The impact of Covid-19 on Africa and the developing world has been foremost an economic crisis, followed by a health crisis that will have profound implications for the China-Africa economic relationship in the years to come. The pandemic represents a critical juncture for China’s role in development finance in Africa and for commercial relations, but we are also likely to see continuity and growth in China-Africa diplomatic engagement and in other areas of cooperation.
In this paper, I will discuss the immediate impacts of Covid-19 for China-Africa relations in the last year, and potential areas of change and uncertainty. I will then highlight areas of continuity and cooperation, before turning to the question of potential EU cooperation and trilateral engagement between them. I conclude with some policy recommendations.
Change and Continuity
The impact of Covid-19 on China’s relations with Africa have been primarily economic and financial in nature. In terms of trade and foreign investment, the global slowdown, as well as the drop in demand from the Chinese economy, has hit resource exporters through falling commodity prices. More indirectly, lockdowns and travel suspensions have also halted many China-Africa cooperation projects and will stall many other Belt and Road projects—the ODI calculated that around 15 BRI projects worth over US$2.4bn ran into trouble last year (Tanjangco et al., 2020).
Another salient issue has been the emerging debt crisis, particularly in sub-Saharan Africa, and China’s contribution to the debt burden of African governments, who face huge fiscal constraints in dealing with the virus, and with the economic fallout of the pandemic. In the last two decades of China’s growing role in global development finance, it is now the largest bilateral official creditor in Africa, but sits outside of OECD Paris Club framework, whose previous role was significant in debt relief for highly indebted poor countries, but now have little influence. Lending has shifted away from traditional donors to rising powers and—more critically—to bondholders and private sector lenders, and has complicated debt relief agreements.
While China did participate in the G20 Debt Service Suspension Initiative last year (DSSI) and has agreed to participate in the Common Framework, the impasse between the commercial interests of Chinese lenders and private sector creditors and bondholders have made restructuring and negotiations for developing country governments even more difficult.
Finance is one area of change where the pandemic may be a critical juncture. Even prior to 2020, debt issues and a disillusionment with Chinese lending was apparent in Africa and elsewhere in the Belt and Road. The Boston University Global Development Policy Center showed that lending from the two primary policy banks globally slowed down significantly after 2018, and there appears to have been a retrenchment in Chinese banks’ appetite for lending (Fig 1) (GPDC, 2020). However, private sector finance may be growing, which may provide potential new sources of finance in areas such as renewable energy investment (Tanjangco et al., 2020). In the longer-term, China’s shift towards a dual-circulation economy may also see a shift further away from the resource trade that has dominated its relations with African countries; the domestic economy may also take priority in how China’s capital reserves will be allocated in the future.
Source: BU GDP Center, 'China's Overseas Development Finance Database', IMF World Economic Outlook database
In diplomatic relations between China and Africa, the political importance of Africa as a region will continue—2021 marks two decades after the first Forum of China-Africa Cooperation, and African countries have remained consistent in their support for China in the UN and international forums, despite the ongoing issues around debt relief. China has eagerly tried to demonstrate in the wake of Covid that it is a cooperative global partner and global power, in its support for multilateral institutions, and through its mask and vaccine diplomacy.
However, the ambitions of the Belt and Road initiative in Africa have also been fraught. The high-profile projects of railways in Kenya and Ethiopia are at risk of becoming white elephants, and have contributed to the debt and financial woes of these countries. Inadequate risk assessment and due diligence from China’s creditor/contractor space, combined with lack of capacity and institutional corruption on the African side has led to ill-advised investments, all of which contributes to reputational damage for China in these countries.
Cooperation and competition
In the Covid crisis and in multilateral contexts—in the UN, G20, and WHO, China has been keen to show itself as a responsible global power, particularly during the Trump administration in the US. In its soft power in Africa, it is nearly unmatched—no other international partner has such visibility. While much of this has been in infrastructure construction, China has also invested heavily in cultural influence, for example, through African media engagement, through Star times, CCTV Africa, and through training African journalists. In all these fronts, compared to Japan or other Asian powers, China’s public diplomacy remains a powerful force.
The EU, however, still plays an influential role, and the pandemic creates opportunities for cooperation with China through common goals, such as in ensuring vaccine rollouts in the developing world—Africa still lags behind the rest of the world in vaccine and supporting a green economic recovery. The EU and China also have a common and mutual interest in investing in climate-resilient technologies in developing countries, drawing from European technical expertise and China’s economies of scale and production capacity in renewables, to scale up financing and investment in renewable energy generation in African countries. The EU can play a key partnership role in working with African governments to build a constituency of support for renewables, to shift countries away from fossil fuel and coal-based development. European partners and development finance institutions can play a role in partnering directly with governments to create a pipeline of feasible projects and ensure energy security for the energy security and needs of the economy.
As well as on the green recovery, European partners can also play a role in engaging with African governments in improving the transparency of their financial data—the lack of transparency of Chinese lending is well-known, and a salient issue for debt restructuring, however transparency is possible though borrowing governments themselves: European partners can work with African governments and bureaucracies to strengthen financial management systems and legal structures for transparency, to publish financial data and indirectly, strengthening their capacity to negotiate against China and other creditors.
GPDC (2020) BU: China’s Overseas Development Finance, Boston University. Available here (Accessed: 20 January 2021).
Tanjangco, B. et al. (2020) Pulse 1: Covid-19 and economic crisis – China’s recovery and international response. Overseas Development Institute, p. 42.
Tanjangco, B. et al. (2020) Pulse 2: China navigates its Covid-19 recovery – outward investment appetite and implications for developing countries. Overseas Development Institute, p. 59.