tiny part of Chinese financing in Africa, the continued de-emphasis of these types of aid is telling of the future. Even Ambassador Lin Songtian, the director general of African Affairs at the Chinese Ministry of Foreign Affairs asserted, “In the past, our African friends would come to China for grants assistance. But grants cannot meet all their demands for industrialization and agricultural modernization. China will instead create an enabling environment and open doors for companies to invest overseas.”
- Secondly, China’s foreign direct investment (FDI) towards Africa could potentially increase. China lags behind Western nations in its FDI’s in Africa. Green field investments, or FDI’s where the foreign entity builds operations in the host country from the ground up, are not China’s strong suit in Africa. For instance, data from 2014 shows that the United States led in the number of projects and France led in the dollar-amount of green field investments in the continent.