China-Africa cooperation given massive lift
For a long time, China's banks and private equity funds and many other financial institutions have been working hard to boost the development of joint programs by China and Africa.
China further pledged to African nations, during the 2018 Beijing Summit of the Forum on China-Africa Cooperation, which ended on Sept 4, that it will provide $60 billion in additional aid and financing. President Xi Jinping said China will provide the$60 billion in the form of government assistance as well as investment and financing by financial institutions and companies.
This will include $15 billion in grants, interest-free loans and concessional loans; $20 billion of credit lines; the establishment of a $10 billion special fund for development financing; and a $5 billion special fund for financing imports from Africa. In addition, China will encourage Chinese companies to make at least $10 billion of investment in Africa in the next three years.
These measures will further push forward the cooperation of both sides in the manufacturing sector, too.
Of the $60 billion, $15 billion will be in aid. I think this will be put into industries that are fundamental to African countries, and the manufacturing sector is an important part. Since this is funding from the government, it will set an example and lead more private funding to also invest in Africa's manufacturing sector.
The $20 billion in credit lines will be decided through consultation by the debtors and creditors, based on market rules. China's official export credit agency - China Export & Credit Insurance Corp - will insure these loans. Some of these loans could be sovereign credit loans offered to African governments. These loans could also be used to help Chinese companies to build manufacturing programs for these countries, and will be able to support promising industries, especially manufacturing industries, that African countries would like to develop.
The third area of funding includes a$10 billion special fund for development financing and a $5 billion special fund for financing imports from Africa. On Sept 5, China Development Bank and 16 African banks signed an agreement to build the China-Africa Inter-Bank Association, which marks the establishment of the first multilateral financial cooperation mechanism between China and Africa. China Development Bank has played an important role in helping Chinese companies to invest in Africa. The establishment of the new association will definitely lead more capital into the development of the manufacturing sector, which is greatly needed in Africa.
Finally, Chinese companies are encouraged to invest $10 billion in Africa over the next three years. In the past few years, with the steady development of the Belt and Road Initiative, Chinese companies no longer simply export goods or do project contracting overseas, but are now involved and invest in more diversified projects. They are also more mature and rational about overseas investment and pay more attention to their social responsibilities in Africa and to environmental protection on the continent.
Thus, China-Africa cooperation in various areas, such as manufacturing, will definitely have a bright future, especially with the gradual realization of the $60 billion in additional aid and financing.
The writer is an associate researcher of the International Monetary Institute of Renmin University of China and an expert of the China Chamber of International Commerce.