China pledges $10b in loans to African countries

China is digging its fingers deeper into the African pie. The dragon of the East is consolidating its hold on the continent by providing much needed financial assistance to countries that badly need it. And in return China is likely to have a stake in natural resources from the continent.

In a white paper on Sino-African economic and trade cooperation, released for the first time by China today December 23, 2010, the Chinese government has pledged to give African countries an amount of $10 billion in preferential loans over two years between 2010 and 2012. This amount will be given in addition to the $5 billion of preferential loans and exports buyers’ credit that China provided from 2007 to 2009.

According to the paper these loans would be used to finance some major projects such as an airport in Mauritius, housing in Malabo, Equatorial Guinea and the Bui Hydropower Project in Ghana.

The paper indicates how the Chinese government views helping African countries to build houses, roads, bridges, railways, telecommunications as very important.

Meanwhile, the total number of infrastructure projects on the continent financed by China exceeded 500 by the end of 2009.

According to China’s Ministry of Commerce, in 2000, China-Africa trade totaled $10 billion. It had surged to $106.8 billion by 2008.

The growth slowed down in 2009 due to the global economic downturn. But the trade volume bounced back to $61.2 billion in the first half of 2010, up 65% year on year.

Chinese investment in Africa has increased 46% over the last decade, with most projects focusing on water conservancy, electricity generation, communications and information technology.

For instance in September Ghana signed an agreement with China for a $3 billion loan to develop the country’s energy sector.

By Emmanuel K. Dogbevi