The topic got revived and hyped since the global pandemic, Coronavirus brought world economy to its knees with the poorer countries exposed more to the backlash.

He gave informed and candid views on the China’s loans to Africa, one of which is that Africa need not to stop borrowing but has to maximize the benefits of the borrowing. Zhou reasoned that it is how to create a beneficial and sustainable debt-development circle that African countries should place high emphasis on.  

From the benefit of history, he used the instance of Japan building ports in China and managing them some 30 years ago to buttress his point that African countries could use the Chinese loans and other incentives as launch pad for growth as China did from Japan and others.

Still on the debts, the researcher revealed that China has signed agreements with 11 African countries on waiver and relief.

To him, the prominence and dominance of the China-Africa relations in global discourses are good signs that the partnership is working. It is rather the progress and achievements of the platform, not failures, that attract attention to it as failures are hardly focused on.

In April 2020, the G20 Summit discussed and urged members to do something about the debt of poorer countries especially in Africa. But till now, nothing seems to have happened. When will the implementation be?

The biggest outcome of April 2020 G20 Summit related to debt problems is the Debt Service Suspension Initiative (DSSI), which allows the eligible countries to suspend debt service by the end of this year. On October 14, G20 agreed to extend the DSSI by six months and examine by the time of 2021 IMF/WBG Spring Meetings whether to extend further the DSSI by another six months. The repayments period is extended from three to five years with one year grace period (six years total).

Meanwhile, in order to strengthen the implementation of DSSI, G20 is working on a “Common Framework for Debt Treatments beyond the DSSI”, which is expected to get endorsement by G20 members ahead of G20 Leader’s Summit in November 2020.

At present, DSSI mainly relies on the contributions of bilateral official creditors. According to the World Bank, the total debt service including principal and interest of 68 eligible countries from May to December 2020 is about USD31.5 billion. Among this, the repayment to private creditors amounts to USD13 billion and occupies the largest proportion, as of 41%. The repayment to bilateral official creditors is about USD11.5 billion with the proportion of 37%. The repayment to multilateral creditors is USD7billion with the percentage of 22%.

Up to now, 41 of 73 eligible countries have applied for the relief, but about 30 countries have refused to participate in DSSI. Because only bilateral official creditors participate in DSSI, private and multilateral creditors haven’t joined. It seems that there is not small distance between the actual suspension and as expected.

As the official creditors, China EXIM Bank has signed DSSI agreements with eleven African countries. China also provides essential support for some African countries to get debt relief from other creditors. Chinese government is encouraging Chinese commercial banks to participate in DSSI for African countries based on market rule. It is reported that China Development Bank has agreed to defer one of the repayments which is commercial loans in Zambia.

So much has been said about China railroading Africa into a debt trap and economic re-colonization, to what extent is this allegation true?

Again, has China ever seized the assets of any African country over loan default? Which country is that and kindly give us details because it’s a common allegation in Africa and the US.

The allegation and the debt trap fabrication are totally untrue.

Before I answer the question, I would like to tell a story. A rich country went to a poor country, and talked about how to build a port in the poor country. The rich country proposed that it could provide one billion US dollars loans to the poor country. But to ensure the benefits and prevent the risks of default, the rich country said the two need to negotiate an agreement. According to the agreement, the rich country may be invited to operate the port for 20 years after it is built and 20 years later transfer it to the poor country, at the same time, 30% of the port revenue should be fixed for the repayments to the rich country.

So, the questions come, who are the two countries? Is this a debt trap?

The first reaction of most people may be that the rich country in this story is China. But in fact, the rich country here is Japan, the poor country who borrowed money is China in the 1980s. Obviously, you will not believe it’s a debt trap because the history has given the answers. As we know, China didn’t lose its strategic assets to Japan since 1949, so the history tells us it is not debt trap. The history of China’s development can also tell that creditors and debtors could both benefit from this kind of cooperation. The simple fact is that loans could foster development if they are well negotiated and well managed.

Regarding the narrative of debt trap, if you try to persuade others to believe one thing, you must show them evidences and facts. As numbers of research show, there is no evidence or any case that China has used debt repayments to seize the assets of other countries. Even though in the cases of Hambantota Port in Sri Lanka and Mombasa Port in Kenya which are frequently described by some media and politicians as debt trap, if you investigate into the agreements and contracts, you will find the allegations of debt trap are rumours and fake. In the case of Mombasa Port, some media says the port will be taken over by China, but if you have a basic knowledge of the agreement, you will find the truth: It is the revenue of port that could be used for repaying the debt of SGR rather than the port assets itself.

