Chinese financial institutions approved $4.61 billion in loans to African countries in 2023, marking the first annual increase in lending since 2016, according to an independent study released on Thursday.
From 2012 to 2018, Africa received over $10 billion annually in loans from China, driven largely by President Xi Jinping’s Belt and Road Initiative (BRI). However, lending significantly declined beginning in 2020, largely due to the COVID-19 pandemic.
The 2023 figure represents a more than threefold increase from 2022, signaling China’s intent to mitigate risks associated with heavily indebted African economies. This observation comes from a study conducted by Boston University’s Global Development Policy Centre.
“Beijing appears to be seeking a more sustainable balance in its lending practices and is experimenting with a new strategy,” stated the university’s centre, which manages the Chinese Loans to Africa Database project.
Notable loans from last year include nearly $1 billion from China Development Bank to Nigeria for the Kaduna-to-Kano Railway and a similar-sized liquidity facility to Egypt’s central bank.
China has emerged as the leading bilateral lender for many African nations, such as Ethiopia, in recent years. The study reveals that China has provided Africa with a total of $182.28 billion in loans between 2000 and 2023, with a significant portion directed towards the continent’s energy, transport, and ICT sectors.
Africa played a key role in the early years of the BRI as China aimed to recreate the ancient Silk Road and extend its geopolitical and economic influence through a global infrastructure development push.
However, China began reducing its lending in 2019, a trend that was accelerated by the pandemic. This reduction left numerous projects across the continent unfinished, including a modern railway intended to link Kenya with its neighboring countries.
The decline in loans was driven by China’s domestic pressures and increasing debt burdens among African economies. Since 2021, countries such as Zambia, Ghana, and Ethiopia have undergone protracted debt restructuring processes.
Last year, more than half of the committed loans, or $2.59 billion, were directed to regional and national lenders, highlighting Beijing’s shift in strategy, the Boston University study noted.
“Chinese lenders’ focus on African financial institutions likely reflects a risk mitigation strategy aimed at avoiding direct exposure to the debt challenges facing African countries,” the study suggested.
Nearly 10% of the 2023 loans were allocated to three solar and hydropower energy projects, indicating China’s interest in funding renewable energy rather than coal-fired power plants.
Despite the observable trends in last year’s lending, the study cautioned that there is no clear indication of the future direction of China’s financial engagement with Africa, as Chinese institutions also extended loans to economically troubled nations like Nigeria and Angola.
“It remains uncertain whether China’s partnerships in Africa will maintain their quality over time,” the Global Development Policy Centre concluded.