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What To Do About the Lack of Chinese Loan Transparency in Africa?

FRED DUFOUR / AFP

One of the central issues in the current Zambian debt crisis is a lack of transparency that makes it largely impossible for investors, policymakers, and constituents on all sides to know what’s really going on.

The Chinese government and creditors are among the worst in this regard. Not only do they refuse to disclose critical information about loans, deals, and other issues that taxpayers both at home and in borrowing countries should know, but what little communication they do provide is often very confusing, even misleading.

It’s hard to tell, though, if the Chinese preference for obfuscation is deliberate and strategic, or if it reflects common practices in an authoritarian one-party state where government transparency is genuinely an alien concept. It’s important to remember that Chinese stakeholders possibly aren’t forthcoming about their dealings in regions like Africa because they don’t come from a culture where that’s valued.

After all, no one gets promoted in China for saying too much. In fact, history teaches a very different lesson. In the mid-1950s, Mao Zedong invited intellectuals to speak out, even criticize the government and the Communist Party in what became known as the Hundred Flowers Movement. Well, that period of openness didn’t last. In fact, it was a prelude to the brutal Anti-Rightist Campaign a few years later, during which millions were purged, imprisoned, and killed.

That fear of dissent continues today, with the discourse on pretty much every major public policy issue tightly controlled by the Party and government.

So, the kind of transparency that the international community so desperately wants from China about its loan contracts in Africa and elsewhere simply isn’t possible in the Chinese system. The political space isn’t there to permit the kind of free-flowing discussion, including criticism, that would naturally ensue from publishing detailed information about loans, terms, interest rates, and so on.

And that’s not going to change anytime soon.

But there is an opportunity for more visibility in the Chinese loan process on the borrower’s side. Bradley Parks, executive director of AidData at William & Mary College in the United States, revealed some interesting insights last month into the contractual language that’s used in Chinese infrastructure deals.

While the Chinese side does insist on secrecy and non-disclosure, AidData found an important loophole that says if the laws of the borrowing country require the terms of the deal to be made public then China will not object. In essence, this is the manifestation of China’s bedrock principle of non-interference that still informs so much of the country’s foreign policy.

The key takeaway here is that if investors, the World Bank, IMF, and other international stakeholders want more transparency, then they’re going to have to persuade/force/cajole legislatures in places like Lusaka to pass laws that require the terms of Chinese loan deals be made public.

At least for now, that’s pretty much the only chance we have to see what’s really going on.

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