China’s rapid rise into an economic powerhouse offering aid and soft loans is changing the aid picture in Africa — winning China its share of critics but also the gratitude of governments who say its engagement makes a difference.
The World Bank has accused China of financing projects rejected by others because of environmental concerns and rights groups say it lends without regard to standards on governance or corruption.
But others say China, whose financial capital Shanghai played host to the May 16/17 annual meeting of the African Development Bank, is simply changing the status quo of an aid game long monopolised by Western powers and multilateral lenders.
”My view from here is that China’s investment in Africa is good for Africa,” said Adrian Davis, who heads the China office at Britain’s Department for International Development.
”It provides a new source of funds and an alternative to the OECD consensus,” he said, referring to the Organisation for Economic Cooperation and Development, dominated by free market-oriented Western industrialised nations.
China has pledged to double development assistance to Africa by 2009 and write off another 10-billion yuan ($1,3-billion) of debt, having already cancelled debts of some 10,9-billion yuan.
The Export Import Bank of China, the country’s official export credit agency, has provided a commitment of $800-million in concessional loans for 55 projects in nearly two dozen African countries.
Despite criticisms from the World Bank, Davis points out that China has been increasingly winning civil works contracts under World Bank bidding, consistent with the Bank’s safeguards.
But there is no doubt that China’s approach is different.
”The Chinese government has demonstrated little to no inclination toward becoming involved in multilateral development initiatives,” said a study on China’s activity in construction and infrastructure in Africa by the Centre for Chinese Studies at Stellenbosch University.
Going it alone
Instead, China focuses on bilateral assistance and rather than imposing conditions on recipient governments, it insists it has no interest in their domestic affairs.
Chinese officials also make no bones about the ways in which government assistance smooths the way to commercial deals for its companies.
”Through aid projects, China has received more business opportunities in African countries,” said Commerce Ministry official Lu Bo.
”The aid projects provided by the Chinese government have provided Chinese companies opportunities to become involved in contractual construction and trade projects.”
Jonathan Wood, head of project finance at Standard Bank, estimates Africa needs spending of $17-billion to $22-billion over the next 10 years to fund infrastructure projects.
The scale is too massive to be financed by the public sector and local capital markets are weak, but China’s approach, he says, may make a difference.
”Foreign aid has been not very effective in the past, although the Chinese model of linking aid to a particular project may prove more effective,” he said.
And with ”trade not aid” long a mantra in the development community, analysts say China’s making the linkages explicit may not be a bad thing.
China’s trade with the continent is expected to reach $100-billion by 2010, from just $6-billion in 2000.
Its own rapid growth into the word’s fourth-largest economy also makes it a powerful example to African governments, who say China’s technologies — which it is more willing to transfer — are more appropriate than those of the West.
With the rise of not just China, but India, Brazil and South Africa, the Western consensus may be outdated.
”China is upsetting the rules of the game,” said Davis. ”But maybe the rules of the game are changing.” – Reuters