China’s overseas lending and debt sustainability in Africa - Seen through the lens of the FOCAC (2023)

Criticism of China’s Belt and Road Initiative (BRI) is misleading and the country did not intentionally entrap BRI countries into debt distress.

China’s Belt and Road Initiative (BRI) has long been blamed for Africa’s debt sustainability. The accusation that the BRI, launched in 2013, is a deliberate ‘debt trap’ first emerged in 2017, and has been used to criticise China’s investment in Africa since.

However this criticism is misleading. China did not intentionally entrap BRI countries into debt distress, as the Sri Lanka case shows. It isn’t Chinese investment, but the model of the Chinese investment, that has contributed to debt distress in some African countries. Chinese lending accounted for only 12% of Africa’s total $696 billion external debts in 2020 and made up less than 15% of debt stock in more than half of the continent’s 22 low-income countries struggling with debt.

That said, Chinese lenders have accumulated a large portion of debt stock in Africa in the past decade. With a higher percentage of Chinese loans in their total external debt stock, debt distress has become a serious problem in countries such as Angola, Djibouti, Ethiopia, and Kenya. China’s state-driven overseas investment model, which is transplanted from its long-standing domestic practices, largely contributes to debt distress in these African countries.

Again, it’s the model, not the investment, that’s the problem.

Different from profit-oriented investment by the private sector, China’s state-backed overseas investment follows a top-down route driven by politics. It usually begins with high-level policy coordination through bilateral agreements or multilateral channels such as the Forum on China-Africa Cooperation (FOCAC). Following this will be a project contract signed by state-owned enterprises (SOEs), project approval by government agencies overseeing outbound investment, financial support by state-owned policy banks and commercial banks, and SOE implementation.

It’s not Chinese investment, but the model of the Chinese investment, that has contributed to debt distress in some African countries

Following government guidance, these investments usually go to huge infrastructure projects for transport, energy, real estate, etc. They come in different forms including loans and grants, foreign direct investment (FDI), contracted projects, equity funds and so on.

The state-led investment model can typically lead to problems and risks such as non-transparency and corruption, lower economic efficiency, lower degrees of localisation, and a lack of participation by the private sector and other international investors.

How do these problems that accompany the Chinese outbound investment model contribute to Africa’s debt problems? A mini case study of lending through FOCAC could shed some light.

Established in 2000, FOCAC is the primary uni-multilateral mechanism for major policy coordination between China and African countries. The institutionalised forum is held every three years and has become the main platform channelling Chinese loans to Africa since 2006. Total promised lending through FOCAC between 2006 and 2021 was US$191 billion, with about $155 billion of this implemented by 2021 (Chart 1). A comparison of this number with data on China’s FDI and contracted projects (Chart 2) illustrates the significance of the loans financed through FOCAC.

Following the same financing model as China’s state-driven FDI and contracted projects in Africa, lending through FOCAC puts political agendas first, and economic agendas, including loans and investment programmes, must accommodate this. Commitments will be delivered at a preceding FOCAC within the three-year interval. These show China’s consistency in keeping its promise to African countries.

The state-led investment model can typically lead to problems and risks such as non-transparency and corruption

The established mechanisms for implementing FOCAC’s commitments guarantee that the financing arrangements will be fulfilled in three years. China’s official records show that all the loans promised at each forum since 2006 have been implemented in that time (Chart 1).

This seemingly efficient financing arrangement comes at the expense of economic returns for China and recipient countries, and debt sustainability for recipient countries; these are not prioritised goals in China’s state-led lending model. In practice, it isn’t possible for most big investment plans to be implemented in three years. Loans driven by political will under FOCAC are approved and provided in a short time, and can lead to reckless investment and contribute to debt distress.

With the guaranteed government bailout triggered by soft budget constraints, China’s state-owned policy and commercial banks, notably the Export-Import Bank of China and China Development Bank, ensure that providing the loans in three years is the priority. Economic efficiency or avoiding causing debt distress in recipient countries are not priorities.

Africa’s debt distress could be intensified by the small size of its economies compared to China’s, and these rapidly built loan stocks in such short periods. For example, the massive amounts lent to Zambia for a single project (US$337.6 million) under the 2015 FOCAC commitments added hugely to the country’s external debt.

Non-transparency is a big problem associated with the state-backed lending model. Under this model there’s a lack of public scrutiny of loan agreements. This could see African governments who are already cash-strapped borrowing excessively and landing in more debt. Chinese lenders are in a dominant position in these loan agreements. The agreements usually contain complicated guaranteed debt repayment measures and other controls such as confidentiality and ‘no Paris Club’ clauses for debt restructure to secure the creditors’ interests.

