Chart of the week: Chinese lending to Africa

According to Boston University’s Global Development Policy Centre, Chinese lending to Africa increased to $4.61 billion in 2023, marking the first rise in years. This amount is still below pre-pandemic levels when loans often exceeded $10 billion annually under the Belt and Road Initiative. The drop in lending began with the COVID-19 pandemic and continued as China faced an economic slowdown, and some African borrowers entered debt restructuring. Lucas Engel, a study co-author, noted that the rebound reflects China’s strategic focus on maintaining relationships with key African borrowers despite domestic challenges.

The Belt and Road Initiative was designed to improve infrastructure in the Global South by providing cheap loans. As an integral part of the Global South, Africa benefited significantly from this initiative. Between 2000 and 2023, Chinese lenders provided 1,306 loans worth a combined $182.28 billion to 49 African countries and seven regional borrowers.

However, some critics fear this could lead to a debt trap, given Africa’s history of loan defaults and requests for forgiveness. One reason China has hesitated to resume granting loans, despite its economy recovering faster than many others after the pandemic, is that many developing countries, including those in Africa, are already heavily indebted to China, with some experiencing financial distress. Additionally, China has shifted its lending strategy from sovereign loans to public-private partnerships, focusing on projects that can generate returns. China’s lending practices have also been criticised for creating debt traps and unequal relationships. In response, China announced it would waive 23 interest-free loans maturing by the end of 2021 for 17 African countries rather than offering more cheap loans.

In 2023, China imported a record $282 billion in total trade volume from Africa, with primary commodities such as metals, minerals, and fuel accounting for about three-fifths of Africa’s exports to China. China’s exports to Africa reached an estimated $143.6 billion in 2022, with total trade valued at $257.67 billion. Top imports from China included telecommunications equipment, fabrics, footwear, and refined oil. From 2021 to 2022, China’s exports to Africa grew by 11%, while African exports to China increased by 19%.

While there remains demand for cheap loans to support infrastructure development, Beijing’s funding priorities have shifted. As of this year’s China-Africa Summit, China focuses more on direct green energy exports to Africa, partly due to tariff wars with the US and potential conflicts with the European Union. Beyond concerns about debt traps, this shift in focus may pose additional funding challenges for African governments.