China turns cautious on lending to Africa amid default crisis fears

Economic pressures from the pandemic will force China to further curb lending on belt and road projects, analyst says

Beijing will be more prudent but some loans to less-distressed countries will go ahead, observers say

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China is expected to be more cautious in its lending to Africa. Photo: AFP

Published: 6:00am, 29 Nov 2020Updated: 6:00am, 29 Nov 2020

In the past two decades, China has poured billions of dollars into the construction of ports, railways, highways and hydropower dams in Africa.

But the continent is staring at a loan drought in the medium term as China and other lenders fear debt defaults in the fallout from the coronavirus pandemic, analysts say.

Yun Sun, director of the China programme at the Stimson Centre in Washington, said China’s lending to Africa in general was expected to ease as the country grappled with its own economic slowdown and tightened up on wasteful lending.

“The general direction after Covid-19 should point to more financial discipline and caution coming to foreign lending, and more stringent procedures for the loan approval,” Yun said.

“I think there is that consensus even in China that the debt crisis this year has done China more harm than good. So, I think the hope is that the lending will slow down in the mid-term.”

Africa had become a centrepiece of China’s foreign policy, with Beijing pouring US$148 billion into the continent between 2000 and 2018, according to the China Africa Research Initiative at the Johns Hopkins University school of advanced international studies.

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