IS CHINA RE-COLONISING AFRICA WITH ITS UNTIDY LOAN DEALS?

China is arguably "re-colonising" Africa and other nations with its loan deals. China’s loan substructure is premised on its robust GDP. China's GDP, currently around $18.8 trillion, solidifies its position as the world's second-largest economy, trailing only the United States. Its industrial prowess, often referred to as the "world's factory," drives global supply chains, producing everything from electronics to automobiles. With a trade surplus nearing $992 billion in 2024, China dominates international markets, particularly in high-tech manufacturing and electric vehicles which it ships across different markets. China ships both debt and debentures, products and raw materials.

According to The Economist in 2024 the Chinese economy grew by 4.7% in the second quarter, compared with a year earlier. And its vast debt volumes often come with mixed reviews. While they provide critical infrastructure, critics argue that the lack of transparency and high-interest rates can lead to loan dependency. China has really extended loans to numerous nations particularly through its Belt and Road Initiative (BRI), which focuses on infrastructure development and economic partnerships.

Some of the countries with significant loan deals with China are Pakistan, which approximately owes $26.6 billion, primarily for infrastructure projects like the China-Pakistan Economic Corridor (CPEC). Angola has a debt of around $21 billion, much of it tied to oil-backed loans. Sri Lanka owes China $8.9 billion, with projects like the Hambantota Port often cited as examples of debt-trap diplomacy. Ethiopia owes China $6.8 billion in debt, with investments in railways and industrial parks. Kenya owes $6.7 billion, including loans for the Mombasa-Nairobi Standard Gauge Railway. Bangladesh owes China $6.1 billion in debt, with projects in energy and infrastructure. Zambia owes China $6.1 billion, with loans tied to mining and infrastructure. Laos owes China $5.3 billion in debt, including for the China-Laos railway. China lent $5.2 billion to Egypt, for investments in the Suez Canal Economic Zone. Nigeria, amongst others borrowed $4.3 billion from China for over-priced projects in railways, airports, and power plants.

Even the United States owes China a significant amount of debt through its holdings of U.S. Treasury securities. As of recent data, China holds approximately $870 billion in U.S. debt, making it one of the largest foreign creditors to the United States, second only to Japan. These holdings are a result of China's trade surpluses with the U.S., where surplus dollars are often reinvested into U.S. Treasury bonds to safeguard their value and earn interest. This financial relationship exemplifies the complex interdependence between the world’s largest economies. While such holdings give China leverage in terms of economic influence, they also tie China's financial stability to the health of the U.S. economy, as any significant sell-off could destabilise global markets, including China’s.

China’s extensive investments and loan agreements, particularly through its Belt and Road Initiative (BRI), have significantly expanded its influence across Africa. Projects like infrastructure development, roads, railways, and ports are often seen as opportunities for economic growth in recipient countries. However, concerns have been raised about the terms of these loans. Critics argue that some agreements lack transparency and could create debt dependencies, leading to what some refer to as "debt-trap diplomacy."

For instance, when nations struggle to repay their loans, they may lose control over critical infrastructure or natural resources, as seen in cases like Sri Lanka’s Hambantota Port and Nigeria’s asset seizures linked to a legal dispute involving a Chinese firm and Nigeria in 2024. Records available indicate that the dispute originated from an arbitration award related to a breached agreement between Zhongshan, a Chinese company, and Nigeria's Ogun State. This led to international rulings where Nigeria contested the tribunal's decision in various jurisdictions. China’s seizure of three presidential jets in France belonging to Nigeria as a security measure for the claims is provocative. The jets were held as part of the enforcement of the arbitration ruling, which Zhongshan pursued to recover its compensation.

Whether this constitutes "re-colonisation" depends on perspective, but it undeniably highlights the need for transparent agreements that balance development goals with long-term financial sovereignty. There are many nations owing Russia, but it does not follow the Chinese debt-trap approach. 17 countries owe Russia $24 billion  according to The Moscow Times.

China’s meteoric rise from the vestiges of colonial subjugation to a global hegemon is a narrative that continues to captivate intellectual discourse. Critics like Pankaj Mishra have underscored the complexities of China's influence, particularly through its strategic positioning within BRICS (Brazil, Russia, India, China, and South Africa) and its broader geopolitical maneuvers. Mishra, in works such as From the Ruins of Empire and Age of Anger, critiques the enduring hierarchies birthed by colonialism and highlights how China’s ascent challenges Western-dominated paradigms of power and modernity. He posits that China's economic and industrial prowess, while remarkable, also raises questions about the replication of exploitative structures in its dealings with developing nations.

China’s dominance within BRICS is emblematic of its unparalleled economic clout. As of recent analyses, China accounts for approximately 60% of BRICS’ combined GDP. This dominance is further amplified by its export capacities, which span industrial machinery, consumer electronics, and automobiles, making it the linchpin of intra-BRICS trade.

China’s industrial prowess is not merely a product of economic liberalisation but also a reflection of its ability to leverage state-led capitalism to outmaneuver traditional market economies. Intellectuals like Mishra and others have debated whether this model represents a genuine alternative to Western neoliberalism or merely a recalibration of imperialistic tendencies under a different guise.

Furthermore, China’s export-driven economy has been instrumental in reshaping global trade dynamics. Its ability to produce goods at scale and at competitive prices has not only bolstered its GDP but also positioned it as a critical player in global supply chains. This economic ascendancy, however, is not without its detractors. Critics highlight the environmental toll of China’s industrial expansion and the socio-economic disparities that persist within its borders as well as its constant rapport with the Russian President, Vladimir Putin, whose war rhetoric is gradually intensifying. Just this morning, U.S. President Donald Trump has denied a New York Times report that his close ally, billionaire Elon Musk, was due to be briefed by the Pentagon on Friday about the U.S. military's plan for any war that might break out with China.

In summation, despite all these twinges of influence, the Financial Times has reported that China's non-financial debt-to-GDP ratio is at a new record, approaching 300%, and that the economy is struggling with a property sector crisis and concerns about deflation, with some analysts suggesting that the Chinese government has announced monetary and fiscal stimulus. Still, China’s trajectory from a fragmented, semi-colonised state to a global powerhouse encapsulates a story of resilience, strategic foresight, and unparalleled industrial growth. And as intellectuals like Mishra remind us, this rise is fraught with contradictions, challenging us to rethink the paradigms of power, development, and equity in an increasingly multipolar world.