tag:blogger.com,1999:blog-91899308299402842112024-03-12T22:33:59.809-04:00China in Africa: The Real StoryThe Blog from the China Africa Research Initiative (at the School of Advanced International Studies, Johns Hopkins University)Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.comBlogger372125tag:blogger.com,1999:blog-9189930829940284211.post-10571651411640599822023-03-02T11:20:00.000-05:002023-03-02T11:20:04.206-05:00Chinese Lending to Sri Lanka: A Factual cum “Reality” Check<div class="separator" style="clear: both;"><span>Note: This guest blog post by Dr Muttukrishna Sarvananthan is a response to CARI briefing paper 08/2022: </span><a href="http://www.sais-cari.org/s/Briefing-Paper-Sri-Lanka-Debt-V5.pdf">EVOLUTION OF CHINESE LENDING TO SRI LANKA SINCE THE MID-2000S: SEPARATING MYTH FROM REALITY</a><span> by Umesh Moramudali and Thilina Panduwawala </span></div><div class="separator" style="clear: both;"><div class="separator" style="clear: both;"><div class="separator" style="clear: both;"><p></p><div class="separator" style="clear: both;">The full version of this rejoinder can be accessed at the following: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4369990 </div></div></div></div><p><b>Introduction</b></p><p>The purpose of this response is, firstly, to pinpoint the factual errors (both quantitative and qualitative) in Moramudali and Panduwawala (2022), and, secondly, to contest the “reality” the authors are attempting to illustrate with such studious endeavour. </p><p>However, more than the factual errors (both quantitative and qualitative), our main concern here is the interpretation of the facts and the conclusions drawn therefrom by Moramudali and Panduwawala (2022). Moreover, we will be pointing out certain instances where Moramudali and Panduwawala (2022) contradict themselves by demolishing and also affirming the so-called “myths” (“hidden debt”, for instance) in different places in the same Briefing Paper. The peer reviewer/s (if there were any) seem to have not noted these contradictions or anomalies.</p><p><b>A Factual Check</b></p><p>Moramudali and Panduwawala (2022) estimate that the total outstanding Chinese loans to Sri Lanka at the end of 2021 were US$ 7.4 billion out of a total “US$ 37.6 billion” of the external public debt of Sri Lanka (excluding the CBSL debt) as at the end of 2021. They estimate the Chinese loans to be 20% of the total external public debt of Sri Lanka at the end of 2021.</p><p>However, according to our estimate based on the Quarterly Debt Bulletin of the Ministry of Finance , the total outstanding publicly-owned foreign currency liabilities of Sri Lanka were almost US$ 46 billion as of September 30, 2022. If we assume that Moramudali and Panduwawala’s estimate of the outstanding Chinese loans to Sri Lanka (US$ 7.4 b) is correct, then the share of China in Sri Lanka’s total outstanding external liabilities was 16% as of September 30, 2022, according to our estimate.</p><p>Due to brevity of space, the details of factual errors (including the data tables) are not included in this blog post. Please read the full rejoinder for the details. https://docs.google.com/document/d/1quL7XFT0Xeo5J1S8Iw3wyscqZx0NN6C6aoG300aBuEc/edit</p><p><b>A Reality Check</b></p><p>Our main concern in the Briefing Paper by Moramudali and Panduwawala (2022) is about the erroneous interpretation/s of the data and the conclusion/s drawn. </p><p>“We found no deliberately ‘hidden debt’ in China’s lending to Sri Lanka’s public sector …” </p><p>It does not really matter whether China accounts for 20% of the total outstanding external public debt of Sri Lanka, or 16% of the total outstanding external liabilities of Sri Lanka as we have estimated, or any other percentage. The foregoing claim is of interest to us.</p><p>The real issue for us is whether the Chinese lending to Sri Lanka during 2007-2022 is predatory or not. It is on this issue that we contest the conclusions arrived at by Moramudali and Panduwawala that classifying the leasing of the Hambantota International Port (built at a total cost of US4 1.3 billion ) to a Chinese state-owned company as an “asset seizure” or “debt-for-equity swap” is a “myth” (see the following quoted passage). Moramudali and Panduwawala’s attempt to “firmly separate myth from reality” is what is contentious to this author. </p><p>“……. the 99-year lease of the (Hambantota) port in 2017 was a measure to address severe balance of payments issues, ...... The lease proceeds helped improve foreign currency reserves and there was no debt-to-equity swap nor an asset seizure, contrary to popular narrative.” </p><p>We agree with Moramudali and Panduwawala (2022) that, in a strictly legal sense the leasing of the Hambantota International Port (HIP) to a Chinese state-owned company in 2017 was not an “asset seizure” nor a “debt-to-equity swap’. It is not an asset seizure because the port was never made collateral for the loans from the China Exim Bank (China Export-Import Bank, aka ChEXIM) to build and subsequently expand the port. Asset seizure occurs only when the borrower had mortgaged the particular (immovable) asset as collateral for the loan/s obtained to build or expand. Usually, there is no collateral involved in any borrowings by a sovereign country. </p><p>Besides, it is not a “debt-to-equity swap” either, because the money received for granting 85% of the equity stake to the China Harbour Group (CHG - a state-owned company) in 2017 was not utilised to repay the loans borrowed for the purpose of building and expansion of the port. As Moramudali and Panduwawala (2022: 2, & 16) have revealed, the money received for the lease was utilised as “…. a measure to address severe balance of payments issues….”, which we assume to have been used to repay one or more of the then maturing International Sovereign Bonds (ISBs). </p><p>Moramudali and Panduwawala (2022: 9) further claim that all the loans obtained from China for the building and expansion of the Hambantota International Port (HIP) are still being serviced by the Treasury of Sri Lanka, having taken over the loans from the balance sheet of the Sri Lanka Ports Authority (SLPA – a state-owned enterprise) in 2017. Between 2013-2017, HIP loans were included in the balance sheet of the SLPA as a NON-GUARANTEED foreign loan of the SLPA. This indeed was a classic example of a “hidden debt” , which Moramudali and Panduwawala (2002: 2) painstakingly deny. It does not really matter whether it was hidden by the Government of Sri Lanka (GoSL) or the lender (Chinese financial institution). Both have an international obligation to be transparent.</p><p>Whilst Moramudali and Panduwawala (2002: 17) confess that “The Auditor General noted that the outstanding balance of four ChEXIM loans for Hambantota port construction were not recorded in the government’s outstanding debt stock. While debt repayments were made on time by the Treasury and tracked by the ERD, outstanding loan amounts were not recorded by the SLPA or the Treasury in annual balance sheets.”, how could they assert that, “We found no deliberately ‘hidden debt’ in China’s lending to Sri Lanka’s public sector.” </p><p>Further, whilst Moramudali and Panduwawala (2022: 2) at the outset deny there was any “hidden debt” in Chinese lending, later on, they also confess that “………there was indeed a portion of Chinese lending to Sri Lanka’s public sector that is apparently ‘hidden’ due to the complexities of debt classification and inconsistency of reporting standards across various public institutions and reports, especially with regards to debt recorded under SOEs. But in reality, they are not ‘hidden’ because at least some public institutions were reporting on these loans in publicly available reports and in data easily obtainable via RTI requests.” </p><p>Obtaining information through an application in terms of the RTI Act is not what a transparent borrower and lender should impose on the citizens or any other interested party. Proactive disclosure of the information is the norm among the Development Assistance Committee (DAC) countries of the OECD.</p><p>To this author, the utilisation of the proceeds of the leasing of the HIP to augment the balance-of-payments or for the repayment of a maturing ISB/s is a dubious accounting practice of the Government of Sri Lanka (GoSL) and a gross violation of the International Public Sector Accounting Standards (IPSAS, 2002) of an accountable democratic state. </p><p>This is where the Chinese lender (EXIM Bank of China) has also erred. If it is indeed a responsible and accountable state-owned lender of the world’s second-largest economy, the EXIM Bank of China should have insisted that the money paid by the China Harbour Group (CHG) to the Government of Sri Lanka for the acquisition of 85% equity stake in the HIP should be channelled to repay the loans obtained from the EXIM Bank of China to build and subsequently expand the HIP. We sincerely believe that, if the lender for the HIP was a state-owned bank from a DAC member bilateral donor, the foregoing dubious transaction by the GoSL would not have been allowed. Therefore, China cannot absolve itself from culpability in the foregoing dubious transaction and accounting practice of the GoSL. </p><p>It is precisely the accounting malpractice of the GoSL and the collusion of China in this dubious transaction that had led to accusations of “asset seizure” and “debt-to-equity swap”. This author has come across similar unethical (if not illegal) practices in the Chinese lending to Pakistan and to some African countries as well. </p><p>Secondly, the 6.3% interest charged on the first agreement dated October 30, 2007, for a loan of US$ 307 million, and 6.5% interest charged on the second agreement dated August 06, 2009, for a loan of US$ 65 million for the Hambantota International Port (HIP) by the Exim Bank of China were exorbitant (but may not be predatory) for an infrastructure project of the scale of the HIP. Moramudali and Panduwawala (2002: 6) have themselves admitted that the aforementioned interest rate/s were very high given that the effective LIBOR (London Inter-Bank Offered Rate – an average of interest rates of leading banks in London) rate was just 2% in 2009. However, we are aware that the first-ever International Sovereign Bond (ISB) floated by Sri Lanka in July 2007 incurred an 8.25% annual interest rate. </p><p><b>Quasi Predatory lending by China</b></p><p>We characterise the Chinese lending to Sri Lanka as ‘quasi predatory’. The rationale for this characterisation is as follows.</p><p>What is predatory lending?</p><p>Predatory lending in financial parlance could be defined as the imposition of unfair, arbitrary, and even abusive terms and conditions on the borrower by the lender. Both the borrower and lender can be individuals, institutions, or nation-states. Such severe conditions can be aggressive sales/lobbying tactics, very high-interest rates (usually 3-digit interest rates), overcharging for administrative cost/s, non-disclosure of risk factors by the lender, failure to carry out due diligence with regard to the technical feasibility and/or financial viability of a particular project (such as the Hambantota International Port or the Colombo Lotus Tower (1,150 feet or 350 metres) – the tallest communications tower in South Asia), very high collateral requirement, a very stringent penalty in the event of default, etc, or a combination of the foregoing. </p><p>Why do we term the Chinese lending to Sri Lanka quasi-predatory?</p><p>Whilst admitting that Chinese lenders (two major ones are the China EXIM Bank and China Development Bank) cannot be accused of charging very high interest rates (interest rates of Chinese lending have been always in single digit and lower than the interest rates charged by private international capital market lenders), excessive administration costs, or imposing very high penalty in the event of default, etc, with regard to its lending to Sri Lanka, to the best of our knowledge, China could be legitimately accused of failing to carry out due diligence with regard to the financial viability/commercial potential of most of the projects funded by it in Sri Lanka (including the Hambantota International Port (HIP), Mattala International Airport, Colombo Lotus Tower, etc) and Sri Lanka’s capacity to repay the corresponding borrowings (by way of an in-depth review of the assets and liabilities of the Sri Lanka Ports Authority, the original borrower for the HIP as noted by Moramudali and Panduwawala (2022), for example), and resorting to aggressive marketing/lobbying tactics amongst Sri Lankan political leaderships and bureaucrats. </p><p>In addition to the aforesaid failure of the Chinese lenders to take due diligence in the cases of funding prestige mega infrastructure projects (for example, HIP), Chinese state-owned infrastructure development companies operating in Sri Lanka for nearly 20 years now (such as China Harbour Engineering Corporation and China Harbour Group, for example) are alleged to be involved in aggressive lobbying for projects (even submitting unsolicited project proposals with suggestions for Chinese funding mechanisms) among the political leadership/s in power and senior bureaucrats. The foregoing are naturally predatory lending practices in financial parlance. </p><p>Additionally, Chinese state-owned companies could also be potentially involved in bribing politicians and/or bureaucrats in their host countries, which is termed “corrosive capital”. We would like to highlight three such concrete examples of abrasive/aggressive project grabbing by Chinese companies in Sri Lanka in the last few years (an elevated highway connecting the Colombo Port City and Thalawathugoda, Eastern Container Terminal at the Colombo International Port, and the elevated highway connecting the new Kelaniya bridge with Athurugiriya), and a concrete example of secrecy demanded by the Chinese Embassy in Sri Lanka with regard to the purchase of Sinovac COVID-19 vaccines by the Ministry of Health. Due to brevity of space we have deleted the details from this blog post, which can be read in the full rejoinder.</p><p>What the aforementioned concrete pieces of evidence point to is that, whilst Chinese lending may not be termed predatory lending (because of the absence of very high-interest rates on their lending and there is hardly any evidence of overcharging in terms of administrative cost/s, etc), Chinese lending could be reasonably characterised as quasi-predatory lending because of their lack of due diligence on project funding, and aggressive lobbying tactics with Sri Lankan politicians and bureaucrats. </p><p><b>Conclusion</b></p><p>Therefore, we would argue that Moramudali and Panduwawala’s characterisation that the accusations of asset seizure or a debt-for-equity swap by Chinese lenders with regard to the acquisition of an 85% equity stake on the HIP in 2017 are a “myth” appears to be an attempt to camouflage reality. It is precisely the aforementioned quasi-predatory practices by the Chinese state-owned companies and Chinese official lenders that elicit such accusations by investigative journalists and other concerned people, including some international development partners.</p><p>In sum, while we may characterise the borrowings by Sri Lanka through the floating of International Sovereign Bonds (ISBs) being similar to borrowing from individual money lenders in Sri Lanka, we may characterise the borrowings from China as being similar to the borrowings from microfinance institutions in Sri Lanka. The former could be characterised as predatory and the latter quasi-predatory.</p><p><br /></p><p><b>Muttukrishna Sarvananthan</b> is the Founder cum Principal Researcher of the Point Pedro Institute of Development (PPID), Point Pedro, Northern Province, Sri Lanka, established in 2004. The author is a Development Economist by profession. https://orcid.org/0000-0001-6443-0358 He has undertaken fiscal and monetary transparency reviews in Sri Lanka for Oxford Analytica, Oxford, UK, https://www.oxan.com/ from 2003 to 2006. Email: sarvi@pointpedro.org </p><p><b>Endnotes</b></p><div><div> 1.https://static1.squarespace.com/static/5652847de4b033f56d2bdc29/t/638689771d0e3c4beb14bf2f/1669761400150/Briefing+Paper+-+Sri+Lanka+Debt+-+V5.pdf Accessed on February 05, 2023.</div><div> 2. Moramudali and Panduwawala, 2022: 2, 3, & 5.</div><div> 3. https://treasury.gov.lk/api/file/d857ad94-e632-4fc6-a221-cab9965d7085 Accessed on February 05, 2023.</div><div> 4. Moramudali and Panduwawala, 2022: 2.</div><div> 5. Moramudali and Panduwawala, 2022: 8.</div><div> 6. Moramudali and Panduwawala, 2022: 4.</div><div> 7. Moramudali and Panduwawala, 2022: 2, 14, & 16.</div><div> 8. Moramudali and Panduwawala, 2022: 16-17.</div><div> 9. Moramudali and Panduwawala, 2022: 9.</div><div> 10. See, Polackova, 1999. https://www.imf.org/external/pubs/ft/fandd/1999/03/polackov.htm Accessed on February 05, 2023.</div><div> 11. Moramudali and Panduwawala, 2022: 2. </div><div> 12. Moramudali and Panduwawala, 2022: 33. </div><div> 13. This is a research in progress by this author.</div><div> 14. https://www.econstor.eu/bitstream/10419/60671/1/526660597.pdf; 15. https://www.sciencedirect.com/science/article/abs/pii/S0304405X14000397?via%3Dihub Accessed on February 08, 2023.</div></div><div><br /></div><p><br /></p>Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-25678070066479600162021-12-10T10:54:00.000-05:002021-12-10T10:54:17.463-05:00Montenegro, China, and the Media: A Highway to Disinformation?<p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmD_X-suXECalYshQPQq-PqwPe1sqBxm5EzPrNeaHKxv9MO5rvWsmCHsN3GHoVrCs_ynyAoUaP3t7yyZtdKTcyvy5vSqwm75UbwkqhXE00ecGe4_PcZdyfxWc0ATXvzq_OwHpRG04PSP6t/" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img alt="" data-original-height="764" data-original-width="1024" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmD_X-suXECalYshQPQq-PqwPe1sqBxm5EzPrNeaHKxv9MO5rvWsmCHsN3GHoVrCs_ynyAoUaP3t7yyZtdKTcyvy5vSqwm75UbwkqhXE00ecGe4_PcZdyfxWc0ATXvzq_OwHpRG04PSP6t/w320-h238/image.png" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;"><a data-v-e1c1f65a="" href="https://www.flickr.com/photos/82543970@N00/1982307080" rel="noopener" style="background-color: white; box-sizing: inherit; color: #e23600; cursor: pointer; font-family: "Source Sans Pro", sans-serif; text-align: start; text-decoration-line: none;" target="_blank">"Perast - Montenegro"</a><span style="background-color: white; color: #333333; font-family: "Source Sans Pro", sans-serif; text-align: start;"> </span><span data-v-e1c1f65a="" style="background-color: white; box-sizing: inherit; color: #333333; font-family: "Source Sans Pro", sans-serif; text-align: start;">by <a data-v-e1c1f65a="" href="https://www.flickr.com/photos/82543970@N00" rel="noopener" style="box-sizing: inherit; color: #e23600; cursor: pointer; text-decoration-line: none;" target="_blank">MILACHICH</a></span><span style="background-color: white; color: #333333; font-family: "Source Sans Pro", sans-serif; text-align: start;"> is licensed under </span><a class="photo_license" data-v-e1c1f65a="" href="https://creativecommons.org/licenses/by-nd/2.0/?ref=ccsearch&atype=rich" rel="noopener" style="background-color: white; box-sizing: inherit; color: #e23600; cursor: pointer; font-family: "Source Sans Pro", sans-serif; text-align: start; text-decoration-line: none;" target="_blank">CC BY-ND 2.0</a></span></td></tr></tbody></table></p><div style="text-align: left;">How do Chinese banks really lend in risky countries overseas? Although no documented cases have come to light in Africa (or elsewhere), rumors that Chinese loan contracts allow China to seize land or unrelated strategic assets, like ports, as collateral for sovereign (i.e. government) loans are rife in African media and civil society.</div><p></p><p>As part of
our ongoing CARI research project on Chinese lending, we published this week a detailed
investigation by our European colleagues Laure Deron, Thierry Pairault, and Paola Pasquali into similar media rumors surrounding a
Chinese-financed highway in the small, mountainous Eastern European nation of Montenegro. </p><p>The Chinese loan contract for this highway has been <a href="https://www.dropbox.com/s/2kd2wk6mk4sdjtr/Montenegro_China%20Eximbank.pdf?dl=0;">available online</a>.* These
scholars’ detailed examination of this case sheds light on just how reporters’ lack of
understanding of common legal terms, in a context where the “China threat” narrative
boosts viewership, can lead to rumors like these: </p><p><i>ON JUNE 21 2021, THE FRENCH PUBLIC TELEVISION channel France 2
evening news aired a report in which it was stated that Montenegro, a
heavily indebted nation, was at risk of “having to cede some of its land to
China” as a result of its inability to pay back a loan for the construction
of a highway. According to reporters, Montenegro’s Port of Bar could
be annexed by China “completely legally”, thanks to an “extraordinary
contract” that had, “already [been] implemented by the Chinese in Sri
Lanka or in Djibouti”. As the report further explained, Montenegro had
accepted conditions “never seen before in Europe (…)”: under the contract,
should it fail to pay back the loan to the Chinese bank, Montenegro would
need to concede lands”. The Balkan State, allegedly, had even requested
that the European Union “help pay back the Chinese, lest the latter use its
territory as a repayment means”. </i></p><p><i>Is this the case? <a href="http://www.sais-cari.org/s/Final_Briefing-Paper-7-Montenegro-Case-Study-Dec-2021.pdf">Read on</a></i></p><p><i>-------</i></p><p><i>*</i>the English version starts on p. 50.</p>Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-27462566216102803832021-12-01T10:38:00.002-05:002021-12-03T18:05:27.733-05:00BBC Misrepresents my Views on "Debt Trap Diplomacy"<p></p><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOYdIwmOt-rcw9NsuRROfaOnnt3XZG0y9PMrA1R-KoA-HOQ60hpaCLknZSZPqEG-ECV98qAu4-xEaVqv_yPWYDBvmPQzQNO4YAhiKPfsAvNcxVbSLB7DtEMx-58gmss6nU5mPCzNJznHOW/" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" data-original-height="1080" data-original-width="1080" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOYdIwmOt-rcw9NsuRROfaOnnt3XZG0y9PMrA1R-KoA-HOQ60hpaCLknZSZPqEG-ECV98qAu4-xEaVqv_yPWYDBvmPQzQNO4YAhiKPfsAvNcxVbSLB7DtEMx-58gmss6nU5mPCzNJznHOW/" width="240" /></a></div>The BBC misrepresented my views t<a href="https://www.bbc.co.uk/sounds/play/m001216g">his morning</a>, and I admit I'm stunned. I'm a big fan of the BBC. Living in Taiwan and Hong Kong, in the 1970s; doing fieldwork across Africa in the 1980s, I used to listen to the BBC World Service on my shortwave radio and I trusted them to present nuanced and balanced analysis.<p></p><p>Last night I had a call from London. I picked up to find a BBC reporter who wanted my views on Chinese "debt trap diplomacy." Apparently the head of Britain's intelligence service, Richard Moore, had g<a href="https://www.bbc.com/news/uk-59474365">iven the BBC an interview</a> in which he said that the Chinese have deliberately used debt as leverage to acquire strategic assets. We spoke for awhile on background and I outlined why this idea had little basis in fact, drawing on <a href="https://www.theatlantic.com/international/archive/2021/02/china-debt-trap-diplomacy/617953/">my extensive research with Meg Rithmire</a> about the Hambantota Port in Sri Lanka <a href="https://www.the-american-interest.com/2019/04/04/misdiagnosing-the-chinese-infrastructure-push/">and other cases</a>, and that of other researchers. I gave examples from Montenegro, Kenya, Zambia, and other places where these fears have been trumpeted in the media, but without evidence to support them. He said that another reporter would call me in an hour and record an interview.</p><p>An hour later, a woman called and simply asked me to speak for a minute about this idea: a quick explanation of what debt trap diplomacy is believed to be, an example from Sri Lanka or elsewhere, and why the evidence doesn't support the story. I briefly explained all of this, she recorded it, and we hung up. </p><p>This morning I've been getting messages from British colleagues who've been doing research on Chinese investment overseas and who know my research. One said that the recording "seemed to have been edited to make it sound like you were possibly supporting the debt diplomacy narrative, which of course misrepresents your nuanced commentary on this available elsewhere." </p><p>I quickly listened to <a href="https://www.bbc.co.uk/sounds/play/m001216g">the BBC recording </a>(my clip is about 1 hr 50 minutes into the program) and was horrified to find that the only clip they took from the interview was my explanation of the "idea" of debt trap diplomacy and the "conventional wisdom" about the case in Sri Lanka. They completely discarded all the evidence I presented after that about why that conventional wisdom was not correct. Then, they brought in a former adviser to the Trump administration whom he interviewed at some length about the China threat, but again providing no evidence about "debt trap diplomacy" aside from this: "we've charted it globally and it's fairly widespread". She also repeated the (oft-debunked) claim that the Chinese bring in all their own workers...