Boston University's Global China Initiative suggests that China's loans to Africa have been decreasing over the past two years. The reasons behind this reduction in loans could be multifaceted.
A recent report by Boston University’s Global China Initiative revealed the plummeting figures of China’s loans to Africa. Much to the growing anxieties of the West, China has been involved in Africa’s infrastructural developments for decades and its presence has been viewed favorably by the African nations in dire need of such investments. While the West has primarily involved itself in giving money to African nations in the form of aid, China could be seen investing in its infrastructure from a position of partnership with these nations.
Taking a larger view of the Chinese loans to Africa in the past decades, the report revealed that the number waned considerably in the last two years. China and the African states have been involved in somewhat of a symbiotic relationship with China providing the much-needed financial push for development in Africa and the African states providing China with their political support in matters of geopolitical importance as well as providing a market base for Chinese products. This engagement deepened further with the launch of China’s Belt and Road Initiative (BRI) which provided further impetus for China to invest in the nations of Africa. China has wholeheartedly done so in the past decade, with its investments in the region reaching a record high point in 2016, amounting to $28.4 billion. While Africa has been a very important playing field for China to establish its influence and effectively counter the Western presence while also evoking the shared history against colonial struggle, there are still a number of factors that may influence China’s decision to reduce its loan spending on Africa.
In the year 2022, nine loans worth $994 million were sanctioned by China in Africa, the lowest since 2004. It could be said that the economic slowdown brought about by the COVID-19 pandemic since 2020 may have a lot to do with the reduction in loan amounts, this may just be a part of the whole picture. While the pandemic did cast a heavy blow to the global pandemic, China’s conscious reduction of loans to African nations is also predicated upon certain other factors. The changes in China’s global and regional priorities as well as the overall debt repayment issues in the nations in Africa, may have resulted in the significant reduction in new loans.
China’s loans to Africa have been primarily concentrated in Benin, Cote D’Ivoire and Angola, with CHEXIM being the top lender. The loans amounted to around $1.42 billion and 64 percent of the loans in 2021-2022. Speculations regarding the plummeting loans to Africa have also been around the changing approach to China’s Belt and Road Initiative (BRI).
China’s BRI sought to fund infrastructural and developmental projects all around the Global South, Africa has been at the forefront of China’s attention in this regard. It is important however to also note China’s shifting vision in terms of the Belt and Road Initiative, after ten years of the project coming into force. As China’s regional, strategic and economic priorities change, there is also a massive change in its approach towards the BRI. Its categorical emphasis on something called the “small but beautiful” approach indicates China’s insistence on investing smaller amounts in projects that are environmentally and ecologically sustainable. The changes in the loans accrued to the African borrowers could also be a result of this new approach by Chinese lenders, with an increasing focus on smaller loan amounts towards environmentally greener projects. In analysis, it can be noted that the reduction in the loan amounts does not necessarily mean that China is looking away from Africa or potentially leaving Africa behind in terms of economic support but it may indicate a changing shift in China’s policies towards its lending practices.
Much of China’s lending approach has been categorized by the West as a ‘debt trap’ strategy but there is greater nuance to this term when it comes to China’s approach in Africa. Even though China has been one of the primary lenders to Africa in the past decades, it is far behind the top lenders which primarily come from the West and international financial institutions. The loan agreements drawn up at the time of such a transaction are usually created to favor the lenders’ interests and the same has been the case with China’s loans in the region as well. However, whether the states in Africa are embroiled in the Chinese debt trap to the extent that they may lose access to the projects thus created, is still to be decided. What is very evident however is, that China is conscious of the debt repayment crisis that has been created through the policies of the BRI and loan spending, resulting in an economic crisis back home as well. Therefore, the reduction in the loans to all these lenders could just be the result of the multiplicity of factors that may have a lot to do with China and its changing economic ambitions.