In December, Chinese president Xi Jinping offered a whopping $60 billion loan and aid package to Africa, according to Voice of America. Xi said that China aims to develop infrastructure, improve agriculture and reduce poverty on the continent. This is only the latest example of China’s burgeoning economic presence in Africa. Its investment there has skyrocketed in recent years from $7 billion in 2008 to $26 billion in 2013, according to figures cited at a Wharton Africa Business Forum held last fall. But the relationship is fraught with controversy.

Opponents assert that it is exploitative for China to finance African infrastructure projects in exchange for the continent’s natural resources. Some accuse China of “neo-colonialist” behavior as it acquires the raw materials like oil, iron, copper and zinc that it urgently needs to fuel its own economy. Supporters, on the other hand, say that China’s initiatives to build and improve infrastructure such as roads, railways and telecom systems have been a boon to Africa’s manufacturing sector; have freed up domestic resources for other critical needs such as health care and education; and have aided everyone doing business on the continent.

Three experts from the front lines of the China-Africa relationship offered their views on this complicated issue at the Forum. (The panel was provocatively titled “China in Africa: The Real Story.”)

Looking at the Numbers

Wenjie Chen, an economist in the African Department of the International Monetary Fund (IMF), said there are widespread misconceptions about China’s involvement with Africa. She presented data reported by China’s Ministry of Commerce, which also appeared in a paper Chen recently authored with David Dollar of the Brookings Institution and Heiwai Tang of Johns Hopkins University.

“One of the great misconceptions about the China-Africa business relationship is that there’s some smoke-filled room in Beijing where all the [state-owned enterprises] sit around and divvy up the projects.” –Aubrey Hruby

While acknowledging that Chinese investment on the African continent has been on the upswing since 2009, Chen said that nevertheless, “there’s not really this pattern where you see more deals going into natural-resource-rich countries.” According to her data, the top 20 African nations in which China is involved include not only commodity-rich nations such as Nigeria and South Africa, but commodity-poor nations like Ethiopia, Kenya and Uganda.

Chen said that the largest deals — which tend to be government-to-government — do in fact involve infrastructure projects and natural resources. Those are the deals that make headlines. But, she asserted, they tend to skew the total reality. When looking at all Chinese firms that invested in Africa between 1998 and 2012, she said a picture emerges of small- and medium-sized private Chinese firms whose activities have nothing to do with commodities. “The number-one industry, in fact, is in services. It’s business services; it’s wholesale and retail,” said Chen, noting that many Chinese entrepreneurs run restaurants, hotels and import/export furniture companies.

“You can see [China’s activity is] really not discriminating in any way. It does not [turn] out to be just in natural resources,” said Chen.

According to Chen, another misconception is that China – compared with Western nations — provides a huge amount of foreign direct investment, in addition to aid, to Africa. “That’s not the case,” she said. “In terms of total FDI that goes into sub-Saharan Africa from China, it makes up about 5% of the total FDI that sub-Saharan Africa receives. It’s a very, very small percentage.” She noted that the aid percentage was even smaller.

The loan percentage is more robust, however, constituting about 13% of what Africa received in 2014, Chen said. But she commented that China’s loans to Africa tend to be non-concessional, meaning they are tied to more market-based interest rates than loans from Europe and North America. The Western loans tend to come with a very low, or no, interest rate. “That’s a major difference that we see.” Chen noted. “For us, it’s really about country to country relationships, and a two-way benefit.”

How Deals Are Made

Aubrey Hruby, co-founder of the Africa Expert Network and co-author of the 2015 book The Next Africa: An Emerging Continent Becomes a Global Powerhouse, also believes there are several myths to clear up about China’s presence in Africa. She is a longtime advisor to companies and individuals investing in African markets, as well as to several African presidents.

“One of the great misconceptions about the China-Africa business relationship is that there’s some smoke-filled room in Beijing where all the SOEs (state-owned enterprises) sit around and divvy up the projects. This doesn’t exist,” she stated. Instead, there is “a ton of competition” among Chinese state-owned enterprises for projects, and even among subsidiaries of the same enterprise.

“It’s a myth that no Africans get to work on these projects…. The reason the Chinese go there is because of cheap labor, since labor costs in China itself are rising.” –Wenjie Chen

Hruby shed further light on the process: Chinese company representatives scout infrastructure projects in Africa such as roads or railways. Then they arrange high-level meetings with government ministers or the president to pitch the idea. Once an African government signs an MOU, the Chinese firm does a feasibility study.

Next a contract is drawn up, she said, and the project is pitched to China’s export-import bank (EXIM) to obtain a loan package. If the size of the loan is of concern, the IMF gets involved to make sure the African country in question can realistically meet its debt obligations. Then the agreement is finalized and the project moves forward.

