Monday, September 3, 2018

China's FOCAC Financial Package for Africa 2018: Four Facts

We finally have the long-awaited 2018 Chinese financial pledges in support of FOCAC (Forum on China-Africa cooperation). Although Chinese president Xi Jinping spun the numbers to come to $60 billion (the same as the 2015 pledges in Johannesburg), the Chinese state only seems to be putting $50 billion of its own money at stake, while encouraging Chinese companies to contribute the rest through their own investment projects.
China pledged:

  • US$20 billion in new credit lines
  • US$15 billion in foreign aid: grants, interest-free loans and concessional loans. 
  • US$10 billion for a special fund for development financing  
  • US$5 billion for a special fund for financing imports from Africa.
(These two latter funds are unlikely to be loan-based but details have yet to be released.)

Here is my quick analysis in "four facts".

1. The total Chinese pledge of grants and loans (including commercial rate loans and export credits) has declined from $40 billion in 2015 to $35 billion in 2018

The first pledge of Chinese interest-bearing loans was in 2009 (US$5 billion). In 2009, the loan pledge doubled to US$10 billion, and in 2012 it was US$20 billion. At Johannesburg in 2012, the Chinese pledged a full US$35 billion in interest-bearing loans of various kinds, and another $5 billion in grants and interest-free loans ($40 billion in total). Now at this Beijing summit, we are back down to $20 billion in what look to be more commercial credit lines and export credits, while the concessional loans have been folded into the rest of the foreign aid instruments: the $15 billion.

2. Which makes this is a more concessional package than that offered in 2015. Why? Because China's foreign aid pledge (grants, interest-free loans, and concessional loans) has jumped to $15 billion. This means that China is providing official, concessional assistance to Africa of $5 billion per year, the highest level ever. These resources are likely all to be administered by China's new International Cooperation and Development Agency.

3. China still doesn't challenge the US position as Africa's largest donor. The US disbursed $12 billion just to Sub-Saharan Africa in 2017, and $250 million to North Africa (Chinese figures include both as "Africa". (This could change under the Trump administration's budget cuts.)

4. Debt relief policies have not changed but a lot of Africans won't realize this. Debt relief is (as always) limited to interest-free Chinese government loans maturing at the end of the year. These foreign aid loans are a long-standing and relatively modest part of Chinese finance in Africa.

Since 2006, African overdue interest-free loans from China have been regularly cancelled -- but not everywhere. These are a relatively small part of Chinese lending. In 2018 these debt relief programs are again, as usual, limited to the "least developed countries, heavily indebted and poor countries, landlocked developing countries and small island developing countries that have diplomatic relations with China." 

Monday, August 20, 2018

Beijing's FOCAC Commitments: A "Real Story" Primer

As Beijing gets ready to welcome dozens of African leaders to the Beijing Summit of the Forum on China Africa Cooperation (FOCAC 2018) in September, many will be wondering whether or not China has lived up to the 2015 FOCAC commitments made in Johannesburg.  FOCAC pledges have happened every 3 years since 2000 and I have been analyzing them since 2006. As we prepare for analysis of this new round, this "Real Story" FOCAC Primer should help.

I. The FOCAC cooperation plans are usually funded by different, specific instruments, and different Chinese financiers. The $60 bn pledged at the FOCAC in Johannesburg in 2015 was not all "official foreign aid" and it was not all "loans."

Let's look at the exact language in Xi Jinping's 2015 speech at the Johannesburg FOCAC Summit:
To ensure the successful implementation of these ten cooperation plans, China decides to provide a total of US$60 billion of funding support. It includes US$5 billion of grant and zero-interest loans; US$35 billion of loans of concessional nature on more favorable terms and export credit line; an increase of US$5 billion to the China-Africa Development Fund and the Special Loan for the Development of African SMEs respectively; and the China-Africa Fund for Production Capacity Cooperation with an initial contribution of US$10 billion.
To elaborate:
  • China Development Bank (commercial)
    • responsible for $5 bn for the CAD-Fund: this is equity investment. This pledge represents only an increase in the fund. It is not guaranteed to be disbursed over 3 years (see point 4 below). 
    • also responsible for the increase of $5 bn for the "Special Loans for the Development of African SMEs". Disbursed over time, probably more than 3 years.
  • Ministry of Finance/Ministry of Commerce (concessional)
    • $5 bn for grants and zero-interest loans. These are administered directly by the Ministry of Commerce. They should all be disbursed by now.
  • China Eximbank (mixed)
    • $35 bn of concessional foreign aid loans and preferential export credits AND export credit lines. Concessional loans and preferential export credits are only provided by China Eximbank. The inclusion of "export credit line" was new for FOCAC pledges.  This could signal commercial rate lines of credit (which China Eximbank also provides) or it could mean the inclusion of China Development Bank. All should be disbursed by now.
    • $10 bn for the China-Africa Fund for Production Capacity Cooperation. This is also an investment fund and is administered by China Eximbank and SAFE (the State Administration of Foreign Exchange, in charge of China's foreign reserves). Disbursed over time.

II. Why would it be a mistake to assume that all Chinese loans to Africa are part of the FOCAC pledges?

At the China-Africa Research Initiative (CARI) at SAIS, we track all Chinese loans in Africa. The two policy banks -- China Eximbank and China Development Bank provide most of them. But we now see China's commercial banks --- ICBC, Bank of China, etc. -- making commercial loans in Africa.

Our CARI database suggests that in the past, only China Eximbank's preferential and concessional loans were included as part of FOCAC's general pledges. For example, our CARI database loan totals for 2013-2015, the last FOCAC period, come to over $42.5 bn -- including suppliers credits, ICBC, CDB, etc. But the FOCAC pledge for that period was only $20 bn. So only about half of that would be specific to FOCAC and reflect the fulfillment of Chinese pledges.

Indeed, a quick look at the loans by lender shows that during that period, China Eximbank committed or disbursed $26.4 bn out of that total. They are the main player for China's loans in FOCAC. Given China Development Bank's more commercial orientation, this is almost certainly going to continue.

III. Some FOCAC commitments are open-ended in time frame and will roll out over more than 3 years.

As one Chinese diplomat told me in 2015, implementing these pledges will go "most likely beyond 3 years or even longer."

For example, at the 2006 FOCAC Summit, Beijing pledged to help set up 3 to 5 trade and economic cooperation zones in Africa. As our research showed, this pledge was not concluded until 2012.  The initiative was led by Chinese companies, not Beijing. Negotiating, securing land for the zones, advertising them: it all took far more than 3 years.

CARI will be publishing more analyses in the lead up to FOCAC here on our blog and on our website. Stay tuned!

