Chinese lending to African governments dropped by nearly a third in 2019 — and probably continued to fall last year — as a rising threat of defaults stemmed a deluge of credit from the country in the past decade.
A study by Johns Hopkins University’s China-Africa Research Initiative showed that Chinese financing to Africa fell below US$9B for the first time in nearly a decade in 2019, with Beijing refraining or reducing the size of loans to major borrowers such as Angola and Ethiopia.
The decline indicates China turned more cautious about lending to Africa even before the coronavirus pandemic upended economies across the world, having committed US$153B in loans since 2000. Much of that came after the boom of commodity prices in 2010.
“Rather than continuing to blindly dump finance into countries with debt issues, Chinese financiers have shifted away from these countries — albeit belatedly in some cases, such as Zambia,” wrote Kevin Acker and Deborah Brautigam, the authors of the study.
Zambia become the first African country to default since the onset of the outbreak in 2020, raising fears other heavily indebted countries could follow suit.
China’s more cautious approach started shortly after lending hit its peak in 2013, after which global commodity prices plunged.
The number of Chinese lenders to Africa rose to more than 30 in 2019 from just three at the turn of the century, with commercial loans growing faster than official credit in recent years. But they are now focusing on bigger economies on the continent such as Egypt and South Africa, avoiding risky countries.
Even so, “Chinese finance will continue to be an important source of infrastructure finance for African countries,” the study concludes.