Pick of the Day: “Chinese lending creating new wave of hidden debt in Africa, IMF says”

A managing editor once told me that a good reporter finds the real story behind the story. Today, the FT found the story behind Chinese investment in Africa: the accumulation of unsustainable debt. The debt relief crowd should be banging their heads on the wall right about now.

After all, the Chinese have impeccable timing. The G8 and World Bank have spent the last decade writing off debt to African countries. NewsShark recalls that just this July, the G8 pledged to cancel $37bn of debt owed by the world’s poorest nations, all in Africa and Latin America.

Despite the lack of specificity in the FT article—not one African country is actually named, except Sudan—the debt that China is leaving in the wake of its rapacious direct foreign investments is a largely untold story.

China Development Bank, the largest development institution by assets in the world, is proving a challenge for the World Bank, which has proposed jointly-financed projects so that pesky social and human rights conditions might be factored into the terms of China’s development loans.

The WB appears overly confident that it will be able to influence CDB, even though China has flatly rejected attaching any detailed conditions to its loans to developing nations.

Apparently it’s not only the WB that’s worried. The European Investment Bank and other multilateral banks are starting to lose business in Asia and Africa to Chinese banks because they don’t give a hoot about social or human rights conditions.

NewsShark Verdict: China’s investments in Africa, whether in the form of oil contracts, infrastructure projects and arms sales with Sudan, arms sales to Zimbabwe, or manufacturing plants elsewhere, all have one thing in common. They exhibit China’s penchant for caring nothing about externalities. This is bad news for post-conflict countries in Africa and countries now in economic and political crises. On top of it all, you can be sure China does not care about its effect on African business, which is smaller and no challenge to more advanced Chinese competitors.