Chinese Lending to Africa is Way More Complicated Than You Think
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Hello and welcome to another edition of the China in Africa podcast, a proud member of the Seneca Podcast Network. I'm Eric Olander, and as always, I'm joined by CGSP's managing editor, Kobus Venstaden, in beautiful Cape Town, South Africa. A very good afternoon to you, Kobus. Good afternoon. Kobus, it has been just over a week now since Donald Trump won re-election to the presidency of the United States. Lots of reaction coming in from

all over the world. Interestingly, though, Kobus, the reactions coming from Africa, much more subdued than we're seeing in other parts of the world. Maybe give us a little bit of insight as to what people are seeing in South Africa specifically, but Africa more broadly. From what I've seen, the reaction is breaking down along a few lines. On the right wing of the African debate, I've seen some people, particularly on Twitter, being very triumphant.

But they tend to be people who are plugged into kind of like anti-trans discourse. So I was like, I saw, I was a little startled by one researcher that I know that seemingly went entirely MAGA, but in French, on X, you know, and it was an interesting moment for me. That's a minority. The rest of the wider reaction, as you say, has been relatively muted. And I think partly it's, I think because

a lot of people don't care. I think, you know, a lot of people are relatively indifferent to it. I think they, not that they don't think, not that they think it won't have an effect. I think they do think it will have an effect.

But I think they also feel that they've seen a first Trump term, and that term was marked by largely a withdrawal of U.S. involvement in Africa. And U.S. involvement in Africa, while robust, has also been on a plateau for a long time. And there hasn't been a lot of new forms of engagement outside of specific infrastructure projects.

So there's been some discussion about whether things like the Lobito corridor will continue. I think that's open for discussion. In South Africa, there's some worry that South Africa is going to be targeted, you know, because there's some anti-South African hawks, you know, in the Republican Party now. And I think they're also worried about the possible impact of the African Growth and Opportunity Act, which is coming up for renewal next year. So, you know, kind of, I think...

A lot of people are wondering what that's going to be. But overall, I think a lot of Africans are counting on less U.S. interest in Africa. And for a lot of them, I think they are seeing that as maybe a good thing or maybe that kind of less interest from the U.S. means less resources, but it also means less risk, I think. You met with an executive from a Chinese tech company today. And one of the observations that he had was that

you know, in South Africa and Kenya and other places, they're not really going to pay much attention to U.S. concerns about Chinese tech in Africa, much as happened during the first Trump administration when there was a lot of concern about ZTE, Huawei, and other 5G providers, for example. Now, probably EVs are on that list as well. Maybe recount a little bit of your conversation without revealing too many of the details of who you spoke with, but talking about, you know, what the reaction was from African stakeholders.

Well, what he told me was that in general, the conversation about whether, you know, working with Chinese companies is going to fall afoul of the US has to a certain extent fallen off the table. Not that they think that there won't be pressure from the US, but because African countries are just increasingly making their own decisions around these issues. And that even though they acknowledge that there may well be pressure, they also don't

that not all of the companies by any means, but some of the major Chinese companies that they've been working with for so long now have a very established presence in Africa and frequently provide more kind of attentive service than many of the European competitors. He was saying that in a lot of cases, some Chinese companies would be more

more involved, you know, for example, in really on nitty gritty, you know, kind of details of project planning in a way that, you know, many of their competitors won't be. And so he was basically saying that the solidity of that relationship means that people aren't that interested in the pressure that will come from the US, depending on how strong that pressure is, of course.

Well, Trump's national security team is starting to take shape now. We know that Florida Senator Marco Rubio is going to be Secretary of State. One of the things that we're starting to see is a hallmark of that national security team, the national security advisor, as well as Rubio, is that being a China hawk seems to be a prerequisite to join the cabinet. And China looks like it's going to be a major focus of the new administration's foreign policy. That probably means

discussions about Africa, Latin America, specifically Latin America, given that's been an area of interest by Marco Rubio. But we're going to probably see a lot more talk about Chinese debt around the world. And that has been one of the hallmarks of the first Trump administration when Mike Pompeo was Secretary of State. They really brought a raise the volume on this predatory lending and on debt traps and all of that. That will probably come back again. I think we've moved beyond that

in some parts of the discourse. But Kobus, as you and I know, we've been for the past four years under the Biden administration and Biden himself was

was propagating that line. But one of the things that we're starting to find out now more is that the diversity of creditors is far more complex than what we have traditionally thought it to be. When we think of Chinese debt in places like Africa, we tend to think of the China Exim Bank and the China Development Bank as the two primary creditors. Those are the policy banks.

