Academic journal article Global Governance

New Friends, Old Friends? the World Bank and Africa When the Chinese Are Coming

Academic journal article Global Governance

New Friends, Old Friends? the World Bank and Africa When the Chinese Are Coming

Article excerpt

With China increasing its financing of Africa's development, roles have shifted and new roles are being assigned. The World Bank, having been for many years a prime and essentially unchallenged financier of Africa's development, is under pressure to reconsider its policies vis-a-vis African members. Two Chinese banks have been highly instrumental in this trend--the China Development Bank and the Export-Import Bank of China. According to various estimates, over the past few years these two banks combined have lent more money to developing countries than the World Bank. This article explores in a comparative fashion a range of features of the World Bank and Chinese policy banks' practices in Africa. It argues that, even though such a comparison is methodologically problematic, the current dynamic is going to affect the norms of governance represented by the World Bank and its lending policies toward Africa. Keywords: World Bank, Chinese policy banks, sub-Saharan Africa, development finance.

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CHINA'S INCREASING PUSH INTO AFRICA HAS RECENTLY GARNERED A LOT OF attention in academia and the media worldwide. It has generated a great deal of tension and poses a major challenge to the current global order, causing discomfort among Western aid agencies. (1) Not surprisingly, the two main executing arms of China's going-out strategy--the Export-Import Bank of China (China Exim Bank) and, to a lesser degree, the China Development Bank--have been in the limelight. Their financial muscle has grown exponentially and pushed many commentators and analysts to measure it against the world's largest public bank; namely, the World Bank. The Financial Times has reported, for example, that the China Development Bank and the China Exim Bank signed loans of at least $110 billion to other developing country governments and companies in 2009 and 2010, whereas the World Bank made loan commitments of $100.3 billion from mid-2008 to mid-2010. (2) In the same vein, Fitch Ratings revealed that the China Exim Bank alone extended $12.5 billion more in loans to sub-Saharan Africa in the past decade than the World Bank. The China Exim Bank lent about $67.2 billion to the world's poorest region between 2001 and 2010 compared with $54.7 billion by the World Bank. (3)

Looking at these numbers, it becomes clear that Chinese public banks are making inroads into the Bretton Woods Institutions' natural habitat. Across the continent, this new dynamic has caused an avalanche of official and semiofficial statements that suggest that the World Bank's longtime clout over African affairs may be coming to an end, or at least has been seriously undermined. For example, many African officials see the terms of loans provided by the Chinese as a new point of reference. "The fact that we secured a loan from China Exim Bank has set a new benchmark with which new loans are now being aligned," says Jose Pedro de Morais of Angola's Ministry of Finance. (4) As quoted in a Financial Times column, Abdoulaye Wade, former president of Senegal, laments that the contract with the World Bank "would take five years to discuss, negotiate and sign," whereas with the Chinese authorities "it takes three months." (5) In light of the growing presence of Chinese banks, Africans are more vocal in criticizing the aid policies of Western donors, and particularly burdensome and often ill-suited conditions attached to loans. This was aptly expressed by one African official who stated that "the reforms you want us to do, we cannot implement, while the reforms we could do, you will not finance." (6) The most widely cited example of China's "undoing" assistance from international financial institutions is probably the International Monetary Fund's conditional loan to Angola, which was rejected by the Angolan government only to then welcome Chinese loans. (7)

Expansion of Chinese banks in Africa certainly is not something the World Bank can afford to overlook. …

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