Breakingviews – China will outperform the United States for Africa

LONDON (Reuters Breakingviews) – The Cold War in China and the United States has an increasingly important theater: Africa. Uncle Sam and the Middle Kingdom can claim to be the main actor of the continent. In 2019, China will take advance.

The United States has a stock of FDI of $ 57 billion, according to data from the United Nations, just ahead of Britain and France. But China made a cumulative investment of $ 40 billion in 2016, up from just $ 16 billion in 2011. In terms of trade, it has been Africa's main partner for a decade. The sum of its exports and imports in 2017 was $ 170 billion, three times more than the United States. Washington has noticed. In mid-2018, as Donald Trump began his trade war, the US president acknowledged China's threat by doubling development financing to $ 60 billion – a far cry from Trump's earlier rejection of unspecified African countries. qualified as "void." But it is not certain to work. After heavy Chinese borrowing from Angola, Ethiopia and Zambia, African governments are wary of megaprojects funded by "debt trap diplomacy", which they be authorized by the United States or China. China has already proposed to align its commitment with the United States. Cash may be easier to use because of Washington's checks and balances and corruption issues. The Chinese and American military bases installed side by side in Djibouti constitute a potential flash point, but in 2019, hostilities will take place mainly in two sectors. The first is infrastructure, where China will try to force America to evade local agreements. A concrete example is the support of the United States at the request of construction giant Bechtel to build a $ 3 billion highway across Kenya – which appropriately hides a shiny new Chinese railway. After two years of slow progress, Kenyan media are questioning the need for this project. Beijing could prevail, possibly by offering equity rather than cheap debts. The second sphere is mining. The People's Republic is looking for minerals such as copper and cobalt, which is at the center of its ambitions to master next generation technologies, such as electric vehicles. Listed companies Glencore and First Quantum faced political problems in Congo and Zambia, respectively. Chinese state-backed mining companies may try to impose themselves. It is even possible to challenge the commercial dominance of the dollar. According to SWIFT, only 0.1% of Africa's external payments are in renminbi. But China-Africa interbank relations rose from 20 in 2008 to 186 in 2017 and many central banks hold renminbi reserves, which facilitates transactions in Chinese currency. By the end of 2019, the pre-eminence of Beijing may no longer be in question.

– This is a Breakingviews prediction for 2019. To see more of our predictions, click on reut.rs/2R6H5pG