Faith Nyasuguta
China’s financial footprint in Africa is growing again, as Chinese lenders approved $4.61 billion in loans to the continent last year. This marks the first increase in lending since 2016, according to a recent independent study by Boston University’s Global Development Policy Centre. The increase comes after years of declining loans, signaling a possible shift in Beijing’s strategy toward African countries.
From 2012 to 2018, Chinese loans to Africa exceeded $10 billion annually, driven largely by President Xi Jinping’s ambitious Belt and Road Initiative (BRI), which aimed to expand China’s global influence through extensive infrastructure projects. However, the lending spree sharply declined with the onset of the COVID-19 pandemic in 2020, exacerbating financial instability and incomplete projects across the continent.
Last year’s lending surge represents a more than threefold increase from the previous year, suggesting a calculated approach by China to manage financial risks while maintaining its geopolitical influence. The $4.61 billion in loans included 13 agreements with eight African countries and two African multilateral lenders, showing a diversification in China’s lending strategy.
The uptick comes ahead of the Forum on China-Africa Cooperation, a major triennial summit where African leaders and Chinese officials will gather to discuss future partnerships. Between 2000 and 2023, China has extended a total of $182.28 billion in loans to African countries, primarily targeting energy, transport, and information and communication technology (ICT) sectors.
During the early years of the BRI, Africa played a crucial role in China’s plans to revive the ancient Silk Road and expand its economic and political reach globally. However, since 2019, Beijing has been reducing its lending due to increasing domestic pressures and the rising debt levels in many African nations. This trend was accelerated by the COVID-19 pandemic, which left several projects incomplete and strained China’s financial commitments.
China’s strategy appears to be evolving, with more than half of last year’s loans, amounting to $2.59 billion, directed toward regional and national lenders. This indicates Beijing’s focus on managing financial risks while retaining its influence across Africa. Yet, the long-term sustainability of China’s partnerships in Africa remains a topic of debate.
David Malpass, the President of the World Bank, recently expressed concern over the lack of transparency in China’s lending practices to developing economies. His remarks come amid worries that several African nations, including Zambia and Ghana, are struggling to meet their debt obligations to Beijing.
Malpass emphasized the need for more transparency in the terms and conditions of these loans to ensure sustainable development.
China, however, has defended its lending, stating that all financial dealings with African nations adhere to international regulations. Developing countries often rely on foreign loans to fund infrastructure, education, and agriculture—key sectors for economic growth.
Yet, the steep rise in interest rates in the U.S. and other major economies from 2022 to 2023 has made loan repayments increasingly costly, especially for countries whose debts are denominated in foreign currencies like the U.S. dollar or euro.
This has created a “double whammy” effect for many African nations. Not only are they dealing with a higher cost of borrowing, but they are also grappling with the depreciation of their local currencies, making it harder to repay their debts. As a result, economic growth in these countries is likely to be slower, adding to the challenges they face in the global financial landscape.
RELATED:
