Is China Helping Africa? Growth and Public Debt Effects of the Subcontinent's Biggest Investor

Abstract

Because of the lack of reliable data, it is difficult to reliably answer the questions that many people are asking about China's activities in Africa: are the modes and magnitudes of Chinese finance creating unsustainable public finance and economic trajectories and — if they are — whose fault is it? Based on the available information and a rough analysis of the match between China's activities and Africa's development demands, we conclude that Chinese finance appears to have helped development on the subcontinent and has not — by itself — jeopardized its public finances: while public debt to GDP ratios have risen in the top ten recipients of Chinese loans, debt to China is generally a small portion of their external public debt. But China’s role in the debt dynamics of some of these countries — that is, the speed at which their external public debt is growing — provides more reason to worry.

Keywords: China, Africa, Sub-Saharan Africa, trade, energy, development finance, debt, transport, FDI