The Myth of the Chinese Debt Trap in Africa

Over the past two decades, China has significantly increased its infrastructure projects in almost every African country, causing discomfort among Western critics. The term 'debt-trap diplomacy' emerged, suggesting that China lends unsustainable debt to poorer countries, forcing them to surrender strategic assets or increase political leverage. However, there's no concrete evidence of this in Africa. Western anxieties about China's influence in Africa are growing, with China becoming a major player in infrastructure development. While the U.S. focuses on aid, China emphasizes business partnerships, appealing to African governments tired of aid and charity. China offers fast and cheap large-scale infrastructure projects, which have been welcomed by African countries, contrasting with the West's historical retreat from infrastructure investments in Africa since the 1960s.

China is involved in infrastructure projects in an estimated 35 African countries, investing over $340 billion. This investment is significant due to Africa's large infrastructure gap. Chinese loans differ from Western loans, typically offering low-interest rates and flexible terms. Chinese loans can be categorized into zero interest loans, concession loans for large infrastructure projects, and commercial loans with higher interest rates. A common misconception is that all Chinese loans are the same, but they vary widely. Reports suggest that Chinese loan agreements often favor lenders, and early investments have sometimes lacked proper due diligence, leading to unprofitable projects. Transparency issues and secretive clauses in Chinese contracts are notable concerns. Despite these issues, Chinese banks ensure borrowers understand loan terms to avoid future disputes.

Debts to China are growing in countries like Kenya and Nigeria. For example, Kenya's $3.6 billion railway from Mombasa to Nairobi has faced financial losses, while Nigeria's largest infrastructure project, funded by a $1.3 billion loan from the China Exim Bank, shows China's critical role in financing. Despite criticisms of transparency and fears of asset seizures in case of defaults, Chinese loans constitute a relatively small percentage of these countries' total debt. Most African nations owe more to private bond markets than to China. The idea that China can leverage its debt for control is unfounded, with data showing limited Chinese influence based on debt. Angola is an exception, holding a third of all Chinese debt in Africa.

In the Democratic Republic of Congo, China's controversial resource-backed loans have led to significant mining investments but also corruption. The 2008 China-Congo agreement involved financing infrastructure and mining projects, but benefits to the Congolese population have been limited, with leaked documents showing funds directed to the then-president's family. The lack of transparency in such deals raises Western fears about China's growing influence. Africa's significant mining industry, particularly in cobalt, crucial for future technologies, highlights the stakes involved. Despite anxieties, China's investments are seen as filling a void left by the West's retreat from large-scale infrastructure projects in Africa.

There are significant ideological differences in how the U.S., Europe, and China approach lending to Africa. Western loans often come with conditions promoting democracy, anti-corruption, and good governance, while Chinese loans focus on business without such conditions. This can lead to political support for China on key issues like Taiwan. African countries often act as a bloc in international organizations, and their political support is valuable to China. While the U.S. and Europe have launched initiatives like the EU's Global Gateway and the U.S.'s Build Back Better World to counter China's influence, these efforts are still developing. China's approach of providing needed infrastructure, despite concerns over transparency and quality, has found favor in Africa, where the infrastructure gap is vast.