Saturday 2 April 2022

The Myth of the Chinese Debt Trap in Africa

"Bloomberg Quicktake: Originals" on Youtube shows that over the past two decades, China has built large infrastructure projects in almost every country in Africa, making Western powers uncomfortable amid wider concerns about Beijing’s investments across the continent. However, a deeper look shows that accusations of so-called debt trap diplomacy turn out to be unfounded.

China is investing into Africa. In particular, China is investing heavily in the so-called African services sector. Investment in subsectors such as scientific research and technology services, transport, warehousing, and postal services more than doubled in 2020.

For Ethiopia, Chinese finance provides critical support for the government's legitimacy, as electricity, transport, and employment opportunities continue to indeed expand, stimulating economic growth and helping promote exports to other countries.

For African countries, the top 10 recipients of loans from China (accounting for 68 percent of the total) include varied countries such as Angola, Ethiopia, Zambia, and Cameroon. The top 10 recipients of FDI - such as the Democratic Republic of Congo (DRC) and South Africa - accounted for 63 percent of total Chinese FDI stock in Africa.

China invested most of its money in USA. The United States is the top destination in the world for Chinese FDI, drawing in $183.2 billion, or 15 percent of China's total so-called outflows, between 2005 and 2019.

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