China's Belt and Road Initiative (BRI) in Africa is facing challenges as African states become aware of the disadvantages of the scheme. Total trade between China and its African partners in the BRI increased by only 1.5% to $281.1 billion, with a 6.7% drop in African exports to China [6176dcf7][fd56620d]. The BRI is structured to give China dominance in the economies involved, with China financing development projects and trade agreements and gaining control over the projects and export business [6176dcf7][fd56620d]. However, many countries find themselves in a trade deficit and dependent on China, leading to concerns of a 'debt trap' [6176dcf7][fd56620d]. Falling commodity prices and China's economic headwinds have further highlighted the disadvantages of the BRI [6176dcf7].
Beijing has made efforts to alleviate the strain on African partners by opening 'green lanes' for duty-free agricultural products and promising assistance in agricultural production and processing [6176dcf7]. However, the long-term burdens of the BRI may become apparent, as seen in other countries like Sri Lanka, Italy, and Pakistan [6176dcf7].
China has been Africa’s largest trade partner for 14 consecutive years. The trade between China and Africa in 2023 grew a modest of 1.5 percent from 2022 to US$ 282.1 billion [fd56620d]. The BRI is China’s proposal to build a Silk Road Economic Belt and 21st century Maritime Silk Road in cooperation with related countries [fd56620d]. China-Africa trade has gradually become stronger while intra-trade between African states has been weak [fd56620d]. China provides loans to African governments to build infrastructure that connects China's strategic resource areas in Africa. Many of the projects are controversial due to debt sustainability issues [fd56620d]. Africa should integrate the BRI into the AfCFTA and focus on industrialization and technology. Africa should increase tariffs on imported goods to protect local products under the AfCFTA agreement [fd56620d].
The decline of the Addis Ababa Metro in Ethiopia, built by Chinese companies, reflects China's changing approach to infrastructure projects in Africa [c899af8e]. The metro project has faced technical issues, financial difficulties, and low ridership [c899af8e]. This decline is seen as a shift towards more cautious and selective investments by China in Africa [c899af8e]. The Addis Ababa Metro is considered a symbol of China's influence in Africa, and its decline may impact future Chinese investments in the region [c899af8e].
China's flagship economic cooperation program, the Belt and Road Initiative, is rebounding in Africa after a lull during the global pandemic. Chinese investment in Africa increased 114% last year, with a focus on minerals essential to the global energy transition [d115d58a]. However, the relationship remains largely extractive, dominated by imports of Africa's raw materials. Chinese sovereign lending to Africa is at its lowest level in two decades, and public-private partnerships have yet to gain traction. The trade deficit between China and Africa has widened, and efforts to boost other imports from Africa have faltered. Chinese officials argue that their engagement in Africa supports the continent's wealth and development [d115d58a].
Chinese banks are expanding their loan books and funding Belt and Road Initiative (BRI) projects overseas as liquidity tightens at home. Bank of China priced three bonds in overseas markets, raising a total of $1 billion in funding. China Development Bank has loaned about $100 billion, while Bank of China has committed to $20 billion in loans. Liquidity conditions in China are tight, and liquidity is leaving the country despite efforts by the People's Bank of China to inject funds. Chinese banks are funding more belt and road projects to export overcapacity from China and strengthen their capital cushion. Credit demand in China is weak, and banks are seeking viable business opportunities abroad. Policy banks are better suited for lending in regions like Africa, as commercial banks are unfamiliar with assessing credit risks in those areas. [edc0068d]