China increased its lending to Africa in 2023 to US$ 4.6 billion marking the first increase in 7 years, according to research by the Boston University Global Development Policy Center.
- •In 2023, Chinese lenders issued 13 new commitments valued at US$ 4.6 billion to 8 African countries and 2 regional financial institutions – the largest lending volume since 2019, at the onset of the COVID-19 pandemic.
- •The slowdown led to several projects stalling including the modern railway to connect Kenya and the neighboring nations including DRC.
- •The increase points to China’s strategic focus in Africa and potential upside shift in engagement with the continent.
More than half the total amount for 2023 – US $2.59 billion – went to African multilateral banks and regional lenders underpinning China’s risk mitigation strategy.
“Chinese lenders’ focus on African financial institutions most likely represents China’s risk mitigation strategy that avoids exposure to African countries’ debt challenges,” the research note stated.
Chinese lenders committed loans worth US$ 501.9 million to three renewable energy projects in Africa accounting for 0.1 percent of the total disbursements in 2023.
The Chinese Millennium
Between 2013-2018, cumulative commitments to Africa surpassed $10 billion annually buoyed by President Xi Jinping’s Belt and Road Initiative, adopted by the Chinese government in 2013. The loans were mainly channeled to Africa’s energy sector (US$ 62.7 billion), transportation (US$ 52.7 billion), information and communication technology ($15.67 billion), and the financial sector ($11.98 billion).
Between 2000 and 2023, Chinese lenders approved 1,306 loans totalling US$ 182.3 billion to 49 African countries and 7 regional borrowers. Angola was the top recipient in the period, followed by Ethiopia, Egypt, Nigeria and Kenya.
China has been a loyal lender to the continent notwithstanding the economic distress affecting most of the African nations. For instance, China approved additional loans to ailing economies such as Egypt, Angola and Nigeria. China’s preferable focus on reinvesting in existing strategic relationships forgoes the expected shift to lending to stronger economies.
“Going forward, China will likely continue to pursue a bifurcated strategy of risk-averse experiments with borrowers that received fewer loans in past years and decidedly riskier forms of engagement with its longtime partners.” the study note added.
This data comes ahead of the 2024 Summit of the Forum on China-Africa Cooperation, taking place in Beijing from 4th to 6th September 2024.