In practice, it isn’t possible for most big investment plans to be implemented in three years China’s Belt and Road Initiative has long been blamed for Africa’s debt sustainability

Political achievements, economic interests and bureaucratic gains for China obtained through FOCAC financing explain further why the country sticks to the bilateral lending model. The concession loans, grants and interest-free loans and equity funds made available through FOCAC help strengthen political ties, boost rapport, and realise China’s foreign policy goals.

The BRI, comprising hundreds of bilateral agreements between China and recipient countries, is President Xi Jinping’s signature foreign policy. Only nine African countries signed up to join the BRI before FOCAC in 2018. Twenty-eight African countries and the African Union Commission signed the BRI agreements during the 2018 FOCAC, helping China to grow the initiative.

Political priority in lending via FOCAC doesn’t mean China cares less about its economic interest – it still benefits with this state-led investment model. Chinese loans usually require state guarantees for repayment from recipient countries. The Chinese concessional loans for infrastructure projects typically come with Chinese SOEs as the main contractors, and a requirement for purchasing equipment and materials from China. This helps reduce its risk of loan defaults and promotes the export of Chinese industrial capacity and equipment.

When African states face financial difficulty, China typically tries to restructure existing debts and postpones the problems with the aim of finding a future solution rather than granting total debt forgiveness.

Bureaucracies in charge of financing through FOCAC and the BRI also benefit. There are many stakeholders under the lending model who can all claim multiple credits from the same loans and projects under FOCAC and the BRI. These include the Export-Import Bank of China, China Development Bank, commercial banks, and SOEs and their supervisor agencies. Government agencies overseeing outbound investment such as the foreign affairs, commerce and finance ministries, the China International Development Cooperation Agency, and the National Development and Reform Commission also all benefit.

Loans driven by political will under FOCAC are approved and provided in a short time

China is Africa’s biggest bilateral creditor. It tends to solve debt problems bilaterally or provide debt relief via FOCAC. Facing strict regulations and responsibility for maintaining the balance sheet and appreciating the value of state assets, Chinese state financiers are eager to assure the loans and investments are repayable and profitable.

But bad loans and debt distress have cost China’s government economically and politically both at home and abroad, and have made Beijing realise that the bilateral approach isn’t enough. In 2017 the country turned to a multilateral approach to mitigate the negative impact that comes with the BRI’s bilateral financing.

Post-COVID-19, China has been under pressure to apply multilateral approaches to Africa’s debt distress. Although reluctantly, Beijing has participated in debt relief initiatives under the Debt Service Suspension Initiative and the G20’s Common Framework, significantly contributing to debt relief. However the amount of debt relief China has promised accounts only for 1% of its total lending to the continent from 2000-20.

China’s preferred state-backed bilateral lending has contributed to debt distress in certain African countries while providing needed loans for development on the continent. The lending model won’t change in a significant way in the foreseeable future. The more important issue is to improve domestic governance and keep a stable political environment for investors in the recipient African countries that can put them in a better position to grow their economies.

Furthermore, the United States and European Union’s counter-measures to China’s BRI, the Partnership for Global Infrastructure and Investment and the Global Gateway, have enabled African countries to more wisely use the investment from both China and the West to improve domestic governance for future development.

Chart 1: Financing through the FOCAC (2006-2021, US$)

FOCAC Ministerial Conference

Total promised loans

Amounts and forms of financing

Follow-ups and implementation



3rd Conference, 2006 (Beijing Summit)

$10 billion

Preferential loans

$3 billion

Implemented by September 2009, with 54 projects in 28 countries.

Preferential export buyers’ credit (PEBC)

$2 billion

Implemented by September 2009, with 11 projects in 10 countries.

Establishment of China-Africa Development Fund (CADF)

$5bn (Raising $1 bn in Phase I, $2bn in Phase II and $2bn in Phase III)

Invested more than $500 million for 27 projects by 2009.

4th Conference, 2009

$11 billion

Preferential loans and PEBC

$10 billion

Approved loans worth $11.3 billion for 92 projects by May 2012.


Raising $2 billion for Phase II

Investment increased to $716 million for 30 projects by November 2011.

Special loans to support small and medium-sized enterprises (SMEs)

$1 billion provided by the CDB

Promised loans worth $966 million for 38 projects by May 2012.

5th Conference,2012

$20 billion credit line

Preferential loans and commercial loans

A little more than $10 billion is preferential loans and the rest of it is commercial loans

An extra $10 billion credit line promised and $2 billion for final phase of CADF increased, making it $5 billion in May 2014 when Premier Li Keqiang visited Africa.

6th Conference, 2015 (Johannesburg Summit)

$60 billion

Preferential loans and PEBC

$35 billion

Foreign Minister Wang Yi declared at the 7th Ministerial Conference in September 2018 that all measures at the 6th Conference have been implemented.

