China Surpasses World Bank as Africa’s Largest Lender

Sources: China Poised to Overtake World Bank as Biggest Lender in Africa
Chinese Promise African Bonanza
China to Surpass World Bank as Top Lender to Africa

According to World Bank figures, China has committed $8.1 billion this year to Nigeria, Angola, and Mozambique, while the World Bank has only $2.3 billion to sub-Saharan Africa. During an “ambitious” summit with 48 African leaders in Beijing over the weekend, China announced that it plans to double annual aid to Africa by 2009. China also signed trade agreements with 10 African nations. Premier Wen Jiabao stated that Chinese trade with Africa would double to $133 billion by 2010.

China’s financial commitment is “threatening to undermine efforts by World Bank President Paul Wolfowitz.” When the World Bank gives aid to developing countries, it places conditions on the governments to encourage improvement and clean up the corruption that is rampant on the African continent. However, China is refusing to place conditions on its loans to the African nations. “China has a more commercial agenda than the World Bank, the U.S. and France, the top Western donors, and terms of some of its loans are less favorable.”

Some view a risk in China being the largest lender in Africa, saying that “Africa may use Chinese money in the wrong way to avoid pressure from the West for good government.” Dan Large, a China specialist at the Rift Valley Institute (Nairobi-based think-tank financed in part by Unicef) worries that “Angola, a nation of 14 million that’s recovering from a 27-year civil war, is avoiding pressure to clean up corruption thanks to aid from China.” According to Wofowitz, the Chinese loans may have the potential to create another debt crisis in Africa, just one year after nations agreed to forgive $57 billion of debt in Africa.

Questions:

1. Should the Western nations intervene in China’s new lending program to African nations?

2. How should the World Bank respond to the possibility that nations are seeking alternative sources of aid in order to bypass conditions World Bank places on their loans?