China's exports rose at the fastest pace in almost three years in November, as strong global demand for goods needed to ride out the pandemic landed the world's second-largest economy a record trade surplus.
A brisk factory recovery in China from coronavirus shutdowns earlier this year has far outpaced reopenings seen in major trading partners, many of which are still struggling with outbreaks.
Exports in November rose 21.1% from a year earlier, customs data showed on Monday, the fastest growth since February 2018. It also soundly beat analysts' expectations for a 12.0% increase and quickened from an 11.4% increase in October.
The strong exports come despite the yuan hovering near multi-year peaks against the dollar, which would be welcome news for policymakers concerned about the impact of a weakening greenback on China's trade competitiveness.
Imports rose 4.5% year-on-year in November, slower than October's 4.7% growth, and underperforming expectations in a Reuters poll for a 6.1% increase, but still marking a third straight month of expansion.
Analysts say improving domestic demand and higher commodity prices helped buoy the reading.
"We believe China's export growth could remain elevated for another several months due to the worsening COVID-19 situation overseas," the note said.
However, they noted some signs that demand for these pandemic-related goods was losing momentum.
The firm shipments led to a trade surplus for November of $75.42 billion, the largest since at least 1981 when Refinitiv records began. It was also wider than the poll's forecast for a $53.5 billion surplus.
China's exports were supported by strong overseas demand for personal protective equipment (PPE) and electronics products for working from home, as well as seasonal Christmas demand, Nomura analysts said in a note.
Booming sales of fridges, toasters and microwaves to households across the locked-down world have helped propel China's manufacturing engine back to life, super-charging demand for key metals like steel, copper and aluminium, after a sharp slump early in the year.
In another sign of buoyant trade, China's export surge and the low turnaround rate of containers from abroad have triggered a recent shortage of containers domestically, state media China Daily reported.
A spate of early indicators showed China's economic recovery from the coronavirus pandemic has stepped up, with manufacturing surveys showing new export orders expanding at a faster pace for November.
That comes despite a sharp appreciation in the yuan in recent months, which some fear could hit exporters. Some firms reported that a strong yuan squeezed profits and reduced export orders in November, the statistics bureau said this week.
The yuan has booked six straight months of gains, its longest such winning streak since late 2014, and is trading at 2-1/2 year highs.
The strong exports widened China's trade surplus with the United States to $37.42 billion in November from $31.37 billion in October.
Chinese buyers nevertheless stepped up purchases of U.S. farm produce including soybeans to fulfill China's pledge in the initial trade deal it signed with the United States in January this year.
While a Biden administration is expected to soften some of the rhetoric seen in strained U.S.-China trade relations in recent years, there are no immediate signs the President-elect intends to unwind the punitive tariffs introduced under the Trump administration.
Although China's imports were weaker than expected, volumes continued to rise on a sequential basis, said Louis Kuijs of Oxford Economics.
"We expect goods imports to grow further into 2021, underpinned by strong domestic demand, with imports of capital goods to be better supported than those of commodities," Kuijs said.
China's iron ore and copper imports both fell in November from the previous month, customs data showed. Crude oil imports in rose as customs continued to clear a backlog.
China has overtaken the U.S. to become the EU's biggest trade partner while the rest of the world slides into the red due to the Covid-19 pandemic.
The country pushed past the United States in the third quarter to become the European Union's top trade partner, as the pandemic disrupted the US while Chinese activity rebounded.
Over the first nine months of 2020, trade between the EU and China totalled 425.5 billion euros ($514 billion), while trade between the EU and the United States came in at 412.5 billion euros, according to Eurostat data.
These figures show the year-on-year change in GDP for some of the world's richest countries, with China's economy larger than it was a year ago while others have seen massive decline
For the same period in 2019, the EU's trade with China came in at 413.4 billion euros and 461 billion euros with the US.
Eurostat said the result was due to a 4.5 percent increase in imports from China while exports remained unchanged.
'At the same time trade with the United States recorded a significant drop in both imports (-11.4 percent) and exports (-10.0 percent),' Eurostat said.
The EU has been China's top trade partner since 2004 when it overtook Japan, but this is the first time the inverse has been true, France's Insee statistics agency said Wednesday.
After a Covid-19-related shock in the first quarter the Chinese economy has rebounded, with the economy growing year-on-year in the third quarter.
