NAIROBI, Aug 29 (Reuters) – Chinese lenders extended $4.61 billion in loans to Africa last year, the first annual increase since 2016, an independent study showed on Thursday.
Thanks to President Xi Jinping’s Belt and Road Initiative (BRI), Africa received over $10 billion in loans from China annually between 2012 and 2018. However, since the start of the Covid-19 pandemic in 2020, lending has declined rapidly.
Last year’s figure, which more than tripled compared to 2022, shows China’s efforts to contain the risks associated with highly indebted economies, according to the study by Boston University’s Global Development Policy Center.
“Beijing appears to be seeking a more sustainable balance in lending and experimenting with a (new) strategy,” said the university center that runs the Chinese Loans to Africa database project.
The new data comes just before the release of the brochure as Beijing prepares to host African leaders next week for the triennial Forum on China-Africa Cooperation.
According to the study, there were 13 loan agreements last year involving eight African countries and two African multilateral lenders.
For many African countries such as Ethiopia, China has become the most important bilateral lender in recent years.
According to the Boston University study, the country has provided loans totaling $182.28 billion to the continent between 2000 and 2023, with the majority of the funds going to Africa’s energy, transport and ICT sectors.
Africa played an important role in the early years of the BRI as China sought to restore the ancient Silk Road and expand its geopolitical and economic influence through a global infrastructure development offensive.
However, China began cutting off its funding as early as 2019 – a process that was accelerated by the pandemic. A number of unfinished projects were left in the region, including a modern railway that would connect Kenya with its neighbors.
The deleveraging is due to domestic political pressure from China and the growing debt burden of African economies. Zambia, Ghana and Ethiopia have been in lengthy debt restructurings since 2021.
More than half of the loans pledged last year, or $2.59 billion, went to regional and national lenders, underscoring Beijing’s new strategy, according to the Boston University study.
“Chinese lenders’ focus on African financial institutions is most likely a risk-mitigation strategy to avoid exposure to African countries’ debt problems,” the report said.
Almost a tenth of the loans for 2023 were earmarked for three solar and hydropower projects, according to the study, highlighting China’s desire to move from coal-fired power plants to renewable energy financing.
Nevertheless, the trends evident in last year’s figures did not indicate a clear direction of China’s financial engagement on the continent, the study showed, as Chinese institutions also lent to struggling economies such as Nigeria and Angola.
“It remains to be seen whether China’s partnerships in Africa will maintain their quality,” said the Global Development Policy Centre.
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Reporting by Duncan Miriri, editing by Karin Strohecker and Angus MacSwan
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