What do the numbers say about the ever-growing loans between the China and the African continent and what do they not say?
It is not hot news anymore: China is on the rise, everyone knows. And in its expansion drift China does not overlook the African continent. The Chinese are more active than ever and actively make use of everything Africa has to offer: from resources to (relatively) undiscovered markets to a strong workforce. Africa has it all to the world economy’s biggest, baddest player of the last decade.
According to the China Africa Research Initiative (CARI) of the renowned John Hopkins University bilateral trade between China and Africa has been steadily rising for the past 16 years (China Africa Research Initiative, 2018). Not only are there strong trade relations between the African continent and China; there are also a lot of loans coming in from China to finance African countries, businesses and international projects. In 2018 auditor reports came out on the financial debacle surrounding the Nairobi-Mombasa railway line. If the Kenyan government was unable to fulfill its debt to Chinese lenders, the Mombasa Port would come under control of the China Exim Bank (Olander, 2019). The latest data even shows that in 2018 China made up 22% of public debt stock and in 2020 29% of debt service in low income Africa (Brautigam et. al., 2020).
Brautigam, Huang and Akcer wrote their report: “Risky Business: New Data on Chinese Loans and Africa’s Debt Problem” on the current debt and financial situation of African countries and the Chinese role in all of this. The idea behind this report is the Western fear that the Chinese are causing more harm than good by creating a debt crisis in Africa. They tried to answer the questions of whether or not African countries are most vulnerable to debt distress those with high Chinese debt? Who the Chinese lenders in Africa are and how they manage to lend in such risky environments? But, also if China is a bigger lender than the World Bank and what kind of terms are common on these Chinese loans. And how often the loans collateralize with natural resource exports? Their findings say that the Chinese role in Africa’s poor financial situation caused by debts is more meager than most data would want you to believe, although the situation differs for every African country (Brautigam et. al., 2020).
They data Brautigam and others use, is on Chinese loan commitments gathered by the CARI and the World Bank and data on Africans debt levels by the World Bank and the International Monetary Fund (IMF) and its International Debt Statistics.
The report starts with a side note on the data saying that Chinese financiers are not keen on providing data systematically and this makes them very little transparent. Many reports on this subject are inaccurate and often reported loans are simply bases on quick memorandums of understanding (MoU’s) that do not end up being officially signed and carried out. This means that collecting data on Chinese loans is a true treasure hunt, with a highly trained multilingual CARI team that works on finding traces of evidence of Chinese loans to African countries. Most of these are only considered official when they are confirmed by registration in ministry of finance reports, central bank documents or when they are reported by Chinese embassies in Africa.
Another side note is that the data on loan commitments cannot be considered the same as debt, as it takes up five years to disburse on average and some of them are already repaid.
What they want to convey is that although the Chinese are significant part of lenders in Africa, their role should not be exaggerated. In half of the countries vulnerable to debt crisis or already in serious debt problems, Chinese loans are a relatively small portion in the total make up of debts. Only in seven of these vulnerable countries do Chinese loans take up between 26 and 58% of debt stock. In the case of the Central African Republic, Taiwan is counted along Chinese numbers, which gives a distorted image.
Furthermore is the variable of debt service also an important part of this report. In Angola and Djibouti for instance, more than 50% of debt service is in Chinese hands, but looking at continental averages: only 29% of all debt service in African countries is owed to Chinese lenders. And when Angola is taken out of the equation, only a small portion of 18% of Africa’s debt service is due to China.
This report shows that although the numbers of Chinese lending to African countries is impressive to say the least, the loans given out by China are not solely to blame for the poor financial state of many countries on the African continent. The dark picture as painted in the intro of this post, is not actually as dark as one would expect at first glance. It is easy to misread en interpret these data and it takes a lot of knowledge, skill and time to gather the information needed to get a clear picture.
It is quite funny to see that, even when the data is already (correctly) collected, different people from different backgrounds will interpret the data differently. This came to light also in the EGSA class, where all of us had to read the same reports and then formulate a question. We got the same data, but the questions that we raised from this data varied from effects on culture and language to Chinese influence on democracies. This means that even when working with ‘cold-hard’ numbers and facts, interpretation can still lead you to different conclusions. Therefore, when reading statistic research reports, it is always good to read behind the numbers to see what exactly they say and do not say.