China, Africa and Debt

An article on the BBC website today (November 5, 2018) asks the question, is China burdening Africa with debt?

In the article, they state that the number of African countries facing a high risk of debt distress will double over the next five years. “High risk of debt distress” means that the debt to GDP ratio exceeds 50%. That is a lot of debt, and it does sound distressing. It is suggested that an expanding amount of loans from China are the problem.

Let’s make a few things clear.

First, this information comes from the IMF and World Bank, which are notorious exploiters of poor countries. Infamous, even. They are going to spin the data in a self-serving way. For instance, the article notes that China holds around 20% of African debt. By saying that this is the most African debt held by a single country makes it sound ominous. But they go on to say that the IMF and other similar organizations hold 35% of the debt, and private investors hold another 32%. Why are these figures not sounding the alarm? China holds 20%, while the IMF and private investors hold 67%, and China is the problem? You might think that the IMF is trying to direct attention away from their own practices, and you would be right.

Second, Chinese investments largely go to infrastructure projects, like roads, telecommunications, utilities, and ports. These facilities are necessary for African countries to develop stable economies and a decent standard of living for their citizens. Contrast this to the kind of investments being hawked in the western world. Google “investing in Africa” and you will find websites with statements like this: “Since our previous survey in 2012, interest in Africa as an investment destination has continued to grow, with the continent often viewed as an investment market with the potential for significant growth and superior returns.” Significant growth and superior returns mean wealth extraction, not building Africa into an independent, self-sustaining part of the world community.

Third, it is clear that organizations like the IMF, which push the neo-liberal policies of austerity as a prerequisite for getting loans, wants to maintain Africa as their own private preserve, and see China as an interloper that will have political as well as economic influence which will interfere with the hegemony of western capital. Not only is it in their interest to divert attention from their own activities, they want to continue them.

Now, it is no secret that China plans to make money from these loans. They have admitted this themselves. That’s why they are loans, not grants. The ultra-left believes this to be a betrayal of the socialist revolution in China. The North Carolina Communists are clear that moral purity is not possible in revolution. Practices such as countering counter-revolution even at the price of bourgeois notions of free speech, or business practices that make money and allowed them to reduce the number of their citizens living on less than $2/day from 85% to 13.1% in the years from 1981 to 2008, are a small price to pay.

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