And we basically think of Chinese creditors as a monolith. China is what we say, but it actually it's far more complicated than that. There's a new report that came out from ODI Global, China's creditor diversification in Africa impacts and challenges of infrastructure debt financing by Chinese commercial creditors.

And it was written by Tianyi Wu, who's a PhD candidate at the Blavatnik School of Government at the University of Oxford, and now a pre-doc research fellow at Boston University's Global Development Policy Center, and our old friend of the show, Yunnan Chen, who's a research fellow specializing in development and public finance at ODI Global in London. Yunnan, Tianyi, very good afternoon to you. Thank you so much for joining us on the show. Thank you so much for having us. Thank you.

Tianyi, this was your report. You took the lead on this research project. Let's begin with you. As you dove into this and you started to look at the different actors there,

When we say, again, Chinese lending, we think of those two policy banks that I pointed out. But as you pointed out, it's not a monolith. Maybe you can give us a lay of the land in terms of this diversity of creditors, from commercial creditors to the policy banks to state banks. Who are the different actors that we're talking about that your research uncovered?

For sure. Like you rightly so have pointed out that if we think about Chinese lending in Africa, the most prominent actors popping into people's head are the policy banks, which are Ex-Im Bank and the China Development Bank. Ex-Im Bank is one of the only institution in China that provides concessional loans, although they also provide loans on commercial terms.

CDB is another policy bank, mainly provide loans on commercial terms, which sort of already differentiate itself from its policy bank partners, Ex-Im Bank. But aside from these two policy banks, which de facto, yes, providing more than 70% of the infrastructure lending in Africa from a continental level, there's this new group of actors, which are commercial creditors, for

from China that are also engaging in specifically a lot of infrastructure lending towards African countries. And within this commercial creditors category, there are essentially two types of actors. The first is the state-owned commercial banks. So these are the banks that do have a state-owned background, but they, because of the marketization of Chinese domestic-owned

owned arrangements, they very much function like all the commercial banks around the world. And then the second category is the Chinese companies. The Chinese companies include not only the state-owned ones that we're much familiar with, but also the private ones. An example would be in the telecommunications sector, the ZTE would be the SOEs, but then Huawei is actually a private company background.

Specifically, the commercial creditors, they provide loans that are much more aligned with the commercial terms, as their name suggested. An example, for example, would be the terms that they provide in terms of their instruments will be much shorter. For example, the maturity rate will be around $10.

three to five years, whereas in comparison with the policy banks, they tend to provide a much medium and long-term facilities. So these are the examples that sort of pumped our research into the spacing that we're looking at a lot of new diverse bankers and as well as companies start to provide credits to African countries and in spaces like infrastructure sectors.

What does it mean for the borrower side and what does it mean for the Chinese side in terms of going forward? Yunnan, as Chinyi was pointing out, the number of lenders and the range of lenders have really shifted over the last while. Could you talk a little bit about why we've seen this shift now? What are some of the factors that are pushing some of these commercial lenders to do more business in Africa now? Sure.

So I think as our paper shows, and as Tianyu pointed out, there's been this gradual shift in China's overseas lending model over time. And some of that has been much, much earlier. So around the early 2010s, we really saw the boom in China's overseas lending, particularly in Africa. That was also what became labelled the Belt and Road Initiative that eventually

encompassed Africa. We saw this going out of Chinese banks and Chinese capital, a lot of it to support domestic economic interests in supporting Chinese contractors, the exports of Chinese goods and technologies, and to build markets essentially for Chinese industries. Over the 2010s, that

model started to evolve and shift as well towards a much more market driven risk diversification strategy and bringing in

Chinese commercial creditors as well as encouraging greater commercial models of financing was part of that. We really see this discourse shift particularly after 2015 and this is laid out in the paper where the policy signals, particularly in key discourse, puts a much greater emphasis on commercial participation. I think it's also important to point out in this period is also this

broader internationalization of China's financial sector. The going out of China's state-owned commercial banks sees them playing a greater role in supporting infrastructure projects and new investment opportunities in Africa. But they're also going out all across the world. This is also the era where we're seeing major bond issuances in European markets and ICBC and Bank of China becoming a lot more prominent in the global north as well.

I'm going to ask a stupid question, Tianyi, here, just because, just so I understand here. So we've got Chinese state policy banks. We've got commercial creditors you've talked about.

