Africa Should Focus on Trade with China not Loans
September 3, 2018 (Lagos, Nigeria)- African leaders will converge today in Beijing for the 2018 Forum on China-Africa Cooperation (FOCAC) summit. The theme of the summit is to build a stronger community with a shared future through win-win cooperation. African countries will need to rethink their engagement strategies with China in order to make the present relationships mutually beneficial and actually a win-win cooperation.
The key economic considerations that had shaped China-Africa relations are mainly loans, development assistance and debt cancellations, and trade. The FOCAC summit will more likely be used by China to offer new rounds of billions of dollars in loans and aid to African countries amidst rising debts. African countries such as Angola and Djibouti which are recipients of China’s foreign loans and aid are already mired in debt. These countries are either restructuring their debts or negotiating another round of loans. Already, some African countries are seeking funding from the World Bank and the International Monetary Fund (IMF) because of their inability to pay back the Chinese.
“Loans and aid dependency from China will make growth elusive and alter the bottom up economic growth strategy in Africa. Instead, Africa should seek an increase in trade level comparable to China’s trade partners in Asia whose trade volume is five times higher than trade with Africa. The Free Trade Agreement (FTA) signed between China and its Association of Southeast Asian Nations (ASEAN) trade partners in 2002 has contributed to the increase in the volume of trade between China and its ASEAN partners. However, Africa is left out of China’s FTAs foray,” said Thompson Ayodele, Senior Research Fellow, Initiative for Public Policy Analysis (IPPA).
Ayodele continues: “The central criteria of China’s FTAs include, achieving “One China” policy; recognition of China as a market economy; achieving access to raw materials; and maintaining and strengthening its political and diplomatic relations. Many African countries such as Kenya, Nigeria, Sudan, and South Africa, to mention a few, meet these criteria with which China signs FTAs.”
“But Africa is at the fringe of China’s foreign trade and economic policies. Two Chinese agencies, the Ministry of Commerce and the Ministry of Foreign Affairs, merely execute decisions reached by the Politburo Standing Committee, the supreme decision-making authority in China. These agencies cannot make decisions on behalf of the Chinese government to commit to trade with Africa. China-Africa FTAs will need to overcome significant political and economic obstacles because the Politburo Standing Committee (PSC) must approve FTAs regarding specific countries or regions of the world. Unfortunately, issues relating to Africa such FTA are rarely discussed at the PSC,” said Ayodele.
According to Ayodele, rather than focussing on the traditional means of engagement such as loans and aid, African leaders would have to set their priorities and develop strategies to actually engage China. The era of relying on China’s foreign loans, aid and development assistance, which will increase African countries’ debt profiles, should give way to increasing trade. The FOCAC forum presents African leaders another opportunity to take advantage of the existing relationships as a leverage on China to seek strategic economic partnership with China through mutually beneficial trade, just the way its Asian neighbors are, not just in terms of foreign loans, aid or development assistance. This ultimately will make the current engagement a win-win cooperation.
The Initiative for Public Policy Analysis (IPPA), an award-winning organization, is Nigeria's public policy research think tank. Its major concern is with the principles and institutions that enhance economic development and wealth creation, with particular focus on Africa and Nigeria.
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