Insee said Chinese imports from Europe picked up in the third quarter, while purchases of personal protective equipment had boosted Chinese exports.
Workers are seen during the production process of wind turbines during a government organised tour at Goldwind Technology in Yancheng, in Jiangsu province on October 14
China's economy has grown 4.9 per cent in the third quarter from last year proving the country is back to its pre-pandemic trajectory with consumer spending and industrial production going back to normal levels.
The figures are far more favourable than the dire economic data coming out of most Western countries, showing how China has bounced back quickly despite being the first country to suffer the coronavirus outbreak.
As the virus spread across the globe, China started to bring the outbreak under control and began to reopen its economy, growing 6.8 per cent in the first quarter of this year, and 3.2 per cent in the April-June quarter.
China has been widely condemned for its handling of coronavirus.
After initially covering up the outbreak, Beijing obscured an investigation into how it started and published infection rates which have been widely questioned and partly blamed for the West's slow response to prepare for the pandemic.
Since China fought off the outbreak, Chinese firms have taken advantage of their good fortune while their global rivals grapple with reduced manufacturing capacity.
Chinese firms have benefited from strong global demand for masks and medical supplies, with exports rising 9.9 per cent in September from a year earlier while factory activity also picked up.
The country's technology sector has also taken advantage of the work-from-home phenomenon with apps including DingTalk and WeChat bringing in huge revenues.
Now the International Monetary Fund is projecting China's economy to expand by 1.9 percent in 2020 which means it'll be the only major world economy to grow this year.
It comes as a new study that found traces of coronavirus in US blood samples from December last year is adding to the growing evidence that the virus was circulating for months before China announced its existence, casting more shadows over the truth about the pandemic and fuelling suspicions of a cover-up by Beijing.
Claims the global outbreak began in a livestock market in Wuhan last winter have crumbled in the face of scientific evidence proving the virus was all over the Western world weeks and even months before China declared the first cases to the World Health Organization on December 31.
Research published on Monday revealed that 39 blood samples taken between December 13 and 16 last year in California, Oregon and Washington state had tested positive for Covid antibodies, meaning the people who gave them had been infected weeks earlier.
The evidence is the earliest trace so far of the virus on US soil, and a further 67 samples from between December 30 and January 17 tested positive in Connecticut, Iowa, Massachusetts, Michigan, Rhode Island and Wisconsin.
It adds to a growing body of proof that the virus had spread thousands of miles outside of China long before its existence was acknowledged. Scientists in Italy say they now have proof the virus was there in September 2019, traces of it were found in Brazil in November, a French hospital patient had it in his lungs in December, and the virus was present in sewage in Spain in January.
Over the years, the vacation rental industry became a huge business, with millions of tourists choosing fully furnished homes or apartments instead of a traditional hotel or motel experience.
However, the COVID-19 outbreak caused an enormous financial hit to the entire market, cutting down revenues of both the big players like Airbnb or Booking.com and smaller vacation rental owners and property managers.
According to data presented by Stock Apps, the revenue of the global vacation rental industry is expected to plunge by $35bn in 2020, a 42% drop year-over-year.
Airbnb, Booking.com, and Expedia Witnessed a 90% Plunge in Reservations
The vacation rental segment includes private holiday homes and houses and short-term rental of private rooms or flats through online marketplaces like Airbnb and Booking.com or in travel agencies.
In 2017, the entire industry generated $78.7bn in revenue, revealed the Statista data. In the next two years, this figure rose by 7% to almost $84bn.
However, vacation rental companies had a rough start to 2020. After a promising first few weeks of 2020, the initial wave of the COVID-19 caused massive cancellations of stays, with even the market’s biggest players witnessing colossal reservation drops.
In week 14 of 2020, short-term rental bookings on the Expedia platform saw a 94% drop year-over-year. Two other travel industry giants, Airbnb and Booking.com, followed with a 93% and 91% plunge, respectively. The strong negative trend continued between June and September after the coronavirus pandemic ruined what is typically a peak summer travel period.
As of week 35, there was a 62% YoY drop in short-term rental bookings on the Airbnb platform. However, Booking.com and Expedia witnessed even more significant losses, with their reservations plunging by 66% and 86% in this period.
Statista data show the global vacation rental industry is expected to witness a recovery in 2021, with revenues growing by 36.7% to $66.9bn, still $17bn under 2019 levels. In the next three years, this figure is forecast to rise to $88.4bn.
