Analysts suggest that the increasing focus on investment means that China is actually confident about Africa’s economic future. In addition, the fact that China is tripling its commitments to a total of 60 billion could mean that it wants to strengthen its position in the African continent and increase the number of assets it owns there.
But China’s recent pivot in Africa has also raised many questions. For instance, Yun Sun, a prolific writer and researcher who is a non-resident fellow at Brookings Institution, notes that there was less talk about natural resources. She wrote, “Rather strikingly, natural resources have almost completely disappeared from China’s policy statements [at FOCAC 2015].” This is surprising because at least until the end of the year 2015, the majority of African exports to China were made up of natural resources.” Is China’s long term strategy in Africa leaning away from natural resources too? If so, what would countries that rely on their resources to pay back Chinese loans do? These unanswered questions still linger.
It should also be noted that the lean towards investment comes at a time when China’s investments in Africa appear to have taken a hit. For instance, in the first six months of 2015, China’s direct investment in Africa stood at 1.19 billion USD, falling by over 40 percent since the previous year. China’s Ministry of Commerce blamed the slack global economic recovery, international commodity price fluctuations and the Ebola outbreak for the dip in investments.
To increase investment, China is exploring new methods. As mentioned above, Ambassador Lin Songtian insisted that China would enhance its investments in Africa by creating an enabling environment and opening doors for Chinese companies to invest overseas, including in Africa. In this new environment, commercial deals would depend on market viability. And acquiring funds would certainly be based on creditworthiness. Regarding this, Ambassador Lin Songtian continues, “To acquire a concessional loan, it takes a very long procedure. But for a commercial loan, all you need is to show how you will pay back.”
This has an immense consequence for African countries and is certainly not as simple as Ambassador Lin implies. It means that African nations have to take extra steps to woo Chinese commercial investors, increase their commercial viability as well as their creditworthiness.
There are signs that show that China will not be giving out loans as easily to African nations as it has done in the past. Bloomberg cites that there were more than 86 billion USD of loans sent to Sub-Saharan Africa between 2000 and 2014, with Angola receiving the lion’s share. As global commodity prices slumped, Angola, Africa’s top oil producer, received a blow to its Moody’s credit rating. It is also facing an uncertain political atmosphere as President Dos Santos is planning to retire in 2018. All these factors contribute to China’s caution towards giving out loans in the African continent. Lin Boqiang, director of Xiamen University’s Energy Economics Research Center and an adviser to the National Energy Administration of China is quoted by Bloomberg saying, “China is more experienced now…it now considers a risk index when making funding decisions. It’s more careful about the terms of loans, asset evaluation of investment projects, and also political security of recipient countries, because much uncertainty stems from unstable politics.”
It is unclear whether China, like Western lenders, will demand a safer and more predictable political atmosphere in order to engage African countries economically. One thing is for sure, however: Africans will have to compete against each other for attracting China’s cash. After all, in forums like FOCAC, China makes promises multilaterally but the actual deals and projects are performed bilaterally, requiring African leaders to actively seek funds for projects. Whether Africa would be significantly impacted as a result of this new arrangement, remains to be seen.