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The twenty first century has seen China investing big in Africa. Lending skyrocketed from one hundred and thirty eight million dollars in two thousand to a high of twenty eight billion dollars in twenty sixteen. But African leaders in Beijing this week find China with a much smaller checkbook than before.
At the end of the day, China has been that guy around the corner with, you know, a bouquet of flowers to Africa, the US, you know, Europe and the UK have time and time again say be careful of the flowers you see out of the window, they have thrones on them.
The Belt and Road initiatives saw China going big on loan led diplomacy, but a changing economic situation in Africa and at home means now China wants to know what it's back from the continent.
The product prices declined, the wage grows, the remains slow, labor market remains loose. There are all points too that consumption recovery well likely remain softer in the next couple of months.
On Today's Next Africa podcast, as the China Africa Stomic continues in Beijing. We'll ask what's brought on the change of heart and whether this new focus will bring in more investment or just burden countries with billions more debt than they actually can handle.
So when China stepped into the field, it was much welcomed by the developing world that there would be increase financing for infrastructure. However, with the rush to get projects off the ground, to put them into action and to begin construction, critical due diligence was often left by the wayside. What this has ended up causing is states to take on projects that they initially thought were affordable, but unfortunately they've been now saddled by debt.
I'm Jennifer's Abasadja and this is the Next Africa Podcast, bringing you one story each week from the continent, driving the future of global growth with the context only Bloomberg can provide. Our Africa Deputy Managing Editor Neil Munchi and our Africa and Middle East correspondent Peter Martin are here with us now. Peter also lived there in China for eight years and wrote a book on it as well,
So thank you both so much for joining us. I know you're covering the summit extensively, but appreciate you taking the time to be on the podcast. Let's just start with a bit of the history. As I just outlined, Chinese lending to Africa has ballooned over the past few decades. What was behind the flood of money? I mean, take us back to where it all started.
In the early two thousands, China and Chinese companies were just starting the global expansion. They talked about having a going out strategy which would see them extend their footprints around the world and become truly multinational corporations. And as they looked at different markets, they saw that it was going to be tough to get into North America, tough to get into Europe. Africa looked like a huge area
of opportunity. It was somewhere where China could look to extract important natural resources from oil to critical minerals, and it was also a potential market for Chinese companies as they sought to produce consumer products. And so they really started to focus in on the market at that stage and extended lending and all kinds of preferential treatment to their companies as they sought to expand.
And Neil I imagine China's investment was attractive to many African countries that were still sort of in development. But how did it differ from the lending or the investment opportunities that they were getting from some of the other big players like the World Bank or the IMF.
It's not just that the ticket sizes were so much bigger and it was so much more money. Also that other institutions, Western Powers, the Middle East, no one else was really offering kind of anything in comparison and compared to the World Bank and IMF, China, happily for many African governments, doesn't accompany their loans with any sort of environmental or human rights conditions or lectures on that front.
And this was at a time when economists broadly agreed, as they still do, most African countries need a ton of money to build major infrastructure to develop their economies and bring their people out of poverty. So this was widely welcomed across the continent.
So then what did we see early on? What were some of the projects that were being financed by China to African countries and governments.
I mean, you can see it across the continent right now, roads, bridges, dams, airports, electricity grids, you name it, right, essential stuff. But the record of the Belton Road initiative is mixed. It's not clear that it was universally good or universally bad. Right. So you have some projects, like there's a hydropowered dam in Zambia that's been hailed as sort of like an economic game changer, built with I think two billion dollars
in Chinese loans. There are other projects. I'm here in Nairobi, five ten miles away is a railroad terminus. This railroad was supposed to go from the Kenyan coast to into Uganda and it ends in the middle of nowhere, one hundred miles from Nairobi. Because at some point the Beldon Roade initiative screeched to a halt and ken You is still paying the debt on that project to this day.
And maybe we can touch to on the Baltin Road initiative a little bit more, Peter, I mean, what was the intention of this initiative by the Chinese government.
This was Hijinping's kind of signature initiative that he kicked off in twenty twelve, twenty thirteen, and he saw it as a way to fill a desperate need for infrastructure across the developing world by extending Chinese loans to countries, but of course also caught political influence. In the first few years when the project kicked off, it looked like it was going to be pretty transformative in its impact.
But as China's own economy has faced head winds, it's been scaled back, partly because China can't afford the burden of extending that much lending, and also partly because Chinese companies realized they may not now get repaid for some of those loans.
And we talked so much across Bloomberg really about the state of China's economy right now. I mean, can you put it into perspective for us, because maybe that would help explain why they've scaled back. But a lot of the world is paying attention to what's happening there.
Pete exactly.
For three decades from the nineteen nineties through the two thousand and twenty tens, China experienced double digit growth, and that was something that Western investors and many Chinese policymakers thought was set to continue, perhaps for many more decades to come. That has not turned out to be the case. Chinese economy now faces pretty severe headwinds. In the short term, there's a property downturn, which is which is impacting growth.
