AFRICAN INTERESTS OF CHINA

The 7^th China-Africa summit (FOCAC) held in Beijing in the first decade of September was the most representative event in its eighteen-year history. It was attended by the leaders of 53 of 54 African countries except Esvatini (former Swaziland), the last state on the continent that maintains diplomatic relations with Taiwan. UN Secretary General Antonio Guterres also honoured the summit with his participation.

China made its first timid steps to "conquer" Africa back in the 1970s as a trading partner with negligible assets. At that time, the obvious favourites among investors were the US, USSR and European countries.

Later, the USSR passed away and Russia, the successor of all its foreign assets, has lost most of its positions in Africa. Due to internal problems, Europe has gradually lost interest in her southern neighbour. The new US administration decided to stop any humanitarian and other assistance to foreign countries rather demanding fair trade relations, which eventually led to the reduction of cooperation with African countries. After the 2008 crisis, Western investment has not been noticeable on the African continent.

Trade imbalance

However, we can see a rapid growth of Chinese investment in Africa. Since 2008, China has been Africa's largest economic partner increasing the trade volume more than 200 times over the past 40 years, from $765 million in 1978 to $170 billion in 2017. During the first half of 2018, bilateral trade volume grew by 16% reaching $98.8 billion compared with the same period of the last year.

In fact, China has repeatedly adjusted its cooperation strategy with Africa. Instead of viewing the Black Continent solely as a sweet spot for distributing Chinese consumer goods and a rich source of raw materials, China soon realised that it was in its own interests to develop African industry and agriculture.

The trade increase between the African countries and China does not mean trade relations are balanced. China is the largest exporter to African countries, but imports very little. African exports to China mainly consist of raw materials, while China's main export items to Africa include industrial products and cheap consumer goods. For example, the import-export ratio between Uganda and China is 22:1. Even Nigeria, the largest oil producer on the continent, imports $11 for every one dollar of exports to China.

Easy Money

Until recently, China has been mainly a creditor of Africa. African countries have long enjoyed borrowing from China, as there was no need to make promises to fight corruption, protect the environment, respect human rights, ensure freedom of speech, etc. In addition, loans were often issued without any collateral requirements, as state guarantees were enough.

But easy money is doomed to vanish soon too – corruption, uncontrolled spending and often the implementation of meaningless projects are perfect examples of overspending. So, time passed, debts accumulated, and it turned out that it was not easy to return the borrowed money.

In a number of countries, such as the Republic of Congo, Zambia, and Djibouti, Chinese loans have become a reason for debt crises. Indeed, Djibouti's loan portfolio, for example, accounts for 75% of the national GDP, and its share in the public debt in the coming years is expected to grow from 82 to 91%.

Kenya is also experiencing problems with foreign debts reaching $50 billion, of which 72% are Chinese loans. Virtually all of Angola's oil goes to pay off Chinese loan debts of $25 billion.

China understands this and periodically carries out debt restructuring. During the last summit, Chinese President Xi Jinping promised that by the end of 2018, the least developed, landlocked states of Africa, as well as the small developing island countries of the continent will be exempted from the payment of interest-free state loans.

Four proposals

Beijing's intention to increase investment and to encourage the launch of Chinese industries will contribute to balancing trade relations with Africa. So, China is now challenged with a task of either buying local productions or building new ones to supply the manufactured products to Chinese and other markets.

About 3,100 Chinese companies have already invested in projects related to transport, energy, telecommunications, mining and manufacturing, agriculture, water, health and education. According to McKinsey, in 2017, more than 10,000 Chinese companies were operating in Africa. For instance, a Chinese company Hua Jian built a shoe factory in Ethiopia, which exports its products mainly to the US. Also in Ethiopia, China is now setting up soybean imports to reduce own dependence on supplies from the United States.

However, African leaders believe that the measures taken by China are not sufficient to smooth the trade imbalance and therefore, insisted on solving this problem during the recent summit in Beijing.

In response, President Xi Jinping made four proposals. First, to help promote African goods within China, for example, by introducing e-commerce, conducting regular specialised trade exhibitions and other marketing events. As a first step, the poorest African states are promised free participation in the China International Import Expo, which opens in November in Shanghai. Secondly, the Chinese government is ready to develop a program of trade facilitation, including, inter alia, new customs procedures tailored for each of the African countries. Thirdly, it was proposed to create a new $5 billion fund to finance imports from Africa. Finally, Beijing pledged to start free trade negotiations with middle-income African countries. Currently, 97% of goods from the least developed countries of the continent have the right of duty-free access to the Chinese market.

Caring for safety

It is likely that the dependence on natural resources of Africa, as well as the actively growing investment in this region, also related to the global project "One belt - one way" including 37 African countries, encourage Beijing to take measures to ensure the safety of its assets.

In fact, China has several real tools to accomplish this task: own army, armed units of countries where China has economic interests, as well as the UN peacekeepers. Beijing will uses all of them.

Following Djibouti, where China opened last year its first foreign military base for 10,000 troopers, Chinese military presence can be expected in Sudan, Kenya and other countries of the continent.

For two weeks in June and July 2018, the China-Africa Defence and Security Forum was held in Beijing and attended by representatives from 50 African countries. This was a great chance to coordinate joint efforts to ensure law and order on the continent. In particular, China announced its readiness to render military assistance to the African Union for $100 million.

The first Chinese military units in Africa appeared in 2003 in Liberia as part of the UN peacekeeping contingent. Subsequently, China became the most active participant in peacekeeping missions in Africa among the five permanent members of the Security Council. As part of the international anti-piracy program, China has sent navy ships to patrol the East African coast since 2008.

In general, since 2010, the Chinese peacekeeping contingent has been the largest in the UN. China pays more than 10% of the total UN expenditures on peacekeeping operations and has declared its readiness to invest another $10 billion in the coming ten years.

To Africa with peace

The summit and the meeting of military personnel are not the only major events of this year between China and Africa. In summer, two more forums were held - the "public" forum, which discussed such issues as education, health and poverty reduction in Africa, as well as a media forum. In November, it is expected to hold a congress on investment cooperation.

Cheap multibillion-dollar loans, investments, financing of social and educational programs, intensive work with all public sections help China to gradually gain real power on the continent.

In 2015, China failed to reach a peace agreement between Sudan and South Sudan. The most it could do then was to get shaky guarantees from both sides not to attack the oil infrastructure that China owned. In return, Beijing vetoed at the UN Security Council on sanctions against state officials of both countries.

However, in July 2018, China put an end to the 22-year war between Eritrea and Ethiopia having managed to put their leaders at the negotiation table. China needs peace in this region, since the Ethiopia-Eritrea-Djibouti triangle, by design, should become an important transport corridor for the growing trade turnover with the continent. And China reached the peace it wanted by using its strong influence in these countries.

China is trying its best to prove that it came to Africa only with good intentions. Maybe this is true. However, a tendency to establish the Chinese monopoly on the continent is alarming. Borrowing money is an ungrateful deed. But if necessary, it is still better to diversify the risks.