</p><p>The reporter leading the story clearly had his mind made up already about the point of view he wanted to present. My little clip was prefaced by a question I was never asked: "What can we do to combat this?" he said, rather than a question that would have made room for a more balanced discussion of this claim. It all reminds me, rather depressingly, about the widespread belief that the Chinese were acquiring large amounts of land in Africa to grow food to send back to China. I spent three years doing field research on that myth and wrote an <a href="https://global.oup.com/academic/product/will-africa-feed-china-9780199396856?cc=us&lang=en&">Oxford University Press book </a>debunking it. No one makes that claim anymore--not due to me, I think, but simply because a more interesting "threat narrative" has now gripped the media's mind. Sigh. </p><p>Update December 2: I reached out to the BBC reporter who originally contacted me, expressed my dismay, and sent him a link to this blog post. He responded right away, with apologies, explaining that my inappropriate clip was an editing decision by an inexperienced producer in a tight production situation. I can understand human error and I'm giving them the benefit of the doubt. </p><p><br /></p>Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-77709971768512110902021-09-28T05:00:00.007-04:002021-09-28T05:00:00.236-04:00Zambia's Chinese Debt in the Pandemic Era<div class="separator"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><img height="207" src="https://lh3.googleusercontent.com/kxHCbHZrmWBfcHlNCx8lmQJ2PCZFSRRKey4ssAP_tMIAWsZ7WTKN9qtDlOuRYrWu_DCUYP7Kyur6HEWlpHj21gQePl7ve1aHjP0-HpvuojbvUsoonthUNPCcCD_hDw=w335-h207" style="font-family: "Times New Roman"; font-size: 12pt; margin-left: auto; margin-right: auto; margin-top: 0px; white-space: pre-wrap;" width="335" /></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Figure 1: Chinese loans, copper prices, and Zambian elections</span></td></tr></tbody></table><p style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em; text-align: right;"> </p></div><p>In August 2021 a new president, Hakainde Hichilema, took office in Zambia, facing a debt burden that had never been fully transparent to Zambia’s public and the world. </p><p>In two CARI papers released today, we shed light on Zambia's Chinese debt dilemmas. </p><p>In <a href="http://www.sais-cari.org/s/BP-5-Brautigam-Wang-Zambia-Chinese-Debt-Pandemic-Era.pdf" target="_blank">CARI Briefing Paper 05/2021, "Zambia's Chinese Debt in the Pandemic Era,"</a> Yinxuan Wang and I use CARI data and research on loan disbursements and repayments to estimate Zambia’s outstanding external public debt to all Chinese financiers, official and commercial: approximately <b>US$6.6 billion</b>. This figure is more than<b> double</b> that of the most commonly cited figure for Chinese debt in Zambia (US$3 billion). </p><ul style="text-align: left;"><li><b>18 major and minor Chinese financiers</b> have provided external loans to Zambia and its state-owned enterprises since 2000, the highest number of any country in our data</li><li>Loan commitments by Chinese financiers between 2000 and 2020 <b>totaled US$10.3 billion</b>, with 63 percent (US$6.47 billion) committed just since 2015 (Figure 1)</li><li>Based on project implementation status, we estimate that <b>US$7.8 billion was disbursed</b> by August 2021. </li><li>Contracted but undisbursed Chinese loans as of August 2021 amounted to <b>US$2.5 billion</b>, around 13 percent of 2020 GDP.</li><li>We calculate that Zambia and its state-owned enterprises have repaid <b>at least US$1.2 billion</b> to Chinese lenders since 2000. </li></ul><p>Our estimate should not be interpreted as evidence that Zambia’s total public external and publicly-guaranteed debt as of December 2020 was significantly higher than Zambia has previously reported ($14.3 billion). These Chinese debt figures can largely be accounted for in aggregate figures published by Zambia’s Ministry of Finance's <a href="https://www.mof.gov.zm/?page_id=6197">Annual Economic Reports</a> and the new "<a href="https://www.mof.gov.zm/?wpfb_dl=352">Government Debt Portfolio Review</a>." For example, Chinese creditors are likely buried in the "other creditors" category of US$4.0 billion in external debt in the end-2020 central government debt report and in the US$527 million of government guaranteed debt owed by ZESCO. It does mean that the Lungu government was not transparent about the heavy weight of Chinese financiers among its many external creditors. </p><p>As there are many rumors about Chinese “debt traps,” it is important to emphasize that Zambia is an outlier when it comes to the weight of Chinese loans (Figure 3). We estimate that Zambia’s loan commitments to all Chinese creditors at the end of 2019 was close to 43 percent of 2019’s gross national income (GNI). The average for Africa was 10 percent (all data refers to the African continent). Figure 2, based on World Bank data for GNI and external PPG debt, and CARI data on Chinese loan commitments shows how Zambia, Djibouti, Angola, and the Republic of Congo stand out.</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody><tr><td style="text-align: center;"><img height="296" src="https://lh3.googleusercontent.com/eevd6qjRHi2vN21VScNdXG7giinsBS8HbDtvKFLg17zgYGDEL9CYfByUSzREvfoDbXdf4oUQrGu4xcJ18IlpaVXUwW99QKeOUnMypFPLlu80nCAt1CvCJe2Fl5H9ig=w481-h296" style="margin-left: auto; margin-right: auto; margin-top: 0px;" width="481" /></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Figure 2: Chinese loan commitments as % of 2019 GNI vs External Debt Stock as % of GNI</span></td></tr></tbody></table><p>In a second paper, <a href="http://www.sais-cari.org/s/WP-51-Brautigam-Zambia-Tragedy-of-the-Commons.pdf" target="_blank">CARI Working Paper No. 51, "How China and Zambia Co-Created a Debt 'Tragedy of the Commons',"</a> I analyze how Chinese creditors, contractors, and Zambian stakeholders failed to take steps to make Zambia's borrowing sustainable. Curious why Zambia was a clear outlier (Figure 2), I explored the system for project development and loan approval in Zambia and China. </p><p>My argument holds that principle-agent problems, including information asymmetries, the tragedy of the commons, and moral hazard, explain the Zambian case. In particular, Zambia has the largest number (18) of separate Chinese lenders of all the African countries in our data, and the second largest number of separate Chinese contractors (29). It also is the African country with the largest amount of Chinese interest-free loan debt write-offs, and the country with the highest number of separate debt cancellations.</p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimqt6DgBP9gP5PJwRBVzHIQRe1RcYyEOdxjd2z-DiPyHyzDVODiZiC-ST53k2rZV-ZjtM6CwmlVbtt8v3vjWG0QissL-k8H0QgFcO9cw0mG8w0ur7wUMl2SEVj-HzGSLRTKSNNfWlrf_58/" style="margin-left: auto; margin-right: auto;"><img alt="" data-original-height="410" data-original-width="725" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimqt6DgBP9gP5PJwRBVzHIQRe1RcYyEOdxjd2z-DiPyHyzDVODiZiC-ST53k2rZV-ZjtM6CwmlVbtt8v3vjWG0QissL-k8H0QgFcO9cw0mG8w0ur7wUMl2SEVj-HzGSLRTKSNNfWlrf_58/w400-h226/image.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Figure 3: Zambia: Chinese contractors' annual revenues<br />and Chinese lenders' annual loan commitments</span></td></tr></tbody></table><p>This large number of stakeholders competing for business in the "pond" of public resources created Zambia's unsustainable debt. Figure 3 shows the relationship between contract revenues in Zambia and loans. A dip in contract revenues after 2013 was followed by significant new lending in 2016 and 2017, and contract revenues rose again.</p><p>Given the complicated situation with at least 18 Chinese lenders having provided external loan funding to the Zambian government and its state-owned firms, reaching consensus on burden-sharing in the Common Framework is likely to prove exceptionally difficult. </p>Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-11611981658607820792021-07-06T11:23:00.004-04:002021-07-12T12:12:39.661-04:00The Road to Who Knows Where: What one highway project in Cameroon can tell us about the complexities of Chinese lending in Africa<span id="docs-internal-guid-836f896f-7fff-0d63-8d5a-4dad983d69b6"><span style="font-family: inherit;"><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><b><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><i>This post is by </i></span></b><b style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><i>former CARI Research Assistant Alex Hardin and </i></span></b><b style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><i>CARI Director Deborah Brautigam. Alex Hardin is now an </i></span><span style="white-space: pre-wrap;"><i>M&E Associate at Winrock International.</i></span></b></p></span></span><p></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"></span></span></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNxnG8Fi_wlmTkU6BC1h3CvvPKO5nE3eR4Awx0LGodFJYUlK9_YBV4Ly8Ox-1dfUR0D4a0BFSL26obafhhzTV5x773LzbS611VPkmVnpXVUdSCiwhcTQaxAqlXLcXhEuw1ur2tKeMtA8Y/s2048/Welcome_to_Douala.jpeg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="2048" data-original-width="1638" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNxnG8Fi_wlmTkU6BC1h3CvvPKO5nE3eR4Awx0LGodFJYUlK9_YBV4Ly8Ox-1dfUR0D4a0BFSL26obafhhzTV5x773LzbS611VPkmVnpXVUdSCiwhcTQaxAqlXLcXhEuw1ur2tKeMtA8Y/s320/Welcome_to_Douala.jpeg" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;">Photo credit: <a href="https://commons.wikimedia.org/wiki/File:Welcome_to_Douala.jpg" target="_blank">The Taxi Photographer via Wikimedia Commons</a></span></td></tr></tbody></table><span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Narratives of China’s lending to Africa are often oversimplified, focusing on the Belt and Road initiative writ large, and leveling accusations of “debt-trap diplomacy.” Yet, a peek beneath the surface reveals an increasingly complex web of Chinese financiers and contractors, African government planning and finance bodies, and numerous other infrastructure agencies. Each project reveals a story that both complicates the reductively simple narrative and helps to paint a clearer portrait of the process by which these projects are realized.</span></span><p></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">One such story is that of the first phase of a Cameroonian highway construction effort intended to link the country’s political capital, Yaoundé, to its economic center, Douala, by way of another major metropolitan hub in Edéa. To this end, in the first phase, as described by a </span><a href="http://dad.minepat.gov.cm/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">project overview from the Ministry of Economy, Planning, and Regional Development (MINEPAT)</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">, Cameroon set out to construct a road between Yaoundé and Bot-Makak, a town approximately one third of the way toward the ultimate endpoint in Douala. To finance construction works, the Government of Cameroon signed a loan with Eximbank China in the form of a </span><a href="http://dad.minepat.gov.cm/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">preferential export buyer’s credit</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> (PEBC) worth US$482,800,000 on March 8, 2012. China First Highway Engineering Co., Ltd. (CFHEC) was selected to build the project. From this point on, progress would be anything but straightforward.</span></span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">In December 2013, China Eximbank made its </span><a href="http://dad.minepat.gov.cm/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">first disbursement</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> of US$96,560,000. Yet </span><a href="https://www.businessincameroon.com/public-management/2703-4742-1-6-billion-fcfa-blocks-douala-yaounde-road-construction-project" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">the start of construction was unexpectedly delayed</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> by the Cameroonian authorities, who intervened at this late date to modify the project specifications by raising the speed limit from 100 km/hour to 110 km/hour as well as increasing the number of planned lanes. This, in turn, led the contractor to warn that the budgeted project cost would allow for construction of only 47 of the contracted 68 kilometers, if built under the new stipulations. </span></span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">On March 27, 2014, the Chinese Embassy’s Economic and Commercial Office posted </span><a href="http://cm.mofcom.gov.cn/article/zxhz/201403/20140300531535.shtml" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">a commentary on the project on its website (in Chinese)</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. The commentary explained that the highway had been originally designed to meet Chinese standards for highway construction. The decision by the Cameroonian authorities would bring the road in line with French standards, which are closer to Cameroonian requirements. The Embassy further remarked that China hoped to see its counterparts in Cameroon (i.e. the Minister of Public Works) provide feedback on the final technical standards of the project as soon as possible, hinting at a growing frustration at the sudden adoption of specifications that differed from those originally negotiated. Adding to the air of exasperation, the author underscored a desire that Cameroon identify its “sole interlocutor” for the project, which it deemed necessary “because several ministries and commissions of the Cameroonian government are involved in the project at the same time”. The author assured readers that Cameroon had promised an official start date before April 15, 2014, despite lingering issues over land acquisition and compensation, a responsibility of the Cameroon side. </span></span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">That optimism was misplaced. Work on the project finally began sometime in the first quarter of 2015 and </span><a href="https://www.camerounweb.com/CameroonHomePage/NewsArchive/artikel.php?ID=326573" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">was scheduled for completion in 2018</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. However, </span><a href="https://actucameroun.com/2020/10/08/autoroute-douala-yaounde-la-chine-bloque-le-financement/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">progress was continually beset by obstacles</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. Chief among these were </span><a href="https://ecomatin.net/autoroute-yaounde-douala-les-travaux-a-nouveau-bloques/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">delays in compensating residents</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> whose property fell along the proposed route. Cameroon’s defaults and restructuring of Chinese loans in 2019 also affected the project. </span></span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">After making </span><a href="http://dad.minepat.gov.cm/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">six disbursements amounting to US$202,675,284</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> up through October 29, 2019, the Chinese bank had stopped disbursements. “Yaoundé does not present any repayment guarantee,” </span><a href="https://actucameroun.com/2020/10/08/autoroute-douala-yaounde-la-chine-bloque-le-financement/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">a well-placed source</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> said. </span></span>China Eximbank proposed a new repayment guarantee mechanism, <span style="font-family: inherit;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">of an unclear nature. Yaoundé had not yet signed it as of October 2020. For all these setbacks, however, work on the 60km section of road </span><a href="https://ecomatin.net/infrastructures-publiques-les-autoroutes-a-livrer-en-2021/" style="text-decoration-line: none;"><span style="color: #1155cc; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">was reported to have reached a “physical execution rate” of 91%</span></a><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> by the start of 2021. </span></span></p><span style="font-family: inherit;"><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The Chinese contractor is bearing the cost of the delay—each day of delay is likely to come at very high cost, as the contractor must pay staff, workers, and perhaps service the company’s own loans. The question now is who will blink first: will the government provide an acceptable guarantee, or will the contractor finish the project, essentially providing its own loan to Cameroon? </span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">In the larger context of China-Africa relations, this project serves to demonstrate that, contrary to the image of a one-sided asymmetry of power dominated by a strong China, African borrowers can exercise a certain degree of agency. Within the constraints of an established relationship involving a Chinese state lender and a Chinese contractor, the borrowing country was able to reconfigure project plans to suit its own ends, seemingly without first consulting its Chinese partners. </span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">This is not to say that doing so was necessarily the most prudent decision—and the repeated delays and missing payments indicate that local Cameroonians are likely to bear some of the negative consequences. For example, the last steps for finishing roads include a final layer of black top that seals the road, and the construction of culverts that channel water away from the road. Will the contractor complete these steps without being paid? Or will the road start to wash away in the rainy season? </span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Nevertheless, the story highlights the fact that examining individual projects reveals the complexity and unpredictability of the relationships that develop between African countries and Chinese actors.</span></p><p dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline;"><i><b>Note</b>: At the time of publication, the Cameroonian government website where the authors sourced a large portion of the data necessary for this analysis (</i></span><span><i><a href="http://dad.minepat.gov.cm/">http://dad.minepat.gov.cm/</a></i></span><i style="font-family: inherit;">) has ceased to be accessible online. We hope that it will become accessible again soon.</i></span></p></span>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0Washington, DC, USA38.9071923 -77.036870711.976350406973179 -112.1931207 65.838034193026814 -41.880620699999994tag:blogger.com,1999:blog-9189930829940284211.post-64046469000909415002021-06-10T14:52:00.018-04:002021-07-01T06:21:32.429-04:00Evaluating the Impact of China-Financed Power Projects on Electricity Access<div><b><i><span style="font-family: inherit;">This guest blogpost is by SAIS PhD student Keyi Tang </span></i></b></div><div><span style="font-family: inherit;"><br /></span></div><div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVv-5izYx76vczYt5qvoDaR6rPfrFORRJ2Q82jI8pNwMJrEB28Fg0hcMeXOCwnY2g1ZUg3-TcFAkqE5yPUgsMmGuLkwp3D7w8t87SOIzzXn8KvphQYoPdTX_TimDBA-sCyCDquI0NaCPI/s2048/Bui_Dam+-+Author+ZSM.jpg" style="margin-left: auto; margin-right: auto;"><span style="font-family: inherit;"><img border="0" data-original-height="1365" data-original-width="2048" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVv-5izYx76vczYt5qvoDaR6rPfrFORRJ2Q82jI8pNwMJrEB28Fg0hcMeXOCwnY2g1ZUg3-TcFAkqE5yPUgsMmGuLkwp3D7w8t87SOIzzXn8KvphQYoPdTX_TimDBA-sCyCDquI0NaCPI/s320/Bui_Dam+-+Author+ZSM.jpg" width="320" /></span></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: inherit;">Photo credit: <a href="https://commons.wikimedia.org/wiki/File:Bui_Dam.jpg" target="_blank">ZSM</a></span></td></tr></tbody></table><span style="font-family: inherit;">In the last decade, China has overtaken the World Bank and the African Development Bank to become the biggest financier of infrastructure projects in sub-Saharan Africa. The <a href="https://chinaafricaloandata.bu.edu/" target="_blank">CARI loan database</a> now housed at Boston University provides extensive data on these projects. Yet little research has been done on how Chinese loans affect the social welfare of African countries. Africa is the region with the highest percent of people who do not have access to electricity. Electric power is the second largest sub-sector in Chinese lending, making up 20 percent of all loans (transport makes up 54 percent). </span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Has Chinese lending improved the access to electricity for Africans? This blogpost proposes a research idea that attempts to answer this question using the SAIS-CARI China-Africa Loan Data and other databases. We hope other researchers will take up this challenge.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><b><span style="font-family: inherit;">Research period: 2010-2019</span></b></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Although SAIS-CARI documents China-financed energy projects in Africa since 2000, the bulk of the loan projects are recorded as being signed post-2010. A focus on the 2010-2019 period could allow a higher number of samples, which translates to more observable events. </span></div><div><span style="font-family: inherit;"><br /></span></div><div><b><span style="font-family: inherit;">Unit of analysis:</span></b></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Because the SAIS-CARI data is at the country level, the easiest way to answer the question is to look at the impacts of China-financed energy projects in different African countries at an aggregate level. Researchers can also use the subnational unit of analysis by searching the subnational location of these projects through Google Map.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><b><span style="font-family: inherit;">Databases</span></b></div><div><span style="font-family: inherit;"><br /></span></div><div><table border="1" cellpadding="0" cellspacing="0" class="MsoTable15Grid4Accent1" style="border-collapse: collapse; border: none;"><tbody><tr><td style="background: rgb(68, 114, 196); border-bottom: 1pt solid rgb(68, 114, 196); border-image: initial; border-left: 1pt solid rgb(68, 114, 196); border-right: none; border-top: 1pt solid rgb(68, 114, 196); padding: 0in 5.4pt; width: 73.6pt;" valign="top" width="98"><p class="MsoNormal" style="margin: 0in;"><span style="color: white; font-family: inherit;">Variables</span></p></td><td style="background: rgb(68, 114, 196); border-bottom: 1pt solid rgb(68, 114, 196); border-left: none; border-right: none; border-top: 1pt solid rgb(68, 114, 196); padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="color: white; font-family: inherit;">Name</span></p></td><td style="background: rgb(68, 114, 196); border-bottom: 1pt solid rgb(68, 114, 196); border-left: none; border-right: none; border-top: 1pt solid rgb(68, 114, 196); padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="color: white; font-family: inherit;">Database</span></p></td><td style="background: rgb(68, 114, 196); border-bottom: 1pt solid rgb(68, 114, 196); border-image: initial; border-left: none; border-right: 1pt solid rgb(68, 114, 196); border-top: 1pt solid rgb(68, 114, 196); padding: 0in 5.4pt; width: 162.95pt;" valign="top" width="217"><p class="MsoNormal" style="margin: 0in;"><span style="color: white; font-family: inherit;">Note</span></p></td></tr><tr><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-image: initial; border-left: 1pt solid rgb(142, 170, 219); border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 73.6pt;" valign="top" width="98"><p class="MsoNormal" style="margin: 0in;"><b><span style="font-family: inherit;">Dependent Variable</span></b></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">Proportion of population with access to electricity</span></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="color: #0b5394; font-family: inherit;"><a href="https://www.iea.org/reports/sdg7-data-and-projections/access-to-electricity" target="_blank">International Energy Agency</a></span></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 162.95pt;" valign="top" width="217"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">Access to electricity by country and year, 2000-2019</span></p></td></tr><tr><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-image: initial; border-left: 1pt solid rgb(142, 170, 219); border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 73.6pt;" valign="top" width="98"><p class="MsoNormal" style="margin: 0in;"><b><span style="font-family: inherit;">Main Independent Variable</span></b></p></td><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">China-financed energy projects</span></p></td><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"><a href="https://chinaafricaloandata.bu.edu/" target="_blank">SAIS-CARI China-Africa Loan Database</a></span></p></td><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 162.95pt;" valign="top" width="217"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">China’s loan to Africa, by country, year, and sector, 2000-2019</span></p></td></tr><tr><td rowspan="5" style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-image: initial; border-left: 1pt solid rgb(142, 170, 219); border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 73.6pt;" valign="top" width="98"><p class="MsoNormal" style="margin: 0in;"><b><span style="font-family: inherit;">Control Variables</span></b></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">OECD countries’ bilateral finance to African countries’ energy projects</span></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"><a href="https://www.oecd.org/dac/financing-sustainable-development/development-finance-data/" target="_blank">OECD Development Finance Data</a></span></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 162.95pt;" valign="top" width="217"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">By recipient country, donor, year, and sector, 2010-2019</span></p></td></tr><tr><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">Spatial distribution of population and population density</span></p></td><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span class="MsoHyperlink"><span style="font-family: inherit;"><a href="https://www.worldpop.org/" target="_blank">Worldpop</a></span></span></p></td><td rowspan="6" style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 162.95pt;" valign="top" width="217"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">Other socio-economic and geographical indicators that might influence access to electricity through channels other than investment on energy infrastructure.