What's the difference between the two if they're owned by the government? How do we as outside, because this is a model that I think a lot of people in other countries don't quite understand. When we think of commercial creditors, oftentimes we think of private banks like Bank of America, which doesn't have an affiliation with the government. But yet in China, when we talk about a bank like ICBC or the Bank of China, these are state banks.

Help us understand what the difference is between the two if they're still owned by the government. For sure. That is a very important question in terms of understanding the state versus market nexus governing Chinese institutions and overseas developed finance. I think one way to look at this is to look at the funding structure of all these different financial institutions. Commercial banks, for example, most of their funding comes from domestic deposit, which

which is the reason why if you look at the instruments they provide, they tend to be of commercial rates. They are structured in a much shorter terms that we pointed out in our report that in comparison, the policy banks, Ex-Im Banks and CDB, part of their funding injections are more so from the state. But at the same time, because of that background, they're able to provide

loans that are at lower interest rates and extended towards a patient capital characteristic. And just following up on that, you know, a lot of the discussion, particularly because over time, we've particularly focused on all of the different problems in renegotiating some of this debt later. So a lot of the choice to go with commercial lenders by African borrowers is frequently complicated.

kind of framed as a problem. We see it from the kind of far end of the telescope when it's already kind of a crisis. But what are some of the reasons why African creditors might want to choose to work with commercial lenders rather than state lenders? What are the pros and cons in working with them? I think this is one of the interesting findings coming out of our work as well, is we found that actually through the diversification of Chinese creditors, diversification

different types of lenders that provide facilities in terms of decision-making processes are quite different. When negotiating with policy banks, because of the mixed dual identity of these institutions, the negotiations are not just primarily between the borrowers and the lenders. They inevitably involved a different level of Chinese bureaucratic actors together with the concerned African borrowers. So the process is actually quite lengthy.

And we pointed out in our working paper is that in comparison, the conversation with commercial creditors in terms of credit provision and mobilizing finance tend to be shorter. And they involved less state level, bureaucratic level. It really seems to be a model that even though with the policy pretense that is Chinese going out, supporting different policies, it's a very commercially orientated model.

And that commercial aspect allows borrowers and lenders to finalize deal in a much quicker fashion. And considering the politics and the local demand for a lot of African leaders, the speed of credit provision is very important. And if we think about how China plays

as a big term coming into the space in the first place, is that they do have advantage over OECD partners or other Western partners in terms of doing things faster. And we're seeing, interestingly, within China, actually, there is also sort of this different advantage of different types of creditors in terms of who can provide credit faster.

So, you know, and Tanya's talking about the speed. Obviously, that's an appeal for African policymakers who oftentimes are very keen to get things done quickly, particularly in democracies where they want to show results and then run on re-election on those results, new infrastructure, new programs and things like that. But there's a downside, though, that your report revealed about debt restructuring if the loans go bad, that the commercial creditors can oftentimes be a little bit more complicated in terms of

how to deal with them in debt sustainability and debt restructuring talks. Talk to us a little bit about that. Sure. So what we know about how Chinese creditors restructure debt or work with borrowers in debt restructuring is that it's a very tough challenge, right? Chinese creditors don't tend to give big haircuts, if at all. In fact, they tend to be quite resistant to any kind of debt restructuring that reduces the overall impact

what we call the net present value of the loan and that they can be quite slow and bureaucratic for many other institutional reasons in getting restructurings over the line.

The issue is that all of the restructurings that we have data on and that we've seen have largely been with policy banks, with Ex-Im Bank and with CDB. Whereas with these commercial creditors, particularly the big state-owned commercial banks, it's a lot more opaque.

The fact that they are much faster in approval is tied to the fact that they are less politically integrated. There's less of an institutionalized process, as Kenny described, in how these loans are approved. So they're quite flexible. They're very agile sources of financing, which is great if you're trying to get a bridge built very quickly. However, because you don't have that same level of political integration,

The prospects of being able to negotiate some of the big concessions that we've seen in the past, as we've seen, for example, in Ethiopia with China Exim Bank and the restructuring of the SGR loan, there aren't as many viable options.

political channels for that to occur. I think it's also important to state that with the large state-owned commercial banks and SOEs, they sit at a political level that's equal to the Ministry of Finance, and they sit above Ex-Im Bank and CDB in the political hierarchy. These banks don't have the same policy mandate or development mandate as Ex-Im Bank and CDB, and so there's less prospect for these kinds of political pressures and political leverage to

to play a role. Not to say that they can't, but I think this is an area which our report is trying to highlight that we do need to pay a lot more attention to these kinds of commercial creditors.

