China’s lending to Africa will fall to $2.1 billion (Shs270.9 billion) in 2024, the steepest decline since the coronavirus pandemic and signaling a major shift in Beijing’s trade approach.
Chinese government lending is now increasingly directed toward smaller, commercially viable ventures and away from the large infrastructure projects that once dominated, according to a new policy brief from the Boston University Center for Global Development Policy that tracks China’s lending to Africa from 2000 to 2024.
“Between 2000 and 2024, 42 Chinese financiers entered into 1,319 loan agreements totaling $180.87 billion (Sh23.3 trillion) with 49 African governments and seven regional institutions,” the brief said.
“As the era of multibillion-dollar projects comes to an end, China’s evolving financial products could mark a new phase of more selective engagement.”
The decline in loans comes after post-C0VID-19 loan defaults in Zambia, Ghana and Ethiopia exposed risks in the Chinese government’s large-scale infrastructure projects. In response, the Chinese government moved away from traditional development finance and turned to renminbi-denominated loans, support for small and medium-sized enterprises (SMEs), and foreign direct investment.
“China is increasingly adopting renminbi-denominated loans, lending to small and medium-sized enterprises (SMEs) through domestic banks in African countries, and foreign direct investment,” the report added.
Countries are already adapting to this change. Kenya converted $3.5 billion (451.5 billion shillings) in loans from China into renminbi, and all infrastructure loans from China last year were denominated in renminbi.
“In Kenya, all infrastructure financing in 2024 was denominated in renminbi, in contrast to the US dollar-denominated borrowing that dominated in the 2010s,” the report said.
Ethiopia is reportedly considering a similar deal, and the Southern African Development Bank signed its first renminbi-based loan deal with China in 2023.
The scale of projects is also shrinking. In 2024, China funded just six projects across Africa, but Angola was the biggest beneficiary, receiving $1.4 billion for road and power infrastructure.
Other projects include Kenya ($277.8 million), Egypt ($76.5 million), Democratic Republic of Congo ($240 million) and Senegal ($85 million).
“Lending remained concentrated in sectors where attracting private investment is a challenge, such as transportation, energy transmission, water and sanitation, and financial services. Fossil fuel projects, energy generation, and information and communication technology (ICT) will cease accepting additional financing in 2024, with ICT now primarily market-driven,” the center said.
“Taken together, the data points to a pattern characterized by more conservative direct lending combined with market-based financing tools that lower costs, reduce debt risk, and support sustainable growth goals,” the Boston University Center said.