The average revenue per user in the vacation rental segment is forecast to amount to $111.1 in 2020, a slight increase in a year. By 2025, this figure is expected to rise to $117.
The Number of Users to Plunge by 42% to 445 Million
Although the initial wave of the COVID-19 caused massive reservations drops in the first months of 2020, statistics show the number of users is expected to stay deep below the last year’s levels.
In 2017, almost 750 million people chose vacation rentals instead of hotels and motels. Over the next two years, this figure rose to 777 million.
However, Statista estimates the number of users in the vacation rental segment to plunge by 42% YoY to 445 million in 2020 and remain under 2019 levels in the next three years.
In global comparison, the United States represents the world’s largest vacation rental market, expected to generate $9.5bn in revenue in 2020, a 45% plunge in a year.
To fight the spread of COVID-19, some US states placed restrictions on short-term rentals, which caused massive complaints from the companies operating in the market. In Florida, property owners and a vacation rental management company even filed a federal lawsuit against the governor, accusing him of violating their constitutional rights.
The Chinese market, the second-largest globally, is forecast to witness a 43.5% drop YoY, with revenues falling to under $5.3bn. Japan, the United Kingdom, and Germany follow, with $3.2bn, $2.6bn, and $2.5bn in revenue in 2020, respectively.
It’s been 20 years since the Forum on China-Africa Cooperation was first held. Another summit is planned for September 2021 in Dakar, Senegal. Meanwhile, Chinese and African officials are reviewing and reflecting on their two-decade relationship.
China-Africa relations are mostly organised via government to government relations. But the perceptions and wellbeing of ordinary people also need to be better considered.
In 2016 the pan-African research institute Afrobarometer published its first study on what Africans think of their governments’ engagement with China.
The study found that 63% of citizens surveyed from 36 countries generally had positive feelings towards China’s assistance. Some things that stood out were China’s infrastructure, development, and investment projects in Africa. On the flip side, perceptions of the quality of Chinese products tarnished the country’s image.
In 2019/20, Afrobarometer conducted another wave of surveys. Data from 18 countries – gathered face-to-face from a randomly selected sample of people in the language of the respondent’s choice – was collected before the COVID-19 pandemic. The survey questions covered how Africans perceive Chinese loans, debt repayments, and Africa’s reliance on China for its development.
Preliminary findings show that the majority of Africans still prefer the US over China as a development model, that China’s influence is still largely considered as positive for Africa, and that Africans who are aware of Chinese loans feel that their countries have borrowed too much.
This is important because – as both African and Chinese leaders reflect on their engagement – these findings should allow them to build a forward-looking relationship that better reflects African citizens’ opinions and needs.
US vs China
The surveys found that Africans still prefer the American development model over the Chinese one. The Chinese development model hinges on state-led policy planning while the American model emphasises the importance of the free market.
Across the 18 countries surveyed, 32% preferred the American development model, while 23% preferred the Chinese model. Overall, this hasn’t changed much since 2014/15, but a few country-level shifts emerge.
In Lesotho and Namibia, the US has surpassed China as a preferred development partner. In Burkina Faso and Botswana, China is preferred. Angolans and Ethiopians, who were not included in the 2014/15 survey, are partial to the American model. However, 57% of Ethiopians and 43% of Angolans believe that China’s influence is having a positive impact on their countries.
Analysts have argued that the Chinese development model is dynamic and multifaceted. It has changed over time depending on the context and period. African governments need to decide what aspects of the Chinese model are best for their countries.
A closer look at responses from the 2014/15 and 2019/20 surveys shows that in countries where China has invested mainly in infrastructure, perceptions have held steady or become more positive. This includes Ghana, Nigeria, Uganda, Guinea and Côte d’Ivoire.
China’s popularity rises in the Sahel
Strategically, China has been deeply involved in security and development activities, infrastructure projects connected to the Belt and Road Initiative, and peace and security operations in the region.
In Burkina Faso, for example, the popularity of China’s development model has almost doubled, from 20% to 39%, in the five years since the previous survey.
In Guinea, where Chinese companies are mainly involved in mining projects, 80% of citizens perceive China’s economic and political influence as positive – four percentage points up from five years ago. Overall, China’s growing involvement in the Sahel region seems to have had a strong impact on citizens’ views.
