What benefits does China gain by waiving debt to African countries like this?

Question

https://www.fmprc.gov.cn/eng/zxxx_662805/202208/t20220819_10745617.html

What benefits does China gain by waiving debt to African countries like this?

Second, we need to take concrete actions to promote common development. China keeps its word with real actions, and will continue to take meeting Africa’s needs as the purpose of our cooperation with Africa. We will work with Africa to fully implement the “nine programs” and advance high-quality Belt and Road cooperation. China will waive the 23 interest-free loans for 17 African countries that had matured by the end of 2021. We welcome and support the decision of Tanzania and Zambia to reactivate the Tazara Railway. China will continue to actively support and participate in the construction of major infrastructure in Africa through financing, investment and assistance. We will also continue to increase imports from Africa, support the greater development of Africa’s agricultural and manufacturing sectors, and expand cooperation in emerging industries such as the digital economy, health, green and low-carbon sectors.

I am guessing they want African countries to support them during UN resolutions, but I feel like they don't really need to waive those debts since China doesn't own much of Africa's debt anyway. Also, they specifically do this for African countries and not other countries. What are the pros and cons of waiving African debt like that?

Just to clarify what I said about debt ownership above in a response to a comment that's not relevant nor needed at all. The question has nothing to do with the alleged debt trap diplomacy.

https://www.youtube.com/watch?v=_-QDEWwSkP0

China doesn't have a lot of African debt in terms of % of total debt. The video above shows this to be true.

More research done on Africa and how China's total debt in the region is exaggerated by narratives, but this has nothing to do with the question, it was in response to a comment that is not really needed to answer to the question.

https://www.hbs.edu/faculty/Pages/item.aspx?num=59720

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3745021

https://www.theatlantic.com/international/archive/2021/02/china-debt-trap-diplomacy/617953/

Same thing, but for Sri Lanka:

http://www.srilankaguardian.org/2022/07/real-debt-trap-sri-lanka-owes-vast.html

Answer 1

In my opinion, China is developing the capabilities of African countries so they can straighten their backs.

Why is that?

Firstly, China needs new allies in the world. The EU, OECD, EEA, G7, OPEC, etc., are already under US influence and/or presence. Central Asia is under Russian influence. Only Africa is left (and, to some extent, Latin America).

Secondly, No matter how poor the African countries are, they have votes in the UNGA and UNSC.

Thirdly, China needs new markets for exports. If Chinese subsidies propel their economies, they will be capable traders and markets for Chinese export products.

Fourthly, Africa has lots of minerals and other natural resources. Until the capacity is built, they can't be extracted efficiently to become raw materials for China's gigantic manufacturing ecosystem.

Finally, if a country with Chinese investments defaults or becomes bankrupt, China must either invest more money to bail them out or leave them there and get out. Both of these options are losing concern for China. Take Sri Lanka's example. China made some investments in Sri Lanka and left the scene. After a few years, Sri Lanka is now bankrupt. If China want to recoup its money, China has to pour in more money to get Sri Lanka going.

Answer 2

Regrading the interest-free loans being forgiven (as in the bold-ed sentence from the Q), it seems to be good PR without forgiving much actual debt, if we trust WaPo with their assessment, which however might be based on slightly earlier data:

As Africa's largest bilateral creditor, China holds at least 21 percent of African debt — and payments to China account for nearly 30 percent of 2021's debt service, as shown in the figure below. Angola alone accounts for almost a third. [...]

China also wrote off the accumulated arrears of at least 94 interest-free loans amounting to at least $3.4 billion. However, interest-free loans make up less than 5 percent of China’s lending to Africa.

More (non-interest-free) loans to Angola were forgiven however:

Between 2020 and 2022, Angola will get $6.9 billion in debt relief, mostly from China.

Also (the British/multinational law firm) Pinsent Masons (which agrees with the 5% figure from WaPo/CARI) gives this further background:

Early zero-interest loan agreements often included the phrase: "if there is difficulty to repay when the loan is due, the repayment period can be extended after consultation between the two governments". This signalled China's willingness to work with borrowers in distress and many African countries benefitted from this, particularly during the 1980s and 1990s when many African economies experienced financial crisis. Over 85% of these early zero-interest loans were cancelled by China.

[...] 212 zero-interest loans with an aggregate value of approximately $3bn were granted by China, amounting to less than 5% of all Chinese loan commitments granted between 2000 and 2018. The limited availability of Chinese zero-interest loans makes it easier for China to work with borrowers in distress.

[...] These loans have an average size of $10 million and are typically made on extremely generous terms including 20-year maturities, 10-year grace periods and no requirement for counterpart funding from a commercial provider.

So, yeah, historically speaking, those interest-free loans given by China ended up being non-refundable a lot of the time, in the long run. So, I guess China gives them with that in mind.

Also, we can guesstimate the 23 loans forgiven (in the recent announcement) as amounting to $230 million.