Venezuela and the Chinese Debt Crisis in Africa

The China in Africa Podcast

Even before the current economic crisis brought on by the COVID-19 pandemic there were widespread concerns about Chinese lending practices in Africa. The U.S. and other critics contend that Beijing is employing a predatory lending strategy where it intentionally loads up poor countries with unsustainable amounts of debt. When they invariably can't repay those loans, China swoops in to seize assets.

While this so-called "debt trap" theory remains very popular, there's simply no evidence to support the assertion according to scholars who've looked into thousands of Chinese loan deals around the world.

So, if it's not a "debt trap" then what are the Chinese doing?

This is a particularly pertinent question now as Angola, Zambia and Kenya are all confronting severe challenges in their abilities to repay Chinese loans. Since this is the first time that African borrowers have encountered this dilemma with the Chinese, no one's really sure what's going to happen.

But a similar situation's been playing out for almost two decades in Venezuela and what's happened there might help inform how the Chinese will handle their ailing loan portfolios in Africa. Matt Ferchen, head of global China research at the Dutch-based Mercator Institute for China Studies, is one of the world's leading scholars on Sino-South American relations and has closely followed the Chinese debt crisis in Venezuela.

Matt joins Eric & Cobus to discuss the fate of $20+ billion of outstanding Chinese loans to Venezuela and what African stakeholders can take away from this experience.

JOIN THE DISCUSSION:

Facebook: www.facebook.com/ChinaAfricaProject

Twitter: @eolander | @stadenesque | @mattferchen

Download Matt Ferchen's latest paper: China-Venezuela Relations in the Twenty-First Century: From Overconfidence to Uncertainty from the U.S. Institute of Peace website.

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