Economic fortunes and debt repayment
A majority of African citizens say China’s economic activities have “some” or “a lot” of influence on their countries’ economies. But the perceived influence has declined from 71% in 2014/15 to 56% in 2019/20 across the 16 countries surveyed in both rounds.
And while six in 10 Africans see China’s influence on their country as positive, this perception has declined from 65% to 60% across 16 countries. Instead, regional African powers, regional and United Nations organisations, and Russia scored well in perceived positive influence. Russia was perceived well by 38%.
This could be a reflection of Russia’s growing political, economic, and security engagement with Africa, as well as the role of Russian media such as Russia Today and Sputnik. A recent study on digital media content in francophone West Africa revealed how the digital content these media houses produce quickly seeps into African media spaces.
The Afrobarometer survey revealed that less than half (48%) of African citizens are aware of Chinese loans or financial assistance to their country.
Among those who said they were aware of Chinese assistance, more than 77% were concerned about loan repayment. A majority (58%) thought their governments had borrowed too much money from China.
In countries which received the most Chinese loans, citizens expressed worry about indebtedness. This included Kenya, Angola and Ethiopia. In those countries, 87%, 75%, and 60% of citizens respectively were concerned about the debt burden.
The latest Afrobarometer data provides lessons both for analysts of Sino-African relations and African leaders.
First, there is no monopoly or duopoly of influence in Africa. Beyond the United States and China, there is a mosaic of actors, both African and non-African, that citizens consider to have political and economic influence on their countries and their futures. These actors include the United Nations, African regional powers and Russia.
Survey findings show that although Chinese influence remains strong and positive in citizens’ eyes, it is less than it was five years ago. This decline might also be linked to perceptions of loans and financial assistance, framed by the ‘debt-trap’ narrative and allegations of Chinese asset seizures.
Once fieldwork resumes, future Afrobarometer surveys in additional countries may shed light on ways in which the pandemic and China’s ‘corona diplomacy’, and media reports on the mistreatment of African citizens in Guangzhou, have affected the hearts and minds of African populations.
The value of global trade is set to fall by 7% to 9% in 2020 from the previous year, despite signs of a fragile rebound led by China in the third quarter, a United Nations report said on Wednesday.
No region was spared by an estimated 19% year-on-year plunge in world trade in the second quarter, as the COVID-19 pandemic disrupted economies, the U.N. Conference on Trade and Development (UNCTAD) said.
Global trade recovered somewhat in the third quarter, when it was estimated at about 4.5% less than in the same period a year ago, the agency said in its latest update.
"Trade in home office equipment and medical supplies has increased in Q3, while it further weakened in the automotive and energy sectors," UNCTAD said. Growth in the textiles sector was also strong.
Its preliminary forecast put year-on-year growth for Q4 2020 at 3% less, but the report said that uncertainties persisted due to how the pandemic would evolve.
If the pandemic resurges in coming months, that could lead to a deteriorating environment for policy-makers and sudden increase in trade restrictive policies, it said.
China's exports rebounded strongly in the third quarter after falling in the early months of the pandemic, and have posted year-on-year growth rates of nearly 10%, UNCTAD said.
"Overall, the level of Chinese exports for the first nine months of 2020 was comparable to that of 2019 over the same period," it said.
Chinese demand for imported products recovered following a decline in Q2 2020, contrary to other major economies, it said.
Earlier this month the World Trade Organization (WTO) upgraded its forecast for trade in goods due to improvements from June and predicted a drop of 9.2% for 2020.
But it saw a more muted rebound in 2021, with further lockdowns from a second wave of COVID-19 infections posing clear risks.
China is preparing to launch an antitrust probe into Google, looking into allegations it has leveraged the dominance of its Android mobile operating system to stifle competition, two people familiar with the matter said.
The case was proposed by telecommunications equipment giant Huawei Technologies Co Ltd last year and has been submitted by the country’s top market regulator to the State Council’s antitrust committee for review, they added.
A decision on whether to proceed with a formal investigation may come as soon as October and could be affected by the state of China’s relationship with the United States, one of the people said.
The potential investigation follows a raft of actions by U.S. President Donald Trump’s administration to hobble Chinese tech companies, citing national security risks.
This has included putting Huawei on its trade blacklist, threatening similar action for Semiconductor Manufacturing International Corp and ordering TikTok owner ByteDance to divest the short-form video app.
It also comes as China embarks on a major revamp of its antitrust laws with proposed amendments including a dramatic increase in maximum fines and expanded criteria for judging a company’s control of a market.