I think something else to say is also in the case of Zambia, that's a very dramatic and kind of a worst case scenario, if I can say that, on how this creditor diversification can play out in a negative way for the country. When you have such a plethora and a pluralist landscape of creditors, without that kind of internal plumbing, as Theo Marri has called it,

between these Chinese creditors. It opens a lot of issues around comparability of treatments, which has not been well addressed in the common framework. And this has had huge costs for Zambia's restructuring. Can I just stop you there very quickly? Because I don't think a lot of people understand what comparability of treatment means. Could you explain that?

Sure. Comparability of treatment is one of the provisions or demands within the G20 Common Framework for Debt Restructuring. Essentially, on a range of three measures, it requires that the debt relief that's provided by these different creditors

should be roughly the same. How you measure that is quite contentious. So debt relief can be provided through giving a haircut up front and reducing the total amount of debt that you are required to repay. It could be done through extending the maturities or providing a bit more flexibility in how that debt is repaid. And so under the G20 Common Framework, there's been this attempt to create a kind of mechanism to measure this comparability of treatments. But because

of the way in which these negotiations are not simultaneous. Usually you have official creditors negotiating first,

and then bondholders, and then commercial creditors, which will include Chinese commercial creditors and CDB at the back, you raise a lot more kind of tension between the official bondholders and commercial creditors, where the commercial creditors might feel that by the time that the first two groups have claimed their share of the pie, that they might have to end up conceding more.

to put it more bluntly. Chenyi, in looking at the commercial creditors, do you see significant differences? And I think, I fear this might be slightly beyond the scope of this specific paper. So, you know, kind of bail on this question if you need to. But do you see significant differences between Chinese private lenders and Western private lenders in how they deal with African debt restructuring?

That's a very interesting question, and I think this is definitely not something that we have unpacked in our paper. But I think it is the commercial trends of these creditors do demonstrate that specifically these creditors' emphasis on making profits out of this transaction signals that they might not be too different.

from the Western counterparts. And the fact that, as Yuna mentioned, during the debt negotiation and restructuring process, all the commercial creditors, both the Chinese ones and non-Chinese ones that are sort of grouped together, would confirm that, at least from the boring sides of the perspective, these creditors were treated in the same fashion. Just talking about the diversity of those creditors, and you brought up Zambia, and Yuna talked about it as well.

One of the things that came out of research done by Professor Deborah Braudigam at Johns Hopkins University's China-Africa Research Initiative was that at one point there were up to 18 different Chinese creditors involved in the talks. And getting them to align on a debt restructuring framework was extraordinarily difficult.

How do you, I mean, again, you may not know this, but how do the different creditors communicate with each other if they're not under, say, a single political umbrella of the Ministry of Finance? And if it's not that easy to be able to get one to align with another in order to agree on a debt restructuring deal, how is it done? I mean, eventually it was done in Zambia, but it took years and years for them to actually get aligned. You know, and maybe you can take a stab at that.

I can take a stab, but I think this is one of these things where it's very, very opaque. We can guess at the different incentives that commercial creditors face that diverge from policy banks, as Penny discussed. However, there hasn't been a very well-structured infrastructure at home to coordinate these different creditors or anyone or any entity to, let's say, assign the pain of

of restructuring or debt relief between them. And so largely, it's been, I think as Deborah put it, a bit of a tragedy of the commons and a diffusion of responsibility between them. And that's really contributed to these dynamics. I think one mechanism where there is a kind of common alignment between the commercial creditors is that, as our report finds, a lot of them do rely on signage insurance

in order to be able to feel comfortable taking the risk of giving financing. And so here is an institution that could potentially play an oversight role and in coordinating with the other international creditors. But SinoShore hasn't really taken up that position, whether for capacity reasons or for other political reasons. And so that role has been played by Eximbank, which sits in a separate part of the

bureaucracy from a lot of these commercial creditors. And what has the effect of that been? Ex-Im Bank does not have the authority to speak on their behalf. Ex-Im Bank alongside the Ministry of Finance can try to coordinate with them, can try to bring them together. And we saw that play out less visibly, but from the outside, where the Chinese representatives in the Zambian negotiations for the Common Framework

pushed back against bondholder proposals, even though they had previously agreed to them. This is something that I think Brad Setzer and Theo Murray have written about. What that represents is that Ex-Im Bank

is not solely an official creditor or representing Chinese official finance. It is also implicitly representing the interests of these other commercial creditors, whilst at the same time not being able to command them or instruct them on what they should do. So I think we're in a bit of a herding cat situation. And until there's a very, very clear and explicit top-down line to instruct these commercial creditors on how to

behave or how to approach these restructurings, it's still going to be a very case-by-case and very improvisational basis. You and Yunnan are scholars who spend your lives trying to figure this out. It's complicated and it's opaque. It just makes me wonder if it's this complicated and this difficult to understand the matrix of Chinese creditors,