Thursday, July 26, 2018

More Bad Data on Chinese Finance in Africa

It is hard to collect data on China's development finance in Africa. That's why we curate a carefully constructed, painstakingly researched database on Chinese loans. We have data project by project, sector by sector. Researchers and policy-makers consult us regularly for more detailed reports on different aspects of Chinese loans. We publish reports on this data and related fielddwork: for example, our first working paper was on Chinese finance for hydropower projects and we have several others on Chinese finance for wind farms in Ethiopia and hydropower in Cameroon.

That's why it's frustrating to read in The Guardian about a new report by an advocacy group that claims that in Africa 
China gave the most to the energy sector, providing $5bn a year, 88% of which was spent on fossil fuels. It did not appear to finance any renewable projects on the continent. Nearly three-quarters of the money supported oil and gas extraction, and another 13% supported coal-fired power generation.
This simply isn't true. Between 2000 and 2015, the Chinese provided almost $10 bn in hydropower finance in Africa, and nearly $1.5 bn in solar, wind, and geothermal power. We only show $2.2 bn in coal-fired power, and $1.9 bn in gas-fired power plants during this period. In the power sector, African governments are borrowing far more for non-fossil fuel energy projects.

Hydropower has its own critics, of course. But it doesn't qualify as a fossil fuel.

Tuesday, July 24, 2018

China Responds to Africa's Industrialization Potential

Ethiopia: photo by Tang Xiaoyang
Xi Jinping is in Africa. An often overlooked story in the China-Africa coverage is the Chinese response to African industrialization goals. Not in all countries, not in all sectors, but we have seen considerable Chinese factory investment in places like Ethiopia, Nigeria, Tanzania, and Kenya.
And as we reported in 2016, some African and European firms are hiring Chinese trainers to transfer technology to their African workers. (We saw this in the factory pictured to the left.)
In a forthcoming CARI working paper we report on our findings from the first phase of this research. For now, you can read my analysis in the Washington Post.

Friday, June 8, 2018

Lumpy "SAIS-CARI" Data on People's Daily

This post is a joint product of the SAIS-CARI team 

On June 4, 2018, People's Daily published an article titled "Chinese investment boosts Africa’s sustainable development: Expert". We at CARI are glad to see our data utilized and shared with a broader audience. However, we would like to provide three corrections to this article.

Problematic percentage?

People's Daily wrote:  "Statistics by the World Bank show that Africa’s external debt has reached $ 6.01 trillion by 2016. The debt from China was estimated to total $114.4 billion between 2000 and 2016, accounting for 1.8 percent of Africa’s total external debt, according to SAIS-CARI."

There are two problems with this statement. First, the tiny percentage reported here and attributed to SAIS-CARI had us scratching our heads. We believe People's Daily made a mistake in the denominator in calculating the percent: Africa's external debt stock is nowhere near US$6 trillion in or even around 2016. According to the World Bank’s International Debt Statistics 2018,* Sub-Saharan African debt was around US$454 billion in 2016 (using the “most recent year available”.) 
If the debt of the North African countries is included, this brings the World Bank’s figure to about $600 billion in external debt, not $6 trillion (i.e. it is not "$6000 billion"). Clearly a wrongly placed decimal point.

Second, this affects the analysis of the "debt burden" of Chinese loans. Moving the decimal point to the correct place shows that People's Daily should have written 18%. However, even this estimate is not based on our most recent data.

Our current estimate of all Chinese loans committed to African public sector borrowers between 2000 and 2015 is US$102 billion and our preliminary (still unpublished) estimates for 2000 to 2016 are $US132 billion.

It's important to point out that this is not total debt. Some of these loans would have been repaid by now, and not all of these commitments have been disbursed, so the amount of outstanding debt is quite a bit lower than the SAIS-CARI figure of total commitments.

Still, these figures are quite significant and over half of these loans were signed in just four years (2013 to 2016). We have been warning about this debt build up.

We do not know if the World Bank figures on Africa debt stock include Chinese loans. If they do, and if we assume that the World Bank debt stock figures are all current for 2016, then China would account for a maximum of 22% of African debt stock in 2016. The actual figure will be lower than this, as we do not have data on loan repayments or actual disbursements. The bottom line is no matter how much below 22% the actual figure is, it will be far higher than 1.8%.

Lumpy across time, sector, and countries

We have other bones to pick with the sector data. The People's Daily article states that "In 2015, the top 3 sectors financed by Chinese loans were transportation ($4.6 billion), power ($4.5 billion), and industry ($ 70 million). Mining didn’t receive any Chinese financing."

Here is another decimal point problem: our CARI figure for China's industry-related loans in 2015 is $700 million, not $70 million.

Regarding mining: while it is true that in 2015, CARI recorded no Chinese loans going towards Africa's mining sector, this is not the whole story. Our loan data are "lumpy" across time, which is to say that there may be wide variations between years. 2015 happened to be a year with no mining loans, yet our preliminary data shows that mining (a category that includes petroleum) will be the largest Chinese loan-financed sector in 2016, due to a US$10 billion loan from China Development Bank to Angola's state-owned oil company Sonangol. The graph above shows how the sectoral emphasis of Chinese loans in African has changed over the past 12 years.

We realize the “lumpy” nature of some of our data across years, sectors, and countries may not be readily apparent from our website. Stay tuned for a revamped data section of our website later this summer.

And as always, we welcome readers of our blog to comment.


* See also  The World Bank has no data for Equatorial Guinea, Namibia, Seychelles, and South Sudan.

Thursday, June 7, 2018

Guest Post - Year of the Dogs? A new boom and bust for Chinese construction in Africa.

This Guest Post is by SAIS PhD student Yunnan Chen. She previously worked as a Research Officer at the Institute of Development Studies at Sussex University. She has an M.A. in Political Science from the University of British Columbia and a B.A. in Politics, Philosophy and Economics from the University of Oxford.

The fall in global commodity prices since 2014 has negatively impacted many resource-exporting economies in Africa, with implications for the China-Africa relationship. Since 2014, total volumes of China-Africa trade have declined steeply. African exports to China fell dramatically between 2014-2015, and while Chinese exports to Africa continued to rise in 2015, this trend appears to have also reversed: our most recent year of data shows that African imports of Chinese goods have also fallen.

This may indicate the effects of low commodity values, as well as the problems of exchange rate crises in many large economies in Africa, which have impacted economic demand and buying power for Chinese goods. Interestingly, this trend appears to have also affected the market for Chinese contractors. Our new 2016 data for labor and contract revenues (below) illustrates what appears to be a downturn in African construction markets, with consequences for Chinese SOEs and private contractors on the continent.

