China binds other countries through loans. Many African states have accessed and received new highways, bridges or rail lines. But they also have a massive indebted.
China is a great power in Africa. It is the most important state creditor for more than half of all African countries. China awarded around $ 170 billion to African governments and regional institutions between 2000 and 2022, according to the Center for Global Development Policy at the University of Boston.
This financing is mainly used for large construction and transport projects that are not implemented by African, but by Chinese companies – with its own employees and their own materials, explains the economist Churchill Ogutu, analyst at the IC Group. Some of the classic Chinese projects in Africa are the expansion of the Airport Enebbe near the Ugandian capital Kampala and the railway line between the neighboring countries Tanzania and Sambia, important for freight traffic.
Motor for modernization
The Chinese infrastructure projects are an engine for the modernization of Africa, my supporter. In some cases, they would have achieved more than international development aid projects in a shorter time. Critics, on the other hand, warn: Chinese loans have driven many African countries into debt trap. And there is concern that China also has a political influence through its economic supremacy in Africa.
Angola is one of the debt leaders. The country in southern Africa is in chalk at around $ 20 billion in Chinese banks. Kenya also took out loans in billions of bills and thus overwhelmes itself massively in China, says the economist Aly Khan Satchu, CEO at the East African Financial Portal. There would also be loans from international donors such as the World Bank and the International Monetary Fund. All of this also has a big impact on the Kenyan economy, which is rather beaded, said Satchu.
China learns through losses in Africa
Many African countries not only have major problems to pay off the loans of Chinese banks; They already fail to repay the interest, which, according to the Kiel Institute for the World Economy, are about three times as high as the interest of other public creditors. China’s losses in Africa have steamed the allocation of new loans, explains economist Churchill Ogutu. China learned from this in Africa. The time of the wild lending is over.
According to observers, this also has to do with the fact that not all Chinese mega projects in Africa are successful. The railway line from Mombasa on the Kenyan coast to the capital Nairobi, for example, is a loss of loss. The planned continued construction to the neighboring country of Uganda was never implemented because China no longer wanted to finance it.
Again more new loans
In the Corona Pandemie Years from 2020, China had significantly reduced lending to African countries, analyzes from the Center for Global Development Policy at the University of Boston show. The Chinese economy was at the time in crisis mode. But the lender China has been back in Africa for some time. An example of this is the loan of the China Development Bank to Nigeria for a 200 km long railway line to connect the northern city of Kano to the central city of Kaduna.
However, at almost five billion US dollars, China only awards about half of the loan volume compared to the years before pandemic. This also has to do with the growing debt burden in Africa and the attempt to minimize your risk of his own risk. Ghana and Ethiopia, for example, have had lengthy debt rescheduling.
Enemable energies offer new market
China has postponed his project focus a little. It is now investing more in renewable energies in Africa, for example in solar energy. This is a large growth market – probably also because Chinese companies master the world market for solar modules and sell their products on the African continent.
China is both: lender and trading partner for Africa. It is a balancing act between development and dependency.
