Business leaders and development strategists speaking in Singapore this weekend were sharply divided over China’s commodity-fuelled drive into Africa, and the US’s attempt to curb Chinese infrastructure lending on the continent. The US had urged the G7 leaders, meeting on Saturday, to pressure China not to load its African clients with potentially expensive new lending for infrastructure. The loans are often linked to oil and other resources plays by the People’s Republic in Africa and other poorer regions.
US calls, aimed at China, for discipline in allocating new lending to poorer countries that have benefited from debt relief, appeared in the G7 communique only in watered-down form. It welcomed “the increasing role of new donor countries”, and added that it is “imperative that all donors share information and take account of debt sustainability issues in their lending practises”.
Govind Nankani, World Bank vice president for Africa, yesterday said that while “we are seeing an increasing number of [Chinese] loans of varying degrees of concessionality”, donors were “concerned about the poorest countries taking on new loans will lead them deeper into debt.”
Without being “country specific”, the IMF’s Africa department head Abdoulaye Bio Tchane said that following the G8’s debt relief package many sub-Saharan countries could again take on debt. But if the new lending was inappropriate, “they could get in a very difficult situation in the next few years.”
Trading with China and India offers “a major opportunity” for African economies, said Harry Broadman, author of a major new World Bank study on China, India and Africa launched yesterday. But resource producers need to be careful – and would be well-advised to save, according to IMF deputy Africa director Benedicte Vibe Christensen.
The resources boom provides a platform for growth, observed South African finance minister Trevor Manuel, but strong governance is needed to win “the battle for rationality in this world of exuberance”.
Morgan Stanley managing director and Asia-Pacific economist Andy Xie argued that by offering above-ground infrastructure in return for mineral assets, “China is saying let’s make the physical world first and then, if everyone gets a share of a bigger pie, people will stop fighting.”
Let Chinese construction enterprises build up sub-Saharan economies so more Africans can benefit from the economic upturn, Xie said – even if Beijing raises hackles over human rights.