Lenders in China approved loans worth $4.61 billion to eight countries and two regional financial institutions in Africa last year, marking the first time the annual loan amount to Africa has risen since 2016. However, the amount is far below the early years of the Belt and Road Initiative (BRI), in which cumulative commitments surpassed $10 billion annually.
China’s loans to Africa in 2023 represented the largest volume of lending to the continent since 2019 before the onset of the Covid-19 pandemic.
Top recipients of Chinese loans
A recent study from Boston University’s Global Development Policy Center estimates that from 2000 to 2023, Chinese lenders provided 1,306 loans amounting to $182.28 billion to 49 African governments and seven regional borrowers. The study also reveals that China’s top five loan recipients between 2000 and 2023 were Angola, Ethiopia, Egypt, Nigeria and Kenya.
During this time, Chinese loans went primarily to Africa’s energy sector ($62.72 billion), transportation ($52.65 billion), information and communication technology ($15.67 billion), and the financial sector ($11.98 billion).
African multilateral banks take largest share
The volume of financing channeled to Africa’s financial sector in 2023 is unique when compared to previous years. More than half the total combined loan amount from China for 2023 ($2.59 billion) was provided to Africa’s multilateral banks, as well as nationally owned banks in Egypt. From 2000-2022, only 5.29 percent of China’s loans to Africa were directed to the continent’s financial sector.
“Chinese lenders’ focus on African financial institutions most likely represents a risk mitigation strategy that avoids exposure to African countries’ debt challenges,” the report stated.
Energy loans regain ground
After a two-year halt in energy lending, China committed loans worth a total of $501.98 million to three renewable energy projects in Africa. The loans supported solar and hydropower projects and were relatively modest in size, in line with China’s recent shift to the “small is beautiful” approach.
Support for these projects also provides further evidence of China’s intention to honor Xi Jinping’s 2021 pledge to cease financing new coal-fired power plants abroad and ramp up funding for renewable energy projects instead.
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China’s relationship with African borrowers to remain steady
China’s willingness to maintain relationships with longtime borrowers in Africa is exposing it to notable risks. Despite growing risk aversion among Chinese lenders, Chinese development finance institutions in 2023 issued loans to three of its longtime borrowers all suffering economic headwinds (Angola, Egypt, and Nigeria).
“Rather than shifting lending to the strongest and healthiest economies on the continent, China is prioritizing reinvesting in existing strategic relationships,” added the report.
Going forward, the study expects China to continue pursuing a multi-branch strategy of risk-averse experiments with borrowers that received fewer loans in past years and decidedly riskier forms of engagement with its longtime partners.
“Additionally, the size of future individual loans is expected to shrink, even in countries that have a long history of engagement with China, as the pre-pandemic pipeline of big-ticket projects empties out,” concluded the study.
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