How well do you think the borrowers understand the differences between the various actors here? And that's not meant to in any way trivialize the borrowers and to be condescending in any way. It's really complicated. It's really hard. These are actually new actors on the scene who for a long time, African borrowers were dealing with the Paris Club. They were dealing with the, you know, the US Ex-Im Bank and the ECRB and some of these very traditional actors who had been doing business the same way for decades.

The Chinese come along with a whole different set of actors, a lot of different rules, and it becomes very complicated. Do you have any insights in terms of how well the Zambians, the Ugandans, and others who borrowed heavily from the Chinese, how fully versed they are on the differences between the commercial and the state banks and the policy banks and whatnot?

There's for sure a huge learning curve for the borrowers. And I think that's the reason why work like this is really important for African countries and borrowers in terms of thinking how they want to engage with Chinese creditors more efficiently and will gear towards credit provision towards their own development context. And specifically, we found out

through this work is that while navigating through this very complex landscape, as you very rightly put, so Chinese contractors play a significant role in terms of bridging this information asymmetry. In the decision-making processes that we've unpacked a little bit in this paper, we mentioned that this role done by the Chinese contractors who are defectually

helping the borrowing countries in terms of A, shaping the infrastructure deals, and then secondly, connecting the right types of creditors to the borrowing countries. So that activity sort of lying between formal and informal lobby and engagement really plays out in terms of shaping the way

borrowers have their understanding with the Chinese diversification of creditors. And I think that has a very significant policy implication in terms of thinking out how much to what extent the autonomy of borrowing countries in terms of making sure that the finance they mobilize is going to fit well with their development agenda, knowing that a lot of information and hence because of that technical capacity, they had to

outsourced to Chinese companies. And I think there's not so very much regulation at the moment. And in fact, in the case of Zambia, Professor Brettkin's work also pointed out that there's this called contractor-facilitated mobilization of finance that sort of contributed to this tragedy of the commons.

Following up on that, what are some of the recommendations you would give to African policymakers to try and get better outcomes? Particularly, as we know, because Africa is also facing this huge and semi-permanent infrastructure backlog, which gets worsened by extreme weather because of climate change. For them, this really is a kind of a ticking clock.

to try and kind of get the infrastructure in place, among other things, to take advantage of a very young population and to also satisfy the needs of that young population. So what are some concrete ways, particularly ways that civil society could also keep a tab on, concrete ways in which they could get better outcomes from Chinese lending? That is a very big question. I think if we find a way to solve that, that will...

be really good news to so many parties involved. But I think one thing taking away from the phenomena of Chinese creditor diversification and the fact that there's no modernistic China, there's no modernistic African countries as well, there is because of this complex dynamic and landscape, a lot of information asymmetry happened. And then sort of the private sectors or the business-orientated mind actors

captivate the governance side. This showcase in both the Chinese side and also on the African sides, both in terms of how projects are shaped and initiated at the very beginning and also how finance were less coordinated and more so driven by the lenders themselves. So I think this is a reckoning moment for the governance sides on both China and the African-born countries in terms of how to shift the mindset from a bottom-up

to a top-down process. Not to say that the governance need to take control of everything, but the top-down mindset is really consulting the civil society organizations, consulting the different parts of development groups in terms of having a plan, how they want to plan the mobilization of finance into the different types of developments.

development projects rather than having the private sectors proposing ideas, proposing how the mechanism could work out to them. So I think that flip and then being more mindful in the governments would be the first step to start with.

