According to figures released on Tuesday, Chinese sovereign credit to Africa decreased to below $1 billion last year, the lowest level in nearly two decades, highlighting Beijing’s turn away from a decades-long big-ticket infrastructure splurge on the continent.
Data from Boston University’s Global China Initiative show that financing has decreased when China’s economy is experiencing difficulties and several African countries grapple with debt challenges.
The ambitious Belt and Road Initiative (BRI), announced in 2013 to revive the Silk Road and expand China’s geopolitical and economic power through a drive for global infrastructure development, has focused on Africa.
According to the Chinese Loans to Africa Database at Boston University, Chinese lenders gave Africa $170 billion between 2000 and 2022.
But since its peak in 2016, lending has dramatically decreased. In 2021, only seven loans totaling $1.22 billion were signed. The lowest level of Chinese funding since 2004 was achieved last year when nine loans totaling $994 million were agreed upon.
Even if the COVID-19 pandemic occurred during those two years, researcher Oyintarelado Moses told Reuters that there are additional causes.
“A lot of that really has to do with the level of risk exposure,” said Moses, who oversees the database and co-authored a report made public on Tuesday.
Around 90 nations are anticipated to join Beijing’s third Belt and Road Forum for International Cooperation, which will be held next month to commemorate the centerpiece initiative’s 10th anniversary.
African governments have generally welcomed Chinese infrastructure investments and credit, but Western opponents have charged Beijing with burdening impoverished countries with unmanageable debt.
Zambia, a significant Chinese borrower, made history by becoming the first African nation to declare bankruptcy in the late 2020 COVID-19 epidemic. Other governments, such as Ghana, Kenya, and Ethiopia, are also having difficulties.
Meanwhile, China is dealing with issues at home as officials work to bolster growth despite prolonged instability in the important real estate sector, a falling yuan, and waning demand for its manufactured goods abroad.
“China’s domestic economy is playing a huge role here,” claimed Moses.
The Export-Import Bank of China and the China Development Bank, the two organizations responsible for most of the lending to Africa, have been redeployed to boost the domestic economy, and most of the remaining overseas lending is going to domestic markets.
However, the loan decrease does not necessarily signal that China’s involvement in Africa is ending.
The Boston University investigation discovered several trends reflecting China’s push towards a higher-quality, greener Belt and Road Initiative, including fewer loans over $500 million and a greater emphasis on social and environmental impacts.
Since this is such a significant aspect of the partnership, Moses predicted that Chinese lenders would continue to show interest, just that it would appear differently.
