Africa to take heat from China’s ‘slowed’ lending

Chinese President Xi Jinping

Chinese President Xi Jinping. 

Photo credit: File | AFP

China’s decision to review lending policies in Africa and other developing countries maybe informed by regular criticism of debt burdens. But any reduced funding may slow the pace of rebuilding the much-needed infrastructure on the continent, hurting its economic rise.

The Chinese have lent Africa about $70 billion worth of loans so far, making China the biggest bilateral lender to the continent, even though it lags behind private lenders.

Lately, however, officials in Beijing have been talking of being smarter, more pragmatic and lend only based on local requests.

On Friday, Zhao Lijian, the Spokesperson of China’s Foreign Ministry told a press conference Beijing will prefer structured dealings on the continent.

“Going forward, we will continue to engage in practical cooperation with Africa across the board on the principles of sincerity, real results, affinity and good faith and with the commitment to the greater good and shared interests,” he said.

He added that that will be focused on “enhancing the Chinese and African people’s well-being and injecting new impetus into building a China-Africa community with a shared future in the new era.”

He spoke days after Tanzania launched the Wami Bridge in Bagamoyo, a Chinese built project that cost about $30 million to erect.

That bridge added to thousands of projects built with Chinese funding across the continent.

According to the Chinese Ministry of Commerce, China has helped build over 10,000 kilometres of railway, “close to 100,000 kilometers of roads, nearly 1,000 bridges, almost 100 ports and many hospitals and schools,” since 2000 when it launched the Forum on China-Africa Cooperation (FOCAC).

“Underdeveloped infrastructure has long been a bottleneck hindering African countries’ development,” Zhao said.

In FOCAC era, China’s direct investment to Africa grew from $490 million in 2003 to $43.4 billion in 2020, making Beijing the fourth largest investor on the continent. Its trade volume with Africa reached $260 billion in 2021.

But China has also faced complaints of debt trapping African countries, especially as its loaning structures are often a matter of secrecy.

In August, Beijing announced a waiver of loans owed by 17 least developed African countries, who had borrowed 23 interest-free loans.

Yet at the last FOCAC meeting last year, the Chinese government reduced investment pledges from $60 billion to $40 billion, after a ministerial meeting in Senegal.

China’s rolling back on loans would thaw growth in Africa and cannot be allowed by most investors, according to assessments by economists at the Renaissance Capital Limited.

An analysis by development data portal Devdiscourse shows that the reduced funding could be bad for Africa especially as the economic growth in Sub-Saharan Africa is set to decline to 3.3 per cent in 2022, down from 4.1 percent.

That slowdown has shown in rising inflation exacerbated by the war in Ukraine, ongoing drought in the Horn of Africa, a tightening in global financial conditions, and the rising risk of debt distress, according to a World Bank bulletin.

Some countries such as Angola, Ethiopia, Zambia, Kenya, Egypt, Nigeria, Cameroon, South Africa, Congo DRC, and Ghana have struggled to repay their loans.

But faced with the dilemma of debt trap, China’s reduced lending may now hurt its own ambition of the Belt and Road Initiative (BRI).

In Africa, some 43 countries have signed on the BRI, signaling readiness to use Chinese funding for ports, railways and roads. They include South Africa, Kenya, Tanzania, Djibouti and Eritrea.

The BRI is important to secure supply and promote exports for Beijing, especially as China buys 50 percent of the world’s raw materials.

The latest indications in the shift in lending emerged last month after President Xi Jinping was appointed for the third term, moving closer to the status Mao Zedong, the founder of modern China.

The twist in policy, explained Chinese Ambassador to Kenya Zhou Pingjiang, is meant to correct the trade imbalance with the continent, promote trade facilitation and encourage more investors into Africa while ensuring Chinese-funded projects are what Africa actually needs.


You're all set to enjoy unlimited Prime content.