</span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"> </span></p></td></tr><tr><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">Armed conflicts location and event data</span></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span class="MsoHyperlink"><span style="font-family: inherit;"><a href="https://acleddata.com/#/dashboard" target="_blank">ACLED Database</a></span></span></p></td></tr><tr><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">Nighttime lights</span></p></td><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"><a href="https://ngdc.noaa.gov/eog/viirs/download_ut_mos.html" target="_blank">VIIRS Data</a></span></p></td></tr><tr><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">GDP per capita, PPP, by country and year</span></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"><a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD" target="_blank">The World Bank</a></span></p></td></tr><tr><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-image: initial; border-left: 1pt solid rgb(142, 170, 219); border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 73.6pt;" valign="top" width="98"><p class="MsoNormal" style="margin: 0in;"><b><span style="font-family: inherit;"> </span></b></p></td><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">Mines in African district</span></p></td><td style="border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"><a href="https://datainspace.org/index.php/2017/03/16/mines-in-african-districts/" target="_blank">Data in Space project</a></span></p></td></tr><tr><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-image: initial; border-left: 1pt solid rgb(142, 170, 219); border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 73.6pt;" valign="top" width="98"><p class="MsoNormal" style="margin: 0in;"><b><span style="font-family: inherit;"> </span></b></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 138.8pt;" valign="top" width="185"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;">International commodity price by year</span></p></td><td style="background: rgb(217, 226, 243); border-bottom: 1pt solid rgb(142, 170, 219); border-left: none; border-right: 1pt solid rgb(142, 170, 219); border-top: none; padding: 0in 5.4pt; width: 92.15pt;" valign="top" width="123"><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"><a href="https://www.imf.org/en/Research/commodity-prices" target="_blank">The IMF Primary Commodity Prices</a></span></p></td></tr></tbody></table><p class="MsoNormal" style="margin: 0in;"><span style="font-family: inherit;"> </span></p><p class="MsoNormal" style="margin: 0in;"><b><span style="font-family: inherit;">Empirical strategy:</span></b></p></div><div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">The following econometric methods are generally applied to evaluate the impact of large-scale infrastructure. Researchers can check the literature below.</span></div><div><span style="font-family: inherit;"><br /></span></div></div><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><div style="text-align: left;"><span style="font-family: inherit;">a.<span style="white-space: pre;"> </span>Ordinary least square (OLS): <a href="https://doi.org/10.1016/j.worlddev.2019.03.014" target="_blank">Humphrey & Michaelowa</a> (2019)</span></div></div><div><div style="text-align: left;"><span style="font-family: inherit;">b.<span style="white-space: pre;"> </span>Difference-in-differences: <a href="https://doi.org/10.1016/j.worlddev.2020.104909" target="_blank">Martorano et al.</a> (2020), <a href="https://doi.org/10.1016/j.enpol.2019.111062" target="_blank">Tang & Shen</a> (2020)</span></div></div><div><div style="text-align: left;"><span style="font-family: inherit;">c.<span style="white-space: pre;"> </span>Instrumental variables: <a href="https://doi.org/10.1162/qjec.122.2.601" target="_blank">Duflo & Pande</a> (2007)</span></div></div></blockquote><div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">If you do undertake this research, send us a copy at sais-cari@jhu.edu!</span></div><div><b><span style="font-family: inherit;"><br /></span></b></div><div><b><span style="font-family: inherit;">Helpful References:</span></b></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Duflo, Esther and Rohini Pande. (2007). Dams. <i>The Quarterly Journal of Economics</i>, Volume 122, Issue 2, Pages 601–646.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Humphrey, Chris and Katharina Michaelowa. (2019). China in Africa: Competition for traditional development finance institutions? <i>World Development</i>, Volume 120, Pages 15-28.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Martorano, B., Metzger, L., & Sanfilippo, M. (2020). Chinese development assistance and household welfare in Sub-Saharan Africa. <i>World Development</i>, 129, 104909.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Tang, Keyi & Yingjiao Shen. (2020). Do China-financed dams in Sub-Saharan Africa improve the region's social welfare? A case study of the impacts of Ghana's Bui Dam. <i>Energy Policy</i>, Volume 136, 111062.</span></div></div>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-67283240202578339432021-05-13T17:45:00.061-04:002021-07-01T06:21:44.342-04:00Don’t miss our CARI/Washington Post Monkey Cage collaboration series<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhoHaBLhv-eOs14eDyU4O4CG-IglwpQsB1B2R3_olGz-cFzjc0_GjYOHMt8vAOtqbqDTBaS7uBjey04whpWK6cMq-w0kaBZB2DbEuKHsWSityLAFJrcU3CkH1dhy6dBWhAohz3qCq4oA3Y/s2896/Illustration+Blog+Post+Monkey+Cage+series.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1086" data-original-width="2896" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhoHaBLhv-eOs14eDyU4O4CG-IglwpQsB1B2R3_olGz-cFzjc0_GjYOHMt8vAOtqbqDTBaS7uBjey04whpWK6cMq-w0kaBZB2DbEuKHsWSityLAFJrcU3CkH1dhy6dBWhAohz3qCq4oA3Y/w640-h240/Illustration+Blog+Post+Monkey+Cage+series.png" width="640" /></a></div><br /><div><br /></div><div><i>From February to April 2021, the Washington Post’s Monkey Cage and the China Africa Research Initiative brought you a series exploring a variety of China-Africa issues. Almost all of these eleven pieces were written by our 2019 writing workshop participants and/or CARI staff. We have compiled below short teasers from each article. To read more, click on the hyperlinked title. </i></div><div><br /></div><div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/02/19/us-policymakers-often-criticize-chinese-investment-africa-research-tells-more-complicated-story/" target="_blank">U.S. policymakers often criticize Chinese investment in Africa. The research tells a more complicated story</a>,” by Yoon Jung Park and Lina Benabdallah</b>, February 19, 2021</li><ul><li>China policy is a top priority for the Biden administration, who will likely face domestic challenges on how it deals with China’s role in the world. A number of legislators in Congress have, over the past several years, tried to outdo themselves with their hard-line positions on China. Nowhere has this been clearer than in their scrutiny of Chinese activities in Africa.</li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/02/26/pandemic-has-worsened-africas-debt-crisis-china-other-countries-are-stepping/" target="_blank">The pandemic has worsened Africa’s debt crisis. China and other countries are stepping in</a>,” by Deborah Brautigam, Kevin Acker, Yufan Huang</b>, February 26, 2021</li><ul><li>With the coronavirus crisis exacerbating the economic crisis in Africa’s low-income countries, economists and other experts argue that debt relief is essential. While the Trump administration and others have been skeptical about China’s willingness to offer debt relief, our research shows that these fears may be overblown.</li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/03/05/dont-believe-hype-about-chinas-vaccine-diplomacy-africa/" target="_blank">Don’t believe the hype about China’s ‘vaccine diplomacy’ in Africa</a>,” by Lina Benabdallah</b>, March 5, 2021 </li><ul><li>Commentary in U.S. and European news media and policy circles have stirred cynical concerns about China using vaccines as a soft-power move to further its political and economic interests in Africa. Academic research, however, shows that China’s humanitarian assistance to Africa, including medical aid, is nothing new. </li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/03/06/these-two-african-railway-megaprojects-tell-us-lot-about-chinas-development-model/" target="_blank">These two African railway megaprojects tell us a lot about China’s development model</a>,” by Maria Adele Carrai</b>, March 6, 2021</li><ul><li>Carrai’s research on two Chinese railway megaprojects in East Africa — the Nairobi-Mombasa line and Ethiopia’s Addis Ababa-Djibouti project — suggests that fears that China is upending development guidelines might be misplaced. </li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/03/12/african-countries-are-helping-china-go-green-that-may-have-downside-africans/" target="_blank">African countries are helping China go green. That may have a downside for Africans</a>,” by Meredith DeBoom</b>, March 12, 2021</li><ul><li>The details of China’s new 5-year plan, released earlier this year, suggest China has put off the difficult steps necessary to become carbon neutral by 2060. How will Beijing pursue this goal — and at what cost? China’s plans for more nuclear power plants could mean that its reliance on Namibian uranium may transfer on to Namibians the price to pay for cleaner energy in China.</li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/03/19/will-chinese-funding-help-strengthen-africas-climate-change-response-its-complicated/" target="_blank">Will Chinese funding help strengthen Africa’s climate change response? It’s complicated</a>,” by Michael Addaney</b>, March 19, 2021 </li><ul><li>Many African governments see projects initiated under China’s massive Belt and Road Initiative as a way to help build much-needed infrastructure and help 46 participating African countries industrialize, strengthening their ability to cope with the effects of climate change. Addaney’s research, however, suggests that other factors matter as well.</li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/04/02/chinese-firms-african-labor-are-building-africas-infrastructure/" target="_blank">Chinese firms — and African labor — are building Africa’s infrastructure</a>,” by Frangton Chiyemura</b>, April 2, 2021 </li><ul><li>The proliferation of Chinese enterprises involved in Africa has attracted a great deal of attention from academics, policymakers and other observers in recent years. Of particular concern to many are China’s employment practices for large infrastructure projects on the continent. Chiyemura’s research shows that Chinese companies hire a large number of local employees. </li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/04/09/chinese-companies-have-different-ways-managing-african-employees/" target="_blank">Chinese companies have different ways of managing African employees</a>,” by Ding Fei</b>, April 9, 2021 </li><ul><li>When local Africans work for Chinese companies, the stereotype suggests, their employment is precarious. But Chinese companies do not manage employees in Africa in any universal way: their diverse backgrounds and investment in different industrial sectors influence their management practices.</li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/04/17/chinese-investment-africa-involves-more-than-megaprojects-private-enterprises-also-are-making-their-mark/" target="_blank">Chinese investment in Africa involves more than megaprojects. Private enterprises also are making their mark</a>,” by Yoon Jung Park</b>, April 17, 2021 </li><ul><li>Data suggests that private Chinese investment in Africa is yielding significant benefits, and African governments are taking note of the positive impacts on business development. U.S. efforts to understand China’s role in Africa and support a broader U.S. business presence in African countries may mean paying closer attention to these private Chinese investments.</li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/04/30/chinas-belt-road-initiative-invests-african-infrastructure-african-military-police-forces/" target="_blank">China’s Belt and Road Initiative invests in African infrastructure — and African military and police forces</a>,” by Natalie Herbert</b>, April 30, 2021 </li><ul><li>China’s military base in Djibouti isn’t the only sign of increasing Chinese security engagement in Africa. Although analysts typically see China’s Belt and Road Initiative as a global investment and economic growth program, these projects also may facilitate increased Chinese security cooperation with participating nations.</li></ul></ul><div><br /></div><ul style="text-align: left;"><li><b>“<a href="https://www.washingtonpost.com/politics/2021/04/30/huawei-is-trying-avoid-us-sanctions-that-may-change-us-china-tech-rivalry-africa/" target="_blank">Huawei is trying to avoid U.S. sanctions. That may change the U.S.-China tech rivalry in Africa</a>,” by Henry Tugendhat</b>, April 30, 2021 </li><ul><li>A battle is unfolding between U.S. and Chinese tech firms over who will control what millions of people in Africa can see, hear, read and say. The launch of Harmony, Huawei’s mobile phone operating system, represents the first major Chinese foray into the world of operating systems that two U.S. companies, Apple and Google, have dominated to date.</li></ul></ul></div>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com2tag:blogger.com,1999:blog-9189930829940284211.post-53679316946993041232021-02-24T11:57:00.003-05:002021-07-01T06:21:53.824-04:00In Memoriam: Professor Ian Taylor<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQNp4FCRD7RR60FDZ2vdt2URWZQqSJ34yocxisintfWaNKlcXymIKBpbA9htnQ_UDw4NjXK-UfJKLmD8hwon_wF3T0IpMfH4e3KU1kJ_FyhhMqOBehzCdEmHQDnCw9j9IHeSNr4v7_wN2y/s721/Ian+Taylor.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="721" data-original-width="450" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQNp4FCRD7RR60FDZ2vdt2URWZQqSJ34yocxisintfWaNKlcXymIKBpbA9htnQ_UDw4NjXK-UfJKLmD8hwon_wF3T0IpMfH4e3KU1kJ_FyhhMqOBehzCdEmHQDnCw9j9IHeSNr4v7_wN2y/s320/Ian+Taylor.jpg" /></a></div>African Studies, International Relations, and our small world of China-Africa researchers, lost one of its towering figures on February 22. Professor Ian Taylor died at the age of 52, after a short and brave battle against cancer. <p></p><p>Ian was at the peak of an astounding career: the author or editor of 12 books, with over 80 refereed journal articles in his vita. He leaves behind his wife Jo, two children, Archie and Blythe, a brother and other family members and colleagues. He was very well-loved. </p><p>For those who were fortunate to know him, Ian was literally larger than life: tall, handsome, and kind, a generous mentor who taught a generation of students at St. Andrews University. He had a wry humor, and his energy was meteoric. And now it turns out that his life, too, was like a shooting star that explodes in a burst of color, light and energy and then is over, much too soon.</p><p>I first met Ian through his work. In the 1980s and 1990s, Philip Snow (who wrote a fantastic book <i>The Star Raft</i> in 1989) and I seemed to be the only people interested in the obscure topic of China and Africa. I had published an article in 1994 in the <i>Journal of Commonwealth and Comparative Politics</i> on China's export of development ideas through its foreign aid to Africa, an article which quickly fell into obscurity. And then, out of the blue, I had a letter from the JCCP editors asking me to peer review a paper they'd received that was also about China and Africa. This became "The 'Captive States' of Southern Africa and China: The PRC and Botswana, Lesotho and Swaziland,' Ian's first refereed journal article. </p><p>Ian started his China journey in Hong Kong, where he studied Mandarin at the University of Hong Kong, earning an MPhil there in the mid-1990s. Our paths crossed increasingly often after that initial paper. Ian was always up for a long discussion about African development, or China's role on the continent. Our encounters often highlighted his zest for life outside the academy. Once, for example, Ian and I were both at a China-Africa conference near Charlottesville, Virginia. Afterwards, instead of heading directly to the airport, he rented a car and spent a couple of days driving and hiking in the Shenandoah mountains, exploring Virginia. In April 2010, he invited me to a conference at St Andrews. After my talk, he brought me home, where I met Jo, Archie and Blythe. We then spent the rest of that sunny Saturday on a memorable mini-tour of the coast of Scotland, visiting the church where he was an elder, walking in the villages along the coast. In 2015, Ian joined our new CARI team as a research affiliate, helping us launch our ESRC China-Africa research project at an event in Addis Ababa. </p><p>Ian wrote to me in June last year to share the news of his grave diagnosis. In his usual full-hearted way, he was embarking on this journey with optimism, fortitude, energy, and deep appreciation for the people who were now going to be his new colleagues. "It looks like I have got a bit of a trek ahead of me," he said. "Definitely getting my taxes back through the treatment! The health people have been brilliant, and I can't complain about anything at all." </p><p>Ian leaves behind a vast legacy, on a personal and professional level. His many honors bear witness to his vibrant mind, always questioning, seeking answers, and sharing what he learned with all of us around the world. And this will live on. </p>Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com6tag:blogger.com,1999:blog-9189930829940284211.post-88200271932826695522020-12-14T16:23:00.007-05:002021-07-01T06:22:01.375-04:00French-language Webinar on French-Chinese Business Cooperation in Africa (Nov 10, 2020)<p><b>Speakers:</b></p><p></p><ul style="text-align: left;"><li><b>Thierry Pairault</b>, Director Emeritus of Research, French National Centre for Scientific Research; Director, Research Center on Modern and Contemporary China, School for Advanced Studies in the Social Sciences (EHESS)</li><li><b>Jérémy Rubel</b>, Director of International Business Development, SETEC ITS (Société d'études techniques et économiques/Technical and Economic Studies Company, Intelligent Transportation Systems division)</li><li><b>Amadou Sy</b>, Director of Investments, Meridiam; Founding Member, Afrikamaono</li></ul><p></p><p>Welcome by <b>Deborah Brautigam</b>, Director, SAIS-CARI</p><p>Moderated by <b>Marie Foster</b>, Program Coordinator, SAIS-CARI</p><p>______________________</p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi093L_HXbhwH9-Lfry1xFLgtuisWpjdVR4Wx_AOESIreG89BzePaEe1bFFEFkeUG0T8ih1464SgvvhVEtjmNKHEIqoZgVi5GjvVh8sayAeNajzSyLB4Vc7LqUO1SUFfPR70FcJkBj0kjA/" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="" data-original-height="333" data-original-width="500" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi093L_HXbhwH9-Lfry1xFLgtuisWpjdVR4Wx_AOESIreG89BzePaEe1bFFEFkeUG0T8ih1464SgvvhVEtjmNKHEIqoZgVi5GjvVh8sayAeNajzSyLB4Vc7LqUO1SUFfPR70FcJkBj0kjA/" width="320" /></a></div>Many aspects of Sino-African relations receive biased or simplistic media coverage. This is especially true of highly nuanced issues, like the dynamics between Chinese and Western business activity in African countries. While most former colonial powers have seen their market shares across Africa decrease as China has grown its economic footprint on the continent, their total volume of trade with African countries has increased. In raw numbers, trade between the European Union and Africa has grown more than China-Africa trade over the past decade. These developments, along with various rumors and misconceptions, are often used to frame the situation as a zero-sum competition between China and the EU. The truth of the matter, however, is far more complex.<p></p><p>On November 10, the China Africa Research Initiative (CARI) hosted a panel discussion on the evolving landscape of French-Chinese business cooperation on the African continent. The event, conducted entirely in French, featured experts on the subject from both academia and the private sector. The panel followed the publication of “<a href="http://www.sais-cari.org/s/PB-50-Pairault-French-Chinese-Business-Cooperation-Africa.pdf" target="_blank">French and Chinese Business Cooperation in Africa</a>,” a CARI policy brief written by Professor Thierry Pairault, who was one of the featured speakers at the event.</p><p>While media outlets often portray a narrative of direct contention between Western and Chinese businesses in Africa, Prof. Pairault’s fieldwork shows that French and Chinese contractors often cooperate on projects. Historically, these partnerships arose in an accidental or informal manner, but in the past few years firms have started proactively seeking out concrete partnerships. Chinese companies in Africa have naturally begun to partner with other foreign contractors as they have diversified their holdings. The French firm CGA CGM and China Merchants Port, for example, co-manage a number of African ports. Increasingly complex economic ties, both formal and informal, continue to mitigate conflict between French and Chinese companies. The Chinese government has sought a more active role in encouraging business cooperation, but French businesses and government officials prefer informal cooperation.</p><p>Jérémy Rubel explored the BRT (Bus Rapid Transit) project in Dakar, Senegal as a case study of collaboration between Chinese firms, European firms, African government entities, and multilateral organizations. The BRT is organized as a public-private partnership (PPP) between the World Bank, the private sector, and the Dakar government. In 2019, the World Bank awarded the contract for the infrastructure and systems portion of the project to Chinese firm CRBC (China Road and Bridge Corporation), which went on to subcontract systems work to the French company FARECO and the Chinese Jiangsu Huimin Traffic Facility Co. Ltd. Other European contractors are currently competing for the private sector operations portion of the PPP. The electric buses for the BRT will likely be sourced from a Chinese firm. Rubel made the case that as a whole, the Chinese framework is increasingly attractive for African public transit projects because it comes with Chinese systems technology, which is less normative but highly innovative, and the services of ambitious Chinese government-backed firms, which are willing to maintain a long-term presence in the client country to operate the project.</p><p>Amadou Sy closed the presentation portion of the panel by using his decade-long career working with Chinese firms in Africa as a starting point to discuss the evolution of the landscape. In his role at Egis International, Sy worked with Chinese contractors in the Congo to pioneer a rigorous new program that sent bilingual, highly-trained Chinese engineers to Beijing, Paris, and the Congo. The program led to a partnership between Egis and Chinese firms for the development and provision of services, which allowed Egis to work directly for Chinese contractors rather than for African governments. He noted that in 2014-2015, more Chinese companies began to arrive in the region, signaling a shift towards more intense competition. Sy now helps launch large and technically complicated invitations to tender in Africa, a role that has led him to conclude that the still-widespread belief that Chinese companies are less competitive is mistaken. Several large and technically complicated contracts have recently gone to Chinese firms thanks to recent cutting-edge advances in Chinese technology.</p><p>One key takeaway from the Q&A session following the presentations: unlike the Chinese, French companies and government agencies have not defined a cohesive narrative in which to frame French business activities in Africa. This reduces the visibility of French involvement relative to their Chinese partners. The speakers weighed in on several other topics during the Q&A, including the increased hiring of local workers for Chinese projects in Africa. Because Chinese firms now compete on more equal footing with other international contractors, wage levels determine the composition of their workforce. Recent salary increases in China mean that African labor is usually less expensive. Mr. Sy also noted that technology transfers from Chinese firms to African countries have become more substantial in recent years due to an influx of Chinese contractors, more aggressive competition, and greater African demand for technology. Finally, the panel explored the channels of influence available to French and Chinese actors abroad. French embassies are mostly political entities that operate separately from the AFD (French Development Agency), while Chinese embassies can be both political and economic tools due to the presence of a Ministry of Commerce-affiliated minister counselor in addition to an ambassador.</p><p>The video recording of the event (in French only) can be found below, and a longer English-language summary of the event is available upon request.</p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="BLOG_video_class" height="266" src="https://www.youtube.com/embed/SKuV2rhpdiw" width="320" youtube-src-id="SKuV2rhpdiw"></iframe></div><br /><p><br /></p>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com2tag:blogger.com,1999:blog-9189930829940284211.post-33289481177406068162020-11-23T16:34:00.004-05:002021-07-01T06:22:14.058-04:00CARI Debt Analysis Outputs since April 2020<p><i></i></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKR-aCw8yE13OXwMeqoHdvjUSFDfvbIS-aW8eo6F3a-lbCHReXT3lGUt3AUhpqbvqjm3IIqoorO0NlJrQR6z845CaUuCIz99tw-XM7rWobLS_O9hRnSJyIxQic2pu5pRa93SVRYWRudzs/s2048/Bank+of+China+4MB.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1307" data-original-width="2048" height="255" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKR-aCw8yE13OXwMeqoHdvjUSFDfvbIS-aW8eo6F3a-lbCHReXT3lGUt3AUhpqbvqjm3IIqoorO0NlJrQR6z845CaUuCIz99tw-XM7rWobLS_O9hRnSJyIxQic2pu5pRa93SVRYWRudzs/w400-h255/Bank+of+China+4MB.jpg" title="Photo credit: Shutterstock" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><i><span style="font-size: x-small;">Photo credit: Shutterstock</span></i></td></tr></tbody></table><i><br />Recent analysis by CARI researchers on Chinese lending in Africa</i><p></p><p></p><a href="https://pandapawdragonclaw.blog/2020/08/31/what-we-know-about-chinas-approach-to-debt-relief-insights-from-two-decades-of-china-africa-debt-restructuring/" target="_blank"></a><ul style="text-align: left;"><a href="https://pandapawdragonclaw.blog/2020/08/31/what-we-know-about-chinas-approach-to-debt-relief-insights-from-two-decades-of-china-africa-debt-restructuring/" target="_blank"></a><li><b><a href="https://pandapawdragonclaw.blog/2020/08/31/what-we-know-about-chinas-approach-to-debt-relief-insights-from-two-decades-of-china-africa-debt-restructuring/" target="_blank">What we know about China’s approach to debt relief: Insights from two decades of China-Africa debt restructuring</a></b>, Panda Paw Dragon Claw, August 31, 2020</li></ul><p>In assessing China’s approach to debt relief, CARI Research Manager Kevin Acker goes beyond China’s participation in the G-20 Debt Service Suspension Initiative (DSSI) and takes a look at the past two decades of Chinese debt relief. From these scenarios, Acker provides insight as to how China might handle the financial stress of the COVID-19 era. </p><p></p><a href="https://thediplomat.com/2020/08/china-the-world-bank-and-african-debt-a-war-of-words/" target="_blank"></a><ul style="text-align: left;"><a href="https://thediplomat.com/2020/08/china-the-world-bank-and-african-debt-a-war-of-words/" target="_blank"></a><li><a href="https://thediplomat.com/2020/08/china-the-world-bank-and-african-debt-a-war-of-words/" target="_blank"></a><a href="https://thediplomat.com/2020/08/china-the-world-bank-and-african-debt-a-war-of-words/" target="_blank"><b>China, the World Bank, and African Debt: A War of Words</b></a>, <i>The Diplomat</i>, August 17, 2020</li></ul><p></p><p>David Malpass, World Bank president and a Trump appointee, claimed that China Development Bank was a significant provider of development assistance to the low-income African countries covered by the G-20 Debt Service Suspension Initiative (DSSI) and should join the initiative. In fact, CARI data show that CDB lending in the DSSI countries is relatively small, and it is significant only in Angola. By pointing a finger at CDB, is Malpass deflecting attention from the World Bank's own failure to join the DSSI? Or is Malpass allowing the rising hostility between the United States and China to add additional challenges to cooperative action over debt debt relief in Africa?