After the long civil war, when waiting for substantive reconstruction aid proved futile, the Angolan government resorted to a comprehensive credit and cooperation agreement with China in 2004. Under this deal, rebuilding is financed by an initial oil-backed loan of 2.4 billion US dollars repayable in 17 years and with an unbeatable interest rate of 1.5 percent. A »topping up« of two billion US dollars was agreed in 2006 when Chinese Prime Minister Wen Jiabao visited Angola in June 2006. Through this new cooperation Angola has risen to become the largest Chinese trading partner in Africa, with a volume of 9.3 billion US dollars in 2006 (2005: 6.95 billion US dollars), even overtaking South Africa. In May of 2006 the southwest African country had already become China’s largest supplier of crude, surpassing Saudi Arabia. At the same time, China overtook the USA as the largest buyer of Angolan oil.

With the help of the oil-backed loans, huge reconstruction projects are being implemented, such as a new international airport for Luanda, a new production and broadcasting center for the state Television TPA, as well as the coastal North-South Highway between Lobito and Luanda. China is also a partner in the projected second Angolan refinery to be constructed in Lobito. Furthermore, the money is being put into the ailing electricity network of the overcrowded capital Luanda, several regional hospitals and schools in all provinces. A huge low cost housing project involving the construction of several satellite cities is to be implemented in all provinces.

The Angolan Government hails the cooperation with China as the only way to quickly re-launch the essential infrastructure which is so important for the revival of the war-torn Angolan economy. The short implementation time for most of the projects will surely also help to improve the Government’s image before the upcoming general elections projected for 2008 and 2009. This help comes at a crucial time, and apparently without strings attached. China is also seen as a new alternative to the West in international relations, creating a new balance with more weight for developing countries.

On China’s side, the immediate economic interest is to secure the energy supply for the booming Chinese economy. Apart from that, the deal is very profitable as China can provide its state firms with formidable projects, export some of its redundant manpower as well as goods and machinery to Angola. Most of the construction work is being carried out by Chinese firms and their imported workers, due to a clause stating that 70 percent of tenders will go to Chinese firms, with 30 percent going to Angolan firms. At the same time, it secures oil for some years to come, and at beneficial terms.

While the immediate advantages for both sides are more than apparent, the medium-to long-term consequences of such a massive Chinese involvement in Angola are less clear. International critics fear first and foremost that this engagement will slow down efforts aimed at bringing about more transparency and economic reform. Apart from that there has been little discussion on the insertion of post-war Angola into the global economy. How will it be possible to revive and diversify local industry – outside of oil and diamond production – in order to compete internationally? In reality, the structure of trade relations with China will be almost identical to relations with the West, with Angola exporting natural resources and importing all kinds of consumer goods. Furthermore, there is no strong impulse for the local economy as Angolan firms and the national work force are only marginally involved in the projects. Thus job creation and knowhow transfer are minimal. Some also fear that there is not enough capacity on the Angolan side to effectively manage and monitor the projects, control their quality and continuously maintain the infrastructure. This could mean that a lot of Angolan money is spent on what could turn out to be white elephants.