China's lending to Africa increased in 2023, study shows

By Kate Bartlett, JOHANNESBURG South Africa 

Chinese lending to Africa rose for the first time in years in 2023, new research by Boston University’s Global Development Policy Center showed Thursday. 

But the $4.61 billion loaned last year is still far less than China’s commitments to the continent pre-pandemic.

In the heady early days of Chinese President Xi Jinping’s global infrastructure project, the Belt and Road Initiative, or BRI, China’s loans to Africa surpassed $10 billion each year.

That lending dropped sharply at the beginning of the COVID-19 pandemic and stayed low as China experienced its own economic slowdown. The decrease in loans also came as some African borrowers entered drawn-out debt overhauls.

Lucas Engel, a data analyst who co-authored the Boston University study, explained why he thinks lending was up somewhat in 2023 despite China’s troubles.

“Investment should be viewed in the context of China’s overall economic heft and the importance China attaches to its relationship with Africa,” Engel said, “especially strategically important long-term borrowers that China has developed close relationships with.”

The Boston University paper found a couple of trends when analyzing China’s loans to eight African countries and two regional financial institutions last year. 

The researchers said one thing that was unique was that more than half the money was loaned to African multilateral banks.

They said this was likely a form of risk mitigation, and Cobus van Staden, managing editor at the China Global South Project, a thinktank based in Pretoria, agreed.

“If you’re lending to African multilateral institutions, that means you are in a mix of lenders and there are de-risking mechanisms in place, partly because the risk is also separated across many actors,” van Staden said. “If you’re lending bilaterally, particularly to a government, then you … the risk impact is higher.”

Despite this growing risk aversion, the researchers noted China was still lending to three major longtime borrowers: Angola, Nigeria and Egypt.

Critics have accused China of ensnaring African countries in “debt traps,” by which large sums owed to Chinese companies make African governments beholden to Beijing economically and politically.

However, economists have widely debunked the "debt trap" theory.

Another thing the Boston University research found was that China was once again committed to energy lending after a two-year hiatus. China committed loans to three renewable energy projects in Africa in 2023, in solar and hydropower.

This is in line with China moving away from the large infrastructure projects of the past to so-called “small is beautiful” projects and a “green BRI.”

Lauren Johnston, associate professor of China studies at the University of Sydney, said it was not surprising that despite the 2023 uptick, China’s loans to Africa hadn’t rebounded to anywhere near previous levels. She noted that initially China was financing large projects like the building of dams, roads and railways. Now, that’s done.

“Maybe this is like a period of consolidating those investments rather than just carrying on and building the next big investment,” Johnston said. 

“It’s a period to consolidate and grasp the economic value and imbed the returns and successes, and learn from any issues with those earlier loans.”

Next week, Xi will address African leaders gathered in Beijing for the Forum on China-Africa Cooperation.