China changes dynamics of African loans
Saturday, 16 June 2007
William Wallis from Shanghai
THE contrast in recent events at the headquarters of the World Bank and those in Shanghai at the African Development Bank's annual meeting served to underline just how great an impact China's rapidly evolving interest in Africa is having.
While the Europeans and Americans were fighting over Paul Wolfowitz's future as president of the World Bank, the Chinese were busy courting African finance ministers and central bankers, traditionally the World Bank's foremost clients.
They laid on banquets, gymnastic shows and special tours for ministerial spouses. Meanwhile, the Chinese Exim bank, according to Donald Kaberuka, the AfDB's president, rolled out proposals for a $20bn round of fresh trade and infrastructure financing in Africa.
The AfDB is caught in the middle. It is keen to engage the Chinese authorities in a strategic discussion over the continent's future.
It is also encouraged by the prospect - which predates the troubles at the World Bank but could be enhanced by them - of becoming a more important player as regional development banks come into vogue.
But it still relies on partnership with the World Bank and IMF and the funding it receives from traditional donors. Mr Kaberuka, a former finance minister in Rwanda, sees the bank as having an important role to play bridging the gulf.
"The African Development Bank is a common vehicle for Africa. A number of Asian actors - Japan, Korea, China, India - can use this vehicle to channel resources to Africa," he said in an interview with the FT.
"What we discussed with [Chinese] Exim bank officials is how this can be done. You will be seeing much more collaboration between us and Exim bank in the coming months."
As China ramps up its aid, trade and project financing to Africa in a bid to secure resources for its booming economy, tensions are however emerging with traditional donors, mostly in the west.
Since the end of the cold war, and in many cases long before that, the money OECD countries have provided has given them unrivalled leverage over African governments to promote their model of development.
The figures show that China is not yet a big provider of soft loans to the continent.
There was a lot of talk about a new Chinese model for African development at the Shanghai meeting. But interventionist states have a bad record in Africa. There is not much evidence yet that China could provide an alternative to the market reforms promoted by the Bretton Woods organisations.
China's mercantile interests on the continent are nevertheless changing the dynamics. Traditional donors from the west have used the budget support they provide to governments to encourage political as well as economic reforms. Their companies have also gained market access and contracts in the process.
The Chinese are using credit lines to secure their own market access and a growing share of oil and mining concessions.
The advantage for African governments with poor records in economic management and human rights is that the Chinese do not try to change the way they govern.
The problem, traditional donors contend, is that if they do not change, new loans will eventually turn into a new African debt crisis.
Mr Kaberuka acknowledges this challenge. "We are all trying to have an MOU with the Chinese on best practices," he said. "Instead of finger-pointing at China, I think it would be better to bring them in. I'm sure they have their own position, so engage them."
However, the onus was ultimately on Africans, he said, to ensure their new relationship with China was beneficial.
"My take on this is that it is Africa and Africans who should try to define and influence the relationship. It is not the Chinese."
Under syndication arrangement with FE
THE contrast in recent events at the headquarters of the World Bank and those in Shanghai at the African Development Bank's annual meeting served to underline just how great an impact China's rapidly evolving interest in Africa is having.
While the Europeans and Americans were fighting over Paul Wolfowitz's future as president of the World Bank, the Chinese were busy courting African finance ministers and central bankers, traditionally the World Bank's foremost clients.
They laid on banquets, gymnastic shows and special tours for ministerial spouses. Meanwhile, the Chinese Exim bank, according to Donald Kaberuka, the AfDB's president, rolled out proposals for a $20bn round of fresh trade and infrastructure financing in Africa.
The AfDB is caught in the middle. It is keen to engage the Chinese authorities in a strategic discussion over the continent's future.
It is also encouraged by the prospect - which predates the troubles at the World Bank but could be enhanced by them - of becoming a more important player as regional development banks come into vogue.
But it still relies on partnership with the World Bank and IMF and the funding it receives from traditional donors. Mr Kaberuka, a former finance minister in Rwanda, sees the bank as having an important role to play bridging the gulf.
"The African Development Bank is a common vehicle for Africa. A number of Asian actors - Japan, Korea, China, India - can use this vehicle to channel resources to Africa," he said in an interview with the FT.
"What we discussed with [Chinese] Exim bank officials is how this can be done. You will be seeing much more collaboration between us and Exim bank in the coming months."
As China ramps up its aid, trade and project financing to Africa in a bid to secure resources for its booming economy, tensions are however emerging with traditional donors, mostly in the west.
Since the end of the cold war, and in many cases long before that, the money OECD countries have provided has given them unrivalled leverage over African governments to promote their model of development.
The figures show that China is not yet a big provider of soft loans to the continent.
There was a lot of talk about a new Chinese model for African development at the Shanghai meeting. But interventionist states have a bad record in Africa. There is not much evidence yet that China could provide an alternative to the market reforms promoted by the Bretton Woods organisations.
China's mercantile interests on the continent are nevertheless changing the dynamics. Traditional donors from the west have used the budget support they provide to governments to encourage political as well as economic reforms. Their companies have also gained market access and contracts in the process.
The Chinese are using credit lines to secure their own market access and a growing share of oil and mining concessions.
The advantage for African governments with poor records in economic management and human rights is that the Chinese do not try to change the way they govern.
The problem, traditional donors contend, is that if they do not change, new loans will eventually turn into a new African debt crisis.
Mr Kaberuka acknowledges this challenge. "We are all trying to have an MOU with the Chinese on best practices," he said. "Instead of finger-pointing at China, I think it would be better to bring them in. I'm sure they have their own position, so engage them."
However, the onus was ultimately on Africans, he said, to ensure their new relationship with China was beneficial.
"My take on this is that it is Africa and Africans who should try to define and influence the relationship. It is not the Chinese."
Under syndication arrangement with FE