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II.C. Other Debt-Creating Financial Flows: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA

Guest post by: International Monetary Fund

Article Overview: Aside from intergovernmental loans, there are other debt-creating financial flows from China to Africa, mainly trade credits, some of which are medium- and long-term.13 Trade credit may be provided by suppliers or financial institutions. Of these the Export-Import Bank of China (China Exim Bank) is the most active. Its total export credit and international guarantee business increased to US$19.8 billion in 2006, from US$15.2 billion in 2005. Though China Exim Bank does not report activities by region, there is clear evidence of significant and expanding operations in Africa.

II.C. Other Debt-Creating Financial Flows: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA

Aside from intergovernmental loans, there are other debt-creating financial flows from China
to Africa, mainly trade credits, some of which are medium- and long-term.13 Trade credit
may be provided by suppliers or financial institutions. Of these the Export-Import Bank of
China (China Exim Bank) is the most active. Its total export credit and international
guarantee business increased to US$19.8 billion in 2006, from US$15.2 billion in 2005.
Though China Exim Bank does not report activities by region, there is clear evidence of
significant and expanding operations in Africa.
By the end of 2005, China Exim Bank had approved more than 50 billion yuan
(US$6.5 billion) for projects in Africa, which accounted for close to 10 percent of the Bank’s
total approvals at that time. 14 Estimates by World Bank staff compiling data from public
sources are much higher—China Exim Bank loans to SSA for infrastructure alone amounted
to US$12.5 billion by mid-2006.15 As of September 2006 there were 259 China Exim Bank
projects in 36 African countries, and 79 percent of its commitments to Africa were for
infrastructure (Ellis, 2007). According to news reports summarized by Moss and Rose
(2006), several of these projects are very large.16 This financing is clearly much larger than
ODA flows.
What is not clear is the extent to which China Exim Bank’s projects or its commitments give
rise to external debt of African countries, because the financial arrangements and obligors
vary from project to project. China Exim Bank’s annual reports indicate that export buyers’
credit accounted for only 10 percent of its new commitments in 2005–06.

IMF Working Paper
African Department
What Drives China’s Growing Role in Africa?
Prepared by Jian-Ye Wang
October 2007

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  V. A. Markets for Exports: AID VS. COMMERCE: FACTORS INFLUENCING THE GROWING TIES
  II.D. Foreign Direct Investment: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA
  VII F. Attract Capital Flows and Encourage Foreign Participation: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
  CONCLUSION: What Drives China’s Growing Role in Africa?
  IV. A. Private Traders: THE ROLE OF THE PRIVATE SECTOR

Article Tags: african countries, bank loans, bank of china, bank projects, china china, china exim bank, clear evidence, export buyers, export credit, export import bank, export import bank of china, external debt, financial flows, financial institutions, guarantee business, imf, international guarantee, oda, public sources, world bank staff



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