China’s lending to Africa saw a significant resurgence in 2023, with Chinese lenders approving $4.61 billion in loans, marking the first annual increase since 2016. According to a study released on Thursday by Boston University’s Global Development Policy Centre, this is a more than three-fold increase from the previous year, signaling a potential shift in China’s approach to financing in the region.
From 2012 to 2018, Africa benefited from over $10 billion in annual loans from China, largely driven by President Xi Jinping’s Belt and Road Initiative (BRI). However, lending sharply declined starting in 2019, a trend exacerbated by the COVID-19 pandemic. The drop left several projects incomplete, including a modern railway intended to connect Kenya with neighboring countries.
The recent uptick in lending suggests that China is experimenting with a new strategy aimed at finding a sustainable balance between supporting African development and mitigating risks associated with the continent’s high debt levels. “Beijing appears to be looking for a more sustainable equilibrium level of lending and experimenting with a new strategy,” the Boston University report noted.
Key among last year’s loans were nearly $1 billion from the China Development Bank to Nigeria for the Kaduna-to-Kano Railway and a similar-sized liquidity facility provided to Egypt’s central bank. In total, China has lent $182.28 billion to Africa between 2000 and 2023, with most funds directed toward energy, transport, and ICT sectors.
The shift in China’s lending pattern was also evident in its focus on regional and national financial institutions, which received $2.59 billion of the total loans in 2023. This move is seen as a risk mitigation strategy, reducing direct exposure to the debt challenges faced by many African countries.
Additionally, nearly 10% of last year’s loans were allocated to solar and hydropower projects, reflecting China’s growing interest in funding renewable energy rather than coal-fired power plants.
