Webinar Summary: Chinese Loans to Africa Database – Data Update, 2000-2023

By Angie Ye

On Wednesday, September 4, the Boston University Global Development Policy Center (GDP Center) hosted a webinar discussion on the latest data and insights from the Chinese Loans to Africa (CLA) Database. Moderated by Rebecca Ray, Senior Academic Researcher with the Global China Initiative (GCI), the webinar featured a presentation by Lucas Engel, GCI Data Analyst, and Jyhjong Hwang, Global China Pre-doctoral Research Fellow, as well as a database demonstration by Diego Morro, GCI Data Analyst and Database Manager.

To begin, Ray provided an overview of the data update, noting that the year 2023 marks the first time the annual loan amount to Africa has risen since 2016. However, she noted that the rise most likely does not signify a return to consecutive annual commitment figures above $10 billion, as seen in the early years of the Belt and Road Initiative (BRI).

Engel and Hwang then presented the general trends in Chinese lending to Africa. The CLA Database documents 1,306 loan commitments amounting to $182.28 billion to 49 African governments, state-owned enterprises and seven regional institutions between 2000-2023. Hwang noted that the majority of Chinese loan commitments to Africa are from Chinese development finance institutions (DFIs), including the Export-Import Bank of China (CHEXIM) and the China Development Bank (CDB), which represents around 83 percent of the overall finance. Other Chinese financiers also include commercial banks and contractors, among others.

Next, Engel discussed recent shifts in Chinese lending to the continent. According to the CLA Database, Chinese lenders signed 13 new commitments to Africa in 2023, with a total value of $4.61 billion that is roughly twice the loan amount committed in 2021 and 2022 combined. Engel noted that the annual loan commitment amounts may not return to levels of the early BRI years, but more likely, China is looking for a new and more modest equilibrium that takes China’s domestic economic challenges, Africa’s precarious debt situation and China’s long-term strategic objectives into account.

Engel also provided a deeper look into the changes and continuity in China’s lending behavior in 2023. First, a sectoral breakdown reveals nearly half of the total committed loans was directed to the financial sector, with most loans for on-lending to small- and medium-sized enterprises (SMEs) and trade finance provided to African regional and national banks. This shift of Chinese lending focus, Engel argued, represents a risk mitigation strategy outsourcing the ‘picking of winners’ to intermediaries with more knowledge of African markets. The use of African intermediaries also allows Chinese lenders to have an impact in African multilaterals’ countries of operations without exposing themselves to risks associated with individual countries. Second, after a two-year hiatus in energy lending, Chinese lenders committed new loans to three new energy projects. The known energy types supported (solar and hydropower) and comparatively modest scope of these loans appear to be in line with China’s ‘small is beautiful’ approach to lending.

On continuity, Engel underscored that instead of shifting lending entirely to lower-risk Africa borrowers, China is doubling down on strategic relationships. Despite ongoing economic headwinds, Angola, Egypt and Nigeria received loans, highlighting China’s prioritization of reinvesting in existing relationships with strategic partners. While China appears determined to invest in existing relationships, the loan amounts being used to reinvest are comparatively modest compared to past commitments, except for Nigeria’s receipt of a $973 million loan for the Kano-Kaduna railway. He noted that China’s risk mitigation strategy and reinvestment in existing relationships may at times pull China in different directions.

Following the presentation, Morro demonstrated how to use the CLA Database, showing users how to explore the data by sector, year, country, project name and lender, as well as how to download the data.

Moving to the guided discussion moderated by Ray, Engel commented on the trajectory of Chinese loans to Africa going forward based on the trends in 2023. While loan commitments may be at a lower equilibrium than in the early BRI years, he remained optimistic that a more diversified engagement with Africa and adjustments to address Africa’s concerns can be expected in the future, contributing to a more sustainable and resilient China-Africa economic relationship.

Hwang also provided additional insights on the recent lending trends from her fieldwork in Zambia and Cameroon. She argued that the ability for African countries to absorb more loans differs largely from state to state, explaining that the data is a result of a variety of policy environments and selection criteria. For African governments, one of the challenges ahead would be filling the infrastructure gaps in energy and transportation, given their significance for public support. She noted that more emphasis on alternative financing and investment, such as public-private partnerships (PPPs), would not only create incentives for the private sector to take on a stake in projects, but also allow less reliance on loan financing. Ultimately, discussions on more cooperation with regional financial institutions such as the Trade and Development Bank or African Export-Import Bank, can be expected to help China reduce future financing risks.

The discussion concluded with each panelist offering their perspectives on the 2024 Summit of the Forum on China-Africa Cooperation (FOCAC) based on insights from the CLA Database. Morro started with discussing the push and pull factors influencing China’s lending decisions, including domestic economic concerns and African demands. Among the topics to watch for during the FOCAC Summit, Engel raised the question of how the financial mechanisms behind infrastructure deals would be designed going forward. With the new demand of green energy, especially EV batteries, Hwang stated she would expect more emphasis on green energy transition.

Lastly, during the Q&A session, the panelists fielded questions on China’s strategic relationships with three of its longtime borrowers, to what extent the loans are tied to the use of Chinese contractors and the implications of increasing financing support through African intermediary institutions for environmental and social risk management. In closing, Engel highlighted that while Chinese lenders’ ultimate objective is to leverage the expertise of African institutions, channeling financing through African intermediaries can potentially bring positive social and environmental advantages, as well as benefit local ownership.

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