And I also want to ask Wina if you have anything else to add on to this. I completely agree. I think a lot of it comes down to governance and strategic planning within African governments and within the sovereign leadership. If you have a clear development plan, you need to source your financing, your other resources.

resources to support that plan. Unsolicited proposals, which we point out in the paper, is something that you see quite frequently with Chinese contractors.

and sometimes supported by some of these commercial creditors, may not bring the best kinds of returns or investments that support the economic transformation or the transformative growth that is needed. I think something else to raise as well, particularly when it comes to these debt questions, is that transparency on the government side is very, very critical and very important. We know that Chinese lending is

murky and maybe not so... It's very, very opaque and there's a lot of murkiness around Chinese debt contracts. But that doesn't override the agency of African governments to be transparent in reporting their debt.

in supporting their debt management offices to collect statistics and to report them to the World Bank International Debt Statistics, for example, to introduce measures of parliamentary oversight when it comes to big infrastructure investments or these kinds of borrowings. So there are also institutional and governance mechanisms that can strengthen how governments invest in infrastructure and how they borrow from Chinese creditors to do so.

But they don't, though. And that's one of the problems. Even though in many African countries, there are either constitutional laws or regulatory laws that require the disclosure of the terms of these loan contracts. But yet, as we saw in Kenya and in other countries, the governments do not reveal the details of these contracts as they are obligated to do so under their own laws. Yunan, why do you think that is?

They say because they're under NDA, but they don't have to agree to those NDAs. Remember, these are two parties, and the African side can say under our laws, our national laws, we cannot agree to the NDA. We have to disclose the terms of the contracts, but they don't. Do you have any insight as to why they're so compliant to those NDAs in those contracts?

I can't speak for that particular case, but I think there's a misalignment perhaps of short-term and long-term incentives. I think for many governments, when you're facing short-term pressures in getting re-elected, in securing that political legitimacy for yourself and for your party, the priority is inevitably to try and get a contract signed as soon as possible, try and get that monument or infrastructure completed as soon as possible.

And, of course, corruption plays a role. There's a big factor there. But I think perhaps the silver lining of the Kenyan case is that there was a lot of civil society pushback on this. There was

media scrutiny over the contract and over the particulars of the case. And we are seeing a lot more public accountability and quite vocal pushback from the society and particularly from young people that this kind of model is not going to play in future. Kenny, I realize it's very difficult to make predictions. Over the last 10 years, we've seen both

both massive amounts of Chinese lending in Africa and very significant shifts, you know, like due to COVID, among other things, you know, lending, you know, falling from a height to almost zero and now seemingly rebounding. So I was wondering which kind of big trends you're looking for in the next five years in this engagement?

Chinese overseas development finance is currently in a huge transition. And I think the key point that this working paper is trying to highlight is that this trend of commercialization, that the massive lending of policy bank is something that is taking up a lot of risks, both from the lender side and from the borrower side. So there is seemingly an effort to try to find

the next stage in terms of continuing the infrastructure financing space. And recently in the Forum on China and Africa Cooperation, there's one key point mentioned in terms of how China is going to finance big infrastructure projects across the

The continent is the public and private partnership. And I think the overall trends of finding market-orientated solutions to support that still a huge band of infrastructure needs of these foreign countries will be still on the agenda. But at the same time, we are currently at the reckoning moment where the old financing model is showcasing financial, environmental, social benefits.

being stability. And then in the future trend, I think this is a problem that in Beijing, actors are trying actively to solve. I mentioned at the beginning of the show that with this incoming Trump administration, we're probably going to see a continuation of the accusation that China engages in predatory lending and intentionally ensnares African countries, specifically in so-called debt traps.

When you hear those arguments, and we've been hearing them for 10 years now, and we're going to continue to hear them, research like yours undermines that argument. There's more evidence that it doesn't exist simply because there isn't the coordination there. And again, we just don't have the evidence to support the accusation. But I'd be curious to get both of your reactions to the debt trap line and what you think when people continue to put it forward. And by the way, this is something that still is quite prominent in Africa itself, particularly

And the Chinese accusation that the West is promoting this argument is also inaccurate because a lot of these accusations are coming out of India as well. So this is still a very prominent theme when we talk about Chinese debt. And there's two experts in this field. I'd be interested to get your take on this. Yunnan, let's start with you and then Tianyi will let you have the last word. The debt trap is a meme that really won't die despite many people's best efforts. And I think it's a reality we're going to have to live with.