</p><p></p><a href="http://www.chinaafricarealstory.com/2020/07/did-benn-steil-get-it-wrong-about.html" target="_blank"></a><ul style="text-align: left;"><a href="http://www.chinaafricarealstory.com/2020/07/did-benn-steil-get-it-wrong-about.html" target="_blank"></a><li><a href="http://www.chinaafricarealstory.com/2020/07/did-benn-steil-get-it-wrong-about.html" target="_blank"></a><a href="http://www.chinaafricarealstory.com/2020/07/did-benn-steil-get-it-wrong-about.html" target="_blank"><b>Did Benn Steil Get it Wrong About China's Intentions for BRI Debt Relief?</b></a>, <i>The China Africa Research Initiative Blog</i>, July 18, 2020</li></ul><p></p><p>Due to the pandemic, the G-20 announced an unprecedented agreement in April to suspend official bilateral debt service payments for the world's low income countries for the remainder of 2020. The Council on Foreign Relations suggested that China Export Import Bank would not join the DSSI. In this blog post, Deborah Brautigam analyzes the PRC’s intention to live up to its COVID-19 pledge on debt relief, suggesting that the CFR misread Chinese intentions. </p><p></p><a href="http://www.sais-cari.org/s/BP-3-Brautigam-Huang-Acker-Chinese-Loans-African-Debt.pdf" target="_blank"></a><ul style="text-align: left;"><a href="http://www.sais-cari.org/s/BP-3-Brautigam-Huang-Acker-Chinese-Loans-African-Debt.pdf" target="_blank"></a><li><a href="http://www.sais-cari.org/s/BP-3-Brautigam-Huang-Acker-Chinese-Loans-African-Debt.pdf" target="_blank"></a><a href="http://www.sais-cari.org/s/BP-3-Brautigam-Huang-Acker-Chinese-Loans-African-Debt.pdf" target="_blank"><b>Risky Business: New Data on Chinese Loans and Africa’s Debt Problem</b></a>, China Africa Research Initiative Briefing Paper, July 2020</li></ul><p></p><p>From modest beginnings in 1960, China has recently become a highly visible actor in Africa’s lending landscape. African borrowers have built roads, installed electrical grids, and modernized their airports with Chinese finance. When commodity prices and growth rates began to tumble in 2015, the specter of a new debt crisis arose. This briefing paper discusses CARI's latest data release on Chinese loan commitments to Africa. </p><p></p><a href="https://thediplomat.com/2020/06/putting-a-dollar-amount-on-chinas-loans-to-the-developing-world/" target="_blank"></a><ul style="text-align: left;"><a href="https://thediplomat.com/2020/06/putting-a-dollar-amount-on-chinas-loans-to-the-developing-world/" target="_blank"></a><li><a href="https://thediplomat.com/2020/06/putting-a-dollar-amount-on-chinas-loans-to-the-developing-world/" target="_blank"></a><a href="https://thediplomat.com/2020/06/putting-a-dollar-amount-on-chinas-loans-to-the-developing-world/" target="_blank"><b>Putting a Dollar Amount on China’s Loans to the Developing World</b></a>, <i>The Diplomat</i>, June 24, 2020</li></ul><p></p><p>After several years of lacking data on outstanding debts to China among developing countries, Yufan Huang and Deborah Brautigam bring clarity to the subject by elaborating on the World Bank’s recently published debt statistics of 72 low-income nations. From the new numbers, they draw several conclusions based on how much debt these governments have and how much is owed to Chinese lenders. </p><p></p><a href="http://www.sais-cari.org/s/PB-47-Brautigam-Kidane-Debt-distress-Asset-seizure.pdf" target="_blank"></a><ul style="text-align: left;"><a href="http://www.sais-cari.org/s/PB-47-Brautigam-Kidane-Debt-distress-Asset-seizure.pdf" target="_blank"></a><li><a href="http://www.sais-cari.org/s/PB-47-Brautigam-Kidane-Debt-distress-Asset-seizure.pdf" target="_blank"></a><a href="http://www.sais-cari.org/s/PB-47-Brautigam-Kidane-Debt-distress-Asset-seizure.pdf" target="_blank"><b>China, Africa, and Debt Distress: Fact and Fiction about Asset Seizures</b></a>, <i>China Africa Research Initiative Policy Brief</i>, June 2020</li></ul><p></p><p>In the past two years, news headlines have periodically speculated that African borrowers are at risk of losing their sovereign assets to Chinese lenders. In this policy brief, Deborah Brautigam and Won Kidane explore what is known about the legal aspects of Chinese lending, including waiver of sovereign immunity clauses and the consequences thereof, and provide policy recommendations.</p><p></p><a href="http://www.sais-cari.org/s/WP-39-Acker-Brautigam-Huang-Debt-Relief.pdf" target="_blank"></a><ul style="text-align: left;"><a href="http://www.sais-cari.org/s/WP-39-Acker-Brautigam-Huang-Debt-Relief.pdf" target="_blank"></a><li><a href="http://www.sais-cari.org/s/WP-39-Acker-Brautigam-Huang-Debt-Relief.pdf" target="_blank"></a><a href="http://www.sais-cari.org/s/WP-39-Acker-Brautigam-Huang-Debt-Relief.pdf" target="_blank"><b>Debt Relief with Chinese Characteristics</b></a>, <i>China Africa Research Initiative Working Paper</i>, June 2020</li></ul><p></p><p>As China is poised to become the world’s largest creditor, concerns about debt sustainability have grown. Yet considerable confusion exists over what is likely to happen when a government runs into trouble repaying its Chinese loans. In this paper, Kevin Acker, Deborah Brautigam, and Yufan Huang draw on CARI data to review the evidence on China’s debt cancellation and restructuring in Africa, in comparative and historical perspective. Cases from Sri Lanka, Iraq, Zimbabwe, Ethiopia, Angola, and the Republic of Congo, among others, point to patterns of debt relief with distinctly Chinese characteristics.</p><p></p><a href="https://thediplomat.com/2020/04/chinese-debt-relief-fact-and-fiction/" target="_blank"></a><ul style="text-align: left;"><a href="https://thediplomat.com/2020/04/chinese-debt-relief-fact-and-fiction/" target="_blank"></a><li><a href="https://thediplomat.com/2020/04/chinese-debt-relief-fact-and-fiction/" target="_blank"></a><a href="https://thediplomat.com/2020/04/chinese-debt-relief-fact-and-fiction/" target="_blank"><b>Chinese Debt Relief: Fact and Fiction</b></a>, <i>The Diplomat</i>, April 15, 2020</li></ul><p></p><p>Dr. Deborah Brautigam discusses the increased pressure China is facing to forgive its loans to Africa due to the recent pandemic and how it will react. By drawing upon examples of how China has managed tricky debt situations in the past, Brautigam debunks claims that China will seize assets or that it has written off half of Africa’s debt.</p><p></p><a href="http://www.chinaafricarealstory.com/2020/04/is-china-hiding-its-overseas-lending.html" target="_blank"></a><ul style="text-align: left;"><a href="http://www.chinaafricarealstory.com/2020/04/is-china-hiding-its-overseas-lending.html" target="_blank"></a><li><a href="http://www.chinaafricarealstory.com/2020/04/is-china-hiding-its-overseas-lending.html" target="_blank"></a><a href="http://www.chinaafricarealstory.com/2020/04/is-china-hiding-its-overseas-lending.html" target="_blank"><b>Is China Hiding its Overseas Lending? Horn, Reinhart and Trebesch's "Hidden Loans" and Hidden Data</b></a>, <i>The China Africa Research Initiative Blog</i>, April 1, 2020</li></ul><p></p><p>This blog post responds to a working paper by Horn, Reinhart, and Trebesch (HRT) about Chinese overseas lending, which states that half of China’s loans to low-income nations are hidden. Deborah Brautigam and Kevin Acker dispute their review of China’s “hidden lending” by comparing it with SAIS-CARI’s data, noticing some numbers have been underestimated and others overestimated. The analysis ends with a discussion about the key difference between loan commitments and loan disbursements, using Nigeria as a case study.</p>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0Washington, DC, USA38.9071923 -77.036870710.596958463821153 -112.1931207 67.217426136178844 -41.880620699999994tag:blogger.com,1999:blog-9189930829940284211.post-716566402295849882020-08-17T11:14:00.005-04:002021-07-01T06:46:40.173-04:00What are Taiwan, China, and the United States Doing in Somaliland?<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx6MT5wQ-RpXL78qIHY5ratmuGOVf7hhgIcAqsqqM4V3l2yvCMMdRxCpuCvvO6WE9qLf5jtPwO55VC_VwIHGcyL7e29nX5ymYidOkaoqx2nk7eVFiNdIqdhb4pqPfiSk4Mma9Rw1F9xMWV/s420/Screen+Shot+2020-08-17+at+9.44.17+AM.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="Typical sign for Taiwan's representative offices" border="0" data-original-height="366" data-original-width="420" height="187" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx6MT5wQ-RpXL78qIHY5ratmuGOVf7hhgIcAqsqqM4V3l2yvCMMdRxCpuCvvO6WE9qLf5jtPwO55VC_VwIHGcyL7e29nX5ymYidOkaoqx2nk7eVFiNdIqdhb4pqPfiSk4Mma9Rw1F9xMWV/w215-h187/Screen+Shot+2020-08-17+at+9.44.17+AM.png" width="215" /></a></div>(revised August 20). Taiwan has been courting Somaliland, a breakaway region of the failed state of Somalia. As <a href="#" id="https://en.wikipedia.org/wiki/Somaliland" name="https://en.wikipedia.org/wiki/Somaliland">Wikipedia puts it</a>, "Somaliland, officially the Republic of Somaliland, is a self-declared state, internationally considered to be part of Somalia." <p></p><p>Some were wondering if China would react with a heavy hand.</p><p>I originally thought they would ignore it. But that didn't happen. As Eric Olander has noted at <a href="#" id="https://chinaafricaproject.com/analysis/somaliland-should-brace-itself-for-what-comes-next/" name="https://chinaafricaproject.com/analysis/somaliland-should-brace-itself-for-what-comes-next/">the China Africa project</a>: China's response was delayed and so far remains rhetorical, but they took (sharp) notice. </p><p>Why did China not ignore this new office, as it has Taiwan's establishment of representative offices around the world? This is not simply a Taiwan-Somaliland-China-Somalia dispute. It involves the US. And it involves Hong Kong. </p><p><b>What Happened in Somaliland?</b></p><p>What happened in Somaliland was Taiwan's<a href="#" id="https://www.taiwannews.com.tw/en/news/3989156" name="https://www.taiwannews.com.tw/en/news/3989156"> establishment of a representative office,</a> not an embassy. This is common practice for Taiwan around the world in the countries that have switched recognition (i.e. official diplomatic ties) from Taiwan to Beijing. (The photo here is courtesy of Wikipedia and shows a similar office in the UK.)</p><p>Taiwan has had a representative office just like this since 1979 in Washington, DC and in 12 other locations around the United States. It has similar offices in <a href="#" id="https://en.wikipedia.org/wiki/Taipei_Economic_and_Cultural_Representative_Office#Taipei_representative_offices_around_the_world" name="https://en.wikipedia.org/wiki/Taipei_Economic_and_Cultural_Representative_Office#Taipei_representative_offices_around_the_world">at least 57 other countries</a> that are important for Taiwan's trade and consular activities. </p><p>Beijing doesn't fight these, aside from pressure to have them located in commercial centers (e.g. Lagos, in Nigeria's case) rather than diplomatic capitals (Abuja). After all, despite the tension of geopolitics, the island and the east coast of China 100 miles away have had their own thick web of family and business ties: around <a href="#" id="https://thediplomat.com/2019/06/why-the-us-may-lose-taiwan-to-beijing-economically/" name="https://thediplomat.com/2019/06/why-the-us-may-lose-taiwan-to-beijing-economically/">$180 billion in cumulative investment </a>from Taiwan into China as of 2019. The world has welcomed investors from Taiwan, and trade with Taiwan, just as China has. </p><p>It's no doubt annoying to Beijing, but the office established in Somaliland (a region of the legally recognized state of Somalia) is juridically no different than the 12 regional offices Taiwan has in the United States. Or the dozens of similar representation offices in Nigeria, South Africa and around the world. It was not the act of a sovereign state. </p><p>Diplomatic recognition with a real, internationally recognized sovereign state, is a different kettle of fish. And Taiwan gaining an official seat in international organizations that are reserved for states: that's politics, not commerce. That's why Beijing fights with tooth and nail to keep Taiwan out of international organizations. It's not just de facto recognition, it's de jure.</p><p>Then why did Beijing react so strongly this time? It's about the United States, <i>and</i> it's about Hong Kong. Somaliland (like Hong Kong) was originally a British colony, “<a href="#" id="https://www.theguardian.com/news/2018/jul/20/when-is-a-nation-not-a-nation-somalilands-dream-of-independence" name="https://www.theguardian.com/news/2018/jul/20/when-is-a-nation-not-a-nation-somalilands-dream-of-independence">one of Britain’s least rewarding possessions</a>”. The timing of the Taiwan courtship, and the US connection to this, has to be seen against the background of China's recent crackdown on Hong Kong's hopes for increased autonomy.</p><p>About the United States role, here's <a href="https://www.blogger.com/blog/post/edit/9189930829940284211/71656640229584988" id="https://www.taiwannews.com.tw/en/news/3989156" name="https://www.taiwannews.com.tw/en/news/3989156">Taiwan's press release </a>on the opening of the office: "Taiwan’s Minister of Foreign Affairs Joseph Wu (吳釗燮) posted on Twitter on Aug. 9 to welcome [the arrival of Taiwan's representative in Somaliland] and thank the U.S. National Security Council for its positive feedback on the emerging ties between Taiwan and Somaliland."</p><p>It's helpful also to remember--especially these days as we seem to be sliding blindly into a new Cold War--how the Taiwan-China diplomatic struggle came about, and the role the United States played. So here's a quick history lesson.</p><p><b>Appendix: Short History of US-China-Taiwan Relations and Why it Matters for Africa</b></p><p>I lived in Taiwan from 1979 to 1980 doing four hours a day of intensive Mandarin and teaching English to support myself. I remember this as one of the happiest years of my life. But my time in Taiwan was also a time of great uncertainty for the island. </p><p>At the end of 1978 the United States had finally established diplomatic ties with Beijing, breaking them with the Republic of China (Taiwan). The US withdrew the large military garrison we had established there. No one was sure what would happen next.</p><p>It seems to be largely forgotten in Washington today that the "Taiwan issue" was jointly created by Japan, which took the island of Taiwan from China in 1895 after attacking the crumbling Qing empire (see <a href="#" id="https://www.taiwan.gov.tw/content_3.php#:~:text=The%20ROC%20was%20founded%20in,end%20of%20World%20War%20II." name="https://www.taiwan.gov.tw/content_3.php#:~:text=The%20ROC%20was%20founded%20in,end%20of%20World%20War%20II.">1895 Treaty of Shimonoseki</a>) and the United States, which used our naval forces to (peacefully) intervene in the Chinese civil war during the 1950s.</p><p>Here's a quick reprise of our US role. </p><p>In 1945, after losing World War II, Japan returned the island of Taiwan to China, then governed by the Kuomintang (KMT, the National People's Party), which was fighting a civil war against the Chinese Communist Party (CCP). </p><p>In 1949, when the communists were about to win the war in China, the KMT fled to Taiwan, 100 miles offshore. </p><p>In 1950, after the outbreak of the Korean War, the US established a naval blockade between Taiwan and mainland China, <a href="#" id="https://history.state.gov/milestones/1953-1960/taiwan-strait-crises" name="https://history.state.gov/milestones/1953-1960/taiwan-strait-crises">sending the Seventh Fleet</a> to patrol the Taiwan straits. We then signed a <a href="#" id="https://www.pbs.org/wgbh/pages/frontline/shows/china/etc/cron.html" name="https://www.pbs.org/wgbh/pages/frontline/shows/china/etc/cron.html">mutual defense treaty</a> with the KMT in Taiwan. We organized an international <a href="http://afe.easia.columbia.edu/special/china_1950_us_china.htm">trade embargo </a>against China that lasted for 21 years (Nixon <a href="#" id="https://www.washingtonpost.com/wp-srv/inatl/longterm/flash/june/china71.htm" name="https://www.washingtonpost.com/wp-srv/inatl/longterm/flash/june/china71.htm">lifted it in 1971)</a>. And between 1949 and 1971, the United States blocked Beijing from taking the China seat in the United Nations, keeping the KMT government artificially propped up as "China". </p><p>So why does all this Cold War history matter for Africans? </p><p>First, it was largely the African governments of countries emerging from colonialism in the 1960s that provided the votes in 1971 that enabled Beijing to be seated at the United Nations. The 54 legally recognized countries on the African continent were (and remain) hugely important in China's diplomacy. </p><p>Second, the Cold War, of course, is no longer a distant memory. And the fingerprints of the Trump administration are not a mystery in the Somaliland story.</p><p>Let's hope that the ripples from this little story in far away Somaliland do not go down in history as one of the first shots of something worse than a cold war. </p><p>It can't be repeated often enough that in the Cold War as it was fought across Africa--from Mozambique to South Africa, from the Congo to Angola--there were no winners when the elephants fought. The grass was trampled.</p><p><i>This post was revised on August 20 to reflect the Chinese reaction to Taiwan's move and to note the relationship between current events in Hong Kong and Somaliland's historical status as a British colony. </i></p><p> </p><p><br /></p><p><br /></p><p><br /></p>Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com1tag:blogger.com,1999:blog-9189930829940284211.post-50180098433676661842020-08-03T15:39:00.002-04:002021-07-01T06:46:49.735-04:00Guest Post – Investment in Africa: China vs “traditional partners” – Part 2<i>This guest post, the second of two, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS). [1]</i><div><br /></div><div>In the first part of this post, I used Eurostat (the statistical office of the European Commission) statistical data issued in March 2020 to assess the investment efforts of traditional partners in comparison with China. My conclusion was twofold. It was, of course, the confirmation of the importance of China's role with the caveat about the effects of offshore financial centres. I will discuss this further in the first section of this post. Secondly, it appeared that the traditional partners had by no means forsaken Africa as a narrative repeated <i>ad nauseam</i> would have it. The question is therefore whether or not European countries show a preference for Africa. That will be the second point I will address.</div><div><br /></div><div><div><b>Offshore Financial Centres</b></div><div><br /></div><div>There is no single, clear and objective criterion for identifying a country as a tax haven or an offshore financial centre. What will often distinguish such a haven will be that it enables companies (but also individuals) to carry out tax and financial operations otherwise considered fraudulent in their own country or in a third country.</div><div><br /></div><div>In the case of the Netherlands, a report commissioned in 2016 by the Dutch Ministry of Foreign Affairs concluded that at least one third of companies operating in developing countries’ extractive sector were directly or indirectly financed or owned by Dutch shell companies on behalf of multinationals. These multinationals, from a wide range of countries, used these shell companies for the sole purpose of avoiding corporate income taxes payable to developing country governments. According to Eurostat, in this highly opaque background, during the six years 2013-2018, almost a third of Dutch investment flows were intended for war-torn Libya. Regardless of the statistical weight of flows labelled as Dutch, it is impossible to ascribe them to any specific country or even to consider them as genuine investments. </div></div><div><br /></div><div>Hong Kong is not only a tax haven but also a judicial haven (a territory, which is not subject to the laws commonly accepted in most other countries). It is also a bridge through which China has more easily connected with the outside world. Official Chinese statistics reveal that, at the end of 2018, 81% of China's outward FDI stock (present value of accumulated annual FDI flows) is reportedly held in tax havens, of which Hong Kong accounts for more than two thirds (69%). This phenomenon is not expected to stop in the coming years even if the share of annual flows decreases slightly. Hong Kong statistics tell us how these funds are then redirected from the former colony.</div><div><br /></div><div>Hong Kong's outward direct investment statistics are published online by the <a href="https://www.censtatd.gov.hk/home.html" target="_blank">Census and Statistics Department</a>, Table 1 gives the figures for the last four years (2015, 2016, 2017 and 2018). These figures show a very significant distribution of destinations (see Table 2). The first thing to note is that, despite the change in tax rules benefiting foreign companies on the Chinese mainland, the old practice of round-tripping seems to be perpetuated to such an extent that 62% of Hong Kong's FDI flows in 2018 were rerouted to mainland China. It is also noteworthy that 44% of Hong Kong's FDI stock has been accumulated in tax, banking, and even judicial havens (offshore havens), including the Netherlands. This means that only 11% of Hong Kong's FDI stock has been accrued in countries other than China and the six mentioned tax havens, i.e. accrued in 190 countries, 54 of which are African. Furthermore, only 2.5% of Hong Kong's total FDI stock is invested in the manufacturing sector. As such, the potential impact on the industrialisation of the African continent would be very limited, even if a small boost might be significant in some countries. </div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHMeK-8jDnMQGb_dO0g3JAP1jvWW2YKGcXfx9K1Kw6MxrIcGzYslOjlt4YcNzynqEhYCNbEqch30dsLty2i7lHdEPHBTj7N5e3HFh7CB3EpIXllOX_CIaTst4sAqav-fCmhjlOag0KhcY/s1119/Screen+Shot+2020-08-03+at+15.33.36.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="624" data-original-width="1119" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHMeK-8jDnMQGb_dO0g3JAP1jvWW2YKGcXfx9K1Kw6MxrIcGzYslOjlt4YcNzynqEhYCNbEqch30dsLty2i7lHdEPHBTj7N5e3HFh7CB3EpIXllOX_CIaTst4sAqav-fCmhjlOag0KhcY/s640/Screen+Shot+2020-08-03+at+15.33.36.png" width="640" /></a></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8YcSu1J8yN1aWHg5_rmpz5JH6f6nTgXJfYalXdSuOAily4fGWTDGg-cXMTlaFFbTqlwtsqRzIOPUBicwG93pgIqgAbe_OrwbjXrucDUw1bGahY2tHza_QERDXimVs2hptQg_GpeHC1yY/s757/Screen+Shot+2020-08-03+at+15.33.18.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="527" data-original-width="757" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8YcSu1J8yN1aWHg5_rmpz5JH6f6nTgXJfYalXdSuOAily4fGWTDGg-cXMTlaFFbTqlwtsqRzIOPUBicwG93pgIqgAbe_OrwbjXrucDUw1bGahY2tHza_QERDXimVs2hptQg_GpeHC1yY/w410-h286/Screen+Shot+2020-08-03+at+15.33.18.png" width="410" /></a></div><div><br /></div><div><div><b>China <i>vs</i> Africa</b></div><div><br /></div><div>In a previous post in the CARI Blog (<a href="http://www.chinaafricarealstory.com/2018/02/guest-post-china-in-africa-much-ado-part-1.html" target="_blank">China in Africa: Much Ado about Investment</a>) and elsewhere, I made it clear that China's investment in Africa is a very small percentage of Chinese outward investment. The same is true for all other countries investing in Africa: according to UNCTAD, in 2019, only 2.9% of global FDI flows went to this continent of 54 countries. This is not a one-time drop since Africa's inward FDI stock was only 2.6% of the world stock in 2019. No wonder. Most FDI originates from developed countries (76%) which invest primarily in other developed countries (67%). The question then is whether traditional partners treat Africa differently from the way it treats China (see Table 3).</div></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKKDADpiN0dGDdsNXxVTJDxYx0YMNaUCa8dDhNk4cMsIL6JxDx7aQ4I_sv3w4rirQwdfQsDEUeP7O0nxk-c8n8cRuVaPLw2Tq9HD6LJBJnoygPIa2oqkZkbZFJ8N7pNwnKuPS3ceQUUj0/s1065/Screen+Shot+2020-08-03+at+15.32.57.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="684" data-original-width="1065" height="411" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKKDADpiN0dGDdsNXxVTJDxYx0YMNaUCa8dDhNk4cMsIL6JxDx7aQ4I_sv3w4rirQwdfQsDEUeP7O0nxk-c8n8cRuVaPLw2Tq9HD6LJBJnoygPIa2oqkZkbZFJ8N7pNwnKuPS3ceQUUj0/w640-h411/Screen+Shot+2020-08-03+at+15.32.57.png" width="640" /></a></div><div><br /></div><div>In Table 3, I have included only European countries with a colonial past in Africa, except for the Netherlands because of its investments' uncertain origin (see <i>supra</i>). For comparison, I have added the USA and Japan for which Eurostat gives figures. In 2018, the stock of European direct investment (28 countries) in Africa was one and a half times higher than that of the same 28 countries in China. The stocks of France, the United Kingdom, Italy and Spain in Africa would have been about two and a half times higher than their investment stock in China. As for Portugal, while it invests in Africa, it recorded no investments in China. </div><div><div><br /></div><div>Conversely the German FDI stock in China is about six times higher than in Africa. Belgium, for its part, expresses an infinitesimal preference for China, but neither Africa nor China are important targets for its FDIs. As a rule, northern and eastern European countries (with the exception of Germany) hardly invest in Africa or China. Except for Belgium, European countries that invest preferentially in Africa are maritime countries with an African colonial past. </div><div><br /></div><div>I would posit that history and geography are therefore very significant factors in explaining such a situation. Therefore, it comes as no surprise that the United States and Japan are targeting China instead of Africa for investment: both were much more active players in China before 1949 than European countries (except the United Kingdom). </div></div><div><br /></div><div>The question that might now arise is whether comparisons between countries or groups of countries still make sense from an economic point of view when multinationals, including Chinese ones, enjoy de facto autonomy that international institutions can hardly control.