International Monetary Fund has said that five countries, Angola, Kenya, Zambia, Cameroon, and Nigeria mostly resource intensive, account for 55 percent of official bilateral debt to China. According to the IMF, “there is a correlation between the prevalence of bilateral trade and lending disbursements between China and the region’s countries, after controlling for GDP. But it is noteworthy that the debt owed to China has not been the principal contributor to the region’s public debt surge in the past 15 years. About half the region’s public debt is now domestic commercial borrowing with higher interest rates and shorter maturity. China’s FDI to sub-Saharan Africa has also increased significantly since 2006. The rise of China’s FDI flows was impressive, reaching about 23 per cent of annual FDI inflows or about $3 billion to the region in 2021.
“However, when compared with the size of investments from other parts of the world, the stock of Chinese investments as a share of the region’s total FDI is still relatively small, given its more recent accumulation—at about 4.4 percent in 2021 (Figure 3).4 Nonetheless, some resource-rich countries have seen relatively large inflows of Chinese FDI directed primarily toward construction and mining. Mounting evidence points to broadly positive effects of Chinese investments on the recipient country’s economic outcomes (Mandon and Woldemichael, 2022). …but recently, China’s economic engagements have cooled down… Following years of expansion, sub-Saharan Africa has seen a retrenchment of Chinese investment and lending since 2017. At the 2021 China-Africa Cooperation Forum, China announced its first cutback in financial support to Africa, from $60 billion to $40 billion over three years.
“Half of this reduction was due to a shift away from direct infrastructure financing toward more trade credit, possibly because of China’s political priorities and many African countries’ increased debt vulnerabilities. Chinese official total loan disbursements to sub- Saharan Africa have fallen precipitously, now representing about one-eighth of their peak value of 1.2 per cent of the region’s GDP in 2016. Similarly, total loan commitments (promised lending arrangements), which rose from 0.2 percent of the region’s GDP in 2005 to a peak of 1.7 percent in 2016, have also contracted dramatically to about 4 percent of their peak value. The decline is also evident in Chinese companies’ African construction gross revenues, which fell 30 percent from the peak of $53 billion in 2015, based on China-Africa Research Initiative data. Additionally, at the third Data on FDI are sourced from the United Nations Conference on Trade and Development.
“In contrast to the long-standing “go out” policy, the Chinese government announced plans to reduce overseas capital outflows in 2021. China-Africa Economic and Trade Expo in June 2023, about $10 billion of projects were signed (Africanews, 2023)—a 50 percent drop compared with 2019’s event, despite high-profile attendance.6 Chinese lending to sub-Saharan Africa has drawn considerable attention and criticism for imposing relatively harsh terms on debtors and using natural resources as collateral (Bräutigam, Huang, and Acker, 2020). Other concerns include the lack of standardization and transparency in public debt because Chinese lenders do not systematically document loans to individual overseas borrowers, leading to significant data gaps. In this context, China provides some official loans on concessional terms, accounting for less than 10 percent of total bilateral loans received by sub-Saharan Africa from China at the end of 2020, based on the World Bank’s International Debt Statistics data. The share of the region’s total external debt-service cost attributable to China’s official bilateral loans is 12 percent as of 2019, based on International Debt Statistics data.
“Moreover, sub-Saharan African countries that are either in debt distress or at high risk of debt distress account for about 40 percent of the total public debt stock to China at the end of 2020. China has been a key player in recent debt restructuring and negotiations (unlike in negotiations leading to the Heavily Indebted Poor Countries Initiative, during which Chinese lending to low-income countries was minimal). It also contributed to the Debt Service Suspension Initiative, providing 63 per cent of suspensions in 2020 and 2021, though owning just 30 per cent of the claims (Bräutigam and others, 2023). But so far, however, debt restructuring for some countries (including under the Group of Twenty Common Framework) has been slow and challenging because of several factors, such as many different debt instruments and a more diverse creditor base (including China), which requires adaptation and coordination. The recent preliminary agreement between Zambia and its official creditors (notably including China) to restructure its external debt is a promising sign for future resolutions in other countries”.