It's an inconvenient one because I think it makes a lot of things a lot more politically sensitive, right? The fact that debt for equity swaps becomes, in terms of political optics,

not viable as a mode of debt restructuring. It's going to cast a lot more suspicion on some of these public-private partnerships and how they work when it comes to the equity investments of Chinese companies. This is in an era where development finance from China, but also from traditional donors from the West, has been in decline while infrastructure needs and climate investment needs are growing. I think

What I would be hopeful for is that if we are going to see a greater geopolitical rivalry between China and the US, that under the Trump administration, the US continues to see as its interest supporting the provision of development finance and climate finance via DFC and via its other entities to Africa and to lower-income countries, and views it also as part of

US interests as well in supporting these global public goods. Very much agree with what Minnan has just mentioned. And just want to add one more point is that it's very important to understand what this narrative is for. If this narrative is more so serving for the purpose of geopolitical tension, the politicization of overseas development finance engagement, I think that we're losing the

point of why these finance is important in the first place. I think Chinese engagement in Africa has always been experiencing a long learning curve. There are mistakes, there are stories that it can take away from. And in those moments that are particularly struggled with a lot of political tension, I think one reference point for all of us engaging in this space is try to remind ourselves what this finance is really for. And I think for

a lot of borrowing country status, there's still a lot of need for infrastructure development and the financing is a very crucial piece in this development.

of on the trajectory. The report is China's Creditor Diversification in Africa, Impacts and Challenges of Infrastructure Debt Financing by Chinese Commercial Creditors, written by Tianyi Wu, who is a PhD candidate at the Blavatnik School of Government at the University of Oxford, and now a pre-doc research fellow at Boston University's Global Development Policy Center. By the way, congratulations on that.

and Yunnan Chen, a research fellow specializing in development and public finance at ODI Global in London. We'll put a link to the report.

In the show notes, we know that quite a few people from Senator Rubio's office listen to our show and follow the work we're doing. We are making it appeal to them to read this report because I think it will help them quite a bit in their understanding of Chinese debt issues in Africa. Tianyi, Yunnan, thank you so much for your time today and for the great work and congratulations on the report. Thank you very much for having us. Thank you so much.

Kobus, this is one of these reports that's going to be added to my list of kind of the benchmark reports that you have to have on your reading list. There's four or five of these that are out there, but if you really want to understand Chinese lending in Africa, and again, what I think is happening in Africa is not just happening in Africa. This probably speaks to the way the Chinese are lending in the Americas, in Asia, and elsewhere in the developing world. But the most important takeaway here is that the simple narratives of quote-unquote China are

is misleading. In the same way we don't like to talk about Africa, you know, the word Africa, which flattens a continent of 54 countries, 1.4 billion people, countless diversity. The same is true with China as well. That word is very misleading because of the diversity of actors. We didn't get into the provincial banks, provincial lenders, state-owned enterprises, private enterprises that are also lending. So when we look at this list of

of actors when it comes to Chinese credit. It is very, very complex and very long and much more nuanced than a lot of people think.

Absolutely. I think it's also, you know, so frequently when we see accounts of Chinese lending or particularly accounts of some of the challenges of Chinese loans, particularly coming from the Paris Club or coming from people like, you know, outgoing US Treasury Secretary Janet Yellen, for example, the differences between Chinese approaches and Western approaches are frequently problematized. You know, it's frequently like, oh, the Chinese are not doing things properly.

properly. But in reality, I think what this report shows is that one has to kind of work with the complexity that Chinese lenders bring.

Because in the first place, you have to take seriously the Chinese way of doing things, kind of study it up and see how it works. But then also, I think a lot of opportunities actually come with this complexity. But you won't be able to really grasp those opportunities unless you understand the complexity. And that complexity leads back to what Tianyi was talking about in terms of the information gap.

asymmetries that are so prevalent. You remember from a couple of years ago, we showcased a video in our coverage of the Ugandan finance minister who was brought to testify in front of a parliamentary committee about the fiasco surrounding the Entebbe Airport loan. And this was a whole drama that popped up. It was during the pandemic, if I recall, I think 22.

And one of the things that he said in front of the Parliamentary Oversight Committee was, you know, when he was asked, he was pressured. They said, why did you sign this contract?

that had such, you know, stiff repayment terms. Again, the parliamentarians were very upset with the terms of the contract. And the finance minister, he acknowledged what a lot of people assumed was, he said, "We didn't understand the contract." And that wasn't because they're stupid. It's only because these contracts are incredibly complex. And there is an information asymmetry. And the Chinese are bringing a different way of doing business than the way they've dealt with other creditors in the past.