</div><div><br /></div><span><a name='more'></a></span><div><i>[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 <a href="http://pairault.fr/sinaf/">http://pairault.fr/sinaf/</a> for more information about his work.</i></div>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-1637751668019064112020-07-31T18:15:00.005-04:002021-07-01T06:46:58.222-04:00Guest Post – Investment in Africa: China vs “traditional partners” – Part 1<i>This guest post, the first of two, is by Dr. Thierry Pairault, research director at France's Centre National de la Recherche Scientifique (CNRS). [1]</i><div><i><br /></i></div><div><div>The highly active and multifarious presence of Chinese companies in Africa and the unrelenting reiteration of a perfectly crafted narrative, have all contributed to the feeling that former colonial powers and other developed countries have disengaged from Africa. Until recently, the lack of Western investment statistics in African countries to compare with China's own statistics and reports of China’s investment and financing (see my post on CARI blog <a href="http://www.chinaafricarealstory.com/2018/02/guest-post-china-in-africa-much-ado-part-1.html" target="_blank">China in Africa: Much Ado about Investment</a>) had convinced Africans of this abandonment. However, in June 2019, <a href="https://ec.europa.eu/eurostat/web/national-accounts/data/database" target="_blank">Eurostat</a> (the statistical office of the European Commission) published its most recent Foreign Direct Investment (FDI) statistics, referenced in an earlier paper (<a href="https://pairault.fr/sinaf/index.php/publications/1829-investissements-en-afrique-la-chine-et-les-partenaires-traditionnels" target="_blank">Investissements en Afrique : La Chine et les « partenaires traditionnels »</a>). On 20 March 2020, Eurostat updated these statistics on European direct investment abroad. In this note I will briefly compare these statistics with those produced by <a href="http://fec.mofcom.gov.cn/article/tjsj/tjgb/" target="_blank">MOFCOM and the Chinese State Bureau of Statistics</a>.</div><div><br /></div><div>According to Eurostat, in 2018, if I eliminate the Netherlands (internationally known as a tax haven, hence whose FDI is not properly Dutch), France continues to have the largest stock of FDI in Africa (€46 billion). This primacy could very soon be breached by China, which ranks second with a stock lower by only 5 billion euros (€41 billion). The USA are still in third place (extrapolated from 2017 figures because 2018 statistics are still unavailable) ahead of the United Kingdom (€2 million less than China), Italy (€15 million less than China), Germany (€29 million less than China). Luxembourg and Cyprus operate systems similar to the Netherlands, albeit to a lesser degree.</div><div><br /></div><div>China's expansion is, indeed, very striking, as shown in Table 1. However, it cannot be concluded that traditional partners no longer invest in Africa because Western investors, in order to maintain a given level of investment stock, must at the very least reinvest some of their profits, but also replenish obsolete capital. Indeed, what we are witnessing is NOT that traditional partners have abandoned Africa, but that Africa has gained a new and powerful partner - China.</div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimcluOhNJxQj1ByD41UO4ND02omYCUhjRSzxXkNC73joJLvN5nefdVy-jMGnmcmr11p3G35hdhQS_03QTjhgCpieNWAtU3tdccnZO0WhsRFACuAaYuncGV0M8bVZq9EyWMss2B9tILoGc/s872/Screen+Shot+2020-07-31+at+18.10.41.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="872" data-original-width="691" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimcluOhNJxQj1ByD41UO4ND02omYCUhjRSzxXkNC73joJLvN5nefdVy-jMGnmcmr11p3G35hdhQS_03QTjhgCpieNWAtU3tdccnZO0WhsRFACuAaYuncGV0M8bVZq9EyWMss2B9tILoGc/s640/Screen+Shot+2020-07-31+at+18.10.41.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div>To go further in the analysis, I undertook a suite of principal component analyses to better understand the structure of the data and to better appreciate the proximity [correlation or lack thereof] between observations. These analyses reported in the above-mentioned paper showed that China's behaviour was just as “capitalist” and “mercantile” as that of Western countries, especially European ones. However, the traditional partners do not favour all the African countries receiving their FDI in the same way... I selected 25 African countries that either had in 2017 FDI stock of at least 1% of the European investment stock or that held a stock of at least 1% of Chinese investment. The year 2017 has been selected here and not the year 2018 for which many statistics are still missing.</div><div><div><br /></div><div>These 25 countries benefitted from a total of 96% of the European stock of FDI in Africa and 89% of the Chinese stock. In other words, European investment was targeted at a smaller number of African countries as compared to Chinese investment. If I assume European investment to be purely economic, the question arises as to whether the greater dispersal of Chinese investment might also be expressing more political (for instance, building a client network for support within UN agencies) than economic objectives. As far as Western countries are concerned, I selected only those with an investment stock in Africa of more than ten billion euros (Germany, the United States, France, Italy and the United Kingdom) for comparison with China. The results are shown in Table 2, Map 1.</div><div><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgN5bCSW2JIzr-VzOPC2pOUz0yfgB9GKYDWYM4yEWyH8_0hoR6XXiXSB_pVnxBWipF6uILf3_6AvVwZqeZis5_s-hrZkzIB2JsEPeR4lbWasou0aQjgD5NkC7Vtaa0aUWykKPuZ0vY-lcs/s1074/Screen+Shot+2020-07-31+at+18.07.55.png" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="827" data-original-width="1074" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgN5bCSW2JIzr-VzOPC2pOUz0yfgB9GKYDWYM4yEWyH8_0hoR6XXiXSB_pVnxBWipF6uILf3_6AvVwZqeZis5_s-hrZkzIB2JsEPeR4lbWasou0aQjgD5NkC7Vtaa0aUWykKPuZ0vY-lcs/s640/Screen+Shot+2020-07-31+at+18.07.55.png" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Table 2. – Recipient countries and main investor countries</td></tr></tbody></table><div><br /><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiR44FCOCG_wdffxeBH6QPKht59d0ApUq5JFpZYykysDamZlo1Dce9DgPeIofjpfyoYgZcrYt5STUtnvbMtUgklpvRJTk7q8RQbX-FxirS1kAXGThxIH7Rr7cLlTcSiRESO4TObDF_kTvc/s840/Screen+Shot+2020-07-31+at+18.01.03.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="840" data-original-width="664" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiR44FCOCG_wdffxeBH6QPKht59d0ApUq5JFpZYykysDamZlo1Dce9DgPeIofjpfyoYgZcrYt5STUtnvbMtUgklpvRJTk7q8RQbX-FxirS1kAXGThxIH7Rr7cLlTcSiRESO4TObDF_kTvc/s640/Screen+Shot+2020-07-31+at+18.01.03.png" /></a></div><div><br /></div><div>In 2017, three countries climb to the top of the investor countries’ list with the most first, second and third places: China (with twenty places) followed by France (with nineteen places) and the United States (with fourteen places). China's advance is even clearer if I only take into account the number of recipient countries where it tops the list of investor countries (eleven), while France tops the list with eight and the United States with three. This growing Chinese preeminence is politically very important from an African political point of view; however, France and the United States remain the most important investors from an economic point of view. </div><div><br /></div><div><div>It should be noted, however, that a high ranking does not always mean more investment. For example, China is the leading investor in Namibia, but its investment stock there is very small – only a quarter of its investment stock in Algeria. In Algeria, however, China only ranks fourth. It should also be noted that China has taken over the position of a “traditional partner” which today is relegated to second or even third place (e.g., France, Italy, and the United Kingdom). </div><div><br /></div><div>Special mention should be made of Algeria, which has distanced itself from France (third-largest FDI stock) without being economically lured by China (fourth-largest stock); instead it has opened its doors to both the United States (second-largest stock) and Italy (first-largest stock) which hold a large share of the exploitation and distribution of its oil and gas resources. China's breakthrough is also still very limited in Egypt, Morocco and Tunisia. In fact, North Africa does not appear to be a privileged land for investments by Chinese companies – even in the case of Egypt, which is nevertheless endowed with a "Chinese" special economic zone, the only one in Africa that is reputed to function to the satisfaction of the parties [2].</div><div><br /></div><div>A final point: one must avoid any absolutist interpretation of both the Eurostat data and the findings they suggest. Generally speaking, available FDI statistics are not yet very reliable; they capture financial flows that may underestimate actual investment. Furthermore, if one has doubts about the quality and comprehensiveness of Eurostat's FDI statistics and those of UN Comtrade, similar doubts about the quality of those produced in China should also be entertained. For the former, the role of tax havens, as in the case of the Netherlands clearly skews their FDI figures. In the case of China, statistics do not tell us the amount of investment that goes through offshore financial centres (starting with Hong Kong) possibly en route to Africa.</div></div><div><br /></div><span><a name='more'></a></span><div><br /></div><div><i>[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 <a href="http://pairault.fr/sinaf/">http://pairault.fr/sinaf/</a> for more information about his work.</i></div><div><br /></div><div><i>[2] Wang Hongyi, « Zhong Fei gong jian chanye yuan de xianzhuang, wenti he duice » [Assessment, problems and measures for industrial parks established jointly by China and Africa], in Zhang Hongming et Wang Hongyi (dir.), Feizhou fazhan baogao n°19 (2016-2017): Feizhou gongye hua yu zhongguo zai feizhou chanye yuanqu jianshe [African Development Report, n° 19 (2016-2017) : The industrialisation of Africa and the establishment by China of industrial parks in Africa], Beijing, Shehui kexue chubanshe, 2017, p. 019-024.</i></div></div></div>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-17779451467273897862020-07-18T17:31:00.001-04:002021-07-01T06:47:06.839-04:00Did Benn Steil Get it Wrong About China's Intentions for BRI Debt Relief?<div dir="ltr" style="text-align: left;" trbidi="on">
On April 15, 2020, the G-20 announced a response to Covid-19's economic distress: an unprecedented agreement to suspend official bilateral debt service payments for the world's low income countries for the remainder of 2020. The G-20 finance ministers are meeting again and there's one question everyone will be wondering:<br />
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<i>Does China intend to live up to its Covid-19 pledge on debt relief? </i><br />
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One of the most influential stories about Chinese debt relief intentions was an April 24 piece on Foreign Affairs' website, "<a href="http://chinese%20debt%20could%20cause%20emerging%20markets%20to%20implode%20beijing%20needs%20to%20help%20its%20poor%20borrowers%20through%20the%20pandemic%20by%20benn%20steil%20and%20benjamin%20della%20rocca%20april%2027%2C%202020/">Chinese Debt Could Cause Emerging Markets to Implode</a>," by prominent Council on Foreign Relations economists Benn Steil and Benjamin Della Rocca.<br />
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Steil and Della Rocca argued that China had “added caveats that make a mockery” of its G-20 debt relief commitment. Beijing planned to exclude hundreds of large Belt and Road Initiative (BRI) loans in low income countries, they charged.<br />
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Their source for their analysis was an op-ed in the English language <a href="https://www.globaltimes.cn/content/1185860.shtml"><i>Global Times</i></a>, widely seen as a source of official views. The op-ed was by Song Wei.<br />
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Song, who works at a Chinese think-tank under the Ministry of Commerce, was <a href="https://www.researchgate.net/publication/331208771_Development_Cooperation_in_Africa_Creating_New_Momentum_for_China-US_Relations">a Fulbright Fellow </a>a few years ago at Columbia University. She <a href="https://www.researchgate.net/publication/331208771_Development_Cooperation_in_Africa_Creating_New_Momentum_for_China-US_Relations">writes frequently on Chinese foreign aid and on African issues</a>.<br />
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Her piece on Africa's debt problems was clearly written before the G-20 announcement and did not reference it. She made the unremarkable point that only China's interest-free loans were eligible for debt write-offs. But then she added that “preferential loans are not applicable for debt relief.”<br />
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This was confusing. And I can understand why Steil and Della Rocca misunderstood Song's statement.<br />
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So let us (belatedly) help them out.<br />
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In April, our team (myself, Kevin Acker, and Yufan Huang) was deeply immersed in the final stages of researching and writing our latest Johns Hopkins University SAIS-CARI working paper: "<a href="http://www.sais-cari.org/s/WP-39-Acker-Brautigam-Huang-Debt-Relief.pdf">Debt Relief with Chinese Characteristics</a>"(June 2020). We had collected and analyzed dozens of examples of debt relief, including China Eximbank's (the sole source of preferential loans in China) restructuring of a number of concessional and preferential loans between 2000 and 2018.<br />
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Steil and Della Rocca wouldn't have known -- as we did by then -- that the Chinese term “债务减免” (debt reduction and cancellation) is often mistranslated into English as “debt relief”.<br />
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So when we saw the same piece in <i>Global Times</i>, we read the statement "preferential loans are not available for debt relief" differently. Song Wei was simply stating something most <a href="https://developmentreimagined.com/2019/04/25/chinas-debt-relief-along-the-belt-and-road-whats-the-story/">China-Africa watchers already knew</a>: Africans should not expect debt write downs or cancellation of anything but interest-free loans, consistent with <a href="https://www.blogger.com/Chinese%20Debt%20Relief:%20Fact%20and%20Fiction%20%E2%80%93%20The%20Diplomatthediplomat.com%20%E2%80%BA%202020/04%20%E2%80%BA%20chinese-debt-relief-fact-a...">China's debt cancellation actions</a> in Africa over the past 20 years. Other loans would not be cancelled.<br />
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Notwithstanding this confusion, Song's article had plenty of other information that clarified her point.<br />
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Most importantly, she described how rescheduling and payment delays (i.e. debt service suspensions like the G-20 pledge) <i>were among the many non-write off measures available for China Eximbank’s preferential loans</i>:<br />
<blockquote class="tr_bq">
"If any debtors encounter difficulties to pay on time, there may be tailored plans <b>including rescheduling </b>[emphasis added]… adding grants to help bring projects back to life, conducting debt-equity swaps, or hiring Chinese firms to assist operations. . . adopting such measures to help the projects get back on track and gain profit has advantages over simply offering write-offs which may only solve issues on the surface and are unsustainable." </blockquote>
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So clearly, although we still do not have much detail on what has happened in the first month of the DSSI, Song Wei's op-ed is not evidence of a Chinese plan to renege on its G-20 commitments.<br />
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Unfortunately, Steil and Della Rocca's piece was cited as the source for other articles, for example "China Squeezes Debt Repayments From Virus-Hit Nations" (Asia Times, May 5). But what's sad--and more important--is the way this piece has become part of the conventional wisdom.<br />
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Just two days ago <a href="https://www.nytimes.com/2020/07/15/briefing/china-cdc-tommy-tuberville-your-wednesday-briefing.html">David Leonardt, a NYT columnist</a> I follow and respect, wrote that China has "tried to squeeze low income countries for debt payments during the pandemic."<br />
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No evidence or links provided, but look closer: Leonardt's charge is simply a clear restatement of the Asia Times headline, which is based on Steil and Della Rocca's piece, which, I hope I've shown, was in error.<br />
<br />
Sigh.<br />
<br />
If China was simply more transparent none of this would be necessary. But until then, we'll keep trying to tell "the real story".<br />
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Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-55789965516395360832020-06-25T15:41:00.004-04:002021-07-01T06:47:15.098-04:00Putting a Dollar Amount on Chinese Loans to Low Income Countries<div dir="ltr" style="text-align: left;" trbidi="on">
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<i>The Diplomat</i> has published <a href="https://thediplomat.com/2020/06/putting-a-dollar-amount-on-chinas-loans-to-the-developing-world/">the analysis Yufan Huang and I did</a> of the World Bank's data on outstanding debt in the 68 low income countries that are eligible to benefit from the <a href="https://www.worldbank.org/en/topic/debt/brief/covid-19-debt-service-suspension-initiative">G-20 Debt Service Suspension Initiative (DSSI)</a>.<br />
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<b>Slicing and Dicing the Data</b><br />
Here are some of the highlights.<br />
<ul style="text-align: left;">
<li>The World Bank is still the largest creditor in poor countries (US$106 billion). But Chinese is very close (US$104 billion). In sub-Saharan Africa, China (US$62 billion) has outspent the World Bank (US$60 billion) as the biggest official lender to Africa’s poor countries. However, if Angola is removed from the data, the World Bank remains the largest creditor for low-income countries in Africa ($43 billion by China vs $59 billion by the World Bank). </li>
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<ul style="text-align: left;">
<li>Creditors are owed about $43 billion in total debt service in 2020, and 30 percent of that is owed to China, more than to any other creditor.</li>
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<ul style="text-align: left;">
<li>However, Angola owed China US$19 billion and Pakistan owed US$16 billion. These two made up 34% of the Chinese debt for all the 72 low-income countries. Half of all the debt service due to China this year is owed by just these two countries (US$6.45 billion). </li>
</ul>
<b>Mixing loans from Taipei (Republic of China) and Beijing (People's Republic of China)</b><br />
<br />
We didn't note this in our piece for The Diplomat, but comparing our data at a granular level with the World Bank's figures, we found that, ironically, in some countries they were including debts actually owed to Taiwan as China. This was the case for part of the debt listed as due to "China" in Liberia, the Central African Republic, and all the debt listed as "China" in Burkina Faso between 2014 and 2018. Burkina Faso only established diplomatic relations with China in 2018 and so did not qualify for any official lending. Beijing is happy to claim that Taiwan is an integral part of China, but will loans from Taipei be honored as Chinese loans?<br />
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Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-10002737136809359232020-04-01T16:45:00.001-04:002021-07-01T06:47:23.655-04:00Is China Hiding its Overseas Lending? Horn, Reinhart and Trebesch's "Hidden Loans" and Hidden Data<div dir="ltr" style="text-align: left;" trbidi="on">
<i>This post, co-written by CARI's Director, Prof. Deborah BRAUTIGAM, and CARI's Research Manager, Kevin ACKER, was originally published on April 1, 2020. It was revised and updated on May 14, 2020 on the basis of a conversation with Horn, Reinhart, and Trebesch (HRT), and a “response to critics” HRT have published on the Center for Global Development <a href="https://www.cgdev.org/publication/chinas-overseas-lending-response-our-critics" target="_blank">blog</a>.</i><br />
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In a March 30, 2020 article, "<a href="https://www.wsj.com/articles/hidden-chinese-lending-puts-emerging-market-economies-at-risk-11585560600" target="_blank">Hidden Chinese Lending Puts Emerging-Market Economies at Risk</a>,” the Wall Street Journal revived debate about Chinese overseas lending, referring to a June 2019 working paper authored by Sebastian Horn, Carmen Reinhart, and Christoph Trebesch (HRT), "<a href="https://www.ifw-kiel.de/fileadmin/Dateiverwaltung/IfW-Publications/Christoph_Trebesch/KWP_2132.pdf" target="_blank">China's Overseas Lending</a>." This paper, an impressive effort to assemble and analyze a wide range of information on Chinese capital flows, has become well-known for its argument that “half of China’s overseas loans to the developing world are ‘hidden’.”<br />
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The HRT paper raised important issues about China’s lack of transparency in their global lending. We appreciate their contributions to these ongoing debates, which have only become more salient as the developing world enters a new, COVID-19-fueled debt crisis.<br />
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However, we take issue with the "hidden lending" analysis done by HRT, specifically for Africa. The authors’ argument that half of China’s overseas loans are “hidden” rests primarily on a comparison of their estimates of Chinese loan commitment data between 2000 and 2017 to the <a href="https://datahelpdesk.worldbank.org/knowledgebase/articles/381934-what-is-the-external-debt-reporting-system-drs" target="_blank">Debtor Reporting System</a> (DRS)’s confidential and unpublished Chinese loan commitment data for the same period, held by the World Bank. The paper cites the China Africa Research Initiative – <a href="http://www.sais-cari.org/" target="_blank">SAIS-CARI</a> – as one of the many sources for its estimates of China's overseas loan commitments.<br />
<br />
A number of African countries do have worrying debt concerns, and China is a substantial lender on the continent. However, HRT appear to have overestimated lending to some countries while underestimating lending to others. Our annual estimates for signed Chinese loan commitments to African governments and their state-owned enterprises are available <a href="http://www.sais-cari.org/data" target="_blank">on our website</a>. The researchers have not released their own data on Chinese loan commitments, although their data set of debt stocks can be found <a href="https://sites.google.com/site/christophtrebesch/data" target="_blank">here</a>. These debt stocks were computed by the authors based on their commitment data, using assumptions about loan terms – interest rates, grace periods, and maturities.<br />
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In the original version of this post, we based our analysis on Figure A3 in their Appendix (reproduced below from the original paper), which they described as providing a list of their "30 top recipients of Chinese loans as of 2017”. This figure, ordered by percent of debtor GDP, included 14 African countries.<br />
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<tr><td class="tr-caption" style="text-align: center;"><span id="docs-internal-guid-16e8919e-7fff-7498-d202-34b8d2477443"><span style="font-family: "arial"; font-size: 9pt; vertical-align: baseline; white-space: pre-wrap;">Note: We have added the red box to this graph reproduced from Horn, Reinhart, and Trebesch, “China’s Overseas Lending,” July 3, 2019. </span></span></td></tr>
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We pointed out in our original post that this graph was clearly not based on SAIS-CARI’s Africa data. When we compiled our own list of the top recipients of Chinese loan commitments for African countries during this same period, we saw a number of sharp discrepancies. </div>
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After the original version of this blog post was posted, we engaged in a productive conversation with the Kiel papers’ authors. They informed us that they had made a mistake in the note for Figure A3. The figure does not show the 30 top recipients of Chinese loans as of 2017. Rather, it shows the 30 countries with the highest Chinese debt to GDP ratios. They noted that they have now revised this language in a <a href="https://www.ifw-kiel.de/fileadmin/Dateiverwaltung/IfW-Publications/Christoph_Trebesch/KWP_2132.pdf" target="_blank">new draft of their paper</a>.</div>
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Even once this misunderstanding was clarified, it remains clear from Figure A1 below, included in their CGD blog response, that in some cases their data on commitments still differs significantly from ours. The HRT researchers have published their estimates of borrowers’ Chinese debt stocks on their personal websites. However, as of May 12, they have not published their estimates of Chinese loan commitment data. Therefore, it is difficult for us to pinpoint precisely where or why these calculations diverge. Furthermore, HRT note that their data includes loan commitments to private borrowers. CARI data is limited to loan commitments to African governments and their state-owned enterprises, which is roughly equivalent to “public and publicly guaranteed” (PPG) borrowing, and specifically does not include private borrowers. This further clouds the comparison.</div>
