Attachments
Executive summary
At the ninth Forum on China-Africa Cooperation (FOCAC-9) in September 2024, China reaffirmed its position as Africa’s largest bilateral creditor. President Xi announced a resource package of just over $50 billion, $10 billion more than the 2021 proclamation. It came as a palpable relief to the African governments, businesses, and regional lending institutions, who rely on Chinese lending. For the first time, the commitments were denominated in renminbi (RMB). Because China is the continent’s largest trading partner, using RMB could not only reduce transaction costs but also provide cover against US dollar-driven currency fluctuations and shortages.
FOCAC-9 took place before the election of President Trump and the economic turbulence it has unleashed upon the world. China remains the continent’s largest trading partner, with two-way trade exceeding $290 billion in 2024. Africa is so dependent on exports to China that any trade war between China and the United States carries significant repercussions for African economies.
FOCAC convenes every three years and has served as the preeminent mechanism for bilateral engagement across economics, health, peace and security, education, and culture since its inaugural session in 2000. FOCAC-9 was the most consequential thus far. Africa’s economic fragility and heightened exposure to external shocks means it is vulnerable to a disproportionate negative impact from global turbulence. Going into the meeting, there was a clear decline in official development assistance (ODA), as traditional partners channeled resources to Ukraine and Gaza. Chinese lending had plummeted, and African sovereigns were effectively locked out of capital markets. When they did gain access, it was at double digit rates, increasing the likelihood of debt distress. African governments have been forced to seek alternative funding sources which tend not to be concessional and with higher interest rates relative to other regions, raising debt servicing costs.
In view of this, how the FOCAC resource package is structured will determine its efficacy to African governments. Heightened scrutiny of the modalities of the package (grants vs. loans) is warranted as the fiscal bandwidth to absorb further loans is significantly constrained among African sovereigns, while China’s ability to extend concessional loans faces its own domestic limitations. This note proposes (a) renewing and expanding the Africa Growing Together Fund at the African Development Bank by embracing a wider slate of participants to enable continued and sustainable lending from China to African projects, and (b) adjusting the existing Chinese lending instruments that target the African private sector.
The importance of FOCAC
While FOCAC is not Africa’s only uni-multilateral forum, it has taken on greater significance as China’s influence on the continent has grown. In recent years, as external actors have stepped up their engagement with Africa, other Africa-plus one summits have emerged: the Russia-Africa Summit, the Indonesia-Africa Summit, and the Korea-Africa summit, each designed to coordinate an external actor’s foreign policy with Africa. The oldest of these is the 1973 France-Africa summit. This was followed by the Tokyo International Conference on African Development (TICAD), which began in 1993 followed by the Europe-Africa Summit and the Forum on China-Africa Cooperation (FOCAC) in 2000.
Most importantly, FOCAC is supposedly the only Africa plus-one forum that was initiated at the request from the African side. It remains the only such summit where there is an African co-chair and the hosting venue alternates between Beijing and African capitals. Even though Chinese lending to Africa on concessional terms (1995) predates FOCAC, since 2000, FOCAC has been the premier mechanism for setting expectations around the scale and focus of concessional bilateral lending from China.
The highlight of each summit is the Chinese leader’s address unveiling China’s three-year engagement program with Africa. Financial engagement has increased dramaticallyfrom as low as $5 billion commitment in 2006 to $60 billion in 2015 and 2018.