SEATTLE — The Forum on China-Africa Cooperation (FOCAC) took place on Dec. 4-5, 2015 in Johannesburg South Africa. The summit was part of a growing trend of cooperation between China and Africa, and China signaled its commitment to this burgeoning relationship by pledging $60 billion to bolster African development.
The $60 billion pledge is three times as large as the funding package that China promised to Africa in 2012.
Of the $60 billion, only $5 billion are grants and interest-free loans. The rest of the sum is comprised of loans and export credits. Unlike traditional development aid, China’s funding is more of an investment than a donation.
China has outlined only a general plan for its funding directives, with $5 billion going to the China-Africa Development Fund, a private equity and venture capital investment arm of the China Development Bank. Another $5 billion will go towards the Special Loan for the Development of African SMEs, which is also controlled by the China Development Bank.
$35 billion will go towards preferential loans, export credits, and concessional loans. The last $10 billion will be designated as initial capital for the China-Africa production capacity cooperation fund.
When President Xi Jinping announced China’s $60 billion pledge at the summit, he highlighted ten specific funding areas, including aid for drought-stricken nations, projects boosting agriculture, infrastructure, and scholarships for African students. A portion of the funds would also be used to cancel debts in Africa’s least developed countries.
China has already invested over $2 billion in Africa each year as foreign direct investment (FDI). Cumulatively, China’s FDI in Africa from 2000 to 2014 was $30 billion.
Although China has recently experienced a slowdown of its economy, Li Yifan, Beijing’s ambassador to Ethiopia, confirmed in an interview with Reuters that China would follow through with its funding pledge.
“In spite of all the doubts, I can share with you that the relevant government departments, development banks, and insurance companies in China are engaging… their African counterparts on how to make this grand plan come (to fruition),” Yifan stated.
The slowdown of China’s economy has already impacted African countries. Much of the rapid, economic growth in African countries came from supplying China’s demand for raw materials. As China steers away from construction and exports as their main industries, its demand for such resources has declined. The drop in demand has led to a decline in the price of commodities, which has had a significant impact on the economies of countries like Zambia and Mozambique.
Zhong Jianhua, China’s special representative on African affairs called for a new stage in China-Africa relations. He noted that the two regions must adapt to a “new normal” of slower growth in China.
China has been Africa’s largest trade partner for the past six years in a row, peaking at $222 billion in 2014. China’s $60 billion pledge to aid African development signals that the relationship between the two regions will continue to grow closer.
Sources: Washington Post, Africa News, Aljazeera, CNN