China's Xi Jinping promises to write off some of Africa's debt

China’s Xi Jinping promises to write off some of Africa’s debt

China will release some African countries from interest-free loans due by the end of this year, President Xi Jinping he said late Wednesday. He spoke at a summit on how China and Africa can fight the pandemic together.

Xi did not say which African countries would be exempt or how much debt would be completely written off.

According to independent estimates, African countries owe a substantial debt to China. About 20% of the African government’s foreign debt is due to China in 2018, according to estimates Jubilee debt campaign, a UK-based charity that supports debt relief for poor countries.
Chinese lenders signed $ 152 billion worth of loans to African countries from 2000 to 2018, according to a separate report released Thursday by China-Africa Research Initiative (CARI), a research project at Johns Hopkins University’s School of Advanced International Studies.

“People are undergoing profound changes that are not visible in a century,” said Xi. “Given the new opportunities and challenges we face, closer cooperation is needed between China and Africa than ever before.”

A fraction of what Africa owes

The Chinese leader also promised that his country would provide “greater support” to African countries that have been hit hardest by the virus or are under economic pressure. He suggested that China could give countries more time to repay other debts, for example.

Xi’s announcement comes as the corona pandemic causes significant difficulty in some of the world’s most underdeveloped countries, including those in Africa – and pressure is being put on creditors to enter. The International Monetary Fund and the World Bank, for example, are urging creditors to suspend debt repayment from Africa as a way to support some of the continent’s poorest countries as they struggle with the effects of the outbreak.

However, analysts said interest-free loans were only part of the debt owed by African countries to China. The CARI report completed less than 5%.

In the early 2000s, such arrangements “accounted for a significant proportion of Chinese loans,” the report said. “However, as other sources of funding from China began to increase … [interest-free loans] became a smaller and smaller percentage of China’s total debt to Africa. “

The cancellation of the African debt is also not new to China. China has written off at least $ 3.4 billion in African debt since 2000 and 2019, according to CARI – mostly in mature, interest-free foreign aid loans that had gone bankrupt.

But the “vast majority” of China’s loans has recently expanded to Africa – including favorable and commercial loans – has never been considered for cancellation, the report added.

An important ally

Xi’s announcement may be more about politics than forgiving significant amounts of debt. The president has in recent weeks he has maintained his country’s diplomatic ties with Africa as a key foreign policy strategy, as he faces a reaction between some western democracies over the handling of the corona pandemic.

China, meanwhile, has seen Africa as an ally since the Cold War, and the two have been more closely linked over the past two decades – especially through trade and foreign investment. The value of bilateral trade has increased twenty times since 2000, to about $ 209 billion in 2004. 2019, according to official Chinese statistics.
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The alliance with Africa also has gave China great influence on the continent, which has been a willing recipient of Chinese investment and infrastructure through Beijing’s Belt and Road initiative. From 2014 to 2018, for example, China’s direct foreign investment in Africa increased by 44% to $ 46 billion, according to the latest figures. United Nations Conference on Trade and Development.

However, the relationship between China and Africa was not entirely smooth. In April, Africans in the southern Chinese city of Guangzhou told CNN they had been evicted from their homes by their owners and removed from hotels as China’s warnings against imported corona cases provoked anti-foreign sentiment. Chinese officials said at the time that the country had “zero tolerance for discreet words and actions”, and that “China and African countries have always supported each other and have always fought the virus together.”

Economic challenges

And the decision to forgive the debt comes at a difficult time for China’s economy, which earlier this year shrank for the first time in decades.

Recent data suggests that recovery in China has been slow. Last month, for example, exports fell as a corona continued to hit the country’s major trading partners, causing a decrease in demand. And recent data on industrial production, investment activity and retail sales – all the important barometers of China’s economy – it was derogatory.
China's economy is still struggling to recover from the pandemic

However, Xi said that strengthening the Belt and Road initiative is important after the pandemic and reiterated that China and Africa share a “long-term friendship”.

“Regardless of how the international landscape develops, China will never remain determined to seek greater solidarity and cooperation with Africa,” Xi said, adding that Beijing would continue to provide African nations with medical supplies. to help them build hospitals and even allow Some countries are among the first Covid-19 vaccines to be accepted if China completes one.

– Jenni Marsh contributed to this report.

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