In essence, debt trap narrative is a propaganda tool by some politicians and media to defame China’s development financing. It is a rogue operation by the United States, India and some other countries who are worried that China’s rising influence will diminish their international or regional influence.

China, a member of the G20 didn’t actually sound committal at the G20 discussion of debt relief for Africa, but later in June at a summit with African countries on the FOCAC platform on Covid-19, President Xi Jinping pledged debt forgiveness for African countries on non-interest loans which is 5 percent of total loans to China. How far has this been implemented?

China has taken part in G20 DSSI this year and in fact played a very important role in shaping the making of DSSI.  Therefore, its historical meaning deserves to be noticed.

China’s debt relief to African and other countries is at bilateral level, based on the principle of country-by-country and loan-by-loan. There are some differences between China’s debt relief with international creditors’ collective case-by-case negotiation. So, we can say that, G20 DSSI is also a mutual learning chance for China and other creditors.

The Study by China-African Research Initiative shows, China cancelled at least US$ 3.4 billion of debt in Africa between 2000 and 2019. As President Xi has pledged, China will cancel debts for 15 African countries on interest-free loans maturing by the end of 2020 under the framework of FOCAC. Even though it may be reiterated in the FOCAC next year, but in my opinion, it has gone into effect.

The interest-free loans are mainly provided to the least developed countries. Therefore, it will be of significant practical and spiritual meanings for these countries. The debt forgiveness is more like foreign aids or grants. It will alleviate the economic and social pressure of these countries. Spiritually, it will strengthen the understanding and mutual confidence between these countries and China, a closer China-African cooperation will provide more possibilities of fighting the virus and reviving the economy. In addition, this will encourage other countries and creditors follow suits and do more responsible and practical contributions on debt relief.

Sub-Sahara Africa countries owe the IMF $62 billion in loans and owes China $64 billion, which is almost the same, why is the Chinese loans to Africa always the issue when nobody seems to mention that of the IMF?

Actually, IMF, World Bank and other international financial institutions (IFI) are frequently criticized for their conditioned lending, excessive interventions on the borrowing countries’ policies, and the poor economic and development performance of these lending in the past. Even though the conditions of IFIs have decreased compared to 1990s, IMF still has very strong influence on the fiscal, financial and trade policies of African and other countries. If the borrowing African countries want to get the financial support from IMF, they must submit the economic stability or growth plan. If they want to get multilateral lending, they must have this kind of IMF-endorsed plan. If they want to get financing from international financing market, the IMF sustainability analysis is also a condition, and if the borrowing will exceed the financing cap set up by IMF lending limit policy, the borrowing countries must get the endorsement from IMF. So, IMF is too influential that no country would risk to criticize IMF.

As well, the lending decision is made from the IMF board of executives in which the West countries have dominating influence, these countries are more likely not to criticize IMF lending, even though they are under-performed lending. More probably, they would seek scapegoats for their failed lending policies and practices.

That is one of the important reasons why China as the emerging development financier is frequently under the spotlight. Some accuse that China’s lending activity has weakened the impacts of IMF and multilateral banks. Some defame China’s lending because it has marginalized the economic prominence of the West in African countries. Some fabricate fake news and rumors on China’s lending in order to diminish China’s economic presence, such as the debt trap narrative.

China’s lending cannot avoid problems and shortages due to its short development history, but we must be cautious at the false “problems”.

Frankly speaking, China’s lending doesn’t have a long history as China is still in the process of “crossing the river by touching the stones”. China Exim Bank’s lending to Africa started at the end of 1990s. China Development Bank started lending in Africa just in 2007. China’s other commercial banks started the hesitating lending only in the second decade of this century. They are learning the lessons from the lending practices of developed countries, such as what Japan has done in China. Their operations are mainly demands-driven, or to meet the demands or requests of African countries.

China’s development financing is advantaged in its usage, most of which flows to development and productive sectors, such as transport, power, energy, infrastructure, mining, manufacturing. These lending have played positive and catalytic contributions on African development, especially in infrastructure, power, transport, etc. But the main problems are the degree of international cooperation is still quite limited, international norms and common practices are still not well learned by Chinese financing institutions even though its high importance have been greatly emphasized since the launching of Belt and Road Initiative in 2013.

