Tuesday, March 11, 2014

China's Trillions in Aid to Africa

Photo credit: Feng Lei, China Foto Press Gamma
Is China providing trillions in aid to Africa? Apparently Mugabe's government in Zimbabwe thought so, and they were disappointed when their effort to reap a mere $30 billion in budget support fizzled in the face of the reality: Chinese finance is far more modest than this. Official aid is especially limited. And unlike the West, China rarely gives direct budget support. When it does, the amount is generally tiny:  $5 million.

Give us bankable projects to finance, the Chinese told Mugabe's government. This is how Chinese finance operates: project finance, generally for infrastructure, or export credits, which can finance imports from China. Mugabe's government ought to know this. They've taken out Chinese loans for tractors and farming inputs. Our China-Africa loan database shows that the biggest loan from China to Zimbabwe was in 2007:  $200 million for agricultural equipment.

So what about those stories about a "trillion in Chinese finance for Africa" by 2025? Don't believe it. This would entail some $85 billion a year, up from current levels of about $10 billion. The absorptive capacity isn't there, nor are the "bankable projects" of that magnitude. 

1 comment:

  1. I think Uncle Bob was thinking in terms of old Zim dollars, before US dollarization of the economy:) Keep up the good work Deborah!

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