When Chinese President Xi Jinping welcomes African leaders to Beijing this week, he does so with a smaller checkbook and a clearer sense of what China expects in return: bigger profits and fewer complications.
Thank you for reading this post, don't forget to subscribe!For over a decade, China has invested more than $120 billion in government-backed loans through its Belt and Road Initiative (BRI) across Africa, funding hydropower plants, roads, and railways. This investment has significantly enhanced China’s influence on the continent, securing access to critical energy and mineral resources while also providing an outlet for China’s industrial capacity. From Angola to Djibouti, these infrastructure projects have become symbols of China’s deepening ties with Africa.
However, this relationship has not been without controversy. Accusations of debt traps, exploitation, and corruption have tainted China’s image in Africa, especially as several African countries, including Zambia, have defaulted on their loans, leading to complex and drawn-out debt restructurings. The unfinished $3.8 billion railway in Kenya, which ends in an empty field, is often cited as an example of the BRI’s unfulfilled promises.
Despite these challenges, the ninth Forum on China-Africa Cooperation (FOCAC) in Beijing will once again see a parade of African leaders, including Nigeria’s President Bola Ahmed Tinubu, Rwanda’s President Paul Kagame, and South Africa’s President Cyril Ramaphosa, underscoring China’s continued role as Africa’s dominant economic partner. This is the first such summit in Beijing since 2018 and the largest diplomatic event Xi is hosting this year.
Heading into this summit, there is a mutual expectation that the strong ties forged by China’s previous investments will continue. However, with China now facing its own economic slowdown, Xi is shifting focus to more opaque, public-private partnerships (PPPs) that promise better financial returns while minimizing China’s direct exposure to potential failures.
“The era of big loans is over,” said Joshua Eisenman, a China-Africa relations expert at the University of Notre Dame. “Future projects will be smaller in scale but more profitable.”
China’s traditional lending to Africa, which peaked at $28.8 billion in 2016, has since declined, dropping significantly during the pandemic before rebounding slightly to $4.6 billion last year. As a result, Beijing is increasingly leaning on commercial banks and profit-driven projects. Notable examples include a $20 billion iron ore mine and railway project in Guinea, a $5 billion oil pipeline in Uganda and Tanzania, and a $400 million cash-for-oil loan in Niger, where the military regime claims it needs the funds to “run the country.”
In a significant development for Nigeria, China’s new strategy could influence the fate of projects like the $823 million light rail project in Abuja, which has been plagued by delays and now costs the country $50 million annually in loan repayments. The PPP model could offer a way to revive such projects, but it also risks adding to the country’s already heavy debt burden, with the Nigerian government needing to carefully manage these agreements to avoid falling into deeper financial distress.
Meanwhile, African nations continue to face mounting debt. Zambia, for example, defaulted on its loans in 2020, leading to protracted negotiations to restructure approximately $3 billion in debt. Nigeria, which owes billions in Chinese loans, must carefully navigate this new landscape, balancing the need for infrastructure development with the risk of further debt.
Critics argue that China’s shift towards PPPs is essentially a form of “creative accounting” that allows African governments to continue borrowing without it appearing as sovereign debt on official records. This could potentially saddle future African governments with billions of dollars in opaque debt.
Still, some experts, like Hannah Ryder of Development Reimagined, argue that this willingness to explore more creative financing solutions is beneficial, as it allows countries to continue building critical infrastructure. However, there are inherent risks. PPPs, if not properly managed, can pose significant fiscal challenges for governments, as they often include clauses that protect the interests of creditors over those of the project’s success.
American officials have expressed concerns about the opacity of these new Chinese arrangements, suggesting that Chinese policy banks may have overextended themselves. However, Beijing refutes these claims, stating that its financing cooperation with Africa has always adhered to international standards and local regulations.
As other nations, including the UAE, Saudi Arabia, and Qatar, step in to fill the void left by China’s reduced spending, and as the U.S. attempts to increase its own investments in Africa, Beijing remains the go-to partner for large-scale projects. Despite the risks, African leaders, including those in Nigeria, continue to see China as a crucial partner in their countries’ development, often preferring Chinese investments over no investment at all.
As China and Africa enter this new phase of their relationship, the challenge for African governments, including Nigeria, will be to ensure that these new partnerships yield tangible benefits for their economies without exacerbating their debt problems. The outcomes of the FOCAC summit in Beijing will likely shape the future of China-Africa relations for years to come.
