China’s Lending to Africa Sees First Increase in Seven Years, Study Reveals

Chinese lenders approved $4.61 billion in loans to Africa last year, marking the first annual increase since 2016, according to an independent study released on Thursday. Africa had been receiving over $10 billion annually from China between 2012 and 2018, fueled by President Xi Jinping’s Belt and Road Initiative (BRI). However, lending sharply declined with the onset of the COVID-19 pandemic in 2020.

The 2023 figure, which represents more than a threefold increase from 2022, suggests that China is seeking to manage risks associated with highly indebted economies, according to a study by Boston University’s Global Development Policy Centre.

“Beijing appears to be aiming for a more sustainable level of lending and is exploring a new strategy,” the university’s centre stated. The centre manages the Chinese Loans to Africa Database project.

This new data comes ahead of the Forum on China-Africa Cooperation, which Beijing will host next week. The forum, held every three years, brings together African leaders and Chinese officials to discuss cooperation and partnerships.

Last year, 13 loan agreements were made involving eight African countries and two African multilateral lenders, the study revealed. Major deals included a nearly $1 billion loan from China Development Bank to Nigeria for the Kaduna-to-Kano Railway and a similar-sized liquidity facility provided to Egypt’s central bank.

China has become the largest bilateral lender for many African nations, such as Ethiopia, over the past few years. Between 2000 and 2023, China lent a total of $182.28 billion to Africa, with most of the funding directed towards the continent’s energy, transport, and ICT sectors.

Africa was a significant focus in the early years of the BRI, as China sought to revive the ancient Silk Road and expand its geopolitical and economic influence through global infrastructure development. However, China began reducing its lending in 2019, a shift accelerated by the pandemic, resulting in a series of unfinished projects across the region, including a modern railway intended to connect Kenya with its neighbors.

The decline in loans was driven by China’s own domestic challenges and the growing debt burdens in many African economies. Since 2021, countries like Zambia, Ghana, and Ethiopia have been undergoing prolonged debt restructuring.

More than half of last year’s loans, or $2.59 billion, were directed to regional and national lenders, highlighting Beijing’s new approach, the study found. “Chinese lenders’ focus on African financial institutions likely represents a risk mitigation strategy to avoid exposure to African countries’ debt challenges,” it stated.

The study also noted that nearly 10% of the 2023 loans were for three solar and hydropower projects, indicating China’s shift towards funding renewable energy instead of coal-fired power plants. However, the trends in last year’s data did not provide a clear indication of China’s future financial engagement with the continent, as loans were still extended to struggling economies like Nigeria and Angola.

“It remains to be seen whether China’s partnerships in Africa will maintain their quality,” the Global Development Policy Centre concluded.

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