Paw Tracker newsletter (Week of Nov 29)

The 8th Ministerial Conference of the Forum on China Africa Cooperation (FOCAC), the triennial big show for China and 53 African nations’ diplomacy, opened with a live video speech by President Xi Jinping on Monday Nov 29 and closed the following day with the release of four key documents charting the way forward for an evolving relationship. Between the speech and the documents, the longest of which runs to 40 pages, there is a veritable wealth of information on the relationship at both the macro and sectoral level. This week’s newsletter will highlight just some of the takeaways we think most relevant to our readership, including health, trade and finance, infrastructure, and climate and environment.

Talk of the Town

The four outcome documents from the FOCAC8 were the Dakar Declaration of the 8th Ministerial Conference of the Forum on China Africa Cooperation, the Forum on China Africa Cooperation Dakar Action Plan (2022-2024), the China Africa Cooperation Vision 2035, and the Declaration on China Africa Cooperation on Combating Climate Change. Many of the headline grabbing figures appeared only in Xi’s opening speech, which is worth reading in full.

Health diplomacy was unsurprisingly one major feature of the two days of China-Africa diplomacy. Xi’s comment on Monday that China will help provide an additional 1 billion vaccine doses to the continent, 60% of which will be donated and 40% of which will be distributed via other, commercially oriented means, was received positively. As we enter the second year of the pandemic, Africa is the least vaccinated continent in the world. But responses from some African commentators asked questions about the specific conditions of the 400 million vaccines which Xi stated will be “provided through such means as joint production by Chinese companies and relevant African countries.” The Action Plan did make clear, however, that IP on the vaccines will be waived. Health diplomacy was not only confined to COVID-19 vaccines, with chapter 4.2 of the Action Plan devoted to medical care and public health.

The vaccine conversation is also intermingled with discussions about FOCAC8’s deliverables on trade, finance and investment. One question on the lips of media and China-Africa watchers was whether donations of vaccines (and their associated dollar value) should be seen as part of the financing and investment package committed at FOCAC8, which has dwindled in comparison to  previous years’ commitments. A tally of commitments under different baskets by Bloomberg showed that, somewhat as expected, overall quantity of financial pledges were down. Perhaps most notable is this year’s absence of grants and interest-free loan pledges. A downsizing but continuation of credit lines, coupled with the Action Plan’s emphasis on exploring “innovative ways of financing” (3.8.1), indicates a different approach to China’s financing for Africa, reflective of a broader trend towards more prudency in China’s Belt and Road commitments. As Dr. Lina Benabdullah of Wake Forest University summarized, “Bottom line: there are more or less creative ways of sourcing the finances this time. Basically long gone is the finance largesse we are used to seeing in FOCAC”.

This year’s financial pledges also include USD 10 billion of finance to support African exports and a target to reach USD 300 billion in total imports from Africa to China over the next three years. Other financial commitments included the allocation of 25% of China’s IMF special drawing rights (SDR), equal to USD 10 billion, to African countries. The share committed outstrips European countries’ SDR redistribution to African countries, but on an Atlantic Council webinar on the first day of the FOCAC former executive secretary of the UN Economic Commission for Africa, Carlos Lopes, nonetheless expressed surprise that China did not allocate more of its SDR allowance to the African continent.

Despite a clear winding down of finance-backed mega infrastructure projects, Xi did pledge that China will undertake 10 connectivity projects in Africa over the next three years. Such projects are critical to the continent. Effective connectivity is essential if Africa is to boost its trade, both internally and externally, and increase the value of domestically produced goods, as outlined in the continent’s own Agenda 2063. What and where exactly those connectivity projects will be is unclear however. At the Atlantic Council’s webinar, Hannah Ryder, CEO of Development Reimagined, stressed that “the ball is in African governments’ court” on this. The need for strong agency, coordination and negotiation on infrastructure is clear. Xi also pledged investment into 10 industrial projects, but again details are unclear.

