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BEYOND THE MYTH OF CHINESE DEBT TRAP: ISSUES AND FACTS
China’s broad cooperation with Africa has proved helpful in the takeoff to sustainable and inclusive economic growth, argues Charles Onunaiju
Nigeria’s President Muhammadu Buhari told his interviewer early this year, “We take loans where it is necessary. We got the Chinese to help us in the rail and roads and so how can we turn them down? So the Chinese are welcome and anybody that is prepared to come and help our infrastructure efforts to do the roads, the rails and power will be welcome”. Despite that the Chinese financial support through concessional loans and grants have considerably filled the gaps in the funding bottleneck of basic infrastructure constructions in Africa, so much fuss has been made of the so-called “Chinese debt trap” by those overly unwilling or even unable to offer a dollar for even a construction of feeder road in any of Africa’ s rural communities.
In December 2018, Mr. John Bolton, the then US National Security Adviser made an outlandish claim that “China uses bribes, opaque agreements and the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands.” To drive home the scare at the alleged China’s debt trap, Mr. Bolton claimed “the nation of Zambia for example, is currently in debt to China to the tune of $6 billion to $10 billion. China is now poised to take over Zambia’s national power and utility company in order to collect on Zambia’s financial obligation.” A few days later, the Zambia government announced that the claim of the US national security adviser was false and that, of its total sovereign debt of about US$9 billion, China’s share is only about US$3 billion and none of its national assets is under any form of threat of seizure.
China’s broad cooperation with Africa which has provided huge support for the continent to overcome the existential bottlenecks of funding shortages, infrastructure deficit and inadequate manpower and which has proved helpful in the critical takeoff to a journey of sustainable and inclusive economic growth. This is the object of vicious attack from quarters that were unwilling to touch Africa with a long spoon in regards to investments, trade, loans and other such activities that could boost the aggregate growth of the economies in the region.
China herself is not a stranger to the use of concessional loans as a funding mechanism for her own economic modernization. At the outset of her modernization programme in1978, China announced an ambitious 10-year plan that focused on 120-key modernization projects, including 30 electric power stations, six trunk railroads, eight coal mines, 10 new steel plans, five harbours, nine non-ferrous metal complexes and 10 new oil and gas fields.
And China was a net recipient of Japan’s generous loans, though Beijing viewed it as mandatory reparations that Tokyo must make for its atrocious war crime against the Chinese, in the same manner, that post-war Germany was obligated to make reparations to the state of Israel on account of the Nazi violence that targeted the Jews. Africa has however, remained uncompensated for the crimes of the heinous Atlantic slavery.
With the signing of the treaty of friendship between China and Japan in 1978, Japan agreed to provide large five-year loan packages to China. The first loan package (1978-1983) totaled 330 billion yen. The second tranche of the yen loan package between 1984 and 1989 amounted to 470 billion yen, with the third loan package between 1990 and 1995 totaling 800 billion yen. According to the account of Professor Deborah Brautigan, a sober and keen China watcher, “All would be repaid in oil and coal, and would form the backbone of China’s modernization”. Yet for all Japan’s loan assistance, the Chinese leadership maintained unassailable prerogative on its major policy decisions both domestic, foreign and even defense policies.
Apart from loans, trade and investments also between Beijing and Tokyo flourished in the period which coincided with the time of China’s intense modernization drive that has borne the fruits of the country’s contemporary national aggregates and global preeminence. In fact despite tension over domestic politics, security policy and history, economic interdependence between China and Japan remained a powerful force. Total trade between the two countries grew from $18.2 billion in 1990 to $66.2 billion in 1999, while Japanese foreign direct investment into China rose from $438 million in 1989 to $4.5 billion in 1995.
Against the foregoing, the hype about Chinese loans, investments and trade morphing to debt trap or surrender of sovereignty of African countries is a hogwash concocted and designed by its peddlers to starve countries on the continent, the veritable and indispensable financial oxygen that is necessary to generate sustainable economic growth and the wider socio-economic development and even political stability.
