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Thread: Chinas New Approach in Africa

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    Chinas New Approach in Africa

    It looks like China is giving up on the Belt and Road in Africa in favor of smaller, targeted investments. African nations couldn't keep up with the grand plans.

    Chinas New Approach in Africa

    China is moving away from its landmark Belt and Road Initiative in favor of smaller direct investments in strategic projects like renewable power and communications. In 2013, Beijing unveiled the Belt and Road, consisting of huge loans for gargantuan infrastructure projects in the Global South. Africa was a major recipient of these loans. However, many BRI projects have not been completed or have been hamstrung by ballooning budgets, failure to repay debts or poor workmanship overseen by Chinese engineers. These disappointments are leading Beijing to reassess its strategy toward Africa.


    Resource Security and Political Capital


    Chinas endgame in Africa is to create favorable trade relationships and a reliable pipeline of natural resources. The strategy behind BRI was to exchange investment for political capital. China would help its partners develop transit routes to promote trade, both within the continent and with the outside world. For Beijing, warm relations with BRI recipients would ensure supply chain security and cheap mineral extraction with reduced royalty payments. At the time, China was also concerned about the security of its oil supply. Improved relations would also support Africas imports of Chinese goods; in 2009, China surpassed the U.S. as the top trading partner for Africa, and today it trails only the EU.


    Generally, Chinese capital has flowed to Africa in two forms: foreign direct investment or loans from the government, commercial banks or state-owned banks. Over the past few years, however, Beijing has poured less capital into things like transportation infrastructure, hydrocarbon pipelines and massive power projects. Instead, it is focused on buying equity in mining projects, funding smaller power-generation projects (especially renewable power), building internet and communications networks, and modernizing African government facilities. Renewable power projects are often profitable in the short term and generate goodwill with ruling parties, as do investments in government buildings.


    One thing China has found is that it can access the continents critical minerals, oil and gas without the huge investments that it once thought were key. Of the $169 billion that Chinese development banks and the government have lent to Africa, for example, a quarter went to Angola to be invested in its state-run oil company in a bid to ensure Chinas own oil supply. Today, 25 percent of Chinas oil and gas comes from Africa, behind only the Middle East. Through long-term supply contracts and favorable political conditions, China has avoided its immediate supply security fears. The same has been true of critical minerals like lithium, copper and cobalt. In the past, Beijing overinvested in resource-rich countries and used the minerals as collateral. In fact, African politicians were grateful for the Chinese investment and the often-favorable partnership terms with Chinese mining companies.



    Chinese lending ramped up through the 2010s and peaked in 2016. From 2012 to 2018, when China stopped funding many of these projects, its Africa loans totaled $107.9 billion a huge burden on Chinas coffers. The massive scale of BRI lending globally brought Chinas current account balance down to just $24 billion in 2018 from $293 billion in 2015, before rebounding after large external loans were drastically reduced. In 2020, China issued only $1.8 billion in loans a massive drop. This slide looks set to continue.


    Financial and Political Problems
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    QuaseMarco (05-22-2023)

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    And we're worried about Russia taking back Ukraine.
    China appears to be outflanking the USA in Africa and moving strong into South America.
    "Hell is empty and all the devils are here."
    William Shakespeare

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    Quote Originally Posted by QuaseMarco View Post
    And we're worried about Russia taking back Ukraine.
    China appears to be outflanking the USA in Africa and moving strong into South America.
    That is their goal.
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