Li 1 W Instructor English 1A 12/10/2019 How Chinese loans are making African countries poorer In the modern era, the debt has become one of the major factors of the economy, through which many nations around the world is surviving. Many developed nations are among the highest under debt nations of the world, which means that the debt has become necessary to run the economy. Countries like Nepal, Italy, Bhutan and the USA are among the countries which are having the largest foreign debt. But the curiosity arises that which country is excelling in providing the foreign debt to the other nations. The countries also run the debt policy through which they lend money to the other countries (Wong, 2019). Now in the world in 2019, China is the leader in lending money to other nations. There are many critics on the current Chinese policies, but there foreign lending has reached the size of the 700 billion dollars, which is even higher than the size of the lending banks of the world, IMF and World Bank. The Chinese government is now lending the money to the developing nations for developing infrastructure and investment in various industries, which provides the FDI to the host countries and provides China with a high lending volume.The debt size to the foreign nations by China is dramatically increasing which is alarming many think tanks of the world, specifically the African countries are one of the largest recipients of the Chinese loan. Many critics have stated the level of the debt to the African nations is unbearable, as they don’t have the capacity to pay off their debts, but the Chinese Government has claimed that the loans have been invested in the railroads, highways, and airports which is a long-term investment that will be paid off in a longer period. The heavy funding of the African nations is the result of their eligibility to meet the requirements of the IMF through which they can precure the only to run the economy. The Republic of Congo has borrowed the amount of the US$2.5 billion from the China, which they have structured to be payed in the period of 156 years (Smith, 2019). According to the Chinese news agencies there are various other African nations which are seeking the loans from the Chinese government as they are lacking in the credibility to get borrowings from the WB or IMF. Ethiopia has managed to get the loan of the US$3.3 billion from China, during the same period, Zambia is seeking same kind of package for their own country to build the infrastructure like airports and highways. One of the critics from the University of Helsinki in Finland, that buying of loans of the African states is like borrowing money from the bank to buy Tesla when I don’t have adequate resources to pay it back. This comment suggests that the profitability of the African nations who are borrowing loans from China will not rise, as this loan is just to run the government circle which is not enough to develop the nation. So, What China is gettin ...

1. Li 1
W
Instructor
English 1A
12/10/2019
How Chinese loans are making African countries poorer
In the modern era, the debt has become one of the major factors
of the economy, through which many nations around the world
is surviving. Many developed nations are among the highest
under debt nations of the world, which means that the debt has
become necessary to run the economy. Countries like Nepal,
Italy, Bhutan and the USA are among the countries which are
having the largest foreign debt. But the curiosity arises that
which country is excelling in providing the foreign debt to the
other nations. The countries also run the debt policy through
which they lend money to the other countries (Wong, 2019).
Now in the world in 2019, China is the leader in lending money
to other nations. There are many critics on the current Chinese
policies, but there foreign lending has reached the size of the
700 billion dollars, which is even higher than the size of the
lending banks of the world, IMF and World Bank. The Chinese
government is now lending the money to the developing nations
for developing infrastructure and investment in various
industries, which provides the FDI to the host countries and
provides China with a high lending volume.The debt size to the
foreign nations by China is dramatically increasing which is
alarming many think tanks of the world, specifically the African
countries are one of the largest recipients of the Chinese loan.
Many critics have stated the level of the debt to the African
nations is unbearable, as they don’t have the capacity to pay off
their debts, but the Chinese Government has claimed that the

2. loans have been invested in the railroads, highways, and
airports which is a long-term investment that will be paid off in
a longer period.
The heavy funding of the African nations is the result of their
eligibility to meet the requirements of the IMF through which
they can precure the only to run the economy. The Republic of
Congo has borrowed the amount of the US$2.5 billion from the
China, which they have structured to be payed in the period of
156 years (Smith, 2019). According to the Chinese news
agencies there are various other African nations which are
seeking the loans from the Chinese government as they are
lacking in the credibility to get borrowings from the WB or
IMF. Ethiopia has managed to get the loan of the US$3.3 billion
from China, during the same period, Zambia is seeking same
kind of package for their own country to build the infrastructure
like airports and highways. One of the critics from the
University of Helsinki in Finland, that buying of loans of the
African states is like borrowing money from the bank to buy
Tesla when I don’t have adequate resources to pay it back. This
comment suggests that the profitability of the African nations
who are borrowing loans from China will not rise, as this loan is
just to run the government circle which is not enough to develop
the nation.
So, What China is getting in return for the higher debt? The
first point----- Natural resources. The African nations are full of
the natural resources which are unused as they are lacking in the
resources through which they can have access to these. Africa is
in the world map like the one of the rich areas according to their
resources and most of all, they have a lot of oil under them. Due
to these reasons, it has become under the limelight of the world
for foreign investment. Under such conditions, china needs
investment in the secure place from there they can have access
to the natural resources such as oil. The Chinese Government is
working on to get exceptional access to the natural resources of
the nations where they have been working and have lent money.
The other kind of minerals which exist in the African nations

