Chinese Loans to Africa During the COVID-19 Pandemic
In 2020, the Chinese Loans to Africa (CLA) Database, managed by the Boston University Global Development Policy Center, recorded 11 new loan commitments worth $1.9 billion from Chinese lenders to African government borrowers. This low amount, not seen since the mid-2000s, is down 77 percent from 2019 volumes, when Chinese lenders signed 32 loan agreements worth $8.2 billion. Such a reduction in Chinese loan commitments to Africa is a continuation of a long-term decrease since 2016 and further exacerbated by the COVID-19 pandemic. The effects of COVID-19 on African economies and a worldwide pullback of Chinese lending capacity may explain such a drastic drop in Chinese lending amounts to Africa in 2020.
A new policy brief explores the trends and impacts of the COVID-19 pandemic on Chinese loans to Africa.
- In 2020, Chinese lenders and African borrowers signed 11 loan agreements for projects in the transport, power, information and communications technology (ICT) and banking sectors across Burkina Faso, Democratic Republic of Congo, Ghana, Lesotho, Madagascar, Mozambique, Rwanda and Uganda and the African Export–Import Bank, a regional bank. The Export-Import Bank of China (CHEXIM) financed eight of the 11 projects, while Bank of China, the Industrial and Commercial Bank of China and Dongfang Electric International Corporation provided the other three.
- From 2000-2020, Chinese financiers signed 1,188 loan commitments worth $160 billion with 49 African governments, their state-owned enterprises and five regional multilateral organizations.
- From 2000-2020, the top ten African government recipients of Chinese loans were Angola, Ethiopia, Zambia, Kenya, Egypt, Nigeria, Cameroon, South Africa, Republic of Congo and Ghana.
- These ten countries account for 71 percent of all commitments between 2000-2020, of which loans to Angola constitute 27 percent, due to large oil-backed loan facilities from the China Development Bank (CDB) and CHEXIM.
- The top recipients of Chinese loan commitments in Africa represent a range of characteristics: from the democratic South Africa to the authoritarian Republic of Congo; from middle-income Egypt to the low-income Democratic Republic of Congo (DRC), from the resource-rich Angola to the resource-poor Ethiopia.
- This diversity of borrowers underscores the willingness of Chinese lenders to respond to host country demand in Africa over the years, regardless of income level or regime type.
- Historically, Chinese loans to Africa for the ICT sector have trailed loans to the transport, power and mining sectors. In 2020, however, funding to the ICT sector rose to be the second largest after transport, with $568 million worth of loans across five projects.
- CHEXIM maintains a leading share of loan commitments to Africa despite overall reduction. In contrast, CDB loans have shrunk since 2016 in relative and absolute terms, with no new loans in 2020.
- Despite low commitments, Chinese loans to Africa particularly from Chinese policy banks, have been a major source of financing for large-scale infrastructure development projects since 2000. However, the extended decrease in loans since peaking in 2016, or since 2013 when excluding Angola, poses uncertainty over Chinese lenders’ future appetite for providing high amounts of financing and African borrowers’ readiness to borrow more.
- A loan reduction in 2020 may not reflect a definite pullback of Chinese lending to the region, as the decline highlights how Chinese loan amounts tend to fluctuate during times of crisis and exposure to structural risk levels.
- The decrease is also consistent with pullbacks of Chinese lending in other parts of the world in 2020.
While loan commitment levels may recover slightly in subsequent years, without structural changes to borrowing practices and lending standards, loan amounts are unlikely to buck the long-term reduction trend. Other financing instruments such as foreign direct investment or Chinese loans to African regional banks for on-lending to African governments may become more frequent sources of financing development projects in Africa.Read the Policy Brief Read the Blog 阅读中文版政策简报