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loans committed to African public sector borrowers between 2000 and 2015 is US$102 billion and our preliminary (still unpublished) estimates for 2000 to 2016 are $US132 billion.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