Chinese loans to Africa fall to lowest level in two decades

by MMC
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Chinese loans fell below $1 billion in 2022

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Several African countries struggling with debt levels

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China faces domestic economic difficulties

By Joe Bavier and Rachel Savage

JOHANNESBURG, Sept 19 (Reuters) – Chinese sovereign loans to Africa fell below $1 billion last year – the lowest level in almost two decades – underscoring Beijing’s abandonment of a decades-long infrastructure spree on the continent, according to data released Tuesday.

The drop in lending reflected in data from Boston University’s Global China Initiative comes as several African countries grapple with debt crises and China’s economy faces growing headwinds.

Africa is at the center of President Xi Jinping’s ambitious Belt and Road Initiative (BRI), launched in 2013 to recreate the ancient Silk Road and expand China’s geopolitical and economic influence through to an effort to develop global infrastructure.

Boston University’s China Lending to Africa Database estimates that Chinese lenders provided $170 billion to Africa between 2000 and 2022.

But loans have declined sharply since the peak in 2016. Only seven loans worth $1.22 billion were signed in 2021. Nine loans totaling $994 million were granted last year, representing the lowest level of Chinese loans since 2004.

Although both years coincide with the COVID-19 pandemic, researcher Oyintarelado Moses told Reuters there are other contributing factors.

“A lot of it depends on the level of risk exposure,” said Moses, who manages the database and co-authored a report released Tuesday.

While African governments have largely welcomed Chinese loans and infrastructure projects, Western critics have accused Beijing of saddling poor countries with unsustainable debt.

Zambia – a major Chinese borrower – became the first African country to default during the COVID-19 pandemic in late 2020. Other governments, including Ghana, Kenya and Ethiopia, are also struggling.

China, meanwhile, faces its own domestic problems as policymakers struggle to revive growth amid continued weakness in the crucial real estate sector, a faltering currency and falling global demand for its manufactures.

“China’s domestic economy plays a huge role here,” Moses said.

The China Development Bank and the Export-Import Bank of China – the two institutions behind most of the loans to Africa – have been redeployed to support the national economy, while much of the remaining foreign loans is aimed at markets closer to the country.

The decline in loans, however, does not necessarily mean the end of Chinese engagement in Africa.

The Boston University analysis found that some trends – fewer loans of more than $500 million and a greater focus on social and environmental impacts – appeared to reflect China’s stated willingness to adopt a “Belt and Road” is greener and better.

“It’s such an important part of the relationship that I think there will continue to be interest from Chinese lenders,” Moses said. “It’s just going to be different.”

(Edited by Tomasz Janowski)

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