China’s Lending to Africa Increases for First Time in Seven Years, Study Reveals

By Duncan Miriri

NAIROBI – Chinese lenders granted loans totaling $4.61 billion to Africa last year, marking the first annual rise in lending since 2016, according to an independent study released on Thursday.

During the period from 2012 to 2018, Africa received over $10 billion in loans annually from China, driven by President Xi Jinping’s Belt and Road Initiative (BRI). However, lending sharply declined following the onset of the COVID-19 pandemic in 2020.

The recent figure reflects a more than three-fold increase from 2022, indicating China’s intention to mitigate risks associated with heavily indebted nations, as reported by Boston University’s Global Development Policy Centre.

"Beijing seems to be aiming for a more sustainable lending equilibrium while experimenting with a new strategy," stated the university center, which oversees the Chinese Loans to Africa Database project.

This new data emerges as Beijing prepares to host African leaders for the upcoming Forum on China-Africa Cooperation, scheduled for next week and held every three years.

The study noted that last year saw 13 loan agreements involving eight African countries and two regional lenders. Major loans included nearly $1 billion from the China Development Bank for the Kaduna-to-Kano Railway in Nigeria, alongside a liquidity facility of similar size for Egypt’s central bank.

In recent years, China has become the primary bilateral lender for several African nations, including Ethiopia. Between 2000 and 2023, China lent a total of $182.28 billion to the continent, primarily focused on energy, transport, and ICT sectors.

Initially, Africa played a significant role in the BRI, as China sought to recreate the historic Silk Road while expanding its geopolitical and economic reach through infrastructure development. However, lending decreased starting in 2019—an adjustment that was expedited by the pandemic—leading to numerous unfinished projects across the region, such as a modern railway intended to connect Kenya with neighboring countries.

The decline in loans has been attributed to domestic pressures within China and the increasing debt burdens faced by African countries. Nations like Zambia, Ghana, and Ethiopia have been involved in extensive debt restructuring since 2021.

Notably, more than half of the loans issued last year—amounting to $2.59 billion—were directed toward regional and national financial institutions, signaling a shift in Beijing’s strategy, as indicated by the Boston University study.

"This focus on African financial institutions likely represents a risk mitigation approach aimed at minimizing exposure to the debt issues faced by African nations," the study observed.

Additionally, nearly 10% of 2023 loans were allocated to three renewable energy projects, highlighting China’s attempt to pivot towards funding renewable energy sources instead of coal-fired power plants.

Despite these emerging trends, the study indicated that last year’s data did not clearly define the trajectory of China’s financial involvement in Africa, as Chinese institutions also extended loans 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.