A potential probe would also look at accusations that Google’s market position could cause “extreme damage” to Chinese companies like Huawei, as losing the U.S. tech giant’s support for Android-based operating systems would lead to loss of confidence and revenue, a second person said.
The sources were not authorised to speak publicly on the matter and declined to be identified. Google did not provide immediate comment, while Huawei declined to comment.
China’s top market regulator, the State Administration for Market Regulation, and the State Council did not immediately respond to requests for comment.
The U.S. trade blacklist bars Google from providing technical support to new Huawei phone models and access to Google Mobile Services, the bundle of developer services upon which most Android apps are based.
Google had a temporary licence that exempted it from the ban on Huawei but it expired in August.
It was not immediately clear what Google services the potential probe would focus on. Most Chinese smartphone vendors use an open-source version of the Android platform with alternatives to Google services on their domestic phones. Google’s search, email and other services are blocked in China.
Huawei has said it missed its 2019 revenue target by $12 billion, which company officials have attributed to U.S. actions against it. Seeking to overcome its reliance on Google, the Chinese firm announced plans this month to introduce its proprietary Harmony operating system in smartphones next year.
Chinese regulators will be looking at examples set by their peers in Europe and in India if it proceeds with the antitrust investigation, the first source said.
“China will also look at what other countries have done, including holding inquiries with Google executives,” said the person.
The second source added that one learning point would be how fines are levied based on a firm’s global revenues rather than local revenues.
The European Union fined Google 4.3 billion euros ($5.1 billion) in 2018 over anticompetitive practices, including forcing phone makers to pre-install Google apps on Android devices and blocking them from using rivals to Google’s Android and search engine.
That decision prompted Google to give European users more choice over default search tools and giving handset makers more leeway to use competing systems.
Indian authorities are looking into allegations that Google is abusing its market position to unfairly promote its mobile payments app.
Angola's debt to China is estimated at USD 20.1 billion, and is the country's largest creditor, said Finance Minister Vera Daves on Friday.
Of this amount, USD10 billion was used to capitalize the Angolan oil company Sonangol and the remaining USD 10.1 billion to finance various investment projects.
Speaking at a press conference, Vera Daves said that the issue of China's financing to Angola has generated a lot of controversy when analyzing the quality of the works carried out by Chinese contractors.
However, the minister explained that the quality of the works does not depend on the creditor - Chinese banks - but on the Angolan State that must inspect them, and on the contractors.
Vera Daves said that upon payment, the paying bank is based only on the invoices presented on the execution of the works. The bill is paid in China and the money does not circulate in the Angolan economy.
"There is always a very strong debate about deliverables, the quality of the works. This does not depend on the financier but on the relationship between the Angolan State and the contractors", she said, explaining that the financing entity, which is a bank, focuses on the invoices and not on the walls.
As for the debt service with China for 2020, standing at USD 2. 678 million, the minister said that the amortizations represent 78.8%, that is 2,103, while interest represents 21.2% (567 million).
She explained that the debt with that Asian giant is commercial and is paid in deadlines of up to eight years, unlike that with the IMF, which allows negotiation of interest rates and repayment terms.
On the discharge of the public debt, estimated at about 90% of GDP and 60% of the General State Budget 2020 (AKz 13.5 billion), ie, USD 5 billion, according to analysts from the Fitch Rating Agency, the director of Public Debt, Valter Pacheco, Angola needs at least 29 years.
However, the official explained that this is just a hypothetical example should the country no longer incur any debt. But this is not the case because the country needs to finance itself to meet needs.
"We will continue to go into debt, but in a more productive and responsible way. Angola will have to continue to finance itself, but with lower interest rates and longer terms ", said the official.
The United States accounts for one of the highest number of billionaires besides hosting the richest person on the planet. The immense fortune by American billionaires can be seen clearly when compared to counterparts from other countries.
Data presented by Buy Shares indicates that the $609.3 billion combined fortune of five richest Americans is more than the cumulative wealth of five richest people from China, Russia, and India at $463.6 billion. The 20 rich people overviewed from four countries now control a combined net worth of $1.72 trillion. The data shows that the top five richest Americans also hold the same position globally.
