Africa's debt not caused by borrowing from China: Standard Chartered economist

The 2024 Summit of the Forum on China-Africa Cooperation was held in Beijing. What were the key takeaways from the summit? How might the China-Africa partnership influence the international political and economic landscape? Is China setting a debt trap in Africa? Our guest shares her insights with China Trends.

Transcript

You Zhixin, Xinhua Correspondent:

Welcome to China Trends. Today we're excited to talk about the summit of the Forum on China-Africa Cooperation. What are the highlights of this summit and what's its impact on the international political and economic landscape? Let's welcome our guest today.

Sarah Baynton-Glen, Africa Economist of Standard Chartered Bank: 

Thank you very much. My name's Sarah Baynton-Glen. I'm an economist at Standard Chartered covering Africa.

You Zhixin:

In your view, what are the highlights of this summit that was just held in Beijing?

Sarah Baynton-Glen:

The summit that took place in Beijing, was a significant pledge of additional support for Africa from China. So we saw the announcement of 50 billion U.S. dollars of trade, investments, and also aid to the region. I think we also saw a focus on a couple of key areas. I think firstly, Chinese yuan internationalization has been top of mind since the BRICS Forum that took place last year. And we've also seen a focus on renewable, in particular, and on the green energy transition. So much more focus on investment in that sector also in terms of solar power. That's definitely been a focus in terms of the discussions for countries across the region in their engagement with China.

You Zhixin :

So how do you see the effectiveness of the cooperation between China and Africa?

Sarah Baynton-Glen:

I think it's very clear that in the past few years, China has been a driver of growth for the region. We've seen that from a trade and investment perspective, increased to 282 billion U.S. dollars in 2023. And we've seen that in terms of Africa's appetite for imports from China, in particular, imports of some of those renewable products that we discussed earlier as well. So solar panels and lithium batteries, for example, and that's definitely one of the trends that we've seen in terms of the trade relationship. I think what we've also seen is that China has been a significant source of financing for the Africa region as well. It's been helping to facilitate the development of infrastructure investment across the region. And we're seeing that focus now shifting towards the power sector, in particular, but also still the development of some of the rail and road infrastructure that's much needed across the region. If you look at the trade composition between China and Africa, actually, China imports a lot of critical metals and all from the region. And that's likely to remain a focus, particularly given the energy transition. I think where we're likely to see further development as well as in terms of manufacturing on the ground in Africa. And we've already started to see a trend whereby Chinese companies are looking to invest in manufacturing on the ground in terms of EV batteries, but also lots of other opportunities we think for, manufacturing and industrialization across the region with China's help.

You Zhixin :

However, some Western media hype over China, saying China is setting a debt trap in Africa. So I wonder what's your thoughts on this.

Sarah Baynton-Glen:

There have been some concerns around debt sustainability for the region more broadly in recent years. We don't think that was caused necessarily by borrowing from China, but it was caused by a number of factors that contributed to a weaker debt sustainability picture for the region. So through COVID and in the years following, we saw a significant increase in fiscal spending from the region, and that also coincided with the time when access to external finance was relatively more difficult. So with tighter monetary policy in developed market central banks, the ability for countries to finance themselves, to finance that increased spending was more difficult. We have seen some countries having to restructure their debts across the region, but not all of those countries have borrowed significantly from China in the past.

You Zhixin :

China and Africa, both of them are very important forces in Global South. The cooperation between these two sides, What do you see its impact on the international political and economic landscape?

Sarah Baynton-Glen:

We are expecting that South-South cooperation will be a bigger driver of global growth going forward. In particular, we look at the context at the end of 2024, and as we go into 2025, we're expecting that global growth is likely to soften, particularly in developed markets. So if you look at the U.S. and the EU, for example, we've seen some softening of economic momentum already. So within that context, stronger South-South cooperation, cooperation between faster-growing economies, and fast-growing emerging market economies is going to be a more important driver of growth. China's engagement with some of Africa's fastest-growing economies is likely to be one of those drivers we think.

You Zhixin:

I wonder what's your view in terms of the prospect of the Chinese economy.

Sarah Baynton-Glen:

By thinking in terms of the outlook going forward, we are expecting there to be much more focus on markets and the private sector, in particular. We saw that at the third plenum meeting much more focus on how to develop the private sector going forward. And that will continue to be a bigger driver of growth we think. That as well as upskilling in terms of technology, the human capital provision as well for developing those sectors is likely to be key we think in terms of the medium-term outlook. On top of that, we think also that China's opening up and engagement with emerging markets is going to continue to be one of the main drivers of growth going forward.

You Zhixin:

Thank you, Sarah. And thank you for watching this episode of China Trends. See you next time.