Retail sales are down, consumer spending is down. But there are also long term headwinds for the Chinese economy, like its aging population or the need to pivot from its investment driven model of growth towards consumer driven growth. That's something that's been really difficult. So, you know, from ten percent a few decades ago, Goldman expects at four point nine percent growth for the Chinese economy this year.
Just going back to this Belton Road initiative and a lot of the loans that China had extended, I mean, were they ever able to make back any of the payment that they had made, especially at a time when they probably need it.
Yeah, you know, it's a mixed bag. Of course, many countries are laboring under the need to repay those loans now, so some of them are being repaid, but a lot of nations actually can't make the repayment, so China has had to kind of scramble and extend emergency loans to countries like Nisir, which heavily indebted to China. Obviously, it's
not in China's interest for these countries to default. It wants to find ways to kick the can down the road, but it also wants to preserve its reputation as a lender that doesn't extend the kind of conditionality that Neil talked about that comes with World Bank or IMF loans.
Stick with us, Neil and Peter. When we come back, we'll look at what China's new offer could be and why that could store up more trouble for the future. Potentially, we'll be right back.
And welcome back.
Today we're discussing China's relationship with Africa as it hosts its ninth Forum on China African Cooperation this week. We have Neil Munchi and Peter Martin joining us. So, guys, maybe you can outline what China's new focus is likely to look like and whether or not we'll get any of that indication this week at the summit.
So you can see it taking shape already, and it's clear that China shifting away from the kind of plain vanilla sovereign to sovereign landing that characterized the Belton Road initiative toward more commercially driven landing, so away from their policy banks toward their commercial banks and what that means is and one analyst refers to China is acting more like a yield maximizing investment portfolio manager. They are seeking projects that can generate or return.
Is there still, Peter a political element to what China potentially wants in return?
Yeah, there absolutely is. So we talked before about Chinese companies desire to make profit and to secure critical minerals resources, which of course have uses for its domestic economy but also military uses. But it's more than that. It's also a desire to make sure that African countries are as far as possible on Beijing sides, or at least neutral on issues that really cares about in the international arena.
So as it looks, for example, to rebut US criticisms of its human rights records at the United Nations, Beijing looks at the fifty plus countries, the fifty plus votes that Africa can deliver at the UN as something that's very valuable.
And I wonder too, based on both of your reporting, when you talk to people about this new lending structure, this new approach by China to African countries, is there concern potentially about future problems that can come up, both on the political front but also economically.
There is a debate about this, right There are those who say that this more commercially focused lending allows African governments to take out loans when they shouldn't. Essentially, many countries are in debt distress, a couple have defaulted, and this is a way for those governments to still take on some debt, but it doesn't go on the books. And there are others who say, well, this kind of
lending public private partnerships have been around for decades. It's a very standard, creative way of building infrastructure and generating revenue in developing countries. It's not totally clear yet how this will shake out.
And so then what could ultimately be the future of this relationship. I mean, is it too early to say what it looks like? And I wonder too. I mean, you both were mentioning the US, Europe some of the other big players that are watching closely. Does this ultimately then affect those relationships with the African countries and those Western nations.
Well, you know, I think it's interesting if you talk to Chinese officials about this. There's a short term recalibration that's going on from Beijing here, but their aspirations for engaging with Africa long term, decades long. This is about making sure that Beijing establishes itself is the kind of power it wants to be on the globe, that it has, the trading partners, the natural resources, the military and political influence that it needs. And so this is not going away.
And US officials recognize that. You've seen an unprecedented number of high level official visits from US officials to Africa during the Biden administration, and you've seen projects like the Libita Corridor, which is a rail project in Angola with some of its neighboring countries that aims to compete in some ways with Chinese investment. And that's something that really
you didn't see in the past. And US officials when they speak to you in private, pretty frank that it's that design to compete with China that's driven this approach.
The US is very much playing catshup here and stuff like Libido is These are important projects, but they're kind of one offs, right, whereas the Chinese approach has been and continues to be whole continent. Right. They are engaging across the continent in real ways, and if you talk to African leaders, it's still clear that the US treats Africa as a strategic backventure right they have other strategic geopolitical priorities that are far beyond the continent.
Well, thank you both, Neil Munschi and Peter Martin. Thank you both for your reporting and for joining us this week on the podcast. And you can read all the latest coverage on the summit on Bloomberg News platforms. So clearly, as we were just speaking with Neil and Peter about this, partnership between China and Africa does date back decades, but the world and the superpowers of today looks much different
from the past. The outcome of the summit will potentially give us a clue into what the future relationship between these regions could look like and also how it could impact not only those involved, but those watching from around the world. This program was produced by Adrian Bradley. Don't forget to follow and review the show wherever you usually get your podcasts. I'm Jennifer's Abasaja. Thanks as always for listening.