CHINA’S LENDING HAND   ♫

by Luís Cardador

BBC World Agenda Magazine, 10-2006

Last week, Sino-Angolan relations reached new heights when China offered Angola a gift of approximately 220,000 dollars in a “gesture of friendship and reaffirmation of the solidarity” that bonds the two nations.

The announcement came at the end of the first ever summit between the CPLP, the  Community of Portuguese-speaking countries and China, held in Macao.

 The volume of trade between China and the seven Portuguese-speaking countries (of which five are in Africa) burgeoned in recent years and now amounts to 33bn dollars, against 11bn in 2003. China expects this figure to reach 50bn in 2009.

The impact of China’s new-found prosperity is particularly stark in Angola, China’s second largest trade partner in Africa.

In recent years, Angola has supplanted Saudi Arabia as China’s premier supplier of crude oil, accounting to 15 per cent of China’s total imports. The two countries bilateral trade volume hit 4.9 billion US dollars in 2004 and 6.95bn in 2005.

Loan fears

In war-torn Angola, with banks cautious about lending, the Chinese have also leapt into an inhospitable economic environment offering millions in loans.

In 2004, the Angolan government and Eximbank, the Chinese export bank, signed a 2bn dollar-line of credit, followed by 12 separate credit agreements worth 2bn dollars signed by the two countries in May 2005.

China’s big wads of cash on hand have allowed the Angolan government to manage on its own without IMF backing, weakening the organization’s leverage in economic matters. These low or free-interest loans, have helped Angola to build, for example, much-needed new housing and reconstruct infrastructure.

The loans were criticised by the IMF and NGOs as lacking in transparency, but for countries like Angola, the source is of secondary importance as China’s loans come with lower interest rates and with fewer strings attached. 

The independent Angolan economist Jose Cerqueira told the BBC that the Chinese loans have helped dispel “the IMF’s all-or-nothing myth”.

In other words, it brought to the fore the issue of compliance with the IMF’s so-called “conditionality”, under which recipients can be forced to adopt specific policies.

According to the economist, “sustainable freedom can only be achieved in the presence of economic growth”, and China is willing to inject cash in countries where many feel “they have only one life to live”.

However, many questions remain unanswered, among them those surrounding China’s sincerity and whether Chinese investment serves Africa’s long-term interests (“will they disappear overnight and leave the continent dry under the sun?”)

But in a continent that has suffered years of neglect and where the aid increases promised by Western countries have been slow in coming, there is little doubt that countries like Angola will have no qualms in stretching out to China’s hand.