Our data for contractor revenues come from Chinese government reports published in China’s annual statistical yearbooks. The data since 2000 have shown year-on-year growth in Chinese contract project revenues in Africa. In 2016, the most recent data show total annual revenues to be $50bn. However, this is a steep downturn of $4bn from $54bn USD in 2015. Aside from a slight decline in 2011 (see chart), this is the first year since 2000 that Chinese contract revenues in Africa have fallen. The top five countries for contracts remain Algeria, Ethiopia, Kenya, Nigeria and Angola, which account for 49% of all reported annual contract revenues in Africa.

Correlating to the decline in contractor revenues, we also see a similar decrease in the numbers of Chinese workers in Africa in 2016. Data for this also comes from official governmental reports—which encompass only the Chinese workers who arrive in Africa for specific projects, and do not give figures for traders, private entrepreneurs and small investors who come to African countries independently. At the end of 2016, there were over 227,000 Chinese workers in Africa, according to official sources -- with Algeria hosting 40% of all Chinese workers, close to 100,000. This is a steep decline from 2015—within a year, 36,000 Chinese workers left the continent. As contract revenues decline, it is not unexpected that employment opportunities for Chinese workers overseas are also tighter.

In 2016, the top 5 countries with Chinese workers were Algeria, Angola, Ethiopia, Nigeria, and Kenya, correlating with the top 5 for contractor revenues. These 5 countries account for 65% of all recorded Chinese workers in Africa at the end of 2016. This shows a slight shift from the previous year: Equatorial Guinea and the Republic of Congo have fallen out of the top 5 of countries with most Chinese workers. Angola and South Africa have also seen steep declines in Chinese workers—respective drops in 33% and 86%—that disproportionately outweigh any decline in revenues. Some of the countries that have seen the largest drops in Chinese workers have been in conflict-afflicted states: in South Sudan, Chinese workers decreased from over 5800 in 2015 to 420 in 2016, and in the Central African Republic, 667 workers fell to only 39. This also suggests the salience of security and conflict concerns, not just economic trends.

Though falling numbers of Chinese labourers can also be accounted in completion of large projects, or wider trends of labor force localisation, it is clear in the shifting economic relationship between China and African economies, that Chinese firms and economic actors are also feeling the effects of Africa’s economic downturn.

Friday, May 11, 2018

CARI is hiring!
CARI is seeking a full-time Senior Research Assistant to start in our D.C. office in July 2018. Key qualifications include a B.A. degree, fluency in reading and researching in Chinese, and MS Excel proficiency. This is a two-year position with the possibility of extension.


To apply, please email your resume, cover letter, the names of two references, and a writing or research sample to, with the subject “SRA application”. Preliminary deadline is June 8th 2018.

The offer is contingent upon funding and university approval. Applicants will also need to complete Johns Hopkins University’s application process - this post will be updated to include a link to the JHU application process as soon as it has been published.

Applicants must be authorized to work in the U.S. SAIS-CARI cannot provide work visas.

Monday, May 7, 2018

Is China winning the (hearts and) minds of African students?

"China is winning over the future of Africa" goes another headline.

Is this the real story?

According to data compiled by Michigan State University, China has now become a more popular destination for African students than the US or the UK. The image to the right from Bloomberg coverage seems to confirm this.

An article in The Conversation by MSU scholars Virginia Breeze and Nathan Moore explains the "dramatic increase ... in part by the Chinese government’s targeted focus on African human resource and education development." This targeted focus is a reality and their data confirm that Africans are taking advantage of this focus.

However, is it true that China is now way ahead of "the West"?

A chart on African students studying abroad by destination country in Breeze and Moore's article makes for a more interesting comparison.

France appears still to be, far and away, the biggest draw for the hearts and minds of African students. FrancAfrique lives on!

A h/t to Libby Holmes.

Monday, March 12, 2018

China To Set Up a New International Development Cooperation Agency

The National People's Congress will vote Saturday on a proposal to set up a new national International Development Cooperation Agency:
Responsibility for the foreign assistance work of the Ministry of Commerce and the coordination of the Ministry of Foreign Affairs and the coordination of the functions of the members of the Ministry of Foreign Affairs have been consolidated. The National Development and Cooperation Agency has been established as a direct agency of the State Council. The specific implementation of foreign aid is still undertaken by the department in charge of division of labor.
组建国家国际发展合作署。将商务部对外援助工作有关职责,外交部队员住协调等职责整合, 组建国家国际发展合作署,作为国务院直属机构。对外援助的具体执行工作仍由用关部门按分工承担。
This is a move long under discussion. As China's aid has grown, this new agency directly under the State Council will enhance the profile of China's assistance program, and give the agency equal standing with other agencies directly under the State Council. It will resemble Britain's Department for International Development, which has similar standing, more than the US Agency for International Development, which is firmly under the US State Department.

a hat/tip to Sigrid Ekman in Beijing

Sunday, March 4, 2018

Secretary Tillerson Heads to Africa: and China is (a?) (the?) Focus

Secretary Tillerson is heading to Africa on March 6th, to Ethiopia, Djibouti, Kenya, Chad, and Nigeria. Although this visit is being framed by some as the Trump administration's response to the fallout from his much criticized recent comment on African countries, it is also clearly being positioned as a response to China's increased engagement on the continent.

A few clips from the special teleconference briefing held for senior State Department officials and journalists March 2, and published on the State website make it clear that State is still influenced by the same mindset that we saw reflected in Secretary Clinton's remarks during her visits in 2011 and 2012. Yet there has also been progress.

The State Department senior official led by mentioning two issues. The first was a general comment on African development challenges. And the second issue was clearly China--though not by name:
The other issue, too, that we’re looking at is how to really keep African resources and also development beneficial for the people of Africa. Right now we’re looking at the growing indebtedness in Africa. That’s not a good thing. We’re looking at other countries, not helpful countries, other countries too, expropriating a lot of resources
When I read that I thought: here we go again. Has the State Department mindset really not changed since 2012? Yet I had to reassess that a bit later, when reporter Laura Koran from CNN asked a question about Tillerson's view of China's role.