From the data, Jeff Bezos is the world’s richest person with a staggering net worth of $205 billion as of August 26, 2020. His wealth is almost double the size of the combined fortune of the five richest people from Russia which stands at $112.4 billion. Bezos is also $88.8 billion richer than Microsoft founder and philanthropist Bill Gates who ranks as the second richest person in the world.
Billionaires among Covid-19 biggest gainers
Most of the global billionaires are spread across different industries with finance and investment remaining the top niche. Notable finance and investing billionaires are Warren Buffett who emerged as the fifth richest person in the world. The group also has an interest in fashion, retail, real estate, and technology.
It is worth mentioning that the wealth of overviewed individuals is estimated based on their documented assets and accounting for debt and other factors. The billionaires on this ranking excluded individuals whose wealth cannot be fully ascertained.
During the coronavirus pandemic, the global billionaires are among the biggest beneficiaries. For example, Jeff Bezos crossed the $200 billion mark, a record milestone since Amazon was among the biggest beneficiaries of the pandemic. In the course of the health crisis, Amazon largely benefited as consumers turned to online retailers for essential goods. Bezos’ personal wealth is mostly in Amazon stock and it has been skyrocketing in recent years along with the company’s share price.
Notably, Bezos’s wealth could have been much more were not for his expensive divorce. Last year, Bezos parted ways with ex-wife, MacKenzie Scott, and agreed to give her 25% of his Amazon stake. Based on the current market, the stake is worth $63 billion.
However, Bezos alongside other billionaires in the technology industry is expected to be among the biggest gainers this year. In the wake of the coronavirus pandemic, the technology sector has shown positive recovery signs with stocks surging. The surge in tech stocks has seen Facebook founder Mark Zuckerberg’s wealth also grow to new heights. Unlike some wealthy people like Facebook’s founder, it took a lot of time for most people to make their first billion.
Are billionaires benefitting from weak tax laws?
On the flip side, the rise of global billionaires has also been marred with some controversy, especially on tax-related matters. In the US, taxing the wealthy has been a major debate that has gone into political circles. There is a general feeling that some of the wealthy gate away with fewer taxes. In the wake of the coronavirus pandemic, millionaires and billionaires were set to reap more than 80% of the benefits from a change to the tax law as part of the coronavirus economic relief package.
Most billionaires usually combine their huge investing and purchasing power alongside government resources in addition to their own resources to profit from during economic crises. In addition to wealth-friendly tax laws and loopholes, some of the richest individuals are able to stay on top.
However, there have been concerns about how some billionaires keep getting rich. Some suspect that billionaires are engaging in unethical practices to attain much wealth. There have been calls for top billionaires to redistribute their wealth. At the same time, there is a school of thought that supports the close scrutinization of billionaires. For example in the United States, Congress has been urged to set up a “Pandemic Profiteering Oversight Committee” whose sole purpose will be to probe corruption and profiteering by a few individuals.
In the past few days, the public space has been awash with comments and outrage on the hearings at the Federal House of Representatives concerning the Chinese loan agreements Nigeria entered into to the tune of $500 million for the part-financing of its rail projects said to be valued at about $849 million.
This is borne out of the fact that the House of Representatives Committee raised the alarm over the alleged waiver of Nigeria’s sovereignty. These hearings in which the Minister of Transportation, Chibuike Amaechi was invited, laid bare some perceived inconsistencies in public debt procurement process in Nigeria with noticeable gaps. For the rail project loan in question, issues have arisen concerning the drafting of the agreement, the processing of the documents as well as the involvement of the Minister of Finance and the Attorney-General of the Federation respectively.
These gaping questions become very disturbing when the lender in question here is China, which has been associated with opaqueness in granting loans to countries in global context.
In investigating the processing of the $500 million Chinese loan from the Export-Import Bank of China, the Federal House of Representatives, as part of its oversight function, discovered that the loan agreement contained a clause in which Nigeria’s sovereignty was supposedly traded off. According to reports, this discovery was made because the agreement entered into, was written in Mandarin, the official form of the Chinese language with the Nigerian officials signing without understanding the full content of the loan document. If that is the case, it strengthens the narrative of the reported opaqueness of typical Chinese loan agreements.
The controversial clause in this loan case, states that, “the borrower hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant to Article 8(5), thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets.” The question that arises here is whether there is no law that requires that the terms and conditions of loan agreements be submitted to the National Assembly for approval. In response to this raging controversies, the Chinese Foreign Ministry denied that China had any clause in the contract ceding Nigeria’s sovereignty and that it followed its “five-no” approach in loan agreements one of which is “no imposition of our will on African countries” and that it gives full consideration to debt sustainability.
