China has decided to take a stab at doing business differently with Africa. Amid the criticism the Asian country has received in recent years it has come up with a more subtle way to invest and secure strong links with the commodity-rich continent: it has launched a $2 billion fund to be underwritten through the African Development Bank and disbursed over a 10-year period – and will be known as the Africa Growing Together Fund (AGTF). It marks the first time China invests in a multilateral institution such as AfDB – whose mission is to promote sustainable economic growth and reduce poverty in Africa – rather than through a direct deal with an African government, as it has done for years. The AfDB-China relationship that was made official on Thursday will be one to follow in coming years since, in a way, it gives the deals to come a more formal background.
This latest economic push into the continent was announced in a very well studied way – even if international public relations isn’t always Beijing’s forte. The backdrop was AdDB’s Group annual meeting, which ended on Friday, and was preceded by an act of humbleness that is rare among senior Chinese officials who usually deny any type of neocolonialism in the continent – a criticism that is today omnipresent – and look away when accused of corruption and malpractices. Zhou Xiaochuan, the governor of China’s central bank, said that “different entities have behaved differently. There may have been some phenomena of Chinese investors [that were] not so good, not so satisfactory.” Around 2,500 Chinese companies have established themselves in Africa over the last two decades, making in one of the biggest markets for the world’s second (or first) largest economy. He later went on to say that “the AfDB’s rich experience, convening power and strong results-oriented culture made the Bank China’s ideal partner for channeling resources in support of long-term growth and development on the continent.”
The multilateral cooperation will be immediately established, and is expected to be used to co-finance some projects before the end of this year. The new fund, which will be overseen by the Banks shareholders, will open contracts to the most suitable bidder rather than just to Chinese companies. China is not among the AfDB top shareholders, which include traditional donors such as the United States and Japan, and African member states. Donald Kaberuka, President of the African Development Bank Group, said that “the AGTF marks an important milestone in the long-standing relationship between China and the African Development Bank Group in particular and Africa in general.”
The opportunity for both China and the African Development Bank to built a deeper and cleaner relationship now is there. Will they be able to achieve just that or will they vie as competitors? A good gauge will be to follow this fund and see if new ones are established in the upcoming years.