Needless to say, the economic fallout caused by the COVID-19 pandemic has severely impacted the global economy. With the world in situ, supply chains and the movement of goods and people have come to an abrupt pause. This has caused severe implications onto the pace and scope of the Belt and Road Initiatives (BRI) and highlighted short comings and limitations to the project which were not previously foreseen. As China mobilizes resources to manage the containment of the virus, it also has to balance challenges to Chinese liquidity and the general economic downturn.
The colossal infrastructure projects and investments undertaken all over the world has the potential of ushering in a new era of trade and growth for economics in Asia and beyond. The vast collection of development projects significantly expands China’s economic and political influence, with some approaching this with caution as it represents an unsettling extension of China’s rising global influence.
The use of financial means to expand global influence has been a staple tool since the onset of the industrial revolution for many countries. For China, foreign direct investment (FDI) in Africa has been prevalent since the 1970’s. projects such as the famous Tanzam Railway, a railway in East Africa linking the port of Dar es Salaam in east Tanzania with the town of Kapiri Mposhi in Zambia’s Central Province. The railway was built from 1970 to 1975, financed and supported by China. The interest free loan was seen by china as a way to get out of its international isolation. For that it needed the support of Africa, the continent with the largest number of members states within the United Nations.
It has been a very tumultuous year for China-Africa relations so far. China has been quick to offer aid and assistance to African nations as well as other nations effected as a part of their “mask diplomacy” initiates, however the pandemic has highlighted some gaping flaws in the BRI. The massive lending schemes that China has implemented and introduced to all countries involved may no longer be tenable. Economies in various partner nations are experiencing high levels of unemployment, coupled with the increasing risk of business to go bankrupt. The impact of the pandemic has significantly stunted China’s capability to extend large loans, resulting in African leaders not having significant capital to resort to.
However, a portion of the relief efforts from China to Africa is attributed from private businesses and individuals, from the established Chinese migrant communities throughout the subcontinent. This puts China in a unique position towards its commitment towards African nations. But ultimately, the disproportionate scale of investments between Africa and China results in a staggering trade deficit. African nations do not have the same economic power and market access compares to China. Fostering a mutually beneficial economic relationship is necessary for the long-term sustainability of the BRI, which can be enhanced by African nations developing more effective FDI strategies.
The bilateral relationship has been further tested recently with Kenya’s Health Minister declaring that imported personal protective equipment (PPE) from China has failed quality tests. The potential ramifications of defective aid equipment could have severe repercussions onto Chinas mask diplomacy efforts. This has not been the first time that Chinese equipment has been deemed faulty; several European nations such as Spain, Finland and the Netherlands have raised concerns over the quality of PPE and test kits delivered.
With recent calls for relief on all official, multilateral and private sector debt repayments, Chinese loans in Africa have been thrown into focus in light of the pandemic. African governments and SOE’s owe more that USD 150 billion, with COVID-19 exacerbating its impact. This will prove to be a pivotal moment in Sino-African relations with the current situation possibly unveiling the true economic disposition that some states find themselves in only to be strategically leveraged by their indebtedness to China for economic, military, or political favour.
Vyshnav Menon is an undergraduate student at the Australian National University (ANU) in Canberra where he studies economics and international relations.
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