Global Humanities and Social Sciences

China's Alternative Borrowing to African Countries: A Counterbalance to Traditional Development Financing

Abstract

In the past thirty years, the Chinese government has significantly increased development financing to countries in the Global South—Africa, parts of Asia, and Latin America, where 1.1 billion people of the world's poorest, accounting for 18% of the world’s population, have received financing for development by tenfold in the form of aid assistance, loans, and grants. Countries such as Kenya, Ethiopia, Uganda, Tanzania, Eritrea, Liberia, Nigeria, Ghana, and those in Southern Africa, including South Africa, Botswana, and Namibia, are practical examples. This has sparked interest in understanding the impact of China's development models and financial aid. Numerous studies have been conducted to examine the impact of Chinese development policies on patterns and outcomes in recipient countries. Methodologically, this paper employs a mix of analytical and qualitative approaches, utilizing official reports from multilateral organizations, such as the International Monetary Fund (IMF), World Bank, OECD Countries, Think Tanks, online publications related to development financing, and other scholarly works to provide a deeper insight and understanding as the thrust of this paper. This shift enables more profound insights into various realities, motivations, and understandings of different perspectives related to this topic.This paper critically reviews the existing literature, focusing on how China has become an alternative to official development financing provided by the Bretton Woods institutions—the International Monetary Fund (IMF) and the World Bank (WB)—counterbalancing United States-led Western alternatives for development financing in poor countries. Although there are claims and counterclaims that Chinese funding is less politically motivated than Western development assistance, empirical studies suggest that the One China Policy plays a significant role in explaining Chinese development financing. Findings of this paper suggest that the Chinese model of development financing has increased public and private sector investments in the global south, including Africa, creating thousands of new jobs. So far, China has given more than 2,151 loans from 1950 to 2018, including 2,824 grants made by China’s state-owned creditors to 146 emerging or developing countries, with total commitments of $564 billion. The impact of China’s development financing is seen in critical sectors such as rail, telecommunication, roads, agro-processing, hotel and tourism, and the construction industries. Additionally, there is evidence that over the last two decades, China’s development financing has surpassed the traditional development financing institutions, breaching a major void that usually bedevils countries in the global south. This paper presents China not only as a normative power but also as a beacon of hope, an alternative for global financing development, and a new path for the future.

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