China-Africa relations: Xi Jinping vows to help Equatorial Guinea diversify economy away from heavy oil and gas reliance

China has pledged to support Equatorial Guinea to diversify its economy away from a heavy reliance on oil and gas - which accounts for 80 per cent of total exports - as the two countries elevated bilateral ties to a "comprehensive strategic partnership of cooperation".

Chinese President Xi Jinping held talks with Equatoguinean counterpart Teodoro Obiang Nguema Mbasogo in Beijing on Tuesday, where he promised that "China supports the economic and social development of Equatorial Guinea and its efforts to promote economic diversification and industrialisation".

Xi said Beijing would encourage Chinese companies to invest and start businesses in Equatorial Guinea and allow more agricultural products from the tiny Central African nation to enter the Chinese market.

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Equatorial Guinea, which has a population of about 1.6 million, is heavily dependent on crude petroleum and gas, which provides about 90 per cent of government revenue and leaves it susceptible to price shocks. But Malabo has identified agriculture, fisheries, finance and tourism to boost the economy.

Xi said China would "share its experience in agricultural and rural development with Equatorial Guinea and continue to carry out agricultural technical assistance projects". After the talks, the two leaders announced the elevation of bilateral ties to a comprehensive strategic partnership of cooperation.

A joint statement said China and Equatorial Guinea had agreed to expand trade and investment cooperation and deepen cooperation in agriculture, fisheries, energy, mining and infrastructure, and that China supported Equatorial Guinea's higher-quality agricultural and fishery products entering the Chinese market.

China agreed to support the building of Equatorial Guinea's public health system and would continue to send medical teams, carry out "light trips" and conduct other free clinics.

Equatorial Guinea promised to improve the business environment for Chinese companies in the country.

Obiang Nguema termed China "a reliable strategic partner" and said that since the establishment of ties more than five decades ago, "bilateral relations have always maintained friendly development".

"Equatorial Guinea is willing to open its doors to China and welcome Chinese companies to invest and cooperate in Equatorial Guinea," Obiang Nguema said, according to a readout from China's foreign ministry. He said this would help his country reach economic diversification and industrialisation and achieve sustained and healthy national development.

Malabo International Airport in Equatorial Guinea. Photo: Xinhua alt=Malabo International Airport in Equatorial Guinea. Photo: Xinhua>

The two leaders witnessed the signing of bilateral deals in investment, economic development, the digital economy, green development and global development initiatives.

Obiang Nguema's trip to China comes amid speculation that China plans to set up a military base on the Atlantic coast of Equatorial Guinea, which China has denied. Washington has variously said China has been wooing Malabo to build a military base, especially at a Chinese-built, deep-sea port in the city of Bata.

But China has repeatedly denied Washington's assertions it planned more military bases. Beijing has only one base on the continent, in Djibouti in the Horn of Africa.

However, John Calabrese, a senior fellow at the Middle East Institute in Washington, said it was possible that establishing a military base was on the agenda, and that the elevation of relations was a prelude to China providing more help for Malabo's economic diversification efforts.

That might be in exchange for agreeing to further, incremental consolidation of the military relationship, including a "facility" that might not initially look like or serve as a base, but could become one, he said.

Sub-Saharan geoeconomic analyst Aly-Khan Satchu said: "I think China is becoming very agile at picking up where the US and others have left off."

"[The] critical point with Equatorial Guinea is that China is going to build a military base on the Atlantic coast there, and hence the upgrade".

Obiang Nguema has been in power since 1979 when he overthrew his uncle Francisco Macias Nguema in a military coup. He has travelled to China on 10 previous occasions.

According to the International Monetary Fund (IMF), the country's economic outlook will be challenging in coming years because of a shrinking oil output from ageing wells, inadequate investment in the sector and declining commodity prices.

"They [Equatorial Guinea] intend to accelerate plans to boost non-hydrocarbon growth, implement a credible arrears repayment plan and establish a modern macroeconomic governance framework," according to an IMF report in February.

China is a key destination for Equatorial Guinea's crude petroleum, gas and rough wood - importing goods worth US$1.3 billion in 2022. Equatorial Guinea imports from China special purpose ships, gas turbines and ceramic bricks.

According to Calabrese, China has over the years provided project financing for a number of infrastructure projects, from road building to the port construction at Bata.

"The loans piled up, contributing to Equatorial Guinea's debt burden. That's not an anomaly either, situating China-Equatorial Guinea relations in the broader context of China's engagements with other sub-Saharan African countries," he said.

According to Boston University's Loans to Africa Database, Equatorial Guinea borrowed US$3.1 billion between 2000 and 2022, most of which funded its energy industry and social housing.

Calabrese said China National Petroleum Corporation (CNPC) had been involved in Equatorial Guinea for nearly two decades, managing the oil supply flows that were the bedrock of Sino-Equatorial Guinea ties.

Further, layered on to this was the creation of a special economic zone in Equatorial Guinea related to the Belt and Road Initiative. Calabrese said it was a standard structure of relations - China importing large volumes of natural resources, with energy security and diversification of suppliers consistently high priorities.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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