China-Africa Lending to Snap Seven-Year Decline, StanChart Says

Antony Sguazzin
·2 min read
1

(Bloomberg) -- China’s lending to Africa may rise for the first time since 2016 as pledges to finance projects ranging from renewable energy to natural gas increase, Standard Chartered Plc said.

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While the appetite of the government of the world’s second-biggest economy and its companies to extend credit to Africa is likely to remain well below its 2016 peak — when it lent close to $30 billion — a reverse of the near collapse in the flow of loans is likely to begin with new countries targeted, the bank said.

“China is likely to favor investing in markets that have not borrowed much from it in the past,” Sarah Baynton-Glen, Africa economist at Standard Chartered, wrote in a Jan. 8 report. “While new lending is likely to remain smaller in scale, and credit considerations will be key, pledges for project financing from China have started to rise.”

An increase in Chinese lending, while likely to be well below levels of a decade ago, would be a boost to a continent that’s largely been locked out of international capital markets by a surge in global interest rates and Zambia, Ghana and Ethiopia defaulting on their foreign debt.

Still, with Chinese lending likely to remain well below historic levels, African countries are expected to increasingly turn to lenders from countries such as the United Arab Emirates, Turkey, India and Japan.

Chinese lending may focus on francophone countries in West Africa, Tanzania, Uganda, Nigeria and Egypt and will likely be mainly private sector investment, Baynton-Glen said.

Money has already been committed to projects in Kenya, Uganda, Botswana, Benin and Namibia, she said.

Currently, Angola and Ethiopia are the African countries most indebted to China.

Baynton-Glen also estimated that bilateral trade between Africa and China reached a fresh record of about $300 billion in 2023, with almost all of the continent’s exports coming in the form of ore and metals.

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