The response of China on this issue notwithstanding, the history of China’s relations with different countries on loan agreements largely leaves a sour taste in the mouth. China has been severally accused of undertaking a global colonisation policy with its debt-trap diplomacy. For most of the countries that China has extended loan facilities to, there has been tales of woe and lamentations. Chinese loans to Sri Lanka, Papua New Guinea, Maldives, Pakistan, Malaysia, Mongolia and Republic of Kazakhstan, among others have been followed with cases of default and takeover of these countries’ assets by China.
These loans are usually given out with very attractive conditions and without thorough due diligence for which these countries find it difficult to resist. What follows is a loan default and then the taking over of major assets in the borrowing countries with these takeovers not limited to the projects for which the loan is procured. By its “Belt and Road” Initiative, China targets countries that have some form of natural resources or something to offer which may not necessarily be cash. One commonality in these assets is that all the infrastructure of roads, ports, highways and airports, among others, financed with these loans all connect to China in what has been aptly described as the “new silk road.” Opaqueness has been one clear characteristic of Chinese loans across many jurisdictions globally. In Africa, the story is not different.
China appears to have taken a strategic position on the continent by willingly donating a mighty Secretariat to the African Union Commission in Addis Ababa, Ethiopia, probably as a good launching pad to gain easy access to virtually all African countries in pursuit of its global expansionist policy. China has extended irresistible loans to many African countries with Angola, an oil rich nation, having the largest Chinese loan exposure on the continent with a portfolio of about $25 billion. This is followed in that order by Ethiopia, Kenya, Republic of Congo, Sudan, Zambia, Cameroun, Nigeria, Ghana and the Democratic Republic of Congo, (DRC).
Most of these loan transactions have run into some trouble with Zambia representing the worst case in Africa where China has taken over their National Power Corporation and the Broadcasting Corporation due to loan default. It is little wonder why these countries wouldn’t default given that the loans are largely concessionary with lots of suspected undercover dealings and perks in favour of African government officials in form of huge kickbacks, which largely do not go through the banking system. Many have dubbed this as China’s new colonial strategy, which it executes by first encouraging indebtedness on very concessionary terms; taking over strategic assets or the commanding heights of the economy on default. The focus is largely on very corrupt countries with very weak governance structures. Given these antecedents, there is a great need for these issues to be addressed in the Forum on China-Africa Cooperation (FOCAC) meetings.
The Debt Management Office (DMO)’s response on this raging issue has also left much to be desired. It addressed the pedestrian issue of how little China’s $3.121 billion loan exposure to Nigeria is, that it represents only 11.28% of the total external debt stock of $27.67 billion or 3.94% of overall total public debt burden of $79.303 billion. By this submission, the DMO stated that China is not a major source of funding for the Nigerian government. The DMO highlighted the fact that the loan is a concession of 20-year tenor with a seven-year moratorium. The DMO prided itself that its law, the Debt Management Office Establishment (ETC) Act 2003 as well as Section 41 (1a) of the Fiscal Responsibility Act 2007 were duly followed in the loan agreements in question.
However, the issue is really not in the quantum of these Chinese loans but on the commitments made by our government officials. The DMO response did not guarantee whether transparency was followed in the negotiating process –particularly with reported incidences of corruption in other jurisdictions. It also did not clearly state whether the unpalatable experiences of other countries in dealing with China on borrowing were factored in nor did it address the issue of sovereignty or whether the agreement was written in Mandarin or not nor how the repayment will be made from proceeds from the projects over the 20-year loan period. How come the National Assembly, which should have approved the loan in the first place is just getting to know about this sovereignty clause after the fact? The DMO needs to provide further explanations on these issues.
On the sovereignty issue, it needs to be noted that, the controversial clause would only come into effect when there is a case of default. It needs to be put in proper perspective that for an economic or commercial transaction, Nigeria would find it difficult to plead its sovereignty in the event of default and would thus need to go for arbitration. Hence the hue and cry on loss of sovereignty for a purely commercial transaction may have been misplaced. This, however, differs in the case of political relations where the ceding of sovereignty is not tolerable. It is proper to understand that for an economic or commercial transaction such as this, the key issue is to avoid a loan default else the case of arbitration cannot be avoided.