Here, verbatim, is the State Department response to the CNN question about China, in italics. (I've highlighted several of the more pertinent sections and added commentary):
Yeah. Okay. So here’s an interesting point is that we, the United States, especially part in – by region. So in the Africa region, we are going to have a heart-to-heart discussion with the Chinese. We’ve invited the Chinese to come to Washington to talk about their programs in Africa. 
And so on the one hand, the unhelpful role is the providing low-interest but really concessionary loans which really indebts the country. So for all of us who worked on HIPC – in other words, getting African countries post-colonial period off of debt – to see these countries re-indebted again is not only outrageous and terrible, but for us it’s really just – I mean, we spent so much time getting them off of debt, and to see them to go back on debt is just terrible. 
And it goes back to not only corruption in some of these states, but also the ease in which not only China – and you’re talking Russia, Iran, and other countries providing low-interest loans. And this is really kind of another forum of impoverishment and poverty, because it’s – unlike HIPC, we can’t really kind of repay loans back to banks, and so this is going to be a very tough issue to address. 
[I agree that debt levels are rising, and with low commodity prices, some countries are having trouble earning enough to repay their debts. Chinese government policy bank loans contribute to that (the major influence, in the case of Ethiopia and Angola). At CARI we have been beating the drum about this recently based on evidence: our tracking of a rising trend in signed Chinese loans.

Yet having worked for the World Bank, done research on debt, and taught about the debt crisis for years, I see debt owed to China as having very different implications for developing countries compared with debt owed to the Paris Club. And in several other countries, we see debt owed more to the traditional lenders: World Bank, supplier's credits, commercial banks, etc.]
The other issues aside too, though, is China builds things. We don’t construct. And so in that regard China can play a helpful role. The other issue, too, is that China has some really good ideas on development in developing areas, such as how to do better healthcare, how to do water production. So those are things that are good. Also China did a good favor for us in Sudan, providing an engineer battalion to provide assistance to the UN operations there. 
So when you look at China, it’s a very complex relationship. We have a lot of areas and issues that we’re in conflict, but the issue comes in is that we’re trying to find the areas where we can build some type of support and cooperation that will be to the betterment of Africa. But one area that’s not to the betterment is these loan rates, which is terrible.
[This is more promising and far more positive than in Secretary Clinton's time. Cooperation over common challenges. Acknowledging Chinese contributions.]
So we’ve looked at countries, and we’re doing data dumping. Some – a lot of countries in Southern Africa and parts of the east and west are having anywhere from 50 percent to in one case 200 percent of GDP debt. And 80 percent and 50 percent are probably Chinese loans, and that’s really not acceptable, and that’s an area that we really need to address and focus on. 
Hmmm. Our China Africa Research Initiative (CARI) team has data on this. Let's see what they have to say next week.
So when you said “countering China,” I think the better word is probably how are we going to resolve tensions, problems. How can we make China much more supportive of the overall development of Africa. Because what we don’t want to see is – let’s say, for instance, Congo, which is very rich in resources – where you see Russia, China, North Korea, Iran taking out resources, yet the Congolese don’t receive very much in benefits. 
How do you resolve that? How do you develop, how do you get these countries to really benefit from the resources that they have, yet at the same time these countries such as China, Russia, Iran is also developing but also they give back a lot to the Africans? And that’s an issue and a question we need to pursue during this trip over.
If I understand what the official was saying here -- and that's a bit of a challenge -- s/he's asking: How do you develop? If we're talking economic development, China has some ideas and some very recent experience. I'm not so sure we have either. But the conversation will be interesting.

Our CARI team is going to try to provide actual numbers on this Chinese debt for the countries where Secretary Tillerson is traveling. We'll be providing a briefing package for media early in the coming week.

Thursday, February 22, 2018

Guest Post - China in Africa: Much Ado about Investment - Part 3

This guest post, the third of three, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS). [1]

There is another approach in attempting to understand China's FDI in Africa: counting the number of Chinese enterprises. Thus, according to a report by McKinsey published in 2017, Dance of the Lions and Dragons, "there are more than 10,000 Chinese-owned firms operating in Africa today." [2] Maybe yes, maybe not. In any case, the report gives no precise definition of what a Chinese enterprise in Africa is, except that it would be "Chinese-owned" implying a business owned by a Chinese natural or legal person. I doubt that statistical services regard an enterprise as "Chinese" on that sole ground.

I already dealt with this issue when Algeria's administration and press had peremptorily applied the data of the National Registry of Commerce and asserted that there were 790 "Chinese enterprises" in Algeria. This was not the case. [3]

Among the enterprises regarded as "Chinese", we must distinguish several categories.

The overwhelming majority of these enterprises are small and micro businesses that are locally incorporated. Legally and statistically speaking, they are all local enterprises even if they are "Chinese-owned". Most often, these businesses are registered by Chinese migrants who invested the savings they earned locally as employees. Not only is the capital built up small, but also it is not, strictly speaking, Chinese FDI, as it does not result from any financial flow from China to some African country.

Let us see how this works with an example. Qin Jianjun is a Chinese national who, starting from scratch, created two companies both incorporated in Algeria, the first in 2006 in the construction industry, the second in 2014 in real estate development. In order to further boost a business that hires about 1,500 local people on its construction sites, Qin Jianjun decided to "sinicize" both enterprises, i.e. to make them look "more Chinese". This is why they are now introduced as subsidiaries of a company incorporated in China... in 2015. In this case, an "Algerian" company became "Chinese". [4]

At the opposite extreme, we find the African subsidiaries of large enterprises incorporated in China. Strictly speaking, these overseas subsidiaries are the only entities that deserve to be designated as "Chinese enterprises" (i.e. overseas business units with legal personality that are controlled by a group incorporated in China).

These two extreme categories are in stark contrast: generally small businesses vs. large companies; local businesses vs. subsidiaries controlled by a Chinese enterprise; no Chinese government support vs. Chinese support (central or provincial government); private vs. (mostly) public... Merging both categories into a single one is like adding apples and oranges.

Between both extremes, we find a wide variety of situations. Among other formal structures, there are representative offices (daibiaochu), executive offices (banshichu), branch offices (fengongsi)…. These various management units are mostly not legal persons and are therefore rarely registered in the local Registry of Commerce. Furthermore, the presence of many of them is often limited to the duration of one contract, or other operation.

Consider Algeria's "Century Project", the construction project of the East-West Motorway. A consortium formed by China's CITIC corporation and China Railway Construction Engineering Group (CRCC) has won the bid for a motorway. Some thirty companies incorporated in China (including the subsidiaries of some foreign firms) have been participating directly or indirectly in the motorway project (see Figure 1).

Very few had a more formal structure than a command post, and even fewer have registered in the Algerian National Registry of Commerce. Even the Consortium, which was incorporated in the British Virgin Islands, has not completed the registration initiated some years earlier when negotiations were underway.

Whatever the way the number of "Chinese-owned firms" is computed, it can at best testify to the Chinese economic presence but in no way serves to label their precise nature: investors, contractors, small business people...

