China debt diplomacy perils African countries' natural assets, sovereignty

China's debt diplomacy has not only threatened the natural assets of African nations but also targeted the sovereignty of these countries. "Unsustainable debt and the constrictive terms of Chinese loans" have been noted as many governments have signed deals with China in recent years, reported Africa Daily. Concerns regarding China's debt diplomacy have emerged about specific clauses that would allow Chinese entities to seize property or assets when there are defaults.

From 2000 and 2020 alone, China has given a total of USD 59.87 billion to African countries and has become the largest creditor to Angola (USD 42.6 billion), Ethiopia (USD 13.7 billion), Zambia (USD 9.8 billion) and Kenya (USD 9.2 billion), as per the Africa Daily news report. These countries are now under pressure to meet their debt obligations. According to Kenyan officials and ministers, they have repeatedly said that they would ask "China to extend the repayment period on USD 5 billion worth of loans, as the debt is "choking" the country's economy. 

China's debt diplomacy threatens African assets 

The problem for African countries has also aggravated due to the steep increase in interest rates in the US and other major economies over the last year. Further, the gradual decrease in the value of the currencies of these African countries and one can not ignore that loans which are offered in dollars and other curren1cies are expensive. Somewhat impact is also because of the pandemic and Russia's invasion of Ukraine which has led many African nations to service their sovereign debts. According to the study by Chatham House, at present 22 low-income African countries are either already in debt distress or at high risk of debt distress. "huge Chinese lending to Africa has created a dilemma for China as it struggles to recoup its money and at the same time presents itself as a friendly nation,"  reported the local newspaper citing the think tank.  

Further, the Chatham House has also warned that China might end up practising more unilateral actions by appropriating significant native assets such as ports, railways or power networks in response to defaults. Djibouti's total debts to China equate to around 43% of its GDP and recently announced it was suspending payment on USD 1.4 billion in Chinese loans, as per an Africa Daily report. Meanwhile, US Treasury Secretary Janet Yellen said that China has become the biggest obstacle to progress in these countries and the lack of transparency in these agreements is another major problem. As per the finding by the Center for Global Development, a Washington-based think-tank, in collaboration with AidData, all of the contracts of China Development Bank and 43% of the deals signed by the Export-Import Bank of China included confidentiality clauses about the terms of the loans.