Allegations fly all over the world that China gives African countries loans with hidden conditions. How true is this when international loans are vetted by the IMF and the World Bank for debt sustainability analysis before approval, why the allegations of hidden conditions by China?

It is the reality that rumours and over exaggerated stories are easy to spread widely. The misinformation producer is eager to sell their publications or stories, the public is willing to consume the rumours, but unfortunately, the real investigation is few, and the real facts may be so boring that many would rather choose to talk about the rumours.

China’s lending doesn’t have string policy conditions in general. In order to ensure the effectiveness of the loans, and to guarantee the outcomes and prevent risks when implementing the loans-backed projects, Chinese financing sectors and companies will discuss with African counterparts to work out the specific guarantee agreements based on consensus and mutual respect. These agreements may contain political, economic, social, foreign exchange, and other risk terms depending on specific cases. This is normal business operation. They are mainly technical conditions, compared to the political and policy conditions imposed by the West and IFIs.

Strictly speaking, is the relationship between China and Africa all about loans especially in the past 20 years of FOCAC?

World experts admitted that in the past 20 years, which would be said is the lifetime of FOCAC, that China’s relationship with Africa has been refined and more humane. How would this good observation or development be sustained?

Obviously, China-African relations are absolutely not just about loans. To admit or not, the reason China-African relations has attracted world-wide attention lies in its rapid and comprehensive development. Chinese financing official or commercial is one of the featured enablers or facilitators on China-African cooperation. China-African relations has positioned itself from China-Africa Strategic Partnerships in 2006 to Comprehensive Strategic and Cooperative China-Africa Partnership in 2015. China-African cooperation areas cover political governance, trade and investment, agriculture, industrialization, infrastructure, power, ICT, development cooperation, etc., which can be seen from the comprehensive cooperation framework and practical initiatives of FOCAC Johannesburg and Beijing summits. The win-win cooperation has fostered African development, benefited China’s development, and international cooperation in Africa. There are many best practices and good stories worth of study.

Frankly speaking, there are no shortcuts to sustain China-African friendly and cooperative relations. The foremost is maintaining the mutual respect and trust with each other, believing the good will of each other. The second is consolidating the foundations and learning from the best practices of the past cooperation. The core is maintaining sincere and practical cooperation based on effective supply-demand relations. The third is addressing the common challenges and problems together in time. The last but not least important is strengthening people-to-people exchange and creating conditions for mutual understanding and trust between the people.

China’s outbound FDI in 2016 for instance was about $181 billion, and just 4% was into Africa and the bulk of it in Europe, why is everything China does about Africa given a different coloration, even investments and nobody talks about that of Europe?

China’s outbound FDI in 2016 for instance was about $181 billion, and just 4% was into Africa and the bulk of it in Europe, why is everything China does about Africa given a different coloration, even investments and nobody talks about that of Europe?

As explained above, the problems of Chinese investment in Africa are frequently over exaggerated, even though they are quite minimal compared its positive impacts. The good stories of Chinese investments are always neglected on purpose or taken as granted. It is rooted in the prejudice and arrogance of some who regard themselves as the moral judge. But the other important reason lies in the weak political, investment and legal environment of the local society compared the Europe, in which the wrong doings cannot be corrected immediately, and sometimes bad behaviors may be tolerated and even encouraged. Therefore, it is also crucial for African countries to build the capabilities of investment regulations and management.

Would African countries’ strategy of continuous borrowing almost endlessly ever get them out of poverty or should they change style?

International borrowing is a common financing approach for national development needs. The real problem is whether the borrowed money will be used in the suitable sectors, such as in the productive and catalytic areas. If it is used well, it will boost economic growth, increase the foreign reserve, attract more investments, and foster national development naturally.

As it is agreed, the sustainable development will be the fundamental determinant of debt sustainability. This will also be the very answer to get out of poverty, increase jobs, and strengthen the resilience of the economy.

So, the problem is not whether to borrow, it is how to maximize the benefits of the borrowing. It is how to create a beneficial and sustainable debt-development circle that African countries should place high emphasis on.

Source of documents：Africa China Economy, Nov. 10, 2020