Seven decades of Chinese state financing in Africa: Tempering current debates

ABSTRACT

Fierce debate persists among policymakers and researchers about the nature and consequences of overseas Chinese state financing. Developing countries in Africa are a major focus of this controversy. However, popular accounts are often devoid of historical context, and instead emphasize China’s emergence as a prominent aid donor since 2000. This article combines evidence on historical and contemporary Chinese development projects to revisit popular claims about the motives and effects of Chinese government financing in Africa. I delineate Chinese development finance to Africa into four periods largely based on China’s own development trajectory: the early years; revolutionary diplomacy; post-reform, commercially oriented development; and the current period of global engagement. I then revisit three controversial narratives about Chinese development finance to Africa: the ‘rogue donor’ label; the socioeconomic and political consequences for African societies; and potential debt risks for African governments. In doing so, I also review recent evidence using the data discussed in this article. On balance, incorporating historical and recent evidence on Chinese state financing produces a mixed outlook with reasons for both optimism and concern. This contrasts with popular, highly opinionated views on Chinese financing that often extrapolate specific episodes into continent-wide narratives.

KEYWORDS:

• Africa
• China
• foreign aid
• development finance
• international political economy

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

The author thanks Pippa Morgan and Yu Zheng for sharing their dataset on Chinese development finance to African countries, and to Andreas Fuchs for sharing datasets from Bartke 1989 and Lin 1993. The author also thanks Emmanuel Akyeampong, Hippolyte Fofack, Yuan Wang, and anonymous reviewers for helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author.

ORCID

Austin Strange http://orcid.org/0000-0003-0878-7920

Notes

1 The Yellow River Sanmenxia Engineering Division was an early PRC hydroelectric project work team that was highly touted by China’s government and later incorporated into Sinohydro Bureau 11, now a subsidiary of PowerChina, a major state-owned enterprise and holding company for several other large SOEs.

2 The Central Intelligence Agency (CIA) also produced multiple studies using data on Mao-era Chinese projects.

3 More recently, Hawkins et al. (2010) attempt to track individual Chinese aid projects globally between 1990 and 2005.

4 See Strange et al. (2013) for a review of various research efforts, including their strengths and weaknesses.

5 These data were constructed using the Tracking Underreported Financial Flows (TUFF) methodology (Strange et al. 2014). In short, TUFF is a standardized set of procedures for open-source data collection designed to identify the publicly known universe of officially financed projects from donors or lenders that do not systematically report project-level data. See Strange et al. (2014) for a discussion of the benefits and limitations of this approach.

6 According to the OECD, for a project to qualify as ODA, it must be (1) undertaken by the official sector; (2) concessional so as to have at least a 25% grant element; and (3) primarily intended for development in the recipient country.

7 As one scholar noted, ‘The major difficulty has been the state of documentation and statistics in the PRC’ (Law 1984, 24). In addition, earlier efforts had difficulty ‘following the money’ and tracking projects from their initial announcement to implementation or completion. Similarly, previous attempts suffered from double-counting projects that were announced at multiple times (Lin 1993, 14–17).

8 As such, in the below analysis I consider both the financial value of projects as well as the total number of projects.

9 Lin (1993) periodicizes the first five decades of China’s global aid into four eras: 1953–63; 1964–71; 1972–78; and 1979–89. Kobayashi (2008) instead uses intervals based on China’s net aid, considering China a net donor from 1953–78, a net recipient from 1978–95, and an emerging donor since 1995. Dreher and Fuchs (2015) divide Chinese aid into five periods based on historical sources: 1956–69; 1970–78; 1979–87; 1990–95; and 1995–2005. Cheng and Taylor (2017) focus specifically on Chinese aid to Africa and demarcate Beijing’s aid financing by the beginning (1955–63), the development (1964–70), and the outrageous (1971–78) stages, followed by an initial reform (1978–93) period.

10 These include mutual respect for states’ territorial integrity and sovereignty, mutual non-aggression, mutual non-interference in states’ internal affairs, equality and mutual benefit, and peaceful co-existence. The principles were incorporated into a joint statement at the Bandung Conference in 1955, after which they gained momentum as overarching foreign policy guidelines for China.

11 Measured in constant dollar terms, only in 2005 did China’s aid budget return to these revolutionary levels.

12 As it provides a relatively comprehensive account that incorporates previous official and unofficial data, in analysis below I also supplement these data with research by Lin (1993). Unless otherwise indicated, both the number of projects and the value amounts refer to project commitments, not disbursements. Values are deflated to 2014 USD.

13 Immediately after World War II, the majority of countries in the world recognized neither the PRC nor ROC as the legitimate government of China (Rich 2009). Major international shifts resulting in widespread recognition of the PRC occurred following US–China rapprochement and China’s ascension into the UN.

14 Unless otherwise mentioned, sectors herein refer to those defined by the OECD.

15 China’s 2011 aid White Paper summarizes this reform, stating that under Deng, China ‘strengthened its foreign aid to the least developed countries, paid more attention to the economic and long-term effects of aid projects and provided aid in more diversified and flexible ways’ (SCIO 2011, 2014).

16 Though not the focus of this article, the early reform era was when China began to more fully join the UN’s primary development institutions such the United Nations Environment Programme (UNEP), the World Health Organization (WHO), and UNESCO, and began to contribute to limited multilateral development finance (Zhou and Xiong 2017). China’s commitment to multilateral financing expanded significantly in later periods, particularly under Hu Jintao, but has remained much smaller than its bilateral financing across different historical periods.

17 Eventually, China’s global approach would also come to include the creation of new development finance institutions, such as the Asian Infrastructure Investment Bank (AIIB).

18 Notably, much of this debate is not directed at Chinese government aid per se, but more generally at Chinese commercial interests in Africa. It is worth noting that public opinion data suggests the majority of African publics reject the notion that China’s economic ties on the continent are ‘neocolonial’ (Sautman and Yan 2009).

19 From a broader perspective, neither China’s development finance nor the Chinese-created institutions such as the BRI that funnel a growing share of Chinese government financing to other countries appear to be challenging the status quo international development regime (Dollar 2018).

20 Others contest this claim and suggest that there is little evidence across African countries that Western donors are losing bargaining power to China (Swedlund 2017b; Humphrey and Michaelowa 2019).

21 It is worth noting that China itself developed a strong aversion to debt after facing enormous war debt burdens throughout its Century of Humiliation and after borrowing large sums from the Soviet Union in the early era of the PRC. More insights are likely to be found in many African economies’ own historical experiences with Western development financing and public debt.

22 Additionally, important details regarding the terms for loans signed in earlier periods of Chinese history are not publicly available.

23 Recipient capacity has also been a crucial mediating factor in other areas of society, for instance, whether and how Chinese aid projects exacerbate environmental degradation in the form of deforestation (BenYishay et al. 2016).