In this second part of the geoeconomic analysis of relations between China and Africa, aspects such as China’s effort to promote the use of the yuan in Africa and displace the dollar, its participation in the G20 Common Framework for debt restructuring are addressed. of certain African countries, the growing Chinese military presence on the continent, and how the United States is countering the strengthening of these ties. To collect information, various articles and academic studies of organizations and think tanks specialized. If you want to delve deeper into the topic, we recommend the LISA Institute Masterclass on Chinese influence on the African continent.
Expansion of yuan in Africa
According to the article «Navigating the Evolving Landscape between China and Africa’s Economic Engagements», China has been signing currency swap agreements with several African countries to facilitate central banks access to yuan (Renminbi) in times of need, offering financial flexibility without increasing your debt in dollars or euros. Egypt and Nigeria are an example of countries that have used and renewed these swap lines, allowing them to access yuan liquidity.
China is advancing its strategy to promote the use of the yuan in Africaseeking to displace the dollar in some commercial transactions. In Zambia, the Bank of China has established its first African subsidiary, allowing customers to transact directly in yuan. This effort is part of China’s broader initiative to de-dollarize its trade relations in Africa, boosting the use of the RMB in settlements and encouraging the use of local currencies in bilateral agreements.
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However, the Most of African countries’ external debt to China remains denominated in US dollarsindicating that, despite agreements to use the renminbi, the dollar remains predominant in these loans.
In parallelChina is promoting the issuance of panda bondsdenominated in yuan, in countries such as Egypt, Kenya and Zambia. With it, The Asian country seeks to limit the influence of the dollar in certain transactionssuch as the export of Zambian copper, where China is the main buyer.
Finally, it should be noted that China has been renewing alliances with African bankssuch as the collaboration between Standard Bank of South Africa and the Industrial and Commercial Bank of China, which facilitates the use of the yuan in 15 African markets.
China-Africa and the G20 common framework
China has been a key player in the G20 Common Framework for debt restructuring in Africaa global effort aimed at helping developing countries manage their rising debt levels. This framework, established by the G20 in 2020, brings together bilateral, private and multilateral creditorslike China, with the aim of coordinating the restructuring of sovereign debts. China’s role in this process is prominentas it is one of the leading lenders in Africa.
However, China has been criticized for its slowness in some negotiations, such as in the case of Zambiawhich required an IMF bailout. Chinese lenders have been firm in their demands, demanding that multilateral institutions like the World Bank assume part of the lossesa proposal that these institutions have rejected. After two years of talks, In 2023, a provisional agreement was reached with Zambia that included the extension of deadlines and grace periodsbut without condoning a doubt.
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In 2024, the government of Ghana made significant progress within the Common Framework by agreeing to restructure $5.4 billion in debt. The memorandum of understanding was signed with the Official Committee of Creditors, co-chaired by China and France. Ghana had requested the restructuring of its debt in 2023after facing serious economic problems related to its high levels of debt.
Other African countries, such as Chad and Ethiopia, also are restructuring their debts under the G20 Common Frameworkwith China playing a predominant role in the negotiations.
China’s military strategy in Africa
One of the fundamental foundations of the relationship between China and Africais the shared commitment to the principle of non-interference. Unlike many Western countries, China has maintained a stance of unconditional cooperation regardless of its political systems. China’s only demand is respect for the one-China policy. All African countries except the Kingdom of Eswatini have adopted this position.
In recent years, Africa has experienced a new wave of military coups, concentrated mainly in West and Central Africa. However, China has maintained strong relations with these countries that it cannot easily abandon due to its strategic and economic interests.
Guinea has become a key supplier of bauxite to Chinavital for your aluminum industry. Following the 2021 coup, China’s Baowu Steel Group signed an agreement to exploit Guinea’s iron reserves in exchange for building a 600 km railway line.
