China's FOCAC Financial Package for Africa 2018
We finally have the long-awaited 2018 Chinese financial pledges in support of FOCAC (Forum on China-Africa cooperation). Although Chinese president Xi Jinping spun the numbers to come to $60 billion (the same as the 2015 pledges in Johannesburg), the Chinese state only seems to be putting $50 billion of its own money at stake, while encouraging Chinese companies to contribute the rest.
China pledged:
- US$20 billion in new credit lines
- US$15 billion in foreign aid: grants, interest-free loans and concessional loans.
- US$10 billion for a special fund for development financing
- US$5 billion for a special fund for financing imports from Africa.
(These two latter funds are unlikely to be loan-based but details have yet to be released.)
Here are a few quick points of analysis.
This is a more concessional package than that offered in 2015. Chinese foreign aid instruments (grants, interest-free loans, and concessional loans) have jumped to $15 billion.
The total pledge of loans and grants has declined from $40 billion in 2015 to $35 billion in 2018
Pledges of Chinese interest-bearing loans peaked in 2015 and are now starting to decline. The first pledge of Chinese loans was in 2009 (US$5 billion). In 2009, the loan pledge doubled to US$10 billion, and in 2012 it was US$20 billion. At Johannesburg in 2012, the Chinese pledged a full US$35 billion in interest-bearing loans of various kinds, and another $5 billion in grants and interest-free loans ($40 billion in total). Now, we are back down to $20 billion in what look to be more commercial credit lines and export credits, while the concessional loans have been folded into the rest of the foreign aid instruments.
Debt relief policies have not changed. Debt relief is (as always) limited to interest-free Chinese government loans maturing at the end of the year. These foreign aid loans are a long-standing and relatively modest part of Chinese finance in Africa. Since 2006, overdue interest-free loans have been regularly cancelled. In 2018 these debt relief programs are again, as usual, limited to the “least developed countries, heavily indebted and poor countries, landlocked developing countries and small island developing countries that have diplomatic relations with China.”
Source: http://www.chinaafricarealstory.com/2018/09/chinas-focac-financial-package-for.html
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