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<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: "arial";"><span style="font-size: 12px; white-space: pre-wrap;">Note: We have added the red boxes to this graph reproduced from Horn, Reinhart, and Trebesch, “<a href="https://www.cgdev.org/publication/chinas-overseas-lending-response-our-critics" target="_blank">China’s Overseas Lending: A Response to Our Critics</a>” (May 2020). HRT note that although they have estimates on public and publicly guaranteed Chinese loan commitments, their data in this graph also includes Chinese loan commitments to private borrowers, which our data excludes.</span></span></td></tr>
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Although HRT assembled this graph to argue that their data is similar to ours, this new graph underscores our point. We believe that some numbers that lie behind the Kiel paper’s analysis are being overestimated, and others underestimated. Some of these differences are clearly significant. Importantly, our differences include most of the countries with the largest loan commitments, highlighted in the two red boxes which we have added above.<br />
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<b>Borrower Debt: Loan Commitments versus Disbursements</b><br />
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Loan commitments do not become debts all at once, and some are never disbursed at all. Disbursements of Chinese loans can be particularly slow. Misunderstandings of the difference between loan commitments and disbursements still remain quite common, even among financial reporters covering China-Africa issues. For example, the Wall Street Journal story relied on HRT’s research to highlight Nigeria as a case of “hidden lending.” The reporters suggested that Nigerian government statistics – which state that Nigeria’s outstanding external debt to China was about $1.9 billion by the end of 2017 – are in error. “In reality,” the <a href="https://www.wsj.com/articles/hidden-chinese-lending-puts-emerging-market-economies-at-risk-11585560600" target="_blank">Wall Street Journal article</a> said, “the total debts Nigeria owed to China were more than double that amount, according to the research.”<br />
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We believe this assessment is wrong. Our data, which tracks officially-signed loan commitments, does estimate that Nigeria signed about $5 billion worth of loans with Chinese financiers between 2000 and 2017. (Appendix 1 elaborates). However, there is no “hidden” lending here. The difference between loan commitments and the amount of external debt owed to China is accounted for entirely by two factors: (1) the amount of debt Nigeria has already repaid, and (2) the lag between loan signing and disbursement (i.e. the moment when the committed loan actually becomes a debt on Nigeria’s books).<br />
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We appreciate that HRT have (as they note in their “response to critics”) now downwardly adjusted their estimate of Nigerian debt to China by US$ 2.6 billion. However, we believe that this example may only be the start of some necessary adjustments to their debt data.<br />
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In February 2020 researchers at the IMF voiced veiled <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/02/05/The-Evolution-of-Public-Debt-Vulnerabilities-In-Lower-Income-Economies-49018" target="_blank">criticism of the Horn, Reinhart and Trebesch estimates</a>. We agree with the IMF. The Horn, Reinhart and Trebesch estimates of the debt that African governments owe to China are calculated from their unpublished loan commitment data. From what we can see in their new Table A1, we believe that they have overestimated some of the African “debt” to China (the IMF’s main concern regarding low-income borrowers) and underestimated it in other cases. </div>
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Furthermore, because the World Bank’s Debtor Reporting System data used by HRT are not publicly available, we are not able to independently verify discrepancies between DRS data and our own estimates of aggregate commitment amounts. Since this is the core of HRT’s argument that 50 percent of Chinese loans are "hidden", this remains a very important missing puzzle piece. Without access to both sets of “hidden” data on loan commitments, however, it is impossible to know which way these apparent mistakes tip the scales.</div>
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<b>Appendix 1: Commitments and Disbursements: the Nigeria Case</b></div>
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Thanks to Nigeria’s highly transparent <a href="https://www.dmo.gov.ng/debt-profile/external-debts" target="_blank">Debt Management Office</a> (DMO), we can track repayments and disbursements annually for each loan Nigeria has signed with China. Tracking repayment is easy: the DMO lists the amount of debt service paid on each loan in each year, separated into principal and interest payments. To calculate disbursement (as these amounts are not usually made public), we take advantage of SAIS-CARI’s data on interest rates. Using the interest rate, we can calculate the amount outstanding on each individual loan from the interest payment made on that outstanding balance the following year. We then compare the year of loan commitment from SAIS-CARI data with the schedule of repayment as published by the DMO. </div>
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The data show that it can take up to 7 years from the year of loan signing for loans to be fully disbursed. Some projects move even more slowly, with disbursements beginning years after loan signing. This means that a loan signed in 2020 may not be fully disbursed until 2027 (at which point the commitment becomes the same as the debt).</div>
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Take the Chinese loan for the 78 km Abuja Light Rail Project, signed in 2012 for USD 500 million. Based on the interest payment of USD 2.7 million in 2013 and the interest rate of 2.5%, only USD 109 million was disbursed in the first year. Therefore, to count the full amount of the loan in 2012 would be to overestimate Nigeria’s debt to China by USD 391 million. </div>
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The loan for the hydroelectric project in Zungeru is another good example. Originally signed in 2013 for USD 984 million, the project was repeatedly <a href="https://www.enr.com/articles/43360-nigeria-names-chinese-contractor-to-build-long-delayed-power-project" target="_blank">delayed</a>, and Nigeria did not start servicing this loan until 2017. In 2018, only USD 4.2 million was paid in interest on this loan, suggesting that by 2017 only USD 168 million had been disbursed.</div>
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As shown in table 2 below, many of the loan commitments China made to Nigeria from 2000-2017 were not fully disbursed by 2017, in addition to the loans mentioned above. Based on our calculations, the outstanding balance of Nigeria’s debt stock to China was USD 1.94 billion, which almost perfectly matches Nigeria’s self-reported figure of USD 1.93 billion. The discrepancy with the total loan commitments of USD 5.3 billion is accounted for by the USD 580 million that had already been repaid, and the USD 2.8 billion that had yet to be disbursed. “Hidden lending” is not a problem in Nigeria, and we wonder how much of a problem it actually is in other countries.</div>
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<i><span style="font-size: x-small;">[1] </span></i><span style="font-size: x-small;"><i>i.e. in order to find the outstanding balance on a loan in 2017, we divide the interest payment made in 2018 by the interest rate.</i></span><br />
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SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com2tag:blogger.com,1999:blog-9189930829940284211.post-74452765914958695702019-12-03T13:31:00.003-05:002021-07-01T06:47:37.777-04:00A Quick Look at the Footprint of Chinese Private Security Companies (PSC) in Africa<i>This guest post by CARI Fellow Dr. Alessandro ARDUINO, from the Shanghai Academy of Social Sciences, is the second of our series "Notes from the Field." We are publishing a selection of posts from our current group of research fellows, with a focus on reflections, research notes and preliminary findings. For his CARI-funded research project, Dr. ARDUINO traveled to Djibouti; this note is partly </i><i>based on the results of this fieldwork trip and </i><i>summarizes the initial phase of research into the role of China’s Private Security Companies (PSC) in Africa. </i><br />
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<tr><td class="tr-caption" style="font-size: 12.8px; text-align: center;">Photo credit: Alessandro ARDUINO</td></tr>
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Since the launch of its Belt & Road Initiative (BRI), China’s engagement with the African continent has been scrutinized through the state-to-state economic and military lens. However, the China-Africa economic and security dimension requires a more complex equation that has to take into account the private security sector variable. While the mainstream narrative focuses on the effective return on investments in the African BRI infrastructure projects, or the opening of new Chinese military bases, there is a growing role for China’s Private Security Companies (PSCs) that are operating on the continent.<br />
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In light of China’s “going out’’ policy, the need to support China’s State-Owned Enterprises (SOEs) that are investing in high risk areas has expanded the Chinese market for security services. Risk assessment and mitigation in the African countries participating in the BRI requires a wide range of security services along both the maritime and land routes.<br />
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Compared to other areas where Chinese PSCs are operating, the African private security dimension is characterized by several peculiarities. First, the African continent still carries the stigma of mercenaries’ behavior during post-colonial conflicts. Second, well before the launch of the BRI and Beijing’s endorsement for PSCs going abroad, several Chinese companies in Africa, operating in a range of sectors from natural resources extraction to small businesses, organized private armed “militia” to protect their interests against criminal or political violence. Third, while the footprint of the Chinese PSCs is still limited, Africa is witnessing a return of the global soldier of fortune in support of local government and international interests, the most recent example of which is the growth of Russian para-military contractors.<br />
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There was a clear historical division of roles between the United States’ support for Africa on military and counterterrorism efforts versus China’s promotion of economic development and trade. Now the division is progressively blurring.<br />
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The first Chinese military base abroad was established in East Africa, which was not by chance. The opening of the PLAN Naval base in Djibouti in 2017 was China’s concrete response to a changing security environment. Also, during the China-Africa Defense and Security Forum in 2018, Beijing promoted the discussion of Africa's security capacity-building, increasing defense cooperation and deepening China-Africa military ties.<br />
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Recent speeches on Africa by both President Xi Jinping and Premier Li Keqiang clearly illustrate how the Chinese perspective on security is closely intertwined with economic development. Thus, in the African development-security nexus it is compelling to consider the interactions between China’s military and maritime engagement on the continent, peacekeeping missions, and the expanding presence of the Chinese PSCs from Kenya to Sudan. The process of integrating security, conflict resolution, and economic development is still riddled with major shortcomings and unintended consequences.<br />
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Nevertheless, an interesting example of integration was observed during the early phase of my research that derived from the maritime security perspective. During a visit to Djibouti, it was clear how the Chinese military base was standing alone in direct proximity and almost as a deliberate challenge to the status quo of older military bases of the US, France, and even Japan. At the same time the Chinese private security sector was already extending feelers in the region from Ethiopia to Djibouti, in order to establish profitable partnerships. For example, during a recent increase in piracy activity from East to West Africa, one company has successfully entered a public-private partnership in the security sector. A Chinese PSC, Hua Xin Zhong An (HXZA), has found a niche market in providing armed guard services aboard Chinese commercial vessels transiting through waters where there is a high risk for hijacking (e.g. Somalia).<br />
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The role of HXZA is quite peculiar as it offers a peek into the future of the Chinese PSCs. HXZA is one of the first Chinese security companies that has been able to obtain a permit from the Chinese government to legally carry weapons abroad and to employ foreign consultants. Most importantly, it has proven its ability to work to internationally-recognized standards and to improve efficiency while simultaneously looking at the wellbeing of the local stakeholders.<br />
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A literature review reveals many references to the field of private military organizations in Africa, but the recent growth of Chinese PSCs raises significant questions about previous assumptions. I expected to find China’s PSCs acting under a sort of supervision from the the Chinese military or perhaps even closer connections to the Chinese government. Instead, it appears that China’s PSCs are acting in a semi-autonomous manner and are focused on providing niche services such as the resolution of kidnappings and piracy prevention.<br />
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Given the potential security requirements of hundreds of Chinese companies operating in Africa, the interaction between the Chinese PSCs and the local stakeholders requires greater study and accurate analysis. Perhaps most importantly, local stakeholder interests must be actively safeguarded.SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-57754847331297418812019-10-22T16:05:00.003-04:002021-07-01T06:47:45.799-04:00US-China Cooperation in Africa? Perhaps not in French Africa<i>This guest post </i><i>by CARI Fellow Dr. Afa’anwi Ma’abo CHE, from Kampala International University, is t</i><i>he first of our series "Notes from the Field." Over the coming weeks and months, we will publish a selection of posts </i><i>from our current group of research fellows</i><i>, with a focus on reflections, research notes and preliminary findings. For his CARI-funded research project, Dr. CHE traveled to Cameroon, which prompted the below thoughts.</i><br />
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<tr><td class="tr-caption" style="text-align: center;">Photo credit: Afa'anwi Ma'abo CHE</td></tr>
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Following China’s resolve to ‘go global’ at the end of the 20th century, Africa has witnessed a surge in Chinese trade, finance, and investments. China has risen and surpassed the US to become Africa’s leading economic partner. Cooperation, relative to competition, between the superpowers has a greater potential to induce optimal positive-sum gains for the superpowers and for Africa. But the scholarly and policy worlds are shrouded in pessimism about chances of the US cooperating with China in Africa. Three major reasons are often averred for the pessimism: i) the current US administration views Chinese engagements in Africa as <a href="https://www.whitehouse.gov/briefings-statements/remarks-national-security-advisor-ambassador-john-r-bolton-trump-administrations-new-africa-strategy/" target="_blank">imperialistic, debt-trap predatory, threatening to the autonomy of African states, inhibitive to US foreign investment opportunities, and inimical to US national security interests</a>; ii) the US government's aversion to China’s ‘non-interference’ policy, which underpins its engagements in Africa; and iii) several African state leaders' seeming preference for unconditional bilateral partnerships (mainly with China), which are oblivious to liberal democracy, human rights, and public accountability performance profiles of African states, as opposed to trilateral partnerships involving the US and intrusive conditionality constraints.<br />
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However, by focusing on the inimical perceptions and preferences of the US, China, and Africa tripod alone, the motivation and capacity of other major players, particularly France, to thwart sustained joint and solo US-China involvement in (French) Africa is overlooked. This blog post avails the opportunity to elaborate.<br />
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Roman Serman, a former French presidential adviser, has rhetorically, albeit unconvincingly, asserted that it would be ridiculous to think that France could invoke its long standing Françafrique defense agreements – which, in part, provide France privileged access to natural resources and markets in some French African countries such as Togo – to, for instance, <a href="https://malilink.net/2017/01/les-accords-de-defense-entre-la-france-et-les-pays-africains/" target="_blank">order Togo to tell China, ‘quitter le pays’</a> (leave the country). But, in March 2019, during his visit to Djibouti, President Macron of France implicitly asked China to <a href="https://af.reuters.com/article/somaliaNews/idAFL8N20Z2E5" target="_blank">steer clear of French Africa.</a><br />
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And Paris has formidable influence it can utilise to serve its interests in Francophone Africa to the detriment of China, principally including: i) the French language, which remains either the <a href="https://qz.com/africa/1428637/french-is-worlds-fifth-spoken-language-thanks-to-africans/" target="_blank">sole official or one of the official languages</a> in all Franc Zone countries and almost all former French colonies in Africa (excluding Algeria, Mauritania, Morocco, and Tunisia); ii) the colonial <a href="https://abc-economie.banque-france.fr/sites/default/files/media/2016/11/02/the_fact_sheet_n_127_july-2010.pdf" target="_blank">CFA franc currency in the Franc Zone</a>, and perhaps most importantly iii) the aforementioned French secret <a href="https://malilink.net/2017/01/les-accords-de-defense-entre-la-france-et-les-pays-africains/" target="_blank">neo-colonial defense agreements</a> with at least 8 French African countries, which essentially guarantee the concerned African countries, particularly their old ruling elite, France’s protection against internal and external foes in exchange for priority access to natural resources and markets (although some of those agreements have since been revised). Elaborate analysis of how France is using these soft and hard power tools to keep an extractive imperial grip on French African countries has been carried out <a href="https://svikaworks.nl/how-much-money-does-france-make-french-speaking-africa/" target="_blank">elsewhere</a>.<br />
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How will China respond to France’s anti-Chinese campaign in Francophone Africa? Well, this is a hypothetical question, but given China’s marginal presence in French Africa within the bigger picture of China in Africa, France’s disgruntlement with China’s ‘<a href="https://af.reuters.com/article/somaliaNews/idAFL8N20Z2E5" target="_blank">encroachment</a>’ in Françafrique could lead Beijing to keep only a limited strategic presence in the French African countries that <a href="https://africacenter.org/spotlight/implications-for-africa-china-one-belt-one-road-strategy/" target="_blank">China consider critical to the ‘Belt and Road’ plan, notably Djibouti, Cameroon, and Senegal</a>, while focusing on growing its already <a href="https://www.cnn.com/2018/07/18/asia/xi-jinping-africa-visit-intl/index.html" target="_blank">relatively greater investment presence in Anglophone Africa</a>. Unfortunately for the people of Francophone Africa, any curtailment to China’s ambitions would only dent any prospects they may have of benefitting from China’s unmatched commitment to the continent.SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-56785450233096693602019-08-27T16:50:00.001-04:002021-07-01T06:47:52.916-04:00China’s new debt sustainability framework for the BRI<i>This is a guest post by Dr. Johanna Malm, independent researcher. She was previously researcher at Stellenbosch University’s Centre for Chinese Studies and PhD Fellow at Roskilde University’s Department of Society and Business. Read more about her research <a href="https://forskning.ruc.dk/en/persons/johanna-malm-previously-jansson" target="_blank">here</a>; she can also be found on Twitter as @drjmalm.</i><br />
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<i>In this piece, she analyzes China’s new debt sustainability framework, launched at this past spring’s Belt and Road Forum. She argues that while China has been responsive to some of the recent criticisms of its lending policies, its approach to development finance still differs significantly from that of the IMF.</i><br />
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<tr><td class="tr-caption" style="text-align: center;">IMF Managing Director Christine Lagarde and China Vice Premier Ma Kai. <br />
Photo credit: <a href="https://www.flickr.com/photos/imfphoto/25948543176/" target="_blank">International Monetary Fund (2016)</a></td></tr>
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China’s second Belt and Road Forum was held in Beijing in April 2019. In response to growing international critiques against Chinese lending abroad, China has acknowledged these concerns and adapted some of its practices.<br />
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As such, debt sustainability was a significant feature of the Belt and Road Forum. The Chinese leadership sought to address debt issues in several ways. In its official communication during the Forum, Beijing <a href="https://af.reuters.com/article/worldNews/idAFKCN1S1069" target="_blank">stated</a> that China is committed to preventing and resolving debt risks. China’s Ministry of Finance also published a new document, the <i><a href="http://m.mof.gov.cn/czxw/201904/P020190425513990982189.pdf" target="_blank">Debt Sustainability Framework for Participating Countries of the Belt and Road Initiative</a></i>. China’s Finance minister Liu Kun <a href="https://af.reuters.com/article/worldNews/idAFKCN1S1069" target="_blank">encouraged</a> China’s financial institutions, Belt and Road signatories, and international agencies alike to use the framework to improve debt management.<br />
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<b>China and the IMF: Three Major Differences</b><br />
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Debt sustainability frameworks are often seen as technical documents that stipulate the recommended terms and amounts of public debt a country can sustainably acquire. However, such frameworks are also inherently political, embodying norms around debt sustainability, such as different conceptions of the relation between public debt and development. China’s approach to this matter differs from that of the International Monetary Fund (IMF).<br />
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China’s new debt sustainability framework marks the first time the country’s approach to debt and development has been articulated in an official document with an English translation, thus signaling that it is targeted for a Western audience. Previously, China’s approach had mostly been articulated by representatives from its financial institutions, most vocally by <a href="http://en.cnki.com.cn/Article_en/CJFDTOTAL-SJJZ200704009.htm" target="_blank">Li Ruogu</a> during his tenure as President for China Exim Bank. As demonstrated by the new debt sustainability framework, China’s approach is still significantly different from the IMF’s approach to debt.<br />
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First, the framework makes no mention of Chinese lending terms. In other words, China has not articulated any commitment to provide financing exclusively on concessional terms (Note: a concessional loan has lower interest rates, longer grace period and longer reimbursement period). Although Chinese policy banks still extend loans to developing countries on concessional terms, loans extended at commercial rates are an important part of its lending portfolio. By not mentioning the lending terms in its debt sustainability framework, China leaves space for its banks to lend on commercial rates as they see fit. This can be compared to the IMF’s debt limits policy, which <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Reform-of-the-Policy-on-Public-Debt-Limits-in-Fund-Supported-Programs-PP4926" target="_blank">advocates</a> for financing on fully concessional terms to low-income countries.<br />
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Second, the framework makes it clear that China does not see debt distress as an obstacle to continued borrowing. The framework <a href="http://m.mof.gov.cn/czxw/201904/P020190425513990982189.pdf#page=12" target="_blank">states</a>:<br />
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<i>“[I]t should be noted that an assessment for a country as “high risk” of debt distress, or even “in debt distress”, does not automatically mean that debt is unsustainable in a forward-looking sense. In general, when a country is likely to meet its current and future repayment obligations, its [public and publicly guaranteed] external debt and overall public debt are sustainable.”</i></blockquote>
In other words, a country in debt distress can still take up loans from China if the individual loan-backed project is commercially viable and if the borrower is able to service its debts. This statement represents a sharp contrast to the approach of the IMF, which <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Reform-of-the-Policy-on-Public-Debt-Limits-in-Fund-Supported-Programs-PP4926" target="_blank">states</a> that non-concessional borrowing to countries in debt distress <i>“would be allowed only under exceptional circumstances”</i> (p. 2 of PDF).<br />