3. are as follows: Diamond, Gold, Nickel ,Timber ,Titanium ,
Graphite, Iron ore and Cooper.
Second, the strategic position. The location of the African
nation is best in terms of the environment and the weather
conditions, this becomes the point of attraction for the Chinese
investment in the African nations. Moreover, there is huge work
labor exists in the African nations which can be utilized in
cheap labor costs. On the other hand, China’s vision towards the
one belt one road is a win-win situation for China, as it wanted
to have access to the major shareholder of the trade in the
world, through funding the infrastructures of the African
countries will help the Chinese traders to shift their goods
throughout Africa, and sell their goods in it. The huge amount
of debt is unbearable for the African states to return, this also
raises the chances for the Chinese to control the infrastructure
by leasing the facilities of transportation.
China also is in the desire to challenge the dominance of the US
in African politics, being the second superpower in the world,
now China has just one rival in the way towards the world’s
largest economy which is the US, which has great influence in
the African nations. The international institutions are working
under the umbrella of the USA, which china wanted to change
through the high level of lending.
The government of China has adopted diplomacy against the
other developing countries of the world through which they can
have access to the resources of the borrowing countries. The
African countries are getting a huge amount of lending from the
Chinese government, through which they have become under the
influence of the Chinese government. Under this diplomacy
China is trying to overpower the control of the borrowing
countries by lending them an amount which they can’t afford to
pay back. Many of the Indian and the An American journalist
has termed this step of China as the wicked one through which
they are overpowering the African nations and spreading their
trap in Africa.
There are many countries, which presents the latest example of

4. the indebt of them by the Chinese loan. The most prominent of
these are the Sri Lankan loan and the Djibouti debt crisis.
Sri Lankan Government had secured loan from the Chinese
Government for the construction of the Magampura Port and the
Mattala Rajapaksa International Airport. These infrastructures
were built by the Chinese contracting companies, the money
was lent by the Chinese state-owned bank. The inability of the
Sri Lankan government to pay the debt, the port and the airport
was given on the 99 years of the lease to the Chinese
government state-owned company (Winnie, P.H.Poonb, &
Zhouc, 2018).
Djibouti is the country in Africa, which had borrowed money
from the Chine, which turned into the excess amount which
reached to the level of 70% of the country’s GDP. This was the
point where the weak nations have to yield in front of their
creditors, as they have controlled the majority of the
infrastructure of the country. China had invested in the
infrastructure of the country, which they failed to pay back,
now on these conditions China is influencing the country’s
policies, which is altering the country politically and culturally
as well.
As in the 15th century, the European nations started the
colonization through acquiring the territories of the ports and
the modes of transportation. This gave them the power to
acquire the major control of the countries, and they started their
business through which they could have a fortune, they could
never get in their lands. Like it is obvious that China is striving
to become a superpower, and for that, there is one way, which is
trade excellence. The government of China is arranging the
facilitates for better trading opportunities for their producers by
providing them with the roads and the ports. China is highly
investing in the developing countries in the roads, railroads, and
ports, through which they can complete their vision of the belt
and road. China is in the desire to have major political control
in the countries through which they have access to the major
markets of the world. The political control will provide them