And so I really hope that there's an opportunity for mid-level bureaucrats within African finance ministries to find ways to improve their knowledge of Chinese finance and development finance so that they can close those information asymmetries. And if we can do that,

as a whole, then I think you're going to have a healthier economic relationship between African borrowers and Chinese creditors. So this is actually not about playing into the debt trap BS that we hear so much about. This is actually just to build a healthier ecosystem between the two. Exactly. And I mean, as researchers like Fuloshada Sula have shown, there are African negotiators who are doing a good job, who do understand how these contracts work.

And it's not only having good people in place, but there are a whole set of strategies that African policymakers can follow to make their negotiations more robust and to get the terms that they want. It certainly is possible, like African countries have managed to pull it off. So I really hope that some of the bad experiences that countries like Zambia have gone through

are also occasions for learning, you know, in moving forward. Because the one thing that, you know, we obviously say all the time is that the Africa-China relationship isn't going away. It's a new reality. It's a new structural reality.

So for African countries to work better with China, to learn how to do that is an investment in the future of the continent. Just a reminder that last year, 2023, the Chinese lent $4.6 billion. And this is, again, a variety of creditors. Lent $4.6 billion to, I think it was somewhere between 8 and 10 African countries. So lending is on the rebound. That's according to Boston University's Global Development Policy Center.

But once again, just to put African debt to China in context, that today it accounts for about 11% of the total. And that is often overlooked. And when we look at the volumes of private creditor debt, mostly Euro bond and also multilateral debt, vastly higher. And so at the height of Chinese lending to Africa was about 18% of the total debt.

So that context is very important, Kovacs, to understand how it fits within the broader picture. And again, oftentimes when we talk about Chinese mining in Africa or Chinese debt in Africa, people don't include that contextual piece there. So Chinese mining, total output of Chinese mining, 4%.

from Africa is 6.7% of the total. So just like the debt, I think it's much smaller than a lot of people assume it to be. But because the narratives are so loud and the headlines are just nonstop about Chinese loans in Africa, I think a lot of people think it's a much bigger slice of the pie than it actually is. Yeah. And these narratives become a way for Western stakeholders, particularly to not acknowledge the

complicit they are in keeping Africa poor and entrenching underdevelopment in Africa and how unjust some of the stuff they do are as well. So for example COP29 is happening as we're recording and I was taken aback when I was doing background reading around some of the issues at how much of the commitments, the climate commitments from the countries that caused the

the climate crisis and therefore who are essentially writing the death sentence of humanity, how much of that financing is in the form of loans and is in the form of commercial loans? So to, you know, kind of continually be braying on about Chinese debt traps is a way of not talking about the structural centrality of Western finance and Western capital and Western politics.

in the problems that we face in Africa. And that is why it's so important, I think, to highlight work like this, because this is what we need. We need to talk about real stuff rather than made-up narratives. And this report really gives an in into the real nature of this relationship.

Indeed it does. We're going to continue to keep watch over the formation of the new Trump administration. That's going to take shape over the next couple of weeks. One position in particular that we're keeping an eye on, who's going to be the Assistant Secretary of State for

for African Affairs. That's probably a position that will be named later, but all eyes right now are on a gentleman by the name of Peter Pham, who, by the way, is also a very well-known China hawk, so we'll keep an eye on that. And if Pham is named to that role, then you can expect a lot more of this hostile rhetoric from the U.S.,

towards China in Africa. But again, we'll wait to see what happens on that. So let's leave the show there. Thank you again to Yunnan and to Tianyi for a wonderful discussion. Kobus and I will be back again next week. But if you want to follow all the work that we're doing at the China Global South Project and join our growing community of readers, including those in Senator Rubio's office,

And in the State Department and in African governments, about 25 governments around the world subscribe to the work that we do every day. And so if you want to find out what they're reading and the great work that Kobus and the team are doing to produce daily coverage of everything China's doing in Africa, Asia, and across the developing world, go to chinaglobalsouth.com slash ChinaGlobalSouth.

Subscribe. Subscriptions are super affordable. And if you are a student or a teacher, just email me directly, eric at chinaglobalsouth.com, and I'll give you links to our half-off discount codes. For just $10 a month, you can get a subscription to the China Global South Project. It's a great deal. So that'll do it. Kobus and I will be back again next week with another episode of the China in Africa podcast. For Kobus Van Staden in Cape Town, I'm Eric Olander. Thank you so much for listening.

The discussion continues online. Tag us on Twitter at ChinaGSProject and visit us at ChinaGlobalSouth.com. If you speak French, check out our full coverage at projetafriquechine.com and AfriqueChine on Twitter. That's Afrique with a K. And you'll also find links to our sites and social media channels in Arabic.

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