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Third, China considers the relationship between debt and growth explicitly in its debt sustainability framework. It <a href="http://m.mof.gov.cn/czxw/201904/P020190425513990982189.pdf#page=5" target="_blank">states</a>: <i>“Productive investment, while increasing debt ratios in the short run, can generate higher economic growth […] leading to lower debt ratios over time”</i>. This indicates that China sees lending as a catalyst for economic growth, as opposed to the IMF’s <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Reform-of-the-Policy-on-Public-Debt-Limits-in-Fund-Supported-Programs-PP4926" target="_blank">debt limit policy</a>, for which growth is enhanced if the loans are concessional.<br />
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<b>Implications Moving Forward</b><br />
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Since the end of World War II, the IMF has been the most influential institution in setting public debt management norms for developing countries. China began to challenge the IMF’s position when it started to increase its overseas lending at the turn of the 21st century. As I have shown in previous research (see <a href="https://eba.se/wp-content/uploads/2016/12/DDB_2016_9_Malm_webb.pdf" target="_blank">here</a> and <a href="https://rucforsk.ruc.dk/ws/files/57116566/Malm_2016_PhD_dissertation.pdf" target="_blank">here</a>), the IMF had no choice but to adapt its own debt sustainability framework in 2013 to allow for developing countries to take up loans on commercial terms from China. This policy change was born of the political impossibility of the IMF to prevent developing countries from taking up Chinese loans.<br />
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However, this shift in the IMF’s position was not widely publicized, and the Fund still hopes to get China to conform to its own ideas of debt sustainability. As the IMF <a href="https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/16/39/Debt-Sustainability-Framework-for-Low-Income-Countries" target="_blank">notes</a>, the effectiveness of its debt sustainability framework <i>“hinges on its broad use by borrowers and creditors”</i>. For instance, in April 2018, the IMF opened a <a href="https://www.imf.org/en/Capacity-Development/Training/ICDTC/Schedule/CT" target="_blank">China-IMF Capacity Development Center</a> in Beijing, which organizes courses directed at Chinese officials working on BRI-related issues. The courses offered include a <a href="https://www.imf.org/en/Capacity-Development/Training/ICDTC/Schedule/CT/2019/DSM-LICCT19-01" target="_blank">workshop</a> on debt sustainability frameworks in low-income countries.<br />
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The IMF’s Managing Director Christine Lagarde reacted to China’s new debt sustainability framework by <a href="https://www.imf.org/en/News/Articles/2019/04/25/sp042619-stronger-frameworks-in-the-new-phase-of-belt-and-road" target="_blank">stating</a> that the framework represents ‘positive steps’ by Chinese authorities. However, she also <a href="https://www.imf.org/en/News/Articles/2019/04/25/sp042619-stronger-frameworks-in-the-new-phase-of-belt-and-road" target="_blank">said</a> that infrastructure financing through the Belt and Road should only go where it is needed and where the debt it generates can be sustained.<br />
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In sum, recent events show that, while China has grown more sensitive to international pressure around its role as a development finance provider – especially when the critiques emanate from other developing countries – its new debt sustainability framework also demonstrates that it is willing to challenge to the IMF’s approach. China’s approach to development finance reflects the country’s own experience as a borrowing country. State-led development finance worked well for China’s own development and it is this model that China replicates in its lending to developing countries today.<br />
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This also highlights that, beyond notions of ‘good’ and ‘bad’ lending, China’s and the IMF’s different approaches have different benefits and drawbacks. While China’s approach can spur growth by providing significant amounts of development finance to countries in dire need of investment, the IMF’s more cautious approach prioritizes lower debt burdens for developing countries. While respective definitions of “sustainable debt burdens” might differ depending on developing countries’ priorities both approaches might prove beneficial for borrowing countries.SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com1tag:blogger.com,1999:blog-9189930829940284211.post-56555889759670742452019-07-01T15:29:00.001-04:002021-07-01T06:48:01.534-04:00Did China "Seize" Sri Lanka's Hambantota Port for Unpaid Debt?<div dir="ltr" style="text-align: left;" trbidi="on">
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<tr><td class="tr-caption" style="text-align: center;">Photo credit: Deneth17 (Wikimedia Commons)</td></tr>
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Africans have been leery about Chinese loans ever since an Indian polemicist coined the term "debt trap diplomacy" to describe the sale of 70% of the shares of Sri Lanka's Hambantota port to a Chinese company-- a highly politicized Sri Lankan investment seen by some as a white elephant, and by others as an important future commercial asset that was developed prematurely, given its original feasibility timeline.<br />
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Now <i>The Economist</i> has <a href="https://www.economist.com/middle-east-and-africa/2019/06/29/china-is-thinking-twice-about-lending-to-africa">mis-characterized my analysis</a> of Hambantota in a June 29, 2019 story, "China is Thinking Twice About Lending to Africa," by suggesting that I examined 3000 projects and found that Hambantota "was the only example of such an asset being seized to cover a debt."<br />
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This is not what I argued. I wrote in <i>The American Interest</i> that Hambantota is the only example "<a href="https://www.the-american-interest.com/2019/04/04/misdiagnosing-the-chinese-infrastructure-push/">that has ever been used as evidence</a>" for this accusation. <i>But even this example does not support the claim.</i><br />
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Some recent reports, including one by <a href="https://rhg.com/research/new-data-on-the-debt-trap-question/">the Rhodium Group</a>, described Hambantota as an "asset seizure" by China in response to debt problems related to the port. This is not how I and other <a href="https://thediplomat.com/2019/05/is-sri-lanka-really-a-victim-of-chinas-debt-trap/">researchers who have examined this case</a> closely see Hambantota.<br />
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The port was clearly troubled, although much of this can be attributed to Sri Lanka's domestic politics. But the important point is that it was not Hambantota's loans that were pressing on the Sri Lanka government. It was international sovereign bond payments. Two thirds of the Hambantota loans were at a fixed rate of 2 percent, with a five year grace period, while one early loan for the first phase, at $307 million, was at a fixed rate of 6.3%. These rates were far <a href="https://oxfordbusinessgroup.com/analysis/tools-trade-bond-market">lower than Sri Lanka's commercial borrowings </a>from bond markets.<br />
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As <a href="https://thediplomat.com/2019/05/is-sri-lanka-really-a-victim-of-chinas-debt-trap/">one analyst notes</a>:<br />
<blockquote class="tr_bq">
Although Hambantota port was leased to CM Port, the loans obtained to construct Hambanota port were not written off and the government is still committed to loan repayments as per the original agreements. The money obtained through leasing Hambantota port was used to strengthen Sri Lanka’s dollar reserves in 2017-18, particularly in light of the huge external debt servicing due to the maturity of international sovereign bonds in early 2019. </blockquote>
Privatizing 70% of Hambantota to CM Ports for $1.1 billion was one way in which foreign exchange could be brought into the country, allowing a balance of payments crisis to be staved off. It was <i>not </i>an asset seizure.</div>
Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com2tag:blogger.com,1999:blog-9189930829940284211.post-21167765574311765312019-06-13T16:07:00.001-04:002021-07-01T06:48:08.711-04:00Ethiopia is struggling to manage debt for its Chinese-built railways<i>This post </i><i>by SAIS PhD Candidate and CARI Research Assistant Yunnan CHEN </i><i>is an excerpt of a piece originally published in Quartz Africa: read the full article <a href="https://qz.com/africa/1634659/ethiopia-kenya-struggle-with-chinese-debt-over-sgr-railways/" target="_blank">here</a>.</i><br />
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<tr><td class="tr-caption" style="text-align: center;">Photo credit: Yunnan CHEN</td></tr>
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In the wake of the Belt and Road Initiative (BRI) Forum in Beijing last month, Ethiopia gained another Chinese debt-concession. China’s second-largest African borrower and prominent BRI partner in infrastructure finance also received a <a href="https://www.africanews.com/2019/04/25/china-forgives-ethiopia-s-interest-free-loans-pm-in-beijing-for-forum/" target="_blank">cancellation on all interest-free loans</a> up to the end of 2018. This was on top of previous renegotiated <a href="https://www.theafricareport.com/11080/ethiopias-china-challenge/" target="_blank">extensions</a> of major commercial railway loans agreed earlier in 2018.<br />
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These concessions highlight the continuing debt-struggles that governments have in taking on Chinese large infrastructure projects. But they also demonstrate the advantages and flexibility, that African governments can gain in working with China—if they can leverage it.<br />
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Ethiopia’s railway projects have been an instructive case of both the benefits and pitfalls of Chinese finance. It has been over a year since the Chinese-built and financed Addis-Djibouti standard gauge railway (SGR) opened to commercial service in January 2018. A flagship project of China’s Belt and Road Initiative in the Horn of Africa, and constructed in parallel with Kenya’s showy Chinese-built SGR, the project was Ethiopia’s first railway since a century ago (another urban-rail project, the Addis light-rail transit (LRT) was completed earlier in 2015), as well as being the first fully-electrified line in Africa.<br />
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Costing nearly $4.5 billion, the SGR was partly financed through $2.5 billion in commercial loans from China Eximbank, according to figures from <a href="http://www.sais-cari.org/data" target="_blank">SAIS-CARI</a>, with further loan packages dedicated to transmission lines and the procurement of rolling stock and locomotives. Part of China’s wider ‘<a href="http://www.chinadaily.com.cn/china/2017-01/06/content_28350041.htm" target="_blank">export-supply chain</a>’ strategy, the railway uses a package of Chinese trains, Chinese construction companies, Chinese standards and specifications—and is currently operated under a six-year contract by a joint venture of the two Chinese contractors, CREC and CCECC, who built it.<br />
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As part of a wider nine-line railway network plan under the Ethiopian Railway Corporation (ERC), the line cuts travel time from the capital Addis Ababa to Djibouti from two days by road to 12 hours.<br />
On an economic front, however, actual uptake of the railway by the industrial zones it was intended to serve remains low—even after a year, the vast majority of the railway’s freight cargo is made up of imports, not exports. Integration with export and industrial zones is low, as the main trunk line does not connect to individual industrial zones, creating significant last-mile shipping and logistics for firms, particularly at port connections. Most exporters continue to use road transport, despite the higher time and financial cost, due to its greater flexibility and reliability compared to the train’s twice-daily schedule.<br />
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This is a major problem for the railway’s economic prospects. Few passenger-based rail systems in the world are profitable; in developing countries, most railways connect to mines: one of the few bulk goods that can generate returns for such capital-intensive transport.<br />
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China also bears these costs. State insurer Sinosure <a href="https://www.ft.com/content/82e77d8a-e716-11e8-8a85-04b8afea6ea3" target="_blank">publicly commented on $1 billion</a> in losses written off for the project, and Eximbank has halted previously-discussed funding for the country’s second line, the section from Weldiya to Mekele. Though contracted to another Chinese SOE, <a href="https://www.railwaygazette.com/news/news/africa/single-view/view/foundation-stone-laid-for-northern-ethiopia-line.html" target="_blank">CCCC</a>, Ethiopia faces little prospect of further loan finance from China, until the first railway can show demonstrable success.<br />
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Further financial challenges afflict the projects, along with Ethiopia’s <a href="https://www.thereporterethiopia.com/content/running-out-steam" target="_blank">growing debt burden</a>. A long-term foreign exchange shortage, worsened by poor export performance, has challenged Ethiopia’s ability to repay many of the loans that financed these projects. Repayments on the principal for the Chinese railway loan began in 2017, before the line was even operational. As of the beginning of 2019, the ERC was not only behind in its loan repayments to China, but also unable to front the remainder of the management fees for the Chinese companies operating the railway.<br />
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In late 2018, Ethiopia negotiated with Beijing to restructure of the Eximbank loan terms, extending the repayment period from <a href="https://uk.reuters.com/article/ethiopia-china-loan/update-1-ethiopia-pm-says-china-will-restructure-railway-loan-idUKL5N1VS4IW" target="_blank">15 to 30 years</a>.<br />
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In this, China’s deep and strategically-tied pocketbook has been a big advantage, allowing Ethiopia to juggle its external obligations and leverage Chinese flexibility where it can. Ethiopia’s renegotiation and rollover of debt indicates that this BRI project is unlikely to have a <a href="https://qz.com/1317234/chinas-debt-trap-in-sri-lanka-is-even-worse-than-we-thought/" target="_blank">Hambantota-esque Chinese takeover</a>. But both sides have been burned: while the strategic discourse of the Belt and Road mean that the SGR will not be abandoned, both lender and borrower now show greater caution in the infrastructure they pour money into.SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com1tag:blogger.com,1999:blog-9189930829940284211.post-86839277912870921552019-04-24T10:46:00.001-04:002021-07-01T06:48:17.607-04:00Neither Tightening Nor Loosening the Belt: Chinese Lending to African BRI Signatories<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><i><span style="vertical-align: baseline; white-space: pre-wrap;">Author:</span><a href="https://twitter.com/TheJordanLink" style="text-decoration-line: none;"><span style="color: black; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="color: #1155cc; vertical-align: baseline; white-space: pre-wrap;"><b>Jordan Link</b></span></a><span style="vertical-align: baseline; white-space: pre-wrap;">, Research Manager at SAIS</span><a href="http://www.sais-cari.org/" style="text-decoration-line: none;"><span style="color: black; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="color: #1155cc; vertical-align: baseline; white-space: pre-wrap;">China-Africa Research Initiative</span></a></i></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As representatives from more than 100 countries assemble this week in Beijing for the second Belt and Road Cooperation Forum, questions remain as the Belt and Road Initiative (BRI) nears its sixth year of existence. Is the BRI a top-down plot for building China’s</span><a href="https://www.axios.com/china-xi-jinping-global-dominance-belt-and-road-forum-1c58a557-1bc7-4b1c-91d7-3837fdc9604c.html" style="text-decoration: none;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> road to global dominance</span></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">? Or is it simply a means to “</span><a href="http://www.beltandroadforum.org/english/n100/2017/0410/c22-45.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">promote world peace and development</span></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">” as offered by Chinese President Xi Jinping?</span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The BRI’s amorphous definition has complicated the issue – with projects ranging from</span><a href="https://www.the-american-interest.com/2019/04/04/misdiagnosing-the-chinese-infrastructure-push/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> port development</span></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> and</span><a href="https://reconnectingasia.csis.org/analysis/entries/blue-belt-and-road/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> hydropower plants</span></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> to</span><a href="https://qz.com/africa/1287675/china-is-exporting-facial-recognition-to-africa-ensuring-ai-dominance-through-diversity/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> facial recognition technology</span></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> and a “</span><a href="https://www.scmp.com/news/china/diplomacy-defence/article/2130785/china-reveals-polar-silk-road-ambition-arctic-policy" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Polar Silk Road</span></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">,” Xi’s vision has simultaneously become omniscient and blurry. If the BRI can encapsulate so many disparate projects, does the label matter?</span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Rather than getting bogged down in this debate, it can be helpful to think of the BRI as a new policy environment that encourages Chinese policy banks, firms, and contractors to engage with developing countries with more impetus than before. While there certainly is a security dimension to this engagement, it is important to establish a strong understanding of how the BRI actually incentivizes Chinese entities abroad.</span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">To that end, how successful has Xi Jinping been in creating a BRI-inspired policy environment that encourages Chinese international economic engagement? Analyzing Chinese loans to Africa provides rich data on the subject.</span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Since the BRI’s announcement in 2013,</span><a href="http://special.chinadevelopment.com.cn/2018zt/zflt/2018/09/1348183.shtml" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> 37 African countries</span></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> have signed BRI Memorandums of Understanding (谅解备忘录). Of them, 28 were signed during the 2018 Forum on China-Africa Cooperation (FOCAC).</span></span><br />
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></span><br />
<a name='more'></a><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Looking at the aggregated data of all African BRI Signatories (Figure 1), the connection between the announcement of the BRI and Chinese loans to Africa appears to be weak. Chinese loans grew consistently from 2008 to 2013. Counterintuitively, lending totals dropped remarkably following the announcement of the BRI in 2013 and did not increase again until 2016. Even after a massive spike in 2016, lending totals dipped below their 2013 levels in 2017. </span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">The picture becomes more stark when removing Angola from the analysis (Figure 2). Angola is one of China’s major oil suppliers, and Chinese banks have long provided oil collateralized loans to the Angolan government and its state-owned oil company Sonangol. These are repaid through oil exports. To meet balance of payments problems caused by price of oil plummeting in 2014, Angola negotiated a large infusion of finance in 2016. Further, while Angola has signed a BRI memorandum of understanding, its location on Africa’s Western coast does not appear as a major node on any official Chinese BRI maps. </span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHfsyzUXeqTNCl8Q9byh3TW-BhpIo7g9i3tkzuxO3SyXWUHvpLPpjpI0XExXvvwR3t19a2FcEkmqGXZWv7ExsuxYyOSlYOLwkItY4wcysY9tuxhNJ7ZcyVMmCecknH-9KySV03JwHrR5Y/s1600/Figure2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><img border="0" data-original-height="700" data-original-width="980" height="456" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHfsyzUXeqTNCl8Q9byh3TW-BhpIo7g9i3tkzuxO3SyXWUHvpLPpjpI0XExXvvwR3t19a2FcEkmqGXZWv7ExsuxYyOSlYOLwkItY4wcysY9tuxhNJ7ZcyVMmCecknH-9KySV03JwHrR5Y/s640/Figure2.png" width="640" /></span></a></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Removing Angola from the analysis shows a sharp decrease in lending to other African countries between 2013 and 2014. Since 2014, the amount of total lending has hovered around USD 10 billion per year. While this is certainly a large amount of lending, the BRI has not dramatically increased Chinese loans to Africa. As the Initiative was only announced in October of 2013, the lending spike for that year likely should not be interpreted as a coordinated response to the unveiling of the BRI. As such, the Belt and Road has not significantly increased Chinese lending to African countries: rather, it has simply sustained total annual lending levels.</span></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The two largest sources of Chinese lending to African countries are the</span><a href="http://english.eximbank.gov.cn/en/" style="text-decoration: none;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Chinese Eximbank</span></a> <span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">and the </span><a href="http://www.cdb.com.cn/English/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">China Development Bank</span></a><span style="background-color: transparent; color: #1155cc; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">(CDB). Since the announcement of the BRI, the Chinese Eximbank has lent African BRI signatories (excluding Angola) nearly USD 28 billion (Figure 3). Across the same time span, the CDB has lent African BRI signatories (excluding Angola) over USD 5 billion (Figure 4). </span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzWYePuHYTOLbrpOwnkM6n1MfyZ3GoqaxwSwB2RUhxt2ix144mrh4gUyYfaqduJ9_DroPig-DXuGMtarW26am9z2QGtSzVgM7zKvvU-owUeca6zwDXpeLAAOOcXOrJluNlzyKhqX3_N1A/s1600/Figure4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><img border="0" data-original-height="700" data-original-width="980" height="457" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzWYePuHYTOLbrpOwnkM6n1MfyZ3GoqaxwSwB2RUhxt2ix144mrh4gUyYfaqduJ9_DroPig-DXuGMtarW26am9z2QGtSzVgM7zKvvU-owUeca6zwDXpeLAAOOcXOrJluNlzyKhqX3_N1A/s640/Figure4.png" width="640" /></span></a></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">While the Eximbank is by far a greater source of lending, the CDB appears to have heeded the call for BRI financing to a greater extent. Eximbank lending has fallen every year following the announcement of the BRI besides a slight uptick in 2017. On the other hand, the CDB’s lending amounts to African BRI signatories have risen dramatically since 2014.</span></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Transportation Infrastructure</span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Interestingly, the announcement of the BRI has not had a positive impact on Chinese lending for African transport infrastructure development – China’s long time comparative advantage on the Continent and a major thrust of the BRI. Surprisingly, lending for transport infrastructure dropped by a significant amount from 2014 to 2015 – nearly a USD 4 billion decrease (Figure 5). In 2014, Kenya signed two loans for its Standard Gauge Railroad for a total of USD 3.6 billion. This amount was split amongst two loans – a concessional loan for USD 1.6 billion with a two percent interest rate and a commercial loan for USD 2 billion at LIBOR + 360 base point interest per year. Transportation infrastructure lending still has not returned to its pre-BRI annual total. </span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwhCHzlylFwxAcYPmUy7DrjzmUBHFx8C_PB2-j4SRVuwKsSBMeE0n2szub9phVox1Z4Uc3QN2V7OU5WqxFmFu2B4agU6m31AtwuGpTjM-Q52lY_gdUD4Yj6UdMYaBXDOpKh-vaoqNB7vU/s1600/Figure5.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><img border="0" data-original-height="700" data-original-width="980" height="456" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwhCHzlylFwxAcYPmUy7DrjzmUBHFx8C_PB2-j4SRVuwKsSBMeE0n2szub9phVox1Z4Uc3QN2V7OU5WqxFmFu2B4agU6m31AtwuGpTjM-Q52lY_gdUD4Yj6UdMYaBXDOpKh-vaoqNB7vU/s640/Figure5.png" width="640" /></span></a></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Putting it Together</span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">A close examination of Chinese loans clearly displays that so far, signing up for the BRI has not increased Chinese lending to African BRI signatories. Counterintuitively, for the continent, lending dropped significantly immediately following the announcement of the BRI. Since then, it has hovered around the same annual amounts (Figure 2). In particular, the Chinese Eximbank, the largest source of Chinese lending to Africa, has significantly dipped its lending totals since the announcement of the BRI. If Xi Jinping is using the BRI to marshal a confluence of economic and strategic gains in Africa, increased Chinese loan totals have not been a key factor. </span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
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<span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "arial" , "helvetica" , sans-serif;">While conventional wisdom and fanfare surrounding the BRI would seem to imply a greater involvement for Chinese policy banks abroad, that is simply not the case in Africa, as lending levels to African BRI signatories have remained stable since 2014. However, if the BRI is viewed as a new policy environment encouraging Chinese policy banks, firms, and contractors to conduct business with African BRI signatories, the doors for lending remain open without clear signs of closing. </span></span></div>
