RECENT data from Boston University’s Global China Initiative has unveiled a significant drop in Chinese sovereign lending to African nations, falling below $1bn in the past year. This represents the lowest level of Chinese lending to Africa in nearly two decades and underscores China’s evolving priorities, moving away from extensive infrastructure projects on the continent.
Chinese engagement with Africa has been a cornerstone of President Xi Jinping’s ambitious Belt and Road Initiative (BRI), initiated in 2013. The BRI aimed to recreate the ancient Silk Road, extending China’s economic and geopolitical influence globally through large-scale infrastructure development.
According to Boston University’s Chinese Loans to Africa Database, Chinese lenders extended approximately $170bn in loans to African nations from 2000 to 2022. However, lending has seen a sharp decline since its peak in 2016. In 2021, only seven loans amounting to $1.22 billion were signed, and last year, just nine loans totalling $994 million were agreed upon, marking the lowest level of Chinese lending to Africa since 2004.
While these two years overlap with the Covid-19 pandemic, researcher Oyintarelado Moses emphasised that other factors contributed to this decline. Moses, who manages the database and co-authored a report on the subject, stated, ‘A lot of that really has to do with the level of risk exposure.’
China is scheduled to host its third Belt and Road Forum for International Cooperation next month, marking the 10th anniversary of the flagship initiative. About 90 countries are expected to participate in the event.
While African governments generally welcomed Chinese lending and infrastructure projects, critics in the West have accused China of burdening impoverished nations with unsustainable debt. Zambia, a significant Chinese borrower, became the first African country to default during the Covid-19 pandemic in late 2020. Other nations, including Ghana, Kenya, and Ethiopia, continue to grapple with debt challenges.
Meanwhile, China faces domestic economic issues, with policymakers striving to stimulate growth amid challenges in the property sector, currency instability, and reduced global demand for its manufactured goods. ‘China’s domestic economy is playing a huge role here,’ noted Moses.
The China Development Bank and the Export-Import Bank of China, the two institutions responsible for most lending to Africa, have been redirected to support the domestic economy. Consequently, a significant portion of the remaining overseas lending is being directed towards markets closer to China.
Despite the decline in loans, it does not signify a complete withdrawal of Chinese engagement in Africa. The analysis by Boston University indicates specific trends, such as fewer loans exceeding $500 million and a greater focus on social and environmental impacts, aligning with China’s stated aim of pursuing a higher-quality, greener Belt and Road Initiative.
Moses commented on the evolving nature of Chinese engagement, saying, ‘This is such a huge part of the relationship; I think there’s still going to be interest from Chinese lenders. It’s just that it’s going to look different.’