Finance Minister needs to be on next plane to China to get Debt deal finalized
Sino – Zambia ties need urgent recalibration to make it real “ Win- Win”
By Mwansa Chalwe Snr
Zambia’s successive administrations have failed to exploit the potential economic benefits from our relationship with China, our “special and all weather friend”. The Chinese do not interfere in the internal affairs of the country. And our strategists over the years, have not taken advantage of this. Instead, some of our leaders have used this non-interference stance, to enrich themselves by having a “generally corrupt relationship” with Chinese entities – both State and Private. China provides an immense opportunity for a small country like Zambia to fast –track its development.
World Leaders Stampede to meet Dr. Xi Jinping
In the last two months of 2023, there have been several heads of state and government that have gone to China to meet President Xi Jinping. The visitors have been from Brazil, Spain, Singapore, Malaysia, France, German and the European Union. But why this unusual heightened pace of diplomatic activity? The reason is simple: the yearning to revitalize their economies
In the last two years – 2020 to 2022 – the World has been hit by two major crisis: the Pandemic and the war in Ukraine, which has negatively affected many economies. Countries are struggling economically with high inflation and interest rates. The International Monetary Fund (IMF) has said that China will be the largest driver of global economic growth in the next five years. China will contribute 22.6% of total world growth, while the US will contribute 11.3%.
“Much uncertainty clouds the short- and medium-term outlook as the global economy adjusts to the shocks of 2020–22 and the recent financial sector turmoil. Recession concerns have gained prominence, while worries about stubbornly high inflation persist,” The IMF said in its World Economic outlook in earlier in April, 2023.
And while on a State Visit to Moscow, China’s leader Xi Jinping boasted that they were driving geopolitical change around the world. He told President Putin: “Right now there are changes – the likes of which we haven’t seen for 100 years – and we are the ones driving these changes together.”
How the World depends on China
Napoleon once said: “When China wakes up, the World will tremble.” And guess what? The process of the World depending on China has already started. The numbers speak for themselves.
In order to put China’s global influence on trade in perspective, it is worth noting the following: in February, 2021, China overtook the US to become the EU’s biggest trading partner. Trade between China and the EU was worth $709bn (€586bn, £511bn), compared with $671bn (€569bn, £485bn) worth of imports and exports from the United States. German, the biggest economy in the EU, has been, for five consecutive years up to 2020, China’s the biggest trading partner
China is Australia’s biggest trading partner. It accounts for 32 per cent of Australian exports which amounts to $153.2 billion; whereas with Japan its trade volume is $296.9 billion; India’s with $77.7 billion; Brazil’s with $90 billion and German with $256.7 billion. The U.S cannot compete with these numbers. China is also Africa’s biggest trading partner.
Zambia’s fast-track economic recovery strategy: Sino -Zambia ties recalibration
It is not rocket science that Zambia with a population of 20 million only, which is less that the 29 million of Beijing, the capital City of China, can easily transform its economy very fast with smart strategies. At the moment and the recent past, Zambia’s relationship with China has not been “win-win”, mainly due to bad choices by our past leaders.
In the past 20 years or so, despite the massive economic relationship between China and Zambia, the benefits have not yet trickled down to ordinary Zambians, to reduce poverty and create sufficient jobs. The claimed “Win- Win” situation is a mirage, and needs some recalibration. The New Dawn government should focus on this. READ MORE: http://www.lusakatimes.com/2021/07/27/zambia-china-economic-ties-need-recalibration/. The lack of benefits to ordinary Zambians was supported by empirical studies carried out by two Scholars from China’s Hebei University of Economics and Business, Cheng Jian and Comfort Lubinda.
“Even though the Sino-Zambia relation is based on win-win cooperation, the current pattern favours China more and that China‘s impetus in engaging with Zambia and Africa as a whole is driven by the need to access markets and raw materials as well as on diplomatic basis. A new strategic partnership in the interest of the Zambian peoples, at least, the majority of local Zambians is needed,” The Scholars wrote in the International Journal of Economics, Commerce and Management, United Kingdom.
During the telephone conversation between President’s Xi JinPing and Hakainde Hichilema on 31st May, 2022, Chinese President made it clear on how Zambia could economically benefit from China.
“China and Zambia are “all weather friends” enjoying traditional and amicable relations and unbreakable friendship. The cooperation between the two countries enjoys huge potential and bright prospects with two way trade volume hitting a record high and Zambia becoming the country attracting the most Chinese direct investment in Africa. The two sides should grasp bilateral relations from a strategic height, support each other on issues concerning respective core interests. The two sides should strengthen strategic communication and policy synergy, fully implement the nine programs of the Forum on China-Africa Cooperation (FOCAC), promote more Zambian goods, especially quality agricultural products, to enter the Chinese Market,” President Xi was quoted in a statement from the Foreign Affairs Ministry.
