China cut lending to Africa in 2019 as debt fears grew

China’s lending to African countries fell substantially before the pandemic hit, according to new research, suggesting lenders became concerned about the sustainability of rising debt levels on the continent.

Chinese lending to African public sector borrowers reached $28bn five years ago, but has dropped since then, falling to just $7bn in 2019 from $9.9bn the year before, according to the figures from the China-Africa Research Initiative (CARI) at Johns Hopkins University.

The data, the most comprehensive on China’s lending to Africa, reflect the same trend as separate global data published late last year by researchers at Boston University, which found that China had sharply curtailed overseas lending by its two largest policy banks across all regions.

The Chinese Loans to Africa Database showed that in 2019 Chinese lenders shifted lending away from African countries that had recently restructured or reprofiled their debt.

Banks cut lending to Angola, Cameroon, Djibouti, Ethiopia and the Republic of Congo. Top borrowers were Ghana, South Africa, Egypt, Ivory Coast and Nigeria.

CARI researchers said: “Countries where China reprofiled, restructured or refinanced existing debt between 2015 and 2019 . . . received far less Chinese finance in subsequent years.”

The IMF categorises more than 20 African countries as being at high risk of debt distress, or already in debt distress, a list that has grown because of the Covid-19 crisis.

This year, Zambia, which has borrowed heavily from China as well as from commercial lenders, became the first African country to default on its eurobond loans.

Last month Ethiopia, another big borrower from China, asked for debt relief under a G20 programme designed for countries whose economies are suffering because of the pandemic. “The Ethiopian government stopped borrowing” commercial loans, said a Chinese official in Addis Ababa, because “they have too many loans”.

Chinese banks make up about one-fifth of all lending to the continent, though Deborah Brautigam, director of CARI, said lending was concentrated in a few countries including Angola, Cameroon, Djibouti, Ethiopia, Kenya and Zambia.

Washington and some African commentators have accused Beijing of seeking to ensnare the continent in debt. John Bolton, former US national security adviser, has claimed China is using debt “to hold states in Africa captive to Beijing’s wishes and demands”.

But Brautigam said it was a “misunderstanding” to see Chinese lenders as plotting to seize assets such as ports, mines or television stations for military or strategic purposes, something for which she said there was scant evidence. Instead, China’s lending strategy aims to create new markets for Chinese companies, she said.

Chinese lending from about 30 banks and institutions was increasingly commercially driven, with banks seeking profits rather than engaging in a joined-up strategy directed from Beijing, she added: “So often people say ‘China’. And then we have to say, now which Chinese actor are you talking about here?”

Still, many commentators in Africa remain suspicious of Chinese motives, describing lenders as being in cahoots with African elites and padding project financing with bribe money.

“China’s current interest in Africa and Latin America is showing the worst form of colonialism because we are being colonised by our very own [people] through a partner from the ‘south’ under the smokescreen of friendship,” said Africa Kiiza, a trade analyst at the Southern and Eastern Africa Trade Information and Negotiations Institute in Kampala.

“We wanted to build highways, dams, ports, railways, refineries . . . But Chinese debt is like a drug and it becomes an addiction,” Kiiza said.

Brautigam said Chinese lenders and construction companies could improve their reputation if they participated in open tenders. “The Chinese would fare much better if they had a rule about competitive bidding processes,” she said.

Even so, according to Afrobarometer, a polling organisation, 59 per cent of people polled in 18 African countries in 2019-20 said they had a “somewhat positive” or “very positive” view of China’s economic impact, with 15 per cent expressing a negative view. Perception of US economic influence was almost identical.

The CARI database will from this week move to the Boston University Global Development Policy Center.