The evolution of
China-Africa lending

While on the surface shifting Chinese lending patterns are a problem for the Continent, these factors should not be cause for immediate concern as the bottlenecks to investment are short-term shocks and Africa has also the ability to reattract waning capital inflows.

Chinese lenders are often risk-adverse, and Africa must instil a level of confidence through good governance and stability - and we’ve already seen that Africa is making long and fast strides to gain investor trust.

Across Africa, technology, AI and automation is driving a digital revolution that is not only enhancing efficiency and competition, but also transparency and governance, crucial elements to increasing investor confidence.  Africa is also focusing on strengthening its capital markets by ensuring high-quality, timely and trustworthy data which can help investors make sound decisions and can protect economies from volatility.

Further, the General Administration of Customs of China recently noted that bilateral trade between China and Africa amounted to $254.3 million in 2021, an increase of 35.3% from 2020.  In the first quarter of 2022, China’s Customs Data confirmed that trade between the two regions increased by 23% to $64.6 million.

As trade and lending picks back up for African countries in debt relief and restructuring discussions, China, similar to other lenders such as Eurobond holders, Western banks and DFIs, needs to focus on existing projects under construction, rather than on new greenfield projects.

Because of the ongoing relationship between China and Africa over the past decades, there are a huge number of incentives for China to continue its involvement on the continent.  While Chinese lending to Africa is still down from pre-pandemic levels, Beijing has reaffirmed its long-term commitment to Africa by taking on a more active role in African stability, notably hosting the Horn of Africa Peace Conference in Addis Ababa at the end of June, as well as recently forgiving 23 interest-free loans for 17 African countries.  In the grand scheme of things, Covid-19 is a short- to medium-term problem which is still being felt heavily in China. As borders continue to open up, the negative impact it has had over the past couple of years on African investment will likely subside and return to pre-pandemic levels.