Tag Archive for Chinese financial aid

How might China react to African inability to pay loan fees on time?

The ability to repay generous Chinese loans is setting up an interesting strategic issue.

Most Chinese infrastructure funding for projects like railways are as loans. Not grants.

Bloomberg reports that Angola has just asked China for a moratorium of two years or more on repaying loans.

To read the entire Bloomberg report, go to http://bloom.bg/1I3JBNL

ECONOMIC BACKGROUND

China is Angola’s largest trade partner. Angola is sub-Saharan Africa’s 3rd largest economy.  China buys about half of Angola’s crude production, which was ~ 1.8 million barrels a day in May.  Chinese state banks are funding projects such as a new airport for the capital and railways and roads

Some of this may be as a barter deal.

Apparently, many of these projects are not self sustainable from their core business revenues.  Who did the due diligence before they were funded?

While seeking payment deferral, Angola also may seek to borrow $25 billion this year. Angola may seek much of the new funding from China and Brazil. Meanwhile, Angola is slashing its domestic budget. Some reports say by more than 20%.