Published On: Tue, May 21st, 2019

The myth of “debt trap” in China-Africa Cooperation

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By Charles Onunaiju

Former U.S Secretary of State, Mr. Rex Tillerson sacked mid-air, by his principal, U.S President Donald Trump while returning from a visit to Africa last year orchestrated the hype, on a visit to the Africa Union headquarters in Addis Ababa, Ethiopia that “Chinese investment does have the potential to address Africa’s infrastructure gap,” but added a spurious claim of “an approach that has led to mounting debt and, a few, if any job in most countries.”
Last December, Mr. John Bolton, US National Security Adviser made more outlandish claims that “China uses bribes, opaque agreements and the strategic of 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 to 10 billion U.S dollars. 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 U.S national security adviser was false and that, of its total sovereign debt of about 9 billion USD, China’s share is only about 3 billion U.S dollars and none of its national assets is under any form of threat of seizure.
China’s broad cooperation with Africa which have provided huge support for the continent to overcome the existential bottlenecks of funding shortage, infrastructure deficit and inadequate manpower and which has currently restored a critical takeoff of sustainable and inclusive economic growth 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 boast 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 program, in March, 1978 China announced an ambitious ten-year plan that focused on 120 key modernization projects, including 30 electric power stations, six trunk railroads, eight coal mines, ten new steel plans, five habours, nine non-ferrous metal complexes and ten new oil and gas fields. According to the account of Professor Deborah Brautigan, a sober and keen China watcher, “by the end of 1978, Chinese officials have signed 74 contracts with Japan to finance turn-key projects that would form the backbone of China’s modernization. All would be repaid in oil and coal.”
China herself was a recipient of Japan’s generous loans though, Beijing viewed it as a 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.
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 yen 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 to 1995 totaling 800 billion yen. 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.
For example in 1995, long after China has ended the nuclear monopoly of the former Soviet Union and Americans by blasting its first nuclear test in 1964, Beijing went ahead with its 42nd nuclear test, despite evident misgivings by the Japanese Prime Minister, Mr. Marayama Tomichi, who during a visit to Beijing have asked Premier Li Peng for a moratorium on nuclear test. Beijing has, however, during her first blast of the nuclear bomb made a commitment never to be first to use a nuclear bomb but would maintain the facility for deterrence.
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 country’s contemporary national aggregates and global preeminence.
Infact 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 US dollars in 1990 to 66.2 billion US dollars in 1999 while Japanese foreign direct investment into China rose from 438 million U.S dollars in 1989 to 4.5 billion U.S dollars 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 in 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 desperately deployed 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 Africa 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 Africa, her 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.
In many instances, the reference of the Hambantota port in Sri Lanka leased to Chinese company, China merchants Port Holdings for 99 years have been cited as typical of the “debt trap” and compromise of national sovereignty allegedly embedded in Beijing’s strategy. But a Sri Lankan senior official explained to the media few months ago that “due to poor management, the Port did not generate sufficient income to pay the loan back. To make it a viable business to generate income instead of asking the public taxpayers to pay it back, the Sri Lankan government made the decision to set joint company with a Chinese company to operate the port together.” Continuing the official said that “on behalf of the government of Sri Lanka, the Ports Authority owns 30% and China Merchants Port Holdings owns 70% of the joint venture to manage the port for 99 years,” and added “if Sri Lanka wants to buy out China’s share, we can negotiate with China merchants port holding.”
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 for Africa “to shine her eyes,” as it is used in local parlance to commend someone to a sober reflection.

Onunaiju is the director, Center for China Studies, (CCS) Abuja.

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