Hruby observed that in Africa, the Chinese are known for moving quickly. Once the MOU is signed, the Chinese can be “on the ground in a week” doing the feasibility study. And the study itself is not comprehensive, she said, but merely to analyze the cost of the project. “This is why you hear African governments saying ‘Oh, the American firms take so long to do a feasibility study. The Chinese will do it in two months.’”

She described a dam project that Ghana had with the World Bank that was stalled for about seven years. “Nothing ever got built, and there was all sorts of frustration. They went through a social audit, an environmental audit … which is all good in a way, but a president only has one term, maybe two, and they have to deliver power to the people.” Eventually, then-president of Ghana John Kufuor “just went to China,” according to Hruby, and “they started digging [in about] one month.”

By contrast, U.S. companies have “a disconnect … around some of the infrastructure projects and project financing approaches so that it takes a long time to put deals together,” said Hruby.

African ‘Wish Lists’

Thomas Laryea, a partner at the global law firm Dentons whose clients include African governments as well as private investors, agreed with Hruby’s statement that the Chinese are actively scouting infrastructure projects in Africa. He noted that this activity has given rise to a cadre of professional facilitators of such deals. “You find these facilitators in many places…. That is now becoming quite a phenomenon.”

On the African side, many African governments maintain “wish lists” (to use Laryea’s term) of infrastructure projects, although they are not necessarily compiled with China in mind. “Unfortunately … these aren’t necessarily projects that are bankable, or are sufficiently thought through, in order to attract and develop the financing.” But this situation was improving, he said. “I looked over the Ivory Coast’s so-called wish list last week or so, and it really is becoming quite substantive.”

When it comes to hammering out the details of big projects with China, Laryea believes that Africa is often at a disadvantage. He called negotiation and decision-making “a major weakness of many African governments…. The deals that are going through as government-to-government deals tend to be very high-level negotiations, sometimes between presidents,” he said, noting that there can be a gap between a leader’s political decision and how the deal can be structured in a way that makes financial, legal and economic sense. He noted that it was critical that African leaders seek out appropriate advisors no matter what country they are dealing with. “The African governments really need to take this issue more seriously.”

The Relationship Evolves

The China-Africa relationship has evolved over time, the panelists agreed, but said that outsiders’ perceptions have not always followed suit. For instance, Hruby said that although American firms often complain that Chinese firms are “going around bribing everyone,” corruption is on the wane. “A lot of the companies I’ve seen and worked with in the past may have paid bribes for projects, but they literally are interested in other ways of doing business. They’re saying, ‘This is not working that well. Can you help us find another way?’”

“I take a very hard line with my clients in the U.S. if they’re really worried about how much of the pie China is taking. They need to get into the game and find a way through.”  –Thomas Laryea

Another shift, said the experts, is that most contracts now stipulate the number of African workers that must be employed on projects. “Maybe the early [projects] had a lot of Chinese workers brought in, but in all the conversations and negotiations that I’ve been part of, the African governments have asked — and mandated by contract — how many [African] workers were used,” said Hruby.

“It’s a myth that no Africans get to work on these projects,” agreed Chen. “The reason the Chinese go there is because of cheap labor, since labor costs in China itself are rising.” She noted that at the IMF she is privy to information about specific projects, for instance the Mombasa-Nairobi Standard Gauge Railway now being built. “You can read it in the staff report … there is an explicit number of African workers.”

What factors are fueling the continuing negative view of China in Africa? In Hruby’s opinion, many in the U.S. government have an “obsession” with the China-Africa relationship — “a longing for the Cold War or something” — that blinds them to a more global view. “There’s no question there’s been a diversification of African partners. There’s the Turkey interplay, Brazil is coming up, and Malaysia was the largest investor one year, even bigger than China. So there are a lot of other players.”

She described meetings in which American companies routinely complain about how Chinese companies unfairly grab projects, but in her view these are typically contracts the American firms would turn down anyway. “[The Chinese] are building roads that can get your Coca-Cola there faster, further, cheaper… Everyone needs the roads. Those benefit local entrepreneurs, international investors,” she noted.

Laryea said he, too, disagrees with the notion that “China is bad for Africa and we should all be worried about it.” He asserted that the relationship has been generally beneficial for African countries as well as the global economy. “I take a very hard line with my clients in the U.S. if they’re really worried about how much of the pie China is taking. They need to get into the game and find a way through.”

What does the future hold now that China’s booming economy is slowing down? “There’s no doubt that the Chinese slowdown is impacting Africa,” commented Hruby. She said that the IMF and World Bank’s projections reduce African growth to less than 4%, much lower than rates seen across the continent two years ago. “It lowers all boats, if you will,” she said. “But I don’t believe it totally derails the African growth story.”