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SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-34690104864551016332019-04-09T14:59:00.001-04:002021-07-01T06:48:25.091-04:00Chinese Lending to Africa for Military and Domestic Security Purposes<i><span style="font-family: "arial" , "helvetica" , sans-serif;">This blog post by <b>SAIS-CARI's Research Manager Jordan Link</b> is the</span><span style="font-family: "arial" , "helvetica" , sans-serif;"> first in a series that will explore security and military matters as they relate to China/Africa issues, a theme also being explored by our 2019 CARI Fellows.</span></i><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">China’s engagement with the African continent has until recently been interpreted primarily through an economic lens. However, <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2018/07/06/china-africa-military-ties-have-deepened-here-are-4-things-to-know/?noredirect=on&utm_term=.06e0160a85ab" target="_blank">China-Africa military ties are also deepening</a> and becoming more complex. China’s first international military base opened in 2017 in Djibouti. The first <a href="http://eng.chinamil.com.cn/view/2018-06/27/content_8071089.htm" target="_blank">China-Africa Defense and Security Forum</a> was held in June of 2018 as representatives of 50 different African countries and the African Union met in Beijing to discuss defense and security cooperation efforts. Against this background, what role does Chinese lending play as the China-Africa security relationship evolves?</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">For purposes of this post, we have separated our data into “military,” “domestic security,” and “dual use” borrowing.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Between 2003 and 2017, China has loaned USD 2.53 billion to 8 African countries explicitly for military and national defense purposes. An additional USD 1.36 billion was loaned for African policing and law and order purposes, while USD 67 million was lent for dual-use purposes. In sum, African countries signed USD 3.56 billion for military, domestic security, and dual use purposes. Over this same time period, China lent African countries a total of USD 147.77 billion. Therefore, lending for explicit defense and/or domestic security purposes has accounted for just over 2% of all Chinese loans to Africa.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The data used in this report is drawn from the loans database curated by the <a href="http://www.sais-cari.org/" target="_blank">China-Africa Research Initiative</a> at Johns Hopkins University. Only signed, implemented, and completed loans were used for the analysis – all unconfirmed loans were excluded. While the CARI database includes all loan data from 2000, we found no loans specifically for defense and/or domestic security purposes from before 2003.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">A loan with defense and/or domestic security purposes includes the following types of projects: aircraft procurement, the construction of military facilities, national security telecoms, patrol ships, CCTV systems and military/security wares. We have no loans in our system specifically for the purchase of arms. In keeping with China’s comparative advantage in African construction projects, African governments borrowed over one billion dollars for the construction of defense and/or security facilities such as barracks. The second largest amount of money went to national security telecoms networks. Third was the procurement of aircrafts.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7UzmKTV7G9fc16PXisxq6ImqSgV2np2Rn4uKJlCjFWx9oZcMXRagaULcIf6A0aQJ8burdSYEqsCAy4wI6V464O3getCwJxTY6WkpS7LPKfhoBOEUvpMtAONAVTF0JAL3CEcJImvvCWTw/s1600/Military+and+Domestic+Security+Loans+%2528USD+millions%2529.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="222" data-original-width="495" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7UzmKTV7G9fc16PXisxq6ImqSgV2np2Rn4uKJlCjFWx9oZcMXRagaULcIf6A0aQJ8burdSYEqsCAy4wI6V464O3getCwJxTY6WkpS7LPKfhoBOEUvpMtAONAVTF0JAL3CEcJImvvCWTw/s400/Military+and+Domestic+Security+Loans+%2528USD+millions%2529.png" width="400" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">We exclude projects such the construction of government buildings outside of the military, broadband networks, or other telecommunications systems. While there are potential defense and security implications for these types of projects, this analysis only includes loans that finance projects signed by the country’s ministry of defense (or equivalent) for explicit defense and/or domestic security purposes.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The USD 3.56 billion amount is distributed through 35 different loans. Zambia stands out, with both the largest number of loans (8) and the highest military and/or domestic security-related borrowing (USD 1.42 billion). The Republic of the Congo (ROC) and Ghana each borrowed six times for military and/or domestic security purposes. The ROC borrowed a relatively small total at USD 147 million. Cameroon signed loans totaling USD 414 million, Nigeria borrowed USD 400 million, and Ghana borrowed USD 357 million.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The <a href="http://english.eximbank.gov.cn/en/" target="_blank">Chinese Eximbank</a> was the top lender, supplying more than 2 billion dollars worth of loans to African countries. This is not surprising as the Chinese Eximbank has lent more money to African countries since 2000 than any other lending source. The second largest source of defense and/or domestic security lending, at USD 440 million, was <a href="http://www.catic.cn/front" target="_blank">China National Aero-Technology Import & Export Corporation (CATIC)</a>, a Chinese state-owned defense company that imports and exports aviation products and technology. The third highest amount – USD 364 million – was lent by <a href="http://www.cccme.org.cn/shop/cccme1800/index.aspx" target="_blank">Poly Technologies</a>, a Chinese SOE that imports and exports defense equipment. </span><br />
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<u><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Facilities</span></b></u><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The ROC, Ghana, Namibia, Tanzania, Zambia, and Zimbabwe all have signed loans for facilities with defense and/or domestic security purposes. For example, nearly all of the loans that fall under this category were for the construction of barracks or housing units for military and security personnel. Zimbabwe has borrowed USD 107 million to build a National Defense College. Zambia borrowed USD 640 million, the highest dollar amount across the Continent. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<u><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Aircrafts and the Dual-Use Conundrum</span></b></u><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">China has provided several loans for the purchase of aircrafts. Aircraft loans present the tricky issue of dual-use technology and equipment. It is difficult to ascertain whether the African countries listed are using these aircraft explicitly for defense and/or domestic security purposes. For example, the MA60 plane is generally used for commercial cargo and passenger flights. However, MA60s have also been used by China for <a href="https://defence-blog.com/news/new-chinese-maritime-patrol-aircraft-starts-to-fly-over-exclusive-economic-zone-in-the-south-china-sea.html" target="_blank">maritime surveillance</a>. These planes can also be used to transport military cargo or personnel. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">We checked whether the MA60 aircraft financed by Chinese loans were later used by the national airline or by the national air force. Zambia’s total includes a USD 56 million loan for two MA60 airliners and twelve Y-12 cargo planes. According to SAIS-CARI research, both the Chinese Ambassador to Zambia and Zambia’s Secretary of Defense were present as witnesses to the loan signing. This implies that the procured aircrafts were for defense and/or domestic security purposes. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In other countries, the national airlines have been flying the MA60 planes. Three other African countries, the ROC, Cameroon, and Zimbabwe have signed loans for MA60 cargo planes that appear to be associated with commercial airline operators.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<u><b><span style="font-family: "arial" , "helvetica" , sans-serif;">National Security Telecoms</span></b></u><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Ghana, Nigeria, Sierra Leone, Senegal, Uganda, and Zambia have signed loans for the creation of national security communication systems. Of the seven loans, six are confirmed to be using ZTE as the contractor to carry out these projects. The one exception was a loan to Uganda, which was put towards acquiring a TETRA Communications System. This system was reported to be used by the police, army, and intelligence agencies in Uganda. Nigeria signed loans worth the most in this category, at nearly USD 400 million.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<u><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Patrol ships</span></b></u><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Cameroon and Ghana both signed loans to procure patrol ships. In 2008, Ghana signed a loan to acquire two patrol vessels worth almost USD 40 million. Cameroon signed a loan in 2012 for two patrol vessels worth USD 330 million.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<u><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Loans for policing: Countering smuggling, improving law and order, and anti-terrorism</span></b></u><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">In 2003, Mauritius signed a loan for a CCTV Surveillance System and airport X-Ray scanning equipment worth USD two million. Details of the loan did not specify the amount that went towards either the surveillance system or the scanning equipment. In 2016, Côte d’Ivoire signed a USD 53 million loan for the Abidjan Video Surveillance Platform. This platform aimed to reduce crime levels by placing video cameras on dangerous streets and crowded public areas. Cameroon signed a USD 84 million loan in 2017 for an urban video surveillance system.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Ghana, Sudan, and Zambia signed loans for the procurement of military and/or domestic security wares. Ghana signed two loans in 2008 for equipment for its own armed forces and peacekeeping operations for a total of USD 160 million. Sudan signed a loan worth USD 106 million in 2003 for unspecified military equipment. In 2016, Zambia signed a USD164 million loan for equipment for its domestic police force, the Department of Immigration, the Drug Enforcement Commission, and prisons. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<u><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Year-by-Year and Looking Forward</span></b></u><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Looking at the total dollar amount lent per year, there were large jumps in both 2010 and 2016. In 2010, Nigeria signed a USD 400 million loan for its police force’s national public communication system. Zambia also signed two loans in 2010: a USD 365.5 million loan for residential housing units for its Air Force and a USD 105 million loan for Z-9 helicopters. Zambia was also a major player in 2016, signing the following loans: a USD 275 million for police and security force housing, a USD 179 million loan for its public security network, and a USD 164 million loan for security equipment. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">China’s lending to Africa for defense and/or domestic security purposes fits the tenor of its <a href="http://www.chinadaily.com.cn/world/XiattendsParisclimateconference/2015-12/05/content_22632874.htm" target="_blank">Second Africa Policy paper</a>, an official government white paper published in 2015 that outlines China’s foreign policy strategy in Africa.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Namely, the paper states “[China] will support the efforts by African countries…to build capabilities in safeguarding peace and stability in Africa. [China] will continue to help African countries enhance their capacity building in national defense and peacekeeping to safeguard their own security and regional peace.” </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Moving forward, it is reasonable to expect security ties between China and African countries to grow. <a href="https://africacenter.org/spotlight/implications-for-africa-china-one-belt-one-road-strategy/" target="_blank">The Belt and Road Initiative</a>, marshaled by CCP General Secretary Xi Jinping, is likely to make inroads across the continent due to local infrastructure needs. As such, Chinese economic and strategic interests will continue to coalesce. Chinese lending to African countries since 2003 for explicit defense and/or domestic security purposes has accounted for just over 2% of all Chinese loans to Africa. At present, this total does not seem to be growing. The construction of military facilities such as barracks and housing units is so far the major focus of military-related loans in Africa as China continues to play towards its comparative advantage in infrastructure.</span>SAIS CARI Teamhttp://www.blogger.com/profile/14453944559215733838noreply@blogger.com0tag:blogger.com,1999:blog-9189930829940284211.post-66313508660667623772018-12-19T10:51:00.001-05:002021-07-01T06:48:31.657-04:00CARI Revisits China, Djibouti, and the New York Times: How Much Debt?<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwlmFfiWxuYirlDrNuxl1XQMmEw6nB2qrT6yC2F1S2uUa2FDqSmvVCaQXAbxqAN3Q_3H6bvuSGIF4eqFMNPsvBAhFu9STXbk6_2Mu4EsWvTfv6NBesk8khjarWO0kLfoi46HQjyxkhPwsQ/s1600/dji-map.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="227" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwlmFfiWxuYirlDrNuxl1XQMmEw6nB2qrT6yC2F1S2uUa2FDqSmvVCaQXAbxqAN3Q_3H6bvuSGIF4eqFMNPsvBAhFu9STXbk6_2Mu4EsWvTfv6NBesk8khjarWO0kLfoi46HQjyxkhPwsQ/s320/dji-map.jpg" width="320" /></a></div>
We are reposting our analysis of Djibouti's debt to China, in view of the launch of the Trump administration's new Africa strategy last week.<br />
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Once again, the administration described Chinese lending as predatory: "the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands." No evidence was provided for this characterization of Chinese lending.<br />
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As with the administration's overblown estimates of Chinese lending in Djibouti (discussed below), we urge reporters to do their own reporting on China-Africa debt issues, and not to simply report the administration's "facts" at face value.<br />
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Our post from 2017 follows:<br />
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The <i>New York Times</i> had a front page article on China and Djibouti this past weekend: "<a href="https://www.nytimes.com/2017/02/25/world/africa/us-djibouti-chinese-naval-base.html?_r=0">U.S. Wary of its New Neighbor in Djibouti -- a Chinese Naval Base</a>." Like many observers, the <i>NYT</i> seems to have been misled about the scale of Chinese engagement, and Chinese lending to Djibouti in particular. Here's what they said:<br />
<blockquote class="tr_bq">
<i>Beyond surveillance concerns, United States officials, citing the billions of dollars in Chinese loans to Djibouti’s heavily indebted government, wonder about the long-term durability of an alliance that has served Washington well in its global fight against Islamic extremism.</i></blockquote>
Here at the China Africa Research Initiative we specialize in tracking and confirming Chinese loans in Africa. We have not been contacted by the US government, and we wonder where they are getting their "data"? In this instance, we were able to interview top ranking officials in Djibouti's Ministry of Finance to confirm Chinese loan financing.<br />
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<b>Signed Loans/Debts Owed by Djibouti to Chinese Government</b> (past decade). All in US$<br />
<br />
1. Goubet/Ghoubet Salt Port Expansion: 64 million<br />
2. Addis-Djibouti Railway (Djibouti share): 492 million<br />
3. Djibouti-Ethiopia Water Pipeline: 322 million<br />
4. Doraleh Container Terminal/Multipurpose<br />
Port Expansion (the endpoint of the Ethiopia-Djibouti Railway)<br />
and Damerjog Livestock Export Port: 405 million<br />
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TOTAL $1283 million, or $1.3 billion<br />
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We also have a confirmed report of $596 million in Chinese finance for two new airports, but this appears to be either a Chinese company suppliers' credit or a public-private partnership investment, not a Chinese government loan. However, even if we add this, the total comes to $1.9 billion. While several other projects--most prominently a toll road highway to the border--have been in the news, we confirmed that they are all still under discussion. Yes, $1.3 billion or even $1.9 billion is a large figure, but it seems inaccurate to call it "billions of dollars in Chinese loans".<br />
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Undue alarmism? Another case of "alternative facts"? More reason to support an increase of $58 billion in the US defense budget? From what we can see, China's main rival in Djibouti has not been the US, but <a href="http://www.dpworld-doraleh.com/">Dubai Ports World</a>, which had a number of public-private partnership (PPP) port contracts in Djibouti, and had also arranged financing to build and operate ports in this important gateway to land-locked Ethiopia, one of Africa's most populous and dynamic countries.<br />
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As always, if someone has better information, please comment here or contact us directly at SAIS-CARI at Johns Hopkins University.</div>
Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com4tag:blogger.com,1999:blog-9189930829940284211.post-64629613824570360062018-12-14T12:07:00.002-05:002021-07-01T06:48:38.399-04:00CARI Update: "Angolan Ghost Town Wakes Up"<div dir="ltr" style="text-align: left;" trbidi="on">
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<tr><td style="text-align: center;"><a href="http://gdb.voanews.com/18B765FC-E5A4-49A5-9D88-A4B5C4A978AA_w640_r1_s_cx0_cy2_cw0.jpg" style="clear: left; color: #0a2d73; margin-bottom: 1em; margin-left: auto; margin-right: auto; text-decoration-line: none;"><img border="0" height="180" src="http://gdb.voanews.com/18B765FC-E5A4-49A5-9D88-A4B5C4A978AA_w640_r1_s_cx0_cy2_cw0.jpg" style="background-color: transparent; background: transparent; border: none; box-shadow: rgba(0, 0, 0, 0.1) 0px 0px 0px; padding: 0px; position: relative;" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="font-size: 10.56px; text-align: center;">Kilamba: credit Voice of America</td></tr>
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Time for an update? Over the holidays CARI will be re-posting some of the most-visited stories from our blog: <i>China in Africa: The Real Story. </i>Below is our April 2, 2014 "real story" about Angola's Chinese-built Kilamba Kiaxi, or Kilamba New City.<br />
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Kilamba is an enormous Chinese-financed satellite city that is, surprisingly still today being <b>derided as an example of a Chinese-built "ghost city". </b><br />
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Several excellent field research-based studies by the intrepid team of <a href="https://saiia.org.za/wp-content/uploads/2014/04/saia_spb_88_-Benazeraf-Alves_20140416.pdf">David Benazeraf and Ana Alves</a>, as well as <a href="https://www.africaresearchinstitute.org/newsite/blog/views-of-suburban-luanda-banishing-the-ghosts-from-kilamba/">Chloé Buire</a>, <a href="https://journals.sagepub.com/doi/full/10.1177/0042098017732522">Anne Pitcher</a>, and others have <b>debunked this myth</b>, providing ample evidence that Kilamba was slow to take off but can hardly be called empty. By the time of her fieldwork in 2015, as Dr. Buire notes, there were 80,000 people living in the apartments of Kilamba, a mid-sized city had materialized on less than a thousand hectares. Today, it has become a popular spot for <a href="https://www.airbnb.com.au/s/Kilamba-Kiaxi--Luanda--Angola/homes?refinement_paths%5B%5D=%2Fhomes&allow_override%5B%5D=&s_tag=AODHc7H9">AirBnB</a> rentals. And Phase II of the project appears to <a href="http://www.angop.ao/angola/en_us/noticias/reconstrucao-nacional/2017/3/17/000-new-dwellings-for-second-stage-Kilamba-city%2c79dba5d9-ebde-4e11-ba6b-035d8c70d515.html">have been funded</a>.<br />
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So when you hear the one about the Chinese "ghost town" in Angola on the VOA, the <a href="https://www.bbc.co.uk/programmes/w3cswqv4">BBC,</a> or CNN: think again. <i>What's the real story</i>?<br />
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The original 2014 post follows:<br />
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<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">Anyone who has been to Luanda knows that the city lacks housing. The hotels are extremely expensive, and researchers have been known to rent a room in someone's house for $100 a day. Angolan president Jose dos Santos pledged to build a million new homes, between 2008 and 2012. Kilamba City was part of that promise. The idea of constructing a new town, </span><a href="https://www.youtube.com/watch?v=7vuYUexc5zI" style="background-color: #f2f2f2; color: #0a2d73; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; text-decoration-line: none;">Kilamba City</a><span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">, 20 km outside Luanda, where flats would be available for purchase, seemed like a good one.</span><br />
<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;"></span><br /><span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;"></span>
<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">A Frenchman, Pierre Falcon, the famous architect of the "</span><a href="http://www.economist.com/node/12630028" style="background-color: #f2f2f2; color: #0a2d73; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; text-decoration-line: none;">Angola-gate</a><span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">" arms trade and corruption scandal, owns the company that oversaw the project: </span><a href="http://www.merinews.com/article/kilamba-from-0-to-200000-inhabitants-in-3-years/15871400.shtml" style="background-color: #f2f2f2; color: #0a2d73; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; text-decoration-line: none;">Pierson Capital Group</a><span face=""arial" , "helvetica" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;"><span style="font-size: 12px;">. </span></span><span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">The complex was financed by ICBC, Industrial and Commercial Bank of China, allegedly backed by oil-revenues. CITIC built the flats. A company owned by the state-owned oil firm Sonangol was in charge of marketing the apartments (they would use those revenues to repay the loan). Chinese firms built Kilamba. And then the apartments seemed to stand empty. Visiting Western journalists photographed the long, lonely expanses of buildings. Kilamba City was filled, it seemed, by ghosts.</span><br />
<br style="background-color: #f2f2f2; color: #222222; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px;" />
<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">Until recently. Or so it seems. According to the </span><a href="http://www.portalangop.co.ao/angola/en_us/noticias/sociedade/2013/8/36/Kilamba-City-flats-sold-out,9a874ce7-f6fa-4f25-b35a-9d888d4c07d4.html" style="background-color: #f2f2f2; color: #0a2d73; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; text-decoration-line: none;">official Angolan news agency</a><span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">, some 40,000 people moved into Kilamba after their families took advantage of long-term, low-cost mortgages to buy flats with prices ranging from US$70,000 to US$140,000. One account said people are </span><a href="http://www.voaportugues.com/content/luanda-housing/1617776.html" style="background-color: #f2f2f2; color: #0a2d73; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; text-decoration-line: none;">standing in line for days to buy one</a><span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;"> (photo left).</span><br />
<br style="background-color: #f2f2f2; color: #222222; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px;" />
<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">The news stories on Kilamba, the "ghost town" mainly date from 2012. If it is actually now becoming a thriving town, why hasn't anyone gone back to report on it?</span><br />
<br style="background-color: #f2f2f2; color: #222222; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px;" />
<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">Readers: have you seen Kilamba? Your comments and stories are very welcome. </span><br />
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<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">Update May 6, 2014: New SAIIA analysis exactly on this topic, by David Benazeraf and Ana Alves, "</span><a href="http://www.saiia.org.za/policy-briefings/oil-for-housing-chinese-built-new-towns-in-angola" style="background-color: #f2f2f2; color: #0a2d73; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; text-decoration-line: none;">Oil for Housing: Chinese-Built New Towns in Angola.</a><span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">" Highly recommended. </span><br />
<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;"><br /></span>
<span face=""arial" , "tahoma" , "helvetica" , "freesans" , sans-serif" style="background-color: #f2f2f2; color: #222222; font-size: 13.2px;">To visit the original post and the 21 comments, <a href="http://www.chinaafricarealstory.com/2014/04/chinese-built-angolan-ghost-town-wakes.html">click here.</a></span></div>
Deborah Brautigamhttp://www.blogger.com/profile/10813215294689392170noreply@blogger.com9