Africa: experts weigh in on RMB 210bln Credit promise from China
Despite the generous offer from China, some experts caution that African nations must ensure the RMB 210 billion credit comes with favourable repayment terms
KAMPALA, September 6, 2024 – In an effort to strengthen China-Africa relations, China has announced a commitment of RMB 360 billion [about US$ 51 billion] in financial support to African nations over the next three years. This promise is detailed in the Beijing Action Plan for 2025-2027, revealed during the ongoing Forum on China-Africa Cooperation (FOCAC) Beijing Summit.
The support package comprises RMB 210 billion in credit lines, RMB 80 billion in various forms of assistance, and at least RMB 70 billion in investments by Chinese companies. According to the Chinese government, this substantial support aims to boost practical cooperation between China and Africa across a broad spectrum of fields.
Despite the generous offer from China, some experts caution that African nations must ensure the RMB 210 billion credit comes with favourable repayment terms.
Corti Paul Lakuma, a research fellow at the Economic Policy Research Centre [EPRC] in Kampala, expressed concerns over potential debt burdens. “African countries have limited options but to take on debt for infrastructure projects like roads, schools, and hospitals,” Lakuma stated. “While borrowing is necessary, it’s crucial that these loans are not tied to our mineral resources and that they come with favorable terms.”
Economist Dr. Fred Muhumuza from Makerere University Business School [MUBS] views China as Africa’s largest trading partner and emphasises the importance of strengthening this relationship. “China has actually reduced its debt offers to Africa. A total of US$ 51 billion over three years is relatively modest. President Xi also mentioned elevating the relationship to strategic matters, focusing more on trade and diplomacy,” Muhumuza noted. “Nevertheless, we still need to address debt restructuring with China.”
In addition to financial support, China has promised duty-free treatment for all tariff lines from least developed countries [LDCs] that maintain diplomatic ties with China. This offer is expected to benefit African agricultural products, as seen in cases like Uganda’s.
Lukuma advises that African countries should ramp up agricultural production and value addition to take full advantage of the Chinese offer. “The 0 percent tariff offer to Africa means we should enhance our agricultural production and value addition,” he said of the offer already being enjoyed by some African countries like Uganda.
Uganda’s agricultural exports to China include coffee, tea, cotton, oil seeds, leather, fish products, dried chili, and vegetables. In 2021, Uganda’s exports to China totaled US$ 37.73 million, according to the United Nations COMTRADE database on international trade.
However, experts suggest that Uganda’s strategy should not solely focus on agribusiness and extractives. “Uganda needs to look beyond these sectors and consider greater participation in global and regional value chains,” an expert advised. “The government should enhance efforts in investment promotion, local production support, and infrastructure development to attract and collaborate with investors from China and India.”
https://thecooperator.news/china-to-release-rmb-360bln-to-africa-in-next-three-years/
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