China’s lending practices in developing African economies have come under scrutiny by the president of the World Bank, David Malpass. Malpass has called for greater transparency in the terms and conditions of the loans. China’s Lending Practices in Africa. However, Malpass believes that the competition between the US and China can be healthy, giving developing countries different options.
China’s Lending Practices in Africa
The borrowing of money from other nations or multilateral bodies to finance sectors that will grow economies, such as infrastructure, education, and agriculture, is common among developing countries. However, the recent steep increases in interest rates in the US and other major economies are making loan repayments more expensive, particularly for developing economies who borrow in foreign currencies. This is because the relative value of their own currency falls, leaving them struggling to find the extra money required to repay their debts.
Addressing this challenge and its consequences and providing financial support to Tanzania was one of the main reasons for this week’s visit by US Vice-President Kamala Harris to three African countries. A new nickel processing facility in Tanzania will supply the U.S. and other markets by 2026. This project will help to build resilient global supply chains and create new industries and employment.
Outlook on Competition between US and China
The US and China are currently competing for influence in Africa, which is home to abundant natural resources such as metals, including nickel, crucial for technology such as electric cars. The new study led by the Kiel Institute for the World Economy shows that globally China lent $185bn (£150bn) in bailouts to 22 countries between 2016 and 2021. However, Malpass has called for greater transparency in the lending practices.
Nevertheless, the competition between the world’s two largest economies for influence in Africa can be useful for developing countries as it provides different options to borrow money to finance sectors that will grow their economies.
