CHINESE lenders approved $4.61bn in loans to African nations in 2023, marking the first annual increase in Chinese financing to the continent since 2016, according to an independent study released on Thursday. This represents a more than threefold increase from the previous year and suggests that China is adopting a more cautious approach to lending, particularly in economies with high debt levels.
Between 2012 and 2018, Africa secured over $10bn annually in loans from China, largely fuelled by President Xi Jinping’s Belt and Road Initiative (BRI), which aimed to extend China’s geopolitical and economic influence through global infrastructure projects. However, lending sharply declined starting in 2020 with the onset of the Covid-19 pandemic.
The latest data, compiled by Boston University’s Global Development Policy Centre, indicates that China is seeking a more sustainable level of lending and is experimenting with a new strategy. ‘Beijing appears to be looking for a more sustainable equilibrium level of lending,’ the university centre noted, highlighting the shift in approach.
As China prepares to host African leaders for the upcoming Forum on China-Africa Cooperation, the study revealed that last year’s lending involved 13 deals across eight African countries and two African multilateral lenders. The most significant loans included nearly $1bn 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 to many African nations, including Ethiopia. Between 2000 and 2023, China lent Africa a total of $182.28bn, with most funds directed towards energy, transportation, and ICT sectors.
Initially, Africa played a significant role in China’s BRI as the country sought to recreate the ancient Silk Road and expand its influence through global infrastructure development. However, starting in 2019, and accelerated by the pandemic, China reduced its lending, resulting in several unfinished projects across the continent, such as the modern railway intended to link Kenya with its neighbours.
The reduction in loans was driven by China’s domestic pressures and growing debt burdens among African economies. Countries like Zambia, Ghana, and Ethiopia have faced protracted debt restructuring processes since 2021.
The study also highlighted that more than half of the loans committed last year—$2.59bn—went to regional and national lenders, reflecting Beijing’s strategy to mitigate risks associated with African debt challenges. Nearly 10 percent of the 2023 loans were allocated to renewable energy projects, including solar and hydropower, signalling China’s shift towards funding greener energy alternatives instead of coal-fired power plants.
Despite these emerging trends, the study noted that China’s financial engagement with Africa in 2023 does not yet reveal a clear long-term direction. Chinese institutions also extended loans to struggling economies like Nigeria and Angola, leaving questions about the future quality and sustainability of China’s partnerships in Africa.
‘It remains to be seen whether China’s partnerships in Africa will retain their quality,’ the Global Development Policy Centre concluded.
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