Lastly, blessed with mentions in Xi’s speech, the Action Plan, the 2035 Vision and it’s own declaration, climate appears to have become a new focus in the FOCAC. The standalone Declaration on China Africa Cooperation on Combating Climate Change is the first time the two sides have signed an issue specific declaration and is symbolic of the rise of climate in China’s overall foreign policy agenda. While somewhat general in its content, some of the mentions of energy are of note. Point 8 of the declaration states that China will "further increase" investments in low emission projects such as wind, solar and other renewables, as well as energy saving technologies, and restates Xi’s UNGA pledge to stop building new coal fired power plants overseas. Chapter 7 of the Action Plan, focused on “Green Development”, echoes the declaration, stating that China will help increase the share of clean energy in the continent's energy mix, while point 7.3.9 singles out solar PV as an area to strengthen cooperation. 

The main question here, however, is “how?”. China’s support for non-hydro renewable energy on the continent has been minimal to date and, as a timely report from the Open University, Institute for Development Studies and Africa Climate Foundation showed last week, a number of barriers to increasing cooperation exist, ranging from institutional to regulatory to financial. One key takeaway from the report is the need to develop new models for infrastructure financing as the traditional model of Chinese development finance backed by Sinosure insurance for projects developed by Chinese SOEs just has not delivered when it comes to wind and solar projects overseas. The Action Plan’s emphasis on “innovative ways of financing” mentioned above may be a positive sign of new momentum on this front.

Of interest in the Climate Declaration is a statement that "the two sides support qualified gas to power projects in accessing green investment and financing support". Gas is not included in China’s domestic taxonomy of projects eligible for green financing and its inclusion here could be the result of a push from key African countries, including hosts Senegal, who have recently pushed for international development support for gas related infrastructure in a number of diplomatic fora. (Nigerian Foreign Minister Geoffrey Onyeama also lobbied for financial support for gas infrastructure during a bilateral press conference with US Secretary of State Anthony Blinken the week before FOCAC). When it comes to energy development in the next phase of China-Africa cooperation, the ball appears to be in Africa’s court once more.

This week's highlight projects

Laos: Soft power triumph with opening of China-Laos Railway 

On December 3, the China-Laos Railway connecting Kunming, the capital of Yunnan province, and Vientiane, the capital of Laos, began operations. Chinese President Xi Jinping and Lao President Thongloun Sisoulith attended the opening ceremony via video call. Hailed as a “landmark project of China-Laos friendship,” the railway represents just the first leg of an envisioned railway network that will one day connect Kunming withSingapore . 

The project is a major engineering achievement, crisscrossing the mountainous terrain of northern Laos with 167 bridges and 75 tunnels. But at a grand total of USD 5.9 billion, the biggest public works project in Laos’ history has sparked concern that the country won’t be able to pay back the more than USD 1.5 billion borrowed from China for the project. 

Why it gets our attention: The railway is all of a soft power triumph, a diplomatic achievement, and a propaganda victory for China. Chinese media have waxed poetic about the railway’s “beautiful future of poems and paintings,” its “smoothing out the mountains and rivers,” and its giving “new hope” to Laotians. It has also provided industrial muscle to China’s recent diplomatic blitz in Southeast Asia. In June China upgraded its ties with ASEAN to a “comprehensive strategic partnership”, a largely symbolic measure, but one that puts it on diplomatic par with the European Union. In November China promised the bloc USD 1.5 billion in development assistance for pandemic control over the next three years. 

The railway is also emblematic of a major propaganda theme of the Belt and Road: while the United States destroys, China builds. Global Times chief editor Hu Xijin circulated an image comparing the United States’ bombing campaign of Laos during the Vietnam War with China’s construction of the China-Laos Railway.

Other project & corporate updates

Saudi Arabia: ACWA Power joins CADFUND in Africa power investment

As FOCAC8 concluded in Senegal on Nov 30, the China-Africa Development Fund (CADFUND) signed an MOU with Saudi’s ACWA Power - a major investor in solar power projects across the Middle East and North Africa - in Beijing to strengthen cooperation on joint investments in renewable projects in Africa. 

The agreement appears to be CADFUND’s answer to President Xi’s call to bring more investment and green development to Africa in his opening remarks addressing FOCAC8.