Economist: African Countries Could Become Mired More Deeply as Beijing Waives Loans

Beijing announced its plan to waive 23 interest-free loans for 17 African countries that had matured at the end of 2021. China’s citizens reacted with unprecedented scolds online, while an analyst warned of the trap behind the apparent largesse of the Chinese Communist Party (CCP).

On Aug. 18, Foreign Minister Wang Yi delivered Beijing’s decision at the Forum on China-Africa Cooperation (FOCAC) video conference.

Wang claimed it was the regime’s concrete action to implement and advance the “high-quality Belt and Road cooperation.”

However, the Chinese populace rejected this claim. An analyst also suspected the decision would only put African countries further into dire economic situations.

Unpopular Decision

Although the exact amount of debt to be waived is not known, a Chinese online article said China’s total loans in Africa were $145 billion at the end of 2020.

Beijing’s latest decision drew much criticism on Chinese social media.

One person wrote, “Traitors, these are the real national thieves!”

Another said, “Spending trillions of RMB so that the African brothers would support ‘one-China;’ this is the style of a big country.”

“Can ordinary Chinese also waive their debts?” a netizen asked.

“A bunch of lazy villagers borrowed money from my mom, over and over again … I owed my mom 300 yuan for Wifi, but she threw me into a dark cell right away! I suspect she’s not really my mom,” another post said.

Since the founding of the People’s Republic of China (PRC), the CCP has used foreign aid to rent its diplomatic recognition even when the nation was in a 3-year famine.

However, this time it’s really putting itself “against the will of the 1.4 billion people,” as one netizen commented.

Mr. Chen (alias), a Shanghai resident, explained there’s wide disapproval of the people to the CCP’s foreign policy.

He said, “It is wrong to keep doing this. The country suffers heavy economic losses from the pandemic, now there’s a shortage of power generation in the Three Gorges dam, even the Shanghai Automobile Manufacturing Plant has to suspend production for a week … where’s the money? … It was interest free loans, now it’s all wiped out, … Plus the many unfinished projects in the Belt and Road Initiative (BRI); people have really bad feelings about it.”

Dollar Diplomacy

Economist Davy Jun Huang explained that the CCP timed the waiving of the loans to suit its purpose, which was to gain diplomatic support from the African countries.

According to a Chinese media report, the Malawi Ambassador to China, Allan Joseph Chintedza, welcomed Beijing’s move and said that every participant in the conference reiterated their support for the one-China policy.

The one-China policy is the CCP’s position of PRC sovereignty under the name of China, and insists it includes Taiwan.

Huang believes the CCP’s geopolitical competition—the discourse power in West Africa—with the West, was also part of the reason for this diplomatic gesture.

In June, the G7 leaders pledged to raise $600 billion over five years to finance needed infrastructure in developing countries. Last year, the European Union announced plans to invest €300 billion (about $299.9 billion) over a span of six years for global infrastructure. Both undertakings are seen as rivals to China’s BRI.

China’s BRI, a global infrastructure plan, is known to have devastated developing countries with crippling debts along with unsustainable infrastructures and unfinished projects.

In August, when U.S. State Secretary Antony Blinken visited South Africa, the White House also released the “U.S. Strategy Toward Sub-Saharan Africa” (pdf)—a promise to deliver democratic and security dividends. “This strategy outlines four objectives to advance U.S. priorities in concert with regional partners in sub-Saharan Africa during the next five years.”

The release says that the CCP “sees the region as an important arena to … advance its own narrow commercial and geopolitical interests … and weaken U.S. relations with African peoples and governments.”

The CCP’s Foreign Ministry spokesperson Wang Wenbin objected to the U.S. statement by saying that no one should “denigrate and smear China-Africa cooperation.”

Deeper in the Mire

Huang explained that the CCP has planned its lending strategy. In the CCP’s debt-trap diplomacy, there are predatory measures such as access rights to local mines, power plants, ports, etc., which are counted into the economic aspects of a loan.

There are also the political aspects of the loan. “In signing the agreement, there are various proportions of low-interest loans, and interest-free loans; and interest-free loans are mostly designed with political needs,” Huang said.

Huang anticipates that new forms of debt will accompany any loan forgiveness.

He said there will be undisclosed trade negotiations, which will only further the dire situation of these African countries.

Huang disclosed the purpose of the BRI according to a CCP’s internal source: The BRI was a carefully calculated conspiracy—not the superficial net gain and loss on the books. “The CCP won’t allow the partner countries to get real prosperity,” Huang said.

To make an analogy, the BRI is like having an elephant plow the field. As the animal steps on the land it further packs it down. That is, elephants will only make the field harder to plant and thus cause a poorer crop yield, he said.

After the CCP’s debt relief, these African partner countries are likely to become more financially dependent on the CCP.

“The finances will collapse, … and they’ll only become even poorer,” Huang said.

Lin Cenxin and Yi Ru contributed to this report.