From S.R.
For decades, China has supplied the funding for major projects in Africa. But a new report says that Beijing has drastically reduced loans in 2020, cutting out Arab states on the continent. The most worrisome aspects for North Africa and other countries is that this marks a trend that could affect BRI. Stay tuned.
He said. She said.
“It took our company about six months to complete this project."
Morimatsu deputy general manager Li Dao Quan says Morocco will be able to produce Covid-19 vaccines by the end of 2022.
Chinese and Egyptian representatives launch a trade and investment center in Cairo in 2017. [Suez Economic and Trade Co-operation Zone]
Focus
Is China Running Out of Money?
Over the last 20 years, China has lent nearly $200 billion to Africa, including Middle East states. But in 2020, Beijing seems to have run out of steam.
In a report by the GDP Center at Boston University, Beijing's credit to Africa dropped significantly in 2020, with 11 loans worth $1.9 billion. This marked a drop of 77 percent from the previous year. None of the loans went to Arab states.
"Loan commitment amounts hit a historic low in 2020," GDP said in a report issued on April 28. "Some possible contributors to this phenomenon include impacts of the Covid-19 pandemic on African willingness to borrow more, rising debt levels in some African countries, more cautious lending practices by some Chinese lenders and China’s macroeconomic pivot towards its 'dual circulation strategy,' which gives Chinese domestic 'circulation,' or domestic supply and demand, the center stage in economic development, while keeping enough openness to the international market to maintain supply chains."
Middle East states have become dependent on Chinese largesse. Beijing has loaned Egypt $7.9 billion, which financed two light rail projects. Sudan has taken out $4.8 billion in loans for power, water and transport projects.
Algeria and Tunisia have also received loans -- albeit totaling less than $150 million -- from Beijing. Chinese lending to these and other African states peaked in 2016.
But in 2020, Beijing stuck to non-Arab states. Its cheap, concessional loans were limited to financially-strapped Burkina Faso, Congo, Ghana, Lesotho, Madagascar, Mozambique, Rwanda, Uganda and Afreximbank, a regional organization. China Development Bank, a leading lender, did not make any loans to Africa that year.
The report said Beijing, which financed an average of 60 projects a year until 2020, was exhibiting caution amid the pandemic, which has led to massive shutdowns in China's industry. The GDP Center also said China might also be reducing the scope of its Belt and Road Initiative, which has regarded such Arab states as Djibouti, Egypt and Morocco as key participants.
"The trend over the two decades raises the question of whether Chinese loans to Africa are drying up," the report said. "Unlike World Bank lending, Chinese lending to Africa tends to decline during times of crisis, so the loan commitment dip in 2020 was not surprising."
Beijing has acknowledged that the days of cheap loans might be over. In November 2021, China told a ministerial meeting in Senegal that it would explore such alternatives as Public-Private Partnerships and Foreign Direct Investment, the latter which increased in 2020.
But FDI has mostly ignored Africa. In 2020, only four percent of global FDI went to Africa, of this one percent to North Africa. Moreover, some of China's loans have sparked controversy in regional states, including Angola, which received 27 percent of all $160 billion in Beijing's financial commitments to the continent.
Analysts said the Russian war in Ukraine might also be a factor in the decrease in Chinese loans to Africa. They also cited increasing difficulty by African states to repay their debt.
Phiwokuhle Mnyandu, a lecturer of African Studies at Howard University, told the seminar in which the report was released that Beijing could be moving away from its Arab allies for major projects in southern Africa. Mnyandu cited a high-speed railway that would link such countries as Botswana, Namibia, South Africa and Zimbabwe.
"Finally, more financing of renewable energy can be expected, per recent guidance from multiple Chinese ministries," the report said.
Foreign investors have expressed confidence that Beijing will restore its economic activities to pre-Covid levels by 2023. In a conference in St. Gallen, Switzerland on May 9, Peter Voser, the chairman of the Swiss engineering and automation group ABB said he expected a recovery in production and industry.
"We had significant order growth in the first quarter in China," Voser said on the sidelines of the annual conference. "We do expect a certain slowdown due to Covid-19, but personally and also as a company we are positive on the overall outlook of the economy in China,."
Ticker Tape
...China has sent its first shipment of vaccine production equipment to Morocco. On May 5, the Pilecki ship left Shanghai with 40,000 cubic meters of Covid-19 equipment from Morimatsu and the Chinese-Polish Joint Stock Shipping Co. in a project valued at 200 million euro. This was said to have marked the first shipment of Covid production systems to an African country. Starting from late 2022, officials said, Morocco would be able to manufacture vaccines to cover more than 60 percent of Africa's needs.
...China and Morocco plan to increase cooperation in tourism. Officials said the two countries would promote cultural exchanges as part of efforts to expand economic ties. On May 9, Morocco's Ibn Zohr University convened a session with the Chinese embassy and the Confucius Institute as part of the 2016 Joint Declaration on Strategic Partnership. The Confucius Institute has introduced Chinese language and culture courses for Moroccans. In 2022, Chinese direct investment in the North African kingdom reached $380 million, including automotive parts and renewable energy.
...Egypt has come on board in embracing the yuan. Officials said Cairo plans to issue yuan-dominated bonds in the Chinese market in an effort to diversify financing tools and sources. They said the yuan, the second largest bond market in the world, would attract investors and reduce costs. China has been an important trading partner of Egypt, including technology transfer, industry and infrastructure. Beijing has been pressing Middle East and other allies to adopt the yuan, rather than the U.S. dollar, for trade.
...Syria has reaffirmed its support for Chinese foreign policy. The Syrian Foreign Ministry said it was reaffirming China's global security initiative in all international forums. The statement on May 10 comes in wake of an intensification of bilateral cooperation, including Syria's participation in the Belt and Road Initiative and the signing of a memorandum of understanding on economic issues. In April, Beijing announced an initiative to reduce global tension, particularly in the Middle East and Africa.
...Qatar has hosted a telecommunications summit with China's Huawei. Called "Thriving with Resilience & Integration in the New Opportunity Realm," the ninth annual meeting in May focused on 5G as well as integrating technologies, infrastructure investment, connectivity and spectrum availability. At the meeting, the company introduced Huawei IntelligentRAN, meant to facilitate smart grids while significantly reducing energy consumption across the entire network. Huawei has been a leading provider of 5G services, technology and training in Qatar and other Gulf Cooperation Council states.