China’s Foreign Aid Loans to Africa; Acts of Extraction or Development?
The continent of Africa is considered a developing region due to the high rate of poverty and lack of infrastructure, and China has stepped up to offer loans to countries in need across the continent. The billions of dollars in loans that China has widely distributed among African countries raises serious concerns. Angola and Zambia are two countries in Africa considered as developing nations. The two countries, in dire need of infrastructure, have desperately sought loans from the Chinese government. Chinese loans have become common among nations even though respected international financial institutions warn against the hidden conditionalities that are likely be attached to such loans. This thesis focuses on Chinese lending practices and why these two countries, Angola and Zambia, resolved to borrow from China. It also examines the advantages and disadvantages attached to the loans, especially Chinese motivations. After a prolonged war, Angola needed funding for infrastructure to boost its economy, so the country agreed to a resourced-backed loan because of its enriched natural oil resources. Zambia also needed developmental loans, and because it was considered a high-risk country liable to default repayment, China became its only option. Resource-backed loans are those where the collateral the government offers to back-up the loan is its resources such as oil, minerals, or commodities, or even landmarks, companies, and properties, such as airport, etc.. The idea behind the loans seems reasonable because it was surmised that the country's economy would grow, but thus far, the opposite has been due to different reasons highlighted in this thesis. I argue that these excessive loans have hurt the two countries’ economies, primarily due to the way the loans were allocated as well as how they were managed. This thesis reveals the problems of irresponsible lending and borrowing practices. It is hoped that this research can help these two countries, and aspiring countries, understand the challenges of borrowing when conditionalities are veiled in secrecy that can lead a poor, but resource-rich country, into a dept trap that ultimately benefits the lender.
City University of New York - City College
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