Introduction
In recent decades, China has emerged not only as Africa’s largest trading partner but also as its primary bilateral lender. The volume of trade between China and African nations surged to $282.1 billion in 2023, with significant contributions from countries like South Africa, Angola, and the Democratic Republic of Congo in exports to China, while Nigeria stood out as the largest importer of Chinese goods. This surge in economic engagement has been facilitated by various bilateral contracts and treaties aimed at accessing Africa’s abundant natural resources and strategic infrastructure.
Today, Chinese companies are involved in 31% of African infrastructure contracts, largely propelled by China’s ambitious Belt and Road Initiative (BRI), which seeks to rejuvenate ancient trading routes – the Silk Road (by land) and the Maritime Silk Route. Since the inception of the BRI in 2013, China has funded numerous mega-projects, including railways in Kenya and ports in Djibouti and Nigeria.
However, several Chinese infrastructure projects in Africa have faced criticism for being perceived as debt traps. Accusations of “debt trap diplomacy” have been leveled against China, suggesting that it structures project-loan terms in a way that hinders contracting parties from repaying their debts, potentially leading to concessions or high economic tariffs. Enforcement mechanisms often involve gunboat diplomacy and international arbitration, rather than litigation in African courts.
The Chinese Investment Model
As part of its debt trap diplomacy, China has been observed providing loans to sustain infrastructure projects such as the BRI, while seizing strategic assets of countries unable to clear their debts. Former US Secretary of State Rex Tillerson has criticized China’s strategy, noting its fostering of dependence through opaque contracts, predatory loans, and corrupt dealings, ultimately burdening nations with debt and eroding their sovereignty.
This approach, coupled with political and fiscal pressures, poses threats to Africa’s natural resources and undermines its long-term economic and political stability, resulting in increased debt and minimal job creation in many countries.
The Contract Trap
Chinese lending agreements often contain commercial clauses designed to unfairly maximize China’s advantage. Noteworthy clauses include China’s versions of cross-default clauses, enabling termination and immediate repayment if the borrower defaults with other lenders, and clauses allowing termination of contracts in case of significant law or policy changes in the borrower’s country, despite China’s influence in policy changes. China’s insistence on its domestic governing laws, combined with such contract structures and gunboat diplomacy, may dissuade countries from instituting arbitration against China.
China’s Double Standards on Arbitration
China’s emphasis on confidentiality and unique commercial clauses in its contracts enables it to misuse its dominant position to its advantage. Despite being a signatory to the Washington Convention on Settlement of Disputes between Investors and Host States, China has been a respondent in only a few cases, while African states have faced numerous cases. China’s avoidance of arbitration awards and use of legal tricks, such as reliance on state immunity and rejection of enforcement through the New York Convention, further highlight its reluctance to abide by arbitration decisions.
Conclusion
China’s expanding economic influence in Africa, particularly through the BRI, raises concerns about the nature of contracts and their impact on involved nations. Debt trap diplomacy and China’s unique commercial clauses in contracts are leaving African countries burdened with debt and minimal benefits. China’s double standards on international arbitration allow it to exploit its dominant position for commercial and geopolitical gains, raising questions about fairness and transparency in its engagements with African nations.
Source – pmldaily.com