What the leadership of the various countries in Africa needs to do is to harness loan and investment flows to critical and strategic national priority, build integrated national economic structures and work it up to the global value chains.
The strategy of scare-mongering African countries with the hype of “Chinese debt trap” is essentially to prevent the rise of Africa, as such efforts, though, of different type was used to prevent the rise of China. From the earlier insinuations from the same quarter that China is a “hollow” power that has nothing tangible to offer to Africa except rhetoric, the tune has changed that China wants to compromise the sovereignty of African countries through debt trap.
But if China was not entrapped by Tokyo despite generous loans, investments and trade, how is Africa destined to become a vassal of Beijing because of loans, investment and trade, except only on the assumptions that African people and leadership are incapable of securing her own interests? This, in itself, reflects the unreformed bigotry of how Africa is viewed from the West.
Despite the sustained hoopla about Chinese loans and the alleged debt trap, the London- based Economist magazine said that these “investments funded by Chinese are not in China” and that the best Beijing can do in respect of government defaults on its loans is to reduce the amount of money that debtors have to pay, adding that “countries with longer records of lending to poor countries often do the same,” citing the example of the “Paris Club of creditors formed in 1956 to devise ways of reducing defaulters’ debt loans.”
If the media high priest of Western liberal order has the above to say about the “myth of China’s debt trap,” there is little to add except it is a mere political tool to undermine China’s support for Africa.
China’s ambitious Silk Road project, from which African states have gained immensely by obtaining commercial loans for infrastructure development, has been the target.
Uganda, in early 2021, fought off allegations that its international airport, Entebbe, risked being taken over by Beijing over a $200 million loan taken six years ago in what is being claimed as “toxic” clauses in the contract. Despite that both Kampala and Beijing have said there is no cause for alarm, the western establishment and its media outlets went on an overdrive, hyping a crushing debt crisis.
Vianney Luggya, the Uganda Civil Aviation Authority spokesperson, said there was no need to worry, as the government cannot give away a national asset such as an international airport.
“In any case we are still within our grace period of seven years, which ends in December 2022,” he added.
Last year , former Kenyan National Treasury Cabinet Secretary Ukur Yatani denied that Nairobi had mortgaged Mombasa port to get the loan for the standard gauge railway and assured the nation that Beijing will not seize the port should the country default on the $3.2 billion SGR loan.
“Kenya did not offer the strategic national asset as collateral for the $3.2 billion loan sourced from the Export-Import Bank of China (Exim China) to finance the SGR project. As such, Mombasa port has no adverse exposure to any lender or category of lenders through existing loan agreements with the government,” Mr Yatani said.
While the Western media were making fuss over phantom Beijing “debt trap”, Wu Jianghao, Chinese Assistant Minister of Foreign Affairs, said the talk about China’s debt trap in Africa is propaganda. “Why is money offered by Western countries to developing countries considered ‘assistance for development’ while the money offered by China is labelled as ‘debt trap’? This view is not logic or correct!” he tweeted.
Wu Peng, Director-General in the Department of African Affairs in China’s Ministry of Foreign Affairs, also said there was no cause for alarm.
“Which of the Chinese projects in Africa have been confiscated in Africa? None. The hype surrounding Chinese ‘debt trap’ in Africa has no factual basis and is being pushed on malicious grounds,” he said.
“China will continue its support for African countries’ efforts to resolve their continent’s issues in their own way, and make a greater contribution to peace and security in Africa. China will continue its firm support for efforts being made by African countries to explore development paths suited to their respective national conditions,” he said.
Despite the open facts and clear issues related to Chinese concessional loans to African countries, vested interests largely consisting of those outside the continent who do not wish for Africa to break out from the net of poverty and underdevelopment continue to drive a wedge in Africa-China cooperation, using the weapons of scaremongering and slander.
Onunaiju is research director of a Think Tank based in Abuja