Standard Chartered Plc said that China’s loans to Africa could increase for the first time since 2016, as it promises to fund more projects in renewable energy and natural gas.
The bank said China and the firms of the world’s second-largest economy are likely to keep their credit to Africa well below the 2016 level – when they lent almost $30 billion – but they may start to reverse the sharp decline in lending by targeting new countries.
“China is likely to prefer investing in markets that have not taken much loans from it before,” Sarah Baynton-Glen, Africa economist at Standard Chartered, wrote in a report on Jan. 8.
“While new loans are likely to be smaller in size, and credit factors will be important, pledges for project financing from China have begun to increase.”
A rise in China’s loans, while likely to be much lower than 10 years ago, would help a continent that has mostly been shut out of global capital markets by a spike in global interest rates and defaults by Zambia, Ghana and Ethiopia on their foreign debt.
However, as China’s loans are likely to stay well below historical levels, African countries are expected to look for more lenders from countries such as the United Arab Emirates, Turkey, India and Japan.
China’s loans may concentrate on French-speaking countries in West Africa, Tanzania, Uganda, Nigeria and Egypt and will likely be mostly private sector investment, Baynton-Glen said.
She said that money has already been allocated to projects in Kenya, Uganda, Botswana, Benin and Namibia.At present, Angola and Ethiopia are the African countries that owe the most to China.
Baynton-Glen also estimated that trade between Africa and China hit a new high of about $300 billion in 2023, with almost all of the continent’s exports being ore and metals.