5. with the power to influence things in their favor (Dreher, Fuchs,
& Parks, 2018).
Debt is a source of inequality. The availability of the debts to
those nations who are ineligible to pay back is the bright chance
for China to acquire control over them. this act of the China is
putting the nations of Africa under the debt trap, which will
increase the poverty and the lesser chances of the employment.
The average institution of China which lends loans requires the
interest of the 3.6 percent. In the at least time of the 12 years as
the maturity period. In such cases the countries like Kenya,
Ghana, Congo, and many others. The 22 countries of Africa
have surpassed the level of debt-to-GDP ration to 55% (Tan,
2019). Many of the times, the investment which is being done in
the African countries, the Chinese people get the most of the
leverage from them, as the construction companies are always
Chinese while the trading is another the advantage which they
get from the infrastructure, while the poor nations of the Africa
needed the infrastructure badly. The influence of China is
increasing in this way. For instance, Kenya has a debt of the
US$50 billion from China. The payback of these loans is
impossible for the Kenyans due to which the Chinese requires
the cultural and political control over the country. The labor
which they hired in the manufacturing of the infrastructure was
brought from China, which didn’t help Kenya in sense of
employment development (Song & Xiong, 2018)
In recent years, China had tried to make a trade relationship
with the 120 countries all around the world. They have made
such a relationship strong through the investment in the regions.
The USA and China are on trade war since the last few years as
they are competing on the trade .Therefore, the USA has to
intervene in the situation of the loaning in Africa, as by many
strategic experts, the increasing influence of the China in Africa
may pose a national threat to the USA. As prior to China the
USA was the largest trader operating in Africa, but the
investment of China reached US$5 trillion in the various nations
of Africa made it the largest trading partner. These positions of

6. the African countries are threating the trading of the USA,
which can be intriguing for the USA to intervene to keep Africa
away from the Chinese debt trap.
As the China has extended its aid in the African countries, in
response to the during the Obama administration, by the
introduction of the Power Africa program. This program was
based on the benefit to the African states through the
development in these regions. This was the step which could
discourage the loans from China, through this program started
by the USAID, the electricity resources were to be generated in
the African states. Since 2000, the investment in the electricity
sector of Africa, the USA has spent US$20 billion. This huge
amount was just meant to discourage the entire Chines control
over the culture and politics of the Africa. But the retaliation by
China was even more severe as China invested US$7 billion
more dollars then the USA. This has given the edge to the
Chinese investment.
The Congress under the Trump administration has moved to
fund the U.S. International Development Finance Corporation
(IDFC). Through this the fund, the purpose is to build the
infrastructure in the African nations through they can avoid the
Chinese loans, but this move of the administration does not
work well, as they need to learn from the smart move which
China is adopting to invest in Africa.
While the mass media stated that the investment by China in the
African state is not performing well in the matter of developing
the lives of the natives. Against which the Chinese analyst
claims that AidData represents that the African states which are
gaining loan from China are growing. Although they agree to
use the investment as the strategic tool to control the influence
of the US, but stills they are making the developing countries
better as the infrastructure is an essential part of the country to
be developed.
China is increasing its military power, but along with that their
main focus is on the increase of the trade around the world
through which they can have access to the big markets.

7. Especially they wanted to target the Europe as the market for
their products. For such expansion of the trade, China is
working on the one belt formula which will make them
successful through the efficient transportation of the goods
easily around the globe. Africa has also been the target for
China, now the debt on the many countries of Africa has
estimated reached US$417 billion. The rising debt of China is
not just limited to the African states, but rather it is expanded to
the USA as well. The other nations of the Asia and America are
under the debt of the China.
Work cited
Dreher, A., Fuchs, A., & Parks, B. (2018). Apples and Dragon
Fruits: The Determinants of Aid and Other Forms of State
Financing from China to Africa. International Studies Quarterly.
Smith, E. (2019, Oct 9). The US-China trade rivalry is
underway in Africa, and Washington is playing catch-up.
Retrieved from cnbc.com:
https://www.cnbc.com/2019/10/09/the-us-china-trade-rivalry-is-
underway-in-africa.html
Song, Z., & Xiong, W. (2018). Risks in China's Financial

8. System. Annual Review of Financial Economics.
Tan, W. (2019, Jul 19). About half of China’s loans to
developing countries are ‘hidden,’ study finds. Retrieved from
cnbc.com: https://www.cnbc.com/2019/07/12/chinas-lending-to-
other-countries-jumps-causing-hidden-debt.html
Winnie, M. L., P.H.Poonb, & Zhouc, L. (2018). Are Chinese
credit ratings relevant? A study of the Chinese bond market and
credit rating industry. Journal of Banking & Finance.
Wong, E. (2019, Jan 13). Competing Against Chinese Loans,
U.S. Companies Face Long Odds in Africa. Retrieved from
nytimes.com:
https://www.nytimes.com/2019/01/13/world/africa/china-loans-
africa-usa.html