As my two previous posts also demonstrate, words such as "Chinese investment" have a very specific meaning especially when they are technical, legal, economic or statistical terms. Indulging in unsuitable semantics when analyzing can only lead to approximations that are detrimental to the understanding of the phenomena studied; consequently, such bias can only be prejudicial to the implementation of any strategy, co-operation or opposition.

Figure 1. -  CITIC-CRCC Consortium. Source: Author. For the genesis of this diagram, click here   
Acronym key:
CECC or CCECC: China Civil Engineering Construction Corporation.
CITIC: China International Trust Investment Corporation.
CRCC: China Railway Construction Corporation Limited.
SASAC: State-owned Assets Supervision and Administration Commission.
Xinjiang Prod. And Const. Corps: Xinjiang Production and Construction Corps.

[1] Dr. Thierry Pairault is research director at France's Centre National de la Recherche Scientifique (CNRS - National Center for Scientific Research) and at the Center of Studies on Modern and Contemporary China at the École des Hautes Études en Sciences Sociales (EHESS - School of Advanced Studies in Social Sciences). Please see for more information about his work.
[2] Dance of the lions and dragons. How are Africa and China engaging, and how will the partnership evolve?, June 2017.
[3] Thierry Pairault, "Algérie, quelle présence chinoise ?" published in A. Adel, Th. Pairault et F. Talahite (éd.), Algérie-Chine : approche socio-économiques, Paris, Eska, 2017, p. 34-45.
[4] The whole story is told in a post on my website: "L'entreprise chinoise est en fait algérienne...",

Wednesday, February 21, 2018

Guest Post - China in Africa: Much Ado about Investment - Part 2

This guest post, the second of three, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS).[1]

Real Trends in China's African Investment

Chinese official overseas FDI data has its problems, as this blog has pointed out. For example, the two largest investment destinations in Latin America are the Cayman Islands and the British Virgin Islands, two offshore financial centers. Yet it's likely to be more accurate than the data put out by The Financial Times. Here we look at trends and comparisons, which are less likely to be affected by the Chinese affection for offshore financial centers. The trends in the MOFCOM data suggest that Chinese investment in Africa is not only modest, it is falling. According to official data, the amount of Chinese FDI in Africa for 2016 was $ 2.4 billion, a decrease of 19% compared to 2015 ($ 2.9 billion), itself falling by 7 % compared to 2014 ($ 3.2 billion), itself in 5% fell compared to 2013 which was the second-highest year from 2003 to today.
Fig. 1: China's OFDI compared (2003-2016) Sources: MOFCOM, UNCTAD

China's FDI in all of Africa is equal to:
  • 14.1% of what China invests in the US
  • 83.6% of what China invests in Canada
  • the same as what China invests in Germany
While the share of China's total outward FDI has increased steadily since 2003 to 13.5% of the World's total FDI, the share of China's FDI in Africa has declined consistently since 2011 and is now only 1.2% of China's total outward FDI and 0.2% of World's total FDI (see Figure 1).

According to Figure 2, Chinese FDI in Africa seems to have peaked, while that in the EU and the US has been steadily rising.

Fig. 2: China's OFDI destinations compared (2003-2016) Sources: MOFCOM, UNCTAD
Investing, Financing, or Providing Services?

Then, the question: how to reconcile the feeling that China is investing heavily in Africa with factual data showing the precise opposite?
Once again, we are confronted with a classic confusion between investing, financing and providing services. International bodies (IMF, OECD ...) gave a clear definition of what should be considered as an investment; it is a definition to which China adheres and which is recalled in the MofCOM's last Statistical Bulletin:[2]
FDI is an activity in which an investor resident in one country obtains a lasting interest in, and a significant influence on the management of an entity resident in another country. This may involve either creating an entirely new enterprise (so-called "greenfield" investment) or, more typically, changing the ownership of existing enterprises (via mergers and acquisitions). Other types of financial transactions between related enterprises, like reinvesting the earnings of the FDI enterprise or other capital transfers, are also defined as foreign direct investment.[3]
China does not invest in infrastructure in Africa but builds and finances African investments in infrastructure.

In order to make the confusion more obvious and give investment its exact role, I shall compare the amount of FDI to the value of services provided. I shall take the turnover of overseas construction contracts completed in one year as a proxy for services.[4]

Figure 3 shows that the turnover achieved by Chinese construction companies in 2016 was more than 25 times higher than the amount invested by China in Africa.

Fig. 3: China in Africa: FDI vs Completed contracts. Sources: MofCOM, National Bureau of Statistics.
This was not an exception but the rule. It must be perfectly clear that China's FDI in Africa is an expense for China but not an income for the hosting African country. On the other hand, payment for services is an expense (and at the same time an investment) for the client African country AND a revenue for China.

Keeping in mind this difference, these two activities each illustrate, in their own way, China's presence in Africa; they show clearly that China is a services provider rather than an investor, that Africa is rather a customer than a partner. This conclusion would be even more evident if the services were to be added to the Chinese goods bought by African countries or, more accurately, to the growing African merchandise trade deficit with China.

In my final post, using examples from Algeria, I will explain how the many kinds of "Chinese" enterprises in Africa further complicate efforts to understand Chinese FDI.

[1] Dr. Thierry Pairault is research director at France's Centre National de la Recherche Scientifique (CNRS) and at the Center of Studies on Modern and Contemporary China at the École des Hautes Études en Sciences Sociales (EHESS - School of Advanced Studies in Social Sciences). Please see for more information about his work.
[2] Notes 1 and 2, page 3 (see
[3] Moreover, to be considered as a direct investment, an investment must represent at least 10% of the shares; otherwise it is a portfolio investment (speculative therefore most often). OECD Economic Outlook, Volume 2003, Issue 1, p. 158 (Box VI-I).
[4] Chinese statisticians use the terms "Contracted projects", chengbao gongcheng, and "Value of Turnover fulfilled", wancheng yingye'e. We are taught, "Overseas Contracted Projects refer to activities of contracting overseas construction projects by Chinese enterprises".

Tuesday, February 20, 2018

Guest Post - China in Africa: Much Ado about Investment - Part 1

This guest post, the first of three, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS). [1]

Once upon a time... Africa met the good fairy China who became a very significant investor. It's a beautiful story, but how accurate is this fairy tale?

The latest The Africa Investment Report published by the Financial Times is an excellent example of why the fairy tale needs reappraisal. Indeed, it states: "China was the number one source country in Africa by capital expenditure, investing $36.1bn into Africa and accounting for 39% of total investment" (The Africa Investment Report, p. 6.)

