By Maurits Elen
In accordance with rapidly-waning Western influence on the African continent, China has surpassed the World Bank as biggest lender to the credit-poor developing world in the past year, according to US-based Asia Society.
China has signed a multitude of billion dollar deals with some of the world’s poorest nations, ranging from investments in hospitals, malls and power stations to new roads, railways, and other institutions. African countries such as Zambia and Angola see the footprint most visibly, where billboards, road signs, and even ATMs are now displaying Chinese characters. And then there’s the plethora of Chinese trade delegations flying over to sign deals some consider to be a new form of imperialism.
Credit lines worth $15 billion have been extended by China to Angola since 2003, creating employment opportunities for thousands of Chinese workers to come over and work on infrastructure projects, but according to Chris Alden from the China in Africa Project some of these lucrative deals have their flaws:
“Essentially the money stays in China – it’s focused on the project, rather than producing a knock-on effect to the economy. The point is the money doesn’t circulate into Angola but rather stays within the Chinese project circles.”
The World Bank extended $11.4 billion worth of loans to 36 African countries in 2010, but China, which is Africa’s biggest trading partner, facilitated a stunning reported $13 billion loan to Ghana alone. In 2010 China lended $743 million to Cameroon, while the World Bank contributed a $30 million. Zambia received $316 million worth of loans from China, with the World Bank providing less than a third of that.
Hannah Erdinger from the Johannesburg-based financial consultancy firm Frontier Advisory, has witnessed a swift and large push into Africa by Chinese banks amid uncertainty on the global financial markets and deteriorated buoyancy in Western economies:
“Traditional partners of the continent such as those with colonial links or development partners have moved out of infrastructure financing and it’s a gap that’s been left and needs to be filled.”
In Zimbabwe, Reserve Bank Governor Gideon Gono considers the Chinese yuan a more stable main currency than the weak US dollar or the Euro (currencies that Zimbabwe has been using in place of their own debunked currency since 2009.)
“With the continuous firming of the Chinese yuan, the US dollar is fast ceasing to be the world’s reserve currency and the Euro-Zone debt crisis has made things even worse.”
Which begs the question, could Zimbabwe ATMS eventually switch to spitting out RMB??
Besides African countries, Latin American nations have also benefited from China’s global reach. They’ve invested in an enormous hydro dam project in Ecuador’s Coca River, lending more than a billion dollars, while charging an interest rate of 6.9%, which is considered astonishingly, since Western countries are not willing to take a risk by doing business with Ecuador that has defaulted on its own debt in the past. Quito-based economist Ramiro Crespo explains:
“Without international organisations, without foreign investment, without international markets, then you have to look for another source. That happens to be China, which has a lot of reserves and extra money.”