Beijing’s three-day Forum on China-Africa Cooperation (FOCAC) concluded on Friday with more pledges of funding for Africa, even though China’s sputtering economy may be hard-pressed to meet those commitments.
The South China Morning Post (SCMP) counted $50.6 billion in Chinese loans, aid programs, and corporate investments for Africa over the next three years that were announced during the forum.
Chinese dictator Xi Jinping further promised to open China’s tightly controlled markets to 33 African nations and said China will bring at least 30 “green energy” projects to Africa, ostensibly creating a million jobs. Chinese infrastructure projects have a long history of reserving their best jobs for imported Chinese managers and professionals.
Xi’s pledges were made even as China’s economy entered what Bloomberg News called a “dangerous new stage” of long-term deflation, lower wages, and reduced consumer demand.
“The danger for China is deflation could snowball by encouraging households reeling from falling paychecks to cut back on spending, or delay purchases because they expect prices to fall further. Corporate revenues will suffer, stifling investment and leading to further salary cuts and layoffs, bankrupting families and firms,” Bloomberg explained.
Foreign analysts compared the current situation in China to Japan’s malaise at the beginning of its “lost decade” in the 1990s and Chinese analysts are growing nervous enough to actually use the word “deflation,” a term normally forbidden by the Chinese Communist Party.
Breaking out of a deflationary spiral is normally thought to require large amounts of government stimulus spending, which could leave China with much less money to spend on fulfilling its promises to Africa.
On the other hand, support for Africa could increase demand for Chinese products. China is Africa’s largest trading partner and Chinese industry is hungry for Africa’s under-developed natural resources, including lithium and rare earths, which are vital to the green energy tech China is pushing in Africa.
Since China is having more difficulty selling those green energy products to Europe and the United States due to rising tariffs and anti-dumping regulations, Africa is probably China’s best bet for increasing export demand. With a little luck, China might be able to nourish enough demand from Africa to give its own economy the demand stimulus it needs.
China’s new model of smaller, more careful loans to Africa might also be the only way to develop African economies enough to repay the titanic sums they already owe to Chinese banks.
For example, Kenyan President William Ruto said during the FOCAC summit that China is promising to buy more agricultural products from his company and help to develop its rail lines. Kenya already owes China over $8 billion, a debt Ruto spent the past year asking Beijing to restructure.
Reuters noted last week that China’s new financial assistance programs for Africa have all been pitched in yuan, rather than dollars, in an “apparent push to further internationalize” China’s currency.
Reuters also noticed that Chinese dictator Xi Jinping appears to have backed down from a grandiose promise he made in 2021 to buy $300 billion worth of goods from Africa. At the FOCAC summit, Xi spoke of granting more market access for African imports, but did not promise any specific volume of purchases. Besides China’s economy faltering, Xi might have backed down from the $300 billion promise because too many African agricultural exports do not meet Chinese safety and sanitation standards.