# **Box 2. New Players in Sub-Saharan Africa**

Emerging creditors such as China—and India on a smaller scale—have increased their financial involvement in Sub-Saharan Africa in the form of loans, grants, debt relief, and direct investment. Relevant data are not easily available, but China appears to be the largest of six new creditor nations. By May 2006, China had contributed $5.7 billion for more than 800 aid projects (IMF 2007). In the latest Beijing Summit of the Forum on China-African Cooperation in November, 2006, China announced that it would provide $5 billion on preferential credits for the period 2007-09 ($ 3 billion in concessional loans and $2 billion for export buyer credits). Counting media reports only, Export-Import Bank of China provided $7 billion in the period 2004-06. In May 2007, Export-Import Bank of China stated that it planned to provide about $20 billion in infrastructure and trade financing to Africa over the next three years ( _Financial Times_ 2007a). China’s investment in oil and textiles has rapidly spiked upwardly in Angola, Sudan, and Zimbabwe. With the support of the Export Import Bank of China, Chinese companies have quickly become leaders in the development of roads, railroads, and major public buildings, as well as telecommunications on the continent (Broadman, Isik, Plaza, Ye, and Yoshino 2007). Chad and China just signed a $257 million economic package to finance several projects in the central African country including telecommunications, a cement factory, and roads.

Chinese banks are also entering a new phase of involvement in Africa by developing partnerships with and buying equity stakes in African banks. The Industrial and Commercial Bank of China is acquiring 20 per cent of South Africa’s Standard Bank for about $5 billion ( _Financial Times_ 2007b). The two banks will jointly establish a global resources fund to invest in mining, metals, and oil and gas in emerging markets. China Development Bank has formed a partnership with Nigeria’s United Bank for Africa to cooperate in financing energy and infrastructure projects in Nigeria and other West African countries ( _Oxford Analytica_ 2007).

China has offered debt forgiveness to 31 African countries, amounting to $1.27 billion since 2000, and more write-offs are expected. By mid-May 2007, China had signed debt forgiveness agreements with 11 of those countries and expected to conclude agreements with the other 22 by the end of 2007 (Wang 2007).

China’s non-concessional loans to some countries have raised concerns that it may be free-riding in countries that received debt relief under the MDRI and the HIPC programs ( _Economist_ 2007). According to some authors, however, the majority of the projects undertaken by China are in non-HIPC resourcerich countries, such as Angola, Nigeria, and Sudan (Goldstein, Pinaud, Reisen and Chen 2006). In those countries, these loans are part of China’s FDI directed to strategic resource seeking.<sup>19</sup> A $5 billion ChinaAfrica Development Fund has been created to support Chinese FDI in Africa.

> 19 China and India’s investments in Africa are examples of a broader South-South investment trend. Aykut and Ratha (2005) show that by the late 1990s, more than a third of FDI received by developing countries originated in other developing countries.

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