The Presidential phone chat was an open invitation for Zambia to exploit the huge Chinese market in agriculture products. For instance, China has a huge Soya bean market which provides Zambia with a great opportunity. In 2021, China imported $44.2 billion in Soya beans. China is trying to reduce reliance on US and Brazil.
And in July, 2022, Zambia and China signed two protocols on sanitary and phytosanitary export of soya bean meal and stevia leaves. The protocols were signed by Chinese Ambassador to Zambia Du Xiaohui and Zambia’s Minister of Agriculture Mtolo Phiri in the southern district of Chikankata in the presence of President Hakainde Hichilema, who said it was a mark of true friendship between China and Zambia. The question one may ask is: what progress has been done in following up and implementing these protocols. Zambia’s relationship with China has been just all talk, and no action. And these are the low lying fruits and home grown solutions to diversify the economy. Zambia needs to exploit such solutions rather than this obsession with IMF and debt restructuring, to the exclusion of other complementary solutions.
Why Finance Minister should be on a Plane to Beijing
Zambia should not assume that China will sign the Memorandum of Understanding (MOU) in the May, 2023 during the next Official Creditor Committee meeting, in two to three weeks’ time, without Zambia engaging China in a face to face meeting, at their home turf. The reasoning for such caution is because of the recent history. Zambia had expected China to sign the MOU on four occasions in recent times. There was expectation for China to sign the MOU on the following instances: By 31st December, 2022; G20 Finance Minister Meeting in February, 2022; end of quarter on 31st March,2023 and recently in April,2023 during the IMF/ World Bank Spring Meetings. On all the four occasions, China did not sign. The missed deadlines have sent a clear message to discerning analysts.
In the light of past experience, and as part of a risk management mitigating measure, the Finance Minister and Development Planning, should immediately take a plane to Beijing. He should lead a powerful Zambian delegation, which should include the foreign minister on a diplomatic trip to go and unlock the restructuring deal. The trip should also be used to arrange a subsequent State visit to China by President Hichilema in the nearest future.
The meetings that Zambia had with Chinese officials in Washington during the IMF/World Bank Spring meetings do not carry as much weight, as some people many think. Those meetings are supposed to be followed by more “serious” ones in Beijing. Zambia should emulate Sri Lanka, whose case was even more dire and worse than Zambia, but has overtaken Zambia in terms of getting financial assurances from China. Complaining, pleading and lobbying IMF to release the $188 million, even without China signing MOU, is not the best strategy. It will not help unlock the deal. The trip to China will.
Sri Lanka engaged in high level sustained economic diplomacy with China on several occasions from January, 2022 to February, 2023 with physical meetings. And in a last ditch effort, in February, 2023, the Sri Lankan President Ranil Wickremesinghe talked to Chinese Finance Minister Liu Kun to personally persuade China to match Colombo’s other creditors as part of a debt restructuring deal to Unblock IMF deal. And within two weeks, in March, 2023 China gave Sri Lanka financing assurances, through a letter from the Export-Import Bank of China which paved the way for the approval of $2.9 billion IMF deal. And within another week, Sri Lanka receives $330million first tranche of $2.9 billion IMF bail-out deal. As at now, the Sri Lankan government has moved to the next stage of the restructuring process. They are having a round of talks with individual bondholders and bilateral creditors for final restructuring deals.
Conclusion
Zambia’s decision as to how it should conduct itself in the 21st Century geopolitical and economical competition between the super powers, is so simple. First, it has been a non-aligned nation since independence, and as the old saying goes,” if it isn’t broken, do not fix it”. Secondly, Zambia’s relationship with the USA and China should not be a zero sum game. Zambia can benefit from both of them. Thirdly, all countries including the United States, are taking advantage of the 1.4 billion Chinese market, and so why shouldn’t a small country like Zambia do the same. There is no doubt that Zambia’s economy will recover much quicker, by taking advantage of our relationship with China. What is required is recalibration to make it truly win-win, and not decoupling.
Mwansa Chalwe Snr is a Chartered accountant and Author. He is an independent financial commentator and analyst. He is the author of: http://www.amazon.com/CHINA-WEST-BATTLEGROUND-AFRICA-Geo-Economic Competition/dp/9982913174 Contact:pmchalwe@gmail.com