By Ezekiel David
Chinese lending to Africa rebounded in 2023, reaching $4.61 billion after years of decline, a new study shows. This marks the first annual increase since 2016, according to a study by Boston University’s Global Development Policy Centre.
While significantly lower than the peak lending period of 2012-2018, when China provided over $10 billion annually, this increase suggests a shift in China’s approach.
“Beijing appears to be looking for a more sustainable equilibrium level of lending and experimenting with a (new) strategy,” the study noted. This new strategy appears to prioritise risk mitigation, with over half of the 2023 loans, totalling $2.59 billion, directed towards regional and national lenders rather than individual governments.
“Chinese lenders’ focus on African financial institutions most likely represents a risk mitigation strategy that avoids exposure to African countries’ debt challenges,” the study explained.
In 2023, notable loans included a nearly $1 billion loan from the China Development Bank to Nigeria for railway development, and a similar amount was provided to Egypt’s central bank. Despite a decrease in lending since 2019, China continues to be a significant lender to Africa, having supplied a total of $182.28 billion between 2000 and 2023, mainly for energy, transport, and ICT projects.
The study also highlighted a growing focus on renewable energy, with nearly a tenth of 2023 loans dedicated to solar and hydropower projects. However, the overall direction of China’s financial engagement with Africa remains unclear, as loans were also extended to countries facing debt challenges, such as Nigeria and Angola.
“It remains to be seen whether China’s partnerships in Africa will retain their quality,” the Global Development Policy Centre concluded.
(Source: Reuters)