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In Gabon, China sources more than 20% of its manganese and controls more than half of the commercial timber sector. In Chad, CNPC dominates the oil sector, while in Mali, Ganfeng Lithium Co acquired 50% of the Goulamina mine. Burkina Faso, since breaking relations with Taiwan in 2018, has received large Chinese investments, especially in its rich gold deposits.
The Chinese government generally has avoided condemning the coup leaderspreferring to urge a peaceful resolution of conflicts. Besides, China has gone a step further by opposing the imposition of sanctions by the UN Security Council to certain African countries, arguing that the organization should not interfere in the internal affairs of member states.
Chinese military presence
China is increasing its military cooperation on the African continentrecently announcing a plan to spend $140 million to train 6,000 African military personnel. According to African Defense Review, this could create divisions in the African armed forces, between units trained by China and the West, with different doctrines.
China already has a naval base in Djiboutikey to your influence in the Indian Ocean and control of the Bab-el-Mandeb Strait, a strategic trade route. In addition, it has shown interest in expanding its presence in the Atlantic, attempting to establish a base in Equatorial Guinea, which would put United States interests in the region at risk.
In May 2024, President Teodoro Obiang made his eleventh visit to China, where ties were raised bilateral to one «comprehensive strategic cooperation partnership».
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In 2022, Trade between both countries reached 1.7 billion dollarswith crude oil being Equatorial Guinea’s main export, while China sends more diversified products, such as special ships and gas turbines.
Between 2000 and 2022, China granted $3.1 billion in loans to Equatorial Guineamainly for infrastructure projects in the energy sector.
According to The Wall Street Journal, China could establish its first military base in the Atlantic in the deep-water port of BataEquatorial Guinea, built by China. Although it is a commercial port, its location is strategic, connected to the Trans Africa Highway 10 that links Bata with Gabon.
In response, The United States offered a $5 million security package to Gabon to counter Chinese military influence in the regionreflecting the growing competition between both powers for strategic control of the area.
US tries to counter China’s dominance in access to critical minerals in Africa
The US administration is stepping up efforts to counter China’s growing dominance in access to critical minerals in Africaa key region for advanced technology supply chains. The continent is home to more than 20% of the world’s reserves of strategic minerals such as cobalt, copper, nickel and lithium, essential for the production of batteries, electric vehicles, fuel cells and renewable energy.
He cobaltin particular, is a critical mineral for the manufacture of lithium-ion batteries, which power everything from mobile phones to electric vehicles. More than 70% of global cobalt production comes from Democratic Republic of the Congowhere China has established a dominant presence through trade agreements and mining concessions. The Asian country not only does it control a large part of the extraction, but also the processing of these minerals, consolidating its strategic advantage.
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USA, despite its dependence on these minerals for industries such as automotiverenewable energy or military technology, has a much more limited presence in mining and processing in Africa. Chinese companies operate more mines on the continent than American companiesgiving them a considerable advantage in terms of access and leaving the US vulnerable to potential supply disruptions or price increases.
In June 2022, The United States launched the Mineral Safety Partnership (Minerals Security Partnership, MSP), with the aim of guaranteeing secure and sustainable supply chains of critical minerals.
The MSP’s priority is to strengthen cooperation with strategic countriesincluding several in Africa, such as Mozambique, Namibia, the Democratic Republic of the Congo, Tanzania and Zambia. The MSP seeks to reduce dependence on dominant players such as Chinawhich controls much of the global processing of these minerals. On September 27, 2024, the last summit of the Forum was held in New York.
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In parallel, the African Growth and Opportunity Act (AGOA) plays a key role in US economic strategy to maintain access to African markets and resources. This agreement, which gives nearly 40 sub-Saharan African countries duty-free access to the US market, expires in 2025. In response, in April 2024, U.S. senators introduced bill to extend trade preferences under AGOA until 2041. African officials and analysts warn that any delay in renewing the agreement could affect both bilateral trade and US access to critical minerals.
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