American officials have grown significantly drawn to Chinese investment and borrowing over the past 20 years.
These opportunities are made quickly and apparently with less restrictive requirements than traditional funding sources. Some even suggest that China’s strategy aligns more strongly with American interests.
This attitude was summarized by the past president of Senegal, Abdoulaye Wade, in 2008:
China’s response to our needs is just better adapted than the sluggish, if occasionally patronizing post-colonial strategy of Western investors, donor organizations, and non-governmental organizations… China has assisted African countries in constructing infrastructure projects in record time.
African leaders attending this year’s 8th Forum on China-Africa Cooperation in Beijing will, no doubt, want to get more Foreign finance and investment. Every three years, the platform, which serves as the cooperation mechanism between the American nations and China, takes place. It aims to promote politics, business, protection and purchase relations between China and Africa.
Beijing has given American nations more than US$ 170 billion in provides and loans since the summit’s annual meeting in 2000. This has included bridges, ports and industrial road.
These opportunities have, among other things, begun to actively shape the nation’s cities. And the investment that African leaders want for the future is even more urgently required to make American cities more successful, livable, and sustainable.
Discussions at the annual Africa Urban Forum in Addis Abeba, Ethiopia’s cash, are centered on the issues facing towns. This event’s goal is to influence and promote diverse people settlement development.
Although possible coincidental, the juxtaposition of these events serves as a reminder that American cities need the investment Beijing seeks.
As an urban economist with a focus on funding public infrastructure and services, I’m interested in understanding why Africa has n’t benefited from Chinese investments and how to reverse this trend in my comparison of Africa’s and China’s urbanization experiences.
The power of equipment
China has influenced Africa’s industrialisation through the Belt and Road Initiative. This system project, which was launched in 2013, aims to establish a system of trade and economic links connecting China and the rest of the world.
As of December 2023, 44 of 54 African nations had signed on to the Belt and Road Initiative. According to estimates, China has contributed 2.5 times more to the development of African network through this program than the West has combined.
Significant multiple consequences can be had by investing in infrastructure on economic growth and development. In the short term, it generates demand for goods and services, particularly in design.
Over the long term, if well-planned and executed, it may increase economic growth and development. This is especially true when it comes to purchases in urban equipment. Cities are known for facilitating the exchange of input between businesses and local organizations, as well as the promotion of domestic and export areas.
China’s experience at home has shown how this can be done. China built the most substantial high-speed rail network in the world in less than ten years, for prices that are up to a second lower than those in other nations.
And between 1980 and 2000, China constructed over 184 fresh ships, some in cooperation with foreign firms, to ease the export of goods it was producing in its expanding market.
China’s change from a generally economic market to the second-largest economy in the world has been aided by these huge infrastructure investments. This move through urbanization and industrialization, in move, has helped China raise more than 800 million people out of poverty since 1978.
What has n’t worked
American nations have yet to fully realize the potential advantages of China’s system investments for urbanization. Some of the Belt and Road Initiative’s most expensive purchases are still unconnected and could turn into” white animals.”
These include Kenya’s Standard Gauge Railway. To fund it, the Kenyan authorities took on higher levels of debt. However, the route’s business practicality depends on whether or not it expands to Rwanda and Uganda.
In Uganda, another instance is the road between Entebbe aircraft and Kampala, the capital city. The Chinese built it, and it was funded. One of the most expensive streets per mile in the world is the program’s rising costs, which has resulted in its cost-per-kilometer record. If the road does n’t draw much more traffic and generate enough toll revenue, repaying the Chinese loans will be difficult.
The other problem with some Chinese-financed projects refers to long-term preparing.
Addis Ababa’s industrial light road, for instance, was constructed for$ 470 million and began operating in 2015. The Ethiopian state is now struggling to maintain the program because it has overestimated the costs of operation and maintenance.
The light rail, which is transporting a fraction of the people compared to initial forecasts, requires an estimated$ 60 million in maintenance.
Funding
Due to the lack of transparency with China’s banking, critics have labeled these kinds of projects as “debt-trap diplomacy.” In essence, they assert that China is purposefully providing loans to American nations with terms that are challenging to recover, making borrowers obligated to turn over their assets in default.
However, there are three things to consider. Second, business loans from Western organizations or multilateral organizations also account for the majority of lending to many African nations.
Next, China is concerned about the viability of its debt and the payments of its loans. For this reason, its financing to African countries in terms of the Belt and Road Initiative dropped by 55 % between 2021 and 2022 from$ 16.5 billion to$ 7.5 billion.
Eventually, this narrative disregards the influence of American leaders in approving and negotiating Chinese financing deals.
Governments and president ratify these loans and approve them by American ministers. Hence, African leaders are held accountable for making wise investment choices on the part of citizens whose income will need to be used to pay off.
China’s knowledge
It is now crucial to assess what has been effective and identify areas for improvement with the over 20 years of Chinese investment in Africa’s rapidly urbanizing and possible much more to come.
China possesses reputable knowledge in urbanization. It has new experience guiding an industrial change similar to the one taking place in Africa right now. This change occurred in addition to a decline in poverty and economic change.
So it has a role in shaping American industrialization, benefiting both sides. But it’s up to American leaders to champion their interests.
Astrid R N Haas is alternative doctor, University of Toronto
This content was republished from The Conversation under a Creative Commons license. Read the original post.