Webinar Summary: Chinese Loans to Africa Database – Data Update

By Lucas Engel

On Thursday, September 21, the Boston University Global Development Policy Center hosted a webinar to introduce a new update to the Chinese Loans to Africa (CLA) Database and discuss past and current trends in Chinese lending to the continent. Oyintarelado Moses, Data Analyst and Database Manager at the GDP Center presented and participated alongside Kevin P. Gallagher, Director of the GDP Center, in a discussion moderated by Rebecca Ray, Senior Academic Researcher at the GDP Center.

The presentation and subsequent discussion highlighted a marked decline in Chinese lending to Africa that has been underway for several years. Nevertheless, both Moses and Gallagher reminded attendees of the context within which this decrease has occurred, emphasizing challenges that, while difficult to overcome in the short term, do not signify a loss of interest in cooperation on either the Chinese or the African side. Shifts in the sectoral make-up of loans and their average size appear to suggest that Chinese lending to Africa can be expected to take a new shape as smaller loans are deployed in a more targeted manner to projects with environmental and/or social benefits.

Moses began by providing an overview of the data, which covers Chinese lending to Africa since 2000, before honing in on the recent update covering the years 2021-2022 and providing insights into what trends can be expected to endure or evolve in the years to come.

The CLA Database records 1,243 loans amounting to $170.08 billion provided by 39 Chinese lenders to 49 African governments and seven regional institutions between 2000-2022. This estimate of China’s total lending to the continent represents 64 percent of World Bank lending to Africa during the same period and nearly five times the amount provided by the African Development Bank. The majority of China’s total lending, around 79 percent, was provided by two development finance institutions, the Export-Import Bank of China (CHEXIM) and the China Development Bank (CDB). On the receiving end, Angola, Ethiopia, Kenya, Zambia and Egypt are China’s top five borrowers in Africa. In terms of sectors, Chinese loans have largely gone towards energy, transport and ICT projects.

Moses also highlighted recent shifts in Chinese lending to the continent, which were gleaned from an analysis of data comprising loan commitments from 2021-2022. This time period represents the first time Chinese lending has fallen below $2 billion for two consecutive years since the early 2000s. Overall, the CLA Database estimates that Chinese lenders signed 16 new loan agreements worth $2.22 billion ($1.22 billion in 2021 and $994 million in 2022) with eight African countries during this time.

This low level of lending, Moses asserted, cannot be explained fully by disruptions caused by the COVID-19 pandemic, but rather, is related to several trends affecting both China’s willingness to lend and African countries’ capacity to borrow. First, debt issues in Africa are depressing demand for loans and leading to increased caution on the side of Chinese lenders. Second, China’s domestic economy is undergoing challenges and major lenders are focusing on directing funds to address domestic priorities. Third, China’s efforts to “green” Chinese overseas development finance as well as the shift toward “small and/or beautiful” projects with greater social and environmental benefits and smaller price tags is driving loan amounts down. Fourth, an increased emphasis on “high quality” China-Africa cooperation is shifting focus away from debt finance towards trade and diplomatic engagement.

In addition to the declining trend in both loan amount and number of loans, Moses underlined a number of other notable trends in the data. For one, China’s top borrowers over the past 20 years received a comparatively modest share of Chinese lending during the last two years, while new lenders have featured more prominently. In terms of sectors, energy was conspicuously absent from the list of Chinese financed projects in 2021 and 2022, which Moses attributed to a temporary transition period as Chinese lenders seek out greener projects.

Moses closed with the expectation that Chinese lenders will provide fewer large-scale loans to African borrowers in the years to come. Observers of Chinese lending to Africa should expect to see more loans under $50 million and a portfolio of loans to projects with more beneficial social and environmental footprints.

During the discussion that followed the presentation of new data and trends, Gallagher provided context for recent developments, pointing to the fact that the underlying causes of the decline in Chinese loans to Africa are unlikely to be reversed in the short term. Gallagher stressed that China’s domestic economic woes should be expected to play their part in depressing the supply side of Chinese loans to Africa for some time, while recovery on the demand side will require concerted efforts by the international community to provide meaningful debt relief for African countries that cannot afford to borrow.

Nevertheless, Gallagher also reminded attendees that China’s current lending remains significant in amount, though it appears modest in relation to 2016 numbers which dwarfed World Bank figures for the same year. In his concluding remarks, he pointed out the benefits associated with Chinese financed projects in Africa while also highlighting some of the risks. The challenge ahead, Gallagher explained, would be to maximize the potential of Chinese finance for plugging infrastructure gaps and generating economic growth, while minimizing the exacerbation of existing problems like debt distress and environmental degradation.

Moses concluded by emphasizing the role Chinese development finance has played in strengthening relationships between China and African countries and reiterating that Chinese loans to Africa are “here to stay.”

Both the presentation and the discussion highlighted the crucial part Chinese loans have played in serving the needs of African countries and shaping China-Africa relations. If recent trends in China’s lending are sustained and smaller loans flows to countries, regions and sectors that previously received less attention, Chinese relations with the continent should be expected to undergo a significant transition.

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