This reading aroused profound doubts in my mind as to the methodology used for a document read by many people and widely cited in the press. I shall provide here two flagrant examples of bald misstatements, conveyed by this report.

Fig. 1: The Africa Investment Report Source: Financial Times

A "Chinese-owned" El Hamdania Port?

The first example is taken from page 5 (see Figure 1). We are told that the China State Construction Engineering Corporation (CSCEC) has invested $ 3.3 billion in Algeria in 2016. The information is false. This very large sum refers to the expected construction cost for the deep water El Hamdania port in Algeria.

A Chinese consortium of banks may finance a portion of this project, although no loans have been signed. But this loan if it happens will be taken out by the Algerian government. Neither the CSCEC nor the other Chinese engineering firm involved in the project -- China Harbour Engineering Company, CHEC -- are investors, but service providers on behalf of the Algerian government, which is the sole investor.

Therefore, this $ 3.3 billion project cannot be considered as a Chinese investment in Algeria in 2016, or even as a future Chinese investment project.

Monday, February 19, 2018

Fruit baskets, Blackface, and Racism in China

This past weekend, China's central television station CCTV broadcast a Chinese New Year celebration that featured a Chinese actress in blackface, with an artificial, large bottom, playing an African woman for comedic effect. Many people have been offended and outraged by this portrayal. The skit has been covered by the New York Times and a host of other media outlets. If the goal was to portray China-Africa relations in a positive light, it backfired big time.

A lot of people have contacted me about this video. After watching it, I was not outraged (but I live in Washington DC, where our standard for outrage is a moving target...).  I agree it was tasteless. It also reflected a "pat ourselves on the back" condescending attitude from the Chinese in the skit toward the "Africans". The Dragon's gifts? Cringeworthy indeed.

Yet in the media coverage so far,** I haven't seen much comparative or historical context for this kerfuffle.

The CCTV "African mama"
China is still at the stage of cultural awareness and sensitivity that the US was in decades ago.  Back then, in Latin America, our government was trying to win hearts and minds through aid programs like the Alliance for Progress. Chiquita, the multinational company of "banana republic" fame, was portraying Latinas as voluptuous dancers with bananas on their heads.

Carmen Miranda for Chiquita Banana 

Our media's concern over expressions of racism in China, even as relatively benign as this one, show how far we have come in the West in overcoming deeply entrenched racism.* But they also remind me how far we have to go. Yes, we have had blackface, yellow-face and red-face, with European actors playing those of African, Asian, and native American heritage. In West Side Story, the Latina heroine was played by Natalie Wood. The Lone Ranger’s Indian side-kick Tonto was played by a white man. And we still have dubious casting decisions that reflect "white-washing" -- see the uproar over a decision to use a 100% European actress (Emma Stone) to portray a woman who was half-European, half Asian/native Hawaiian).

At Halloween, we're still blithely dressing our kids in Carmen Miranda "Chiquita Banana" costumes, although as NPR and others have pointed out, many Latin Americans view this as offensive and racist.

Yes, we have progressed. Europeans no longer exhibit people from Africa in zoos. And recall Sarah Baartman and other 19th century "South African Khoikhoi women who, due to their large buttocks, were exhibited as freak show attractions" across Europe.

Today our racism is institutionalized. In the US, we no longer make it illegal for people of different races to ride together on a bus, eat together at a lunch counter, or marry the person they love. Yet as research and the Black Lives Matter movement shows, our racism takes these insidious forms: disproportionate incarceration rates; police brutality, and discrimination in employment, credit, and housing. These are much harder to overcome. (At home, China's equivalent racism is directed toward its Muslim and Tibetan populations.)

What's likely to happen in China? In recent years, China's economy has developed faster than any in the modern era. To those of us who first visited China in the 1970s, the social changes from 1978 onward are mind-boggling. Without much of a legacy of slavery, China's racism toward Africans has not been nearly as deep as ours in the US.

Research tells us that racism and cluelessness prejudices such as we saw in the CCTV broadcast are learned, they are not "hard-wired" in the human brain.*

Given this, I was encouraged to see, in the online comments, the internal Chinese debates over racism sparked by the media coverage. Change is happening.

If a thoughtful, respectful and friendly relationship with Africans is really desired in Beijing, they will allow these debates to continue among Chinese netizens. Conversations like this are part of how Chinese people will get "woke" to their racism.

*For an interesting discussion of the research on "the origins of racism," see this link:
**After posting this, I read an interesting take on this published in Kenya. Hat tip to Magnus Fiskesjö. And here's a link to a fascinating and relevant 2016 blog post by Derek Sheridan on the infamous Qiaobi ad.

Saturday, February 3, 2018

Will Trump's Comments Push African Countries Toward China?

Source: The Economist, January 18, 2018 (hat tip to Jeff)
Now the world knows what the US president allegedly thinks about African countries.

At the Council on Foreign Relations blog, analyst John Campbell warns that "this racist and anti-African rhetoric is likely to strengthen the hand of those in Africa that would see their countries turn away from the West and towards more authoritarian governments, like those of Russia and China."

Perhaps. Yet this assumes a kind of "new Cold War" set of choices, where countries need to chose "the West" or "the East." Today's African countries can admire China's astounding economic development success, and take advantage of Chinese offers of finance, without rejecting the West or its own generous financial flows. They can have their cake and eat it too.

On the other hand, Washington should know that for decades, the Chinese government has made Africa a diplomatic priority. The Economist (see illustration) might not be aware that this far predates any special concern with Africa's natural resources. Since January 1991, China's foreign minister has started each year by traveling to Africa for high-level meetings with a group of selected countries. This year Foreign Minister Wang Yi visited Rwanda, Angola, Gabon, and São Tomé and Príncipe.

As I noted in The Dragon's Gift, a decade ago, I gave a talk to a group of African ambassadors in Washington, and in the discussion afterwards, one ambassador mentioned these Chinese visits, saying "China gives Africans more respect than they get from the West." I was struck by how many other ambassadors nodded vigorously in agreement.

Trump's comments mark a new low, but in other ways, his sentiments are not new. What is new is having these sentiments expressed at such a high level by our top leader. China has its own problems with racism and anti-African rhetoric among its citizens, but the government has always prioritized a respectful engagement with African governments, not just in words but in deeds, like the annual January visits. Our state department could help to neutralize these comments with its own push for respectful engagement, but a year after coming to office, the Trump administration has still not nominated anyone to be the Assistant Secretary of State for African Affairs. 

Monday, December 4, 2017

Guest Post: Financing Wind Power Development in Sub-Saharan Africa: From One Donor to Many

This guest post is by Yanning Chen, PhD candidate at Johns Hopkins SAIS. This article first appeared on Agenda for International Development ( on October 12, 2017.

