The China model’s false promise

Africa needs infrastructure. Like many regions in the developing world, Africa lacks roads, railways, and hydropower dams to spark economic development. And China, a major builder of infrastructure, has shown a willingness to offer loans to build new infrastructure around the world. Many African countries look to repeat China’s success story of fast-paced development by taking on high levels of debt from Chinese and other lenders to finance new large-scale infrastructure projects.

But it takes more than just infrastructure to bring about widespread development. Africa will also need to attract high levels of manufacturing investment if it is to repeat China’s development story. And most African countries cannot compete with countries in south and southeast Asia seeking to attract the same investment. The decisions of African governments on infrastructure must be well targeted, or else, their limited borrowing space can lead to a new debt crisis, not the promised widespread development of the China model.

DIIS senior researcher Luke Patey discussed how African governments can ensure they make the most of infrastructure finance on the China-Africa podcast and Radio24Syv. He expands on his recent article in the Financial Times and argues that African countries need to ensure they enhance the position of their own domestic firms to capitalize on infrastructure finance and manufacturing investments from China. He urged African leaders to leverage regional integration to negotiate better trade and investment deals with outside partners.

China’s English language daily, the Global Times, made an official response to the Financial Times article and Patey also highlighted the political and economic motives of China’s overseas loans in an interview with CNN.