A report in the state-run newspaper China Daily that touted China’s “investments” in Africa’s burgeoning sustainable energy sector was misleading and highlights a common problem surrounding the use of the word “investments” in the context of Chinese economic engagement on the continent.
“Chinese investments in renewable energy are increasing rapidly in sub-Saharan Africa,” the article stated right from the beginning. The problem is that “investment” is a rather flexible word. All the examples cited in the article were of projects financed via Chinese loans or built by Chinese contractors. But none were investments in the conventional use of the word, where the Chinese side assumed the risk by taking an equity stake in the projects.
The bulk of the risk associated with the projects cited in the article was on the African borrowers’ side. The Chinese creditors and contractors assumed much less risk and often benefited from the security of sovereign-backed loans — meaning the likelihood of repayment is almost guaranteed.
So, it’s not accurate that China is “investing” in Africa’s clean energy market — at least according to the conventional definition of investment. Instead, it’s providing financing and competitive contracting services, which are no doubt important but not the same as actually investing and sharing the risk burden.