Sub-Saharan Africa is undoubtedly the most important frontier for climate change mitigation and adaptation. More than 620 million people, two-thirds of the population, lack access to electricity. Electrifying sub-Saharan Africa using existing energy mix jeopardizes the goal of limiting warming below two degrees Celsius above pre-industrial levels reiterated in the Paris Agreement. Finding a low carbon path for sub-Saharan Africa requires significant investment and cooperation in renewable energy, including wind, solar, hydro, geothermal, nuclear, and biofuels. 

Wind power stands out among renewable energy options in the region for three reasons. First, sub-Saharan Africa has abundant wind potential, especially in highlands of Chad and Ethiopia and coastal regions. McKinsey estimate puts onshore wind capacity at 109 GW. Secondly, wind farms are less controversial and more quickly to build. Hydropower dams are costly and pose irreparable dangers to the local geography and communities. Solar farms take up large parcels of land and require regular cleansing. Once wind farms are operational, they do not disturb nearby farming and grazing activities. Thirdly, price of wind technology has declined drastically in the past decade. Comparison of levelized cost of electricity (LCOE) by Lazard, an international financial advisory and asset management firm, shows wind is one of the cheapest renewables and comparable to coal. However, it is worth noting that LCOE does not account for technology transfer costs, adapting the grid, regional variations, cost of capital, and other risks associated with launching new technologies in sub-Saharan Africa. 

Currently, sub-Saharan Africa accounts for less than 1% of global installed wind power capacity. Despite its small presence, wind development in the region expanded exponentially in the past decade, with introduction of new actors, financing mechanisms and institutional arrangements. Case studies of wind farm development in Ethiopia, Kenya and South Africa seek to illustrate the robust wind financing landscape in sub-Saharan Africa. 

Ethiopia currently has two wind farms in operation—Ashegoda Wind Farm and Adama Wind Farm. Both wind projects were supported through its Growth and Transformation Plan (GTP), a five-year plan setting targets for the entire economy. In 2008, Ethiopian Electric Power Corp. (EEPCo), the then national utility company, signed an ECP (Engineering, Procurement and Construction) contract with Vergnet of France to development a 120MW wind farm at Ashegoda. French Development Bank (AFD) and BP Paribas financed 90% of the $289.7 million project through a mixture of commercial and concessional loans, with the Ethiopian Government covering the remainder. Ashegoda Wind Farm was inaugurated in 2013. 

In 2009, HydroChina and CGC Overseas Construction Group (CGCOC) signed an EPC contract with EEPCo to develop a 51 MW wind farm at Adama. It was the first Chinese overseas EPC project in clean energy. Export-Import Bank of China financed 85% of the $117 million project through the preferential export buyer’s credit. Following completion of the first phase, EEPCo added 153 MW to Adama Wind Farm under the same financing framework. Adama Wind Farm II inaugurated in 2015. Both Ashegoda and Adama Wind projects adopted concessional financing from single donor to mitigate institutional uncertainty and promote domestic industry overseas. In Ethiopia’s case, the government has no experience and no regulatory support for wind farm development. Thus companies treading into uncharted waters rely on national development agencies to safeguard through extensive negotiation and challenges. Single donor concessional financing model offer them maximum flexibility. 

Kenya: Independent Power Producer (IPP) & Multilateral and Private Financing 

Kenya officially liberalized its electricity generation sector through power sector reform in 1996, allowing IPPs to own and operate energy projects along national generation company. Long tradition of IPPs has enabled creative financing packages to support wind energy. In addition to IPPs, Kenya supports wind energy through feed-in tariffs. Kipeto Wind Farm is a $323 million project to add 100 MW wind capacity in Kenya. Owned by a joint venture between African Infrastructure Investment Fund, International Financial Corporation (IFC) and Craftskills Wind Energy International, the project is part of U.S. Power Africa Initiative, which seeks to double access to electricity in sub-Saharan Africa. Under the Initiative, Overseas Private Investment Corporation (OPIC), the U.S. government’s development finance institution, has committed a $232 million loan. China Machinery Engineering Co is the EPC contractor with turbines as well as operation and maintenance (O&M) provided by General Electric. 

Valued at over $800 million, Lake Turkana Wind Farm project is the largest private investment in Kenyan history, as well as the largest wind farm in Africa at 310MW capacity. Developers for Lake Turkana Wind Farm are KP&P Africa B.V and Aldwych International. Other equity partners involve three Nordic investment funds –Finnfund, Nofund and the Danish Investment Fund for Developing Countries (IFU). African Development Bank (AfDB), with the Standard Bank of South Africa and Nedbank as co-arrangers, arranged debt financing. Most notably, $128 million of the loan came from AfDB’s own Green Bond program, which finances a portfolio of eligible Greenfield renewable energy projects. Fourteen financial institutions, including European Investment Bank, Netherlands Development Finance Company, PTA Bank, Danish export credit agency (EKF) and others, collectively provided over $600 million in loans to the project. In addition to private investors, public institutions, such as Government of the Netherlands and EU Africa Infrastructure Trust fund, were also crucial in providing grants and loan guarantees. The wind farm came online in July 2017. Due to its innovative public-private partnership financing structure, the Lake Turkana Wind Farm project was nominated as the “African Renewable Deal of the Year”. 

South Africa: IPP & the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) 

Despite South Africa’s vast wind potential along its coastal regions, abundant coal resources in the country had slowed development of wind power. South African government introduced renewable energy feed-in-tariffs (REFIT) in 2009. However, the government replaced REFIT with the Renewable Energy Independent Power Producer Procurement Program (REIPPP) in 2011, a competitive tender process for renewable energy projects. REIPPP has been lauded for its transparency and effectiveness. Between 2011 and 2015, there have been five rounds of bidding with a total of 92 IPPs awarded, accounting for 6327MW of renewable capacity. Of which, thirty-seven are wind farm projects, accounting for 2660MW of wind capacity. 

Financing for wind projects in South Africa come from a variety of sources. To highlight a few, Sere 100MW wind farm received a $365 million loan from AfDB and the Clean Technology Fund, a climate investment fund to facilitate technology transfer; Enel Green Power, developer for 111MW Gibson Bay Wind Farm, obtained a $170million loan from German Development Bank (KfW); a joint venture between South African developer Exxaro Resources and Tata Enterprise, financed the Amakhala Emoyeni Wind Farm through a debt/equity ratio of 80/20, with $323.8 million loan from IFC ($72million) and Standard Bank of South Africa ($256million). In fact, one report notes that Standard Bank of South Africa has financed 40% of 1760MW renewable energy capacity operational in South Africa in 2015. The growth of South Africa’s renewable energy program, as well as local financing capability is truly awe-inspiring. 