Grants and interest-free loans

$5 billion


$5 billion added

Special loans for SMEs

$5 billion added

Initial loans for the China-Africa production capacity cooperation fund

$10 billion

7th Conference, 2018 (Beijing Summit)

$60 billion

Grants and interest-free loans, preferential loans

$15 billion

90% of promised $60 billion ($54 billion) has been implemented, except for the portion of preferential loans, according to Foreign Minister Wang Yi’s speech at the 8th Conference in October 2021.

credit line

$20 billion

Special fund for China-Africa development finance

$10 billion

Special fund for trade financing (export from Africa)

$5 billion

Promoting investment from Chinese enterprises

$10 billion

8th Conference, 2021

$30 billion

Credit line

$10 billion

Promoting investment from Chinese enterprises

$10 billion

Redirect its IMF Special Drawing Rights reserves

$10 billion


$191 billion

About $155 billion implemented by October 2021.

Chart 2: Chinese loans, FDI flows, gross revenues of contracted projects to African countries (2006-2021, US$ billion)

China’s overseas lending and debt sustainability in Africa - Seen through the lens of the FOCAC (1)

Sources: Loans (FOCAC): See Chart 1; Loans (SAIS-CARI):; FDI flows:; Contracted Project: National Bureau of Statistic of China:

Notes: There exist overlapping parts between loans and contracted projects or the FDI flows. Loans (SAIS-CARI) refer to data of the Chinese loans to African countries (2006-2019) cited from the Global Development Policy Center of Boston University and China Africa Research Initiative at Johns Hopkins University.

Image: © Oleg Elkov / Alamy Stock Photo

China’s overseas lending and debt sustainability in Africa - Seen through the lens of the FOCAC (2)

About Alex He

Xingqiang (Alex) He is a CIGI senior fellow. Alex is an expert on digital governance in China, the Group of Twenty (G20), China and global economic governance, domestic politics in China and their role in China’s foreign economic policy making, and Canada-China economic relations.


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Did China pay off Africa debt? ›

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How much African debt does China have? ›

China accounts for about 12% of Africa's external debt of around $700 billion, with Zambia and Ghana, both of whom have defaulted on their debt obligations, among its biggest creditors on the continent, according to London-based international affairs policy institute Chatham House.

How is China helping African countries? ›

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How is China benefiting Africa? ›

From 2000 to 2020, China helped African countries build more than 13,000 km of roads and railway and more than 80 large-scale power facilities, and funded over 130 medical facilities, 45 sports venues and over 170 schools.

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In 2020, the African countries with the largest Chinese debt were Angola ($25 billion), Ethiopia ($13.5 billion), Zambia ($7.4 billion), the Republic of the Congo ($7.3 billion), and Sudan ($6.4 billion).

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The countries with the biggest debt burdens in relative terms were Djibouti and Angola, followed by the Maldives and Laos, which opened a debt-laden railway line to China last year. The President of the World Bank, David Malpass, has called the level of debt “unsustainable” that many countries once again hold.

How much loan China gives to African countries? ›

Chinese lenders account for 12% of Africa's private and public external debt, which increased more than fivefold to $696 billion from 2000 to 2020.

Who owns most of Africa's debt? ›

China has become Africa's biggest bilateral lender, holding over $73 billion of Africa's debt in 2020 and almost $9 billion of private debt. Select a country to view and hover over the chart for more details.

How much do we actually owe China? ›

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How much do we really owe China? ›

US Treasurys Owned by China, in USD Billions

As of Jan. 2021, China owns $1.095 trillion of the total $28 trillion U.S. national debt.

What's causing Africa's debt crisis? ›

Low tax revenues, high-interest loans, and superpower squabbling over debt relief have made matters worse for African governments.

Which country has the most debt in Africa? ›

Country List Government Debt to GDP | Africa
Equatorial Guinea27.142.6
47 more rows

Which countries in Africa are indebted to China? ›

Biggest African debtors to China:
  • Angola - $42.6 billion.
  • Ethiopia - $13.7 billion.
  • Zambia - $9.8 billion.
  • Kenya - $9.2 billion.
Dec 18, 2022

Why is China investing so much time and money into Africa? ›

China imports massive quantities of vital natural resources from sub-Saharan Africa. These include oil, liquefied natural gas, timber, gold and copper, uranium, and precious base metals such as cobalt and lithium.

Why is China buying land in Africa? ›

China is the world's largest copper producer and consumer, and many other minerals, including oil and gas, are found in significant quantities in Africa. China's need for these materials has helped to spur significant levels of Chinese investment in African mining.

Who gives the most aid to Africa? ›

