Where Is the Africa-China Relationship Headed in 2021?

Many African countries experienced an uneven relationship with China in 2020. Early in the year, the continent’s leaders worried how African students and businesspeople living in China would fare after the outbreak of Covid-19 in Wuhan. The racist treatment of Africans a few weeks later in Guangzhou and elsewhere in China caused major diplomatic rifts, but African leaders’ attention quickly shifted to controlling the pandemic inside their own borders. Initially shielded from Covid-19 cases by their lack of global exposure to trade and tourism, African states carefully watched China and other Asian countries work hard to contain the outbreak and realized they had to take immediate action, too. Coordinating through the Africa Centers for Disease Control and Prevention, approximately 7 in 10 African countries closed borders and instituted social distancing before detecting 10 cases. That fast action ensured that African countries, throughout 2020 and to date, remained at under 5 percent of global cases and 4 percent of global deaths, with just 10 African countries accounting for over 80 percent of cases and deaths on the continent.

However, trade with China then faltered, leading to shortages and inflationary effects, and Chinese workers left projects in African countries due to concerns about the pandemic’s spread. But all this soon recovered too. The Africa-China relationship began to strengthen as the Chinese government and Chinese private organizations such as the Alibaba Foundation provided medical equipment to almost all African countries, and as China announced donations to the World Health Organization (WHO) and joined the COVAX and G20 debt suspension initiatives.

Alongside these turbulent developments, many observers have warned of possible Africa-China reckonings that might come to the fore in 2021: that Chinese lending to Africa, which has been a key aspect of Africa-China cooperation, seemed to have fallen in 2019 and would keep reducing; that Chinese equipment and future vaccines were substandard; and that China was simply using African countries as pawns in the great U.S.-China chess game.

While there are certainly weaknesses in the Africa-China relationship still to be addressed, I disagree with these 2021 reckonings and their reasoning. I predict that in 2021, the relationship between African nations and China will strengthen even further. Why? And, most importantly, will this be good for Africa?

Q1: What is China’s new dual circulation policy, and what does it mean for African countries in 2021?

A1: China has a new post-Covid-19 domestic strategy, and it has big implications for its trade with African countries. It is called “dual circulation” and implies several simultaneous shifts:

  • Strengthening Chinese domestic consumer markets as a source of economic growth;
  • Prioritizing domestic high-tech manufacturing and associated services for export;
  • Reducing dependency on income from exporting low-value manufactured goods; and
  • Reducing dependency on singular sources of imports into China.

This shift could benefit African countries, at least in the short and medium term. Currently providing just 4 percent of China’s imports, African countries may gain from the import diversification and consumer market growth the policy implies.

That said, as I know firsthand through my work at Development Reimagined (which runs a specialized market entry program for African brands into China), it is extremely difficult to get even the most astute and innovative African businesspeople and their new products into China, especially value-added products. Entrance into China will require considerable relaxation of China’s immigration rules and non-tariff trade restrictions with African countries, plus more investment in manufacturing capacity in African countries, both of which have yet to be seen in 2021. It therefore calls for hard work on the part of African governments—with the new African Continental Free Trade Area (AfCFTA) Agreement—to ensure the enticing Chinese offer of trade does not create the same dependency on selling natural resources, raw commodities, and agricultural products that Africans have established with other developed markets. It also means that African governments should direct Chinese (and other) service providers and investors to link with, grow, and help Africa’s domestic e-commerce and mobile payment firms—such as M-Pesa from Kenya—to extend to and from China, rather than crowd them out with Chinese (or other international) alternatives. That will be the only way to get the most job and development benefits from the China relationship.

Q2: Will Chinese loans to Africa fall in 2021? If so, what are the implications for African countries?

A2: There is much speculation that China’s lending abroad is falling, especially to African countries, often underpinned by the implication that China has finally “realized” just how difficult lending to Africa really is.

While official data has not yet been released on China’s external loans from 2019 or 2020, the abovementioned speculation is problematic for two reasons. First, it implies that African projects are by their nature riskier than others globally. This is a highly subjective view held by some states and investors, but other views are possible. In my view, the decisive African Covid-19 response demonstrates the latter should prevail. Second, the idea of falling lending is not grounded in an examination of the internal drivers that lead China to lend and African countries to borrow.

In China, for instance, while several domestic banks are facing major challenges in a post-Covid-19 context, central and provincial governments have thus far maintained incentives to deliver infrastructure projects internationally and shift some of China’s most labor-intensive manufacturing to its Belt and Road Initiative, including to African nations. These may even intensify in a bid to help Chinese firms recover and diversify under the dual circulation policy.

Similarly, for Africans, the Covid-19 crisis has brought into sharp focus the need for more finance rather than less. Development Reimagined has recently collated a detailed debt guide and flagship report that elaborates on this point, but let me summarize it here. The fact is that more finance is needed to provide adequate internet access for children that cannot go to school and to ensure trade can flow across borders while avoiding huge queues of trucks. This is illustrated by Tanzania’s January 2021 announcement of phase three of a new railway, which will involve a Chinese construction firm, although it will be funded by Tanzania’s national budget. How will countries deliver on these urgent infrastructure needs while also paying for Covid-19 health costs and providing socioeconomic safety nets to the most vulnerable, as well as paying off existing debt? How will they do this when the International Monetary Fund (IMF) requires them to cut government spending in order to receive Covid-19 support? Chinese lending may offer the only short- or medium-term route.

In this context then, if African nations are able to encourage China’s lending institutions to maintain the supply of loans in 2021 amid the noise of an alleged “debt crisis,” that will lead to a strengthened relationship.

Q3: How will these changes affect the 2021 Forum on China Africa Cooperation (FOCAC)? And what are implications of the Africa-China relationship for Africa’s other development partners?

A3: The eighth FOCAC—potentially virtual or in Dakar, Senegal—will serve as a barometer of the health of Africa-China relations and how it compares to other external partnerships that Africa or China have.

First, the forum will signal whether Beijing will make good on its pledge to provide vaccines to the continent. Right now, the Chinese government, plus Alibaba’s cross-border arm Cainiao and Ethiopian Airlines, are launching a program to send vaccines to many African countries, some for free, some purchased. The free vaccines announced so far are fairly small, but depending on how open other development partners are to negotiations and donations, China may well become the main source of vaccines for African countries going forwards, just out of pure practicality.

Second, it will reveal whether Africa’s other development partners in 2021 can match or exceed what China offers to African economies. To match China’s pull in Africa in 2021, development partners will need to offer brand-new, multimillion-dollar consumer markets to high-end African brands and low-income farmers alike. They will need to have an explicit policy to invest both loans and equity into manufacturing overseas without requiring policy reforms (or strings) attached. They will need to be able to direct their pharmaceutical sector to discount and make local vaccine manufacturing deals with African countries without requiring onerous intellectual property protections. While all this would be highly welcome, it is unlikely to even enter into development discourse, let alone happen.

Hence, FOCAC will almost certainly confirm that the Africa-China relationship will strengthen in 2021. Despite its challenges and weaknesses in delivering more for African people, right now, it simply beats the rest.

Hannah Ryder is a senior associate (non-resident) with the Africa Program at the Center for Strategic and International Studies in Washington, D.C., and CEO of Development Reimagined, an international development consultancy and the first Kenyan wholly foreign-owned enterprise in Beijing.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Hannah Ryder
Senior Associate (Non-resident), Africa Program