Trends & Challenges 

Wind farm financing and development across Ethiopia, Kenya and South Africa demonstrate large variance. However, several trends emerge. 

Financing for wind power indicates a variety of options and sources, ranging from traditional western/OECD donors to emerging markets; multilateral development banks to local banks; Clean Development Mechanism to Green Bond.
Adoption/availability of these various financing mechanisms responds to local institutional and regulatory environment. In Ethiopia, lack of regulatory and institutional support limit financing option to single donor, whereas in Kenya, tradition of IPPs enable innovative financing structure; however, lack of institutional support limits the number of wind project opportunities. Finally, in South Africa, competitive, transparent and regular IPP tendering process has allowed private investors to flourish.
Despite significant progress in wind energy development and financing in sub-Saharan Africa, there is under-utilization of new climate financing mechanisms, such as Clean Development Mechanism (CDM), Green Climate Fund and the China South-South Climate Cooperation Fund. At the moment, some sub-Saharan countries find CDM cost-ineffective to register. In addition, CDM does not account for mitigation from emerging market investors. Sustainable development mechanism, CDM’s post-2020 successor, should address these issues. 

Development and financing for wind energy in Sub-Saharan Africa has traditionally relied heavily on the public sector with greater involvement from the private sector in recent years. Facing the double-threat of climate change and energy poverty, public financing will be grossly insufficient. Scaling up private sector wind energy finance is crucial in limiting global warming to two degrees Celsius, as well as meeting Sustainable Development Goal of ensuring universal access to affordable, reliable and modern energy.

Wednesday, November 22, 2017

China and Zimbabwe: After Mugabe

What is China’s role in the downfall of Robert Mugabe? As Zimbabwe’s major investor and provider of development finance, China has considerable interests in the country’s stability. Yet it is highly unlikely that there was any official Chinese involvement in Robert Mugabe's resignation and the end of his 37 years in power. Beijing would have little to gain and much to lose from becoming directly involved. Why is this the case? And how is Mugabe's resignation likely to affect China-Zimbabwe relations going forward? 

First, Chinese leaders have a long-term mindset and China’s domestic politics is always foremost in that mindset. Direct involvement in even an informal coup would break very long-standing principles that are part of China’s core foreign policy — and it would signal that “interference in the internal affairs of other countries” is acceptable. Beijing does not want, in any way, to promote this idea. It is far more likely that they sat back and waited for Mugabe’s endgame to be played out by Zimbabweans -- which is what appears to have happened. And then they would move smoothly to befriend the official winner. This is what happened, for example, in Zambia when Michael Sata, an outspoken critic of Chinese investment, was elected as president in 2011.

Second, even though many consider Zimbabwe a "client state" of China, Zimbabwe in fact receives relatively little official finance from China's two policy banks, the China Export-Import Bank (Eximbank) or the China Development Bank (CDB). Zimbabwe was one of the first countries in Africa to receive China Eximbank policy loans in the late 1990s, but the country defaulted on these early loans, and  Eximbank had to turn to Sinosure (China's export credit insurance corporation) for reimbursements. As a result, both policy banks have been reluctant to lend more in subsequent years, despite repeated requests. Zimbabwe does not even rank in the top 10 of Chinese loan recipients in Africa in terms of aggregate loans received from China between 2000 and 2015

Further to this, as usual, some news media have misunderstood the difference between "under discussion" and actual loan agreements. For example, the Zimbabwean government has been negotiating with China Eximbank over the past three years to borrow approximately $1.2 billion USD in preferential export buyer's credits for the expansion of the Hwange Coal Power Plant. China Eximbank set 15 conditions that Zimbabwe had to meet in order to sign the loan agreement, with a critical condition being that Zimbabwe raise 15% of the contract cost. There is no loan, at least, not yet. To put this in context: discussions about rehabilitating Hwange with Chinese cash have been ongoing since at least 2008. (On how African state media trumpet expectations of Chinese largesse while Chinese state media are more realistic, see our post from 2016 on Zimbabwe: "China and Africa: Venus and Mars.")

Third, unlike Angola, which is of strategic value to China -- 12% of China's crude oil imports in 2016 are from Angola -- China does not rely on any sort of Zimbabwean exports of anything. As a result, instability in Zimbabwe, political or otherwise, is of much less concern to China than instability in Angola. China was willing to renegotiate the loan terms with Angola in mid-2015 when low oil prices made repayment difficult for Angola, even issuing more credit lines to float their economy. In contrast, when Zimbabwe failed to repay their loans, China simply reduced lending to a trickle.

Finally, China (CCP) and Zimbabwe (Zanu-PF) do have strong party-to-party ties, and military engagement is also cozy. It is not clear whether this is a strategic coordinated partnership directed by Beijing. Some evidence suggests this, in particular the state visit by President Xi Jinping in late 2015, the Zimbabwe involvement of Norinco, a centrally run military corporation, and the relatively high proportion of military-related loans over the past 15 years in the existing portfolio. Most of the loans for military equipment (mainly aircraft) were taken out around a decade ago and appear to be suppliers' credits rather than Eximbank or CDB loans. On the other hand, a concessional Eximbank loan of $98 million did help finance the construction of Zimbabwe's National Defense College. We wrote about this in a post in 2011. This loan is an interesting example of central support (Eximbank) for a business initiative organized by a Chinese province: Anhui. This loan was secured by profits from a joint-venture in diamond mining between an Anhui company and the Zimbabwe military.

Zimbabwe's military and Anhui province have a strong relationship organized largely around greed and opportunism: Zimbabwe's military leaders have partnered with Chinese construction companies, mining firms, and farming companies from Anhui Province (the latter as I discussed in my latest book: Will Africa Feed China?). Multiple stakeholders in China complicate China's economic statecraft.  I do not know the extent of personal ties among the Anhui Province companies and the new leadership in Zimbabwe, but I expect that they are likely to be quite good. This "mutually beneficial relationship" would be an interesting angle to investigate further.

How will ordinary Chinese investment be affected by Mugabe's resignation? Probably not at all.  As we wrote here in 2014, Chinese companies have also been affected by Zimbabwe's indigenization law which requires 51% of large investments to be locally owned. (See also a great 2016 analysis on this by Yun Sun.) There isn't any indication yet that Zimbabwe will reverse this legislation. 

With appreciation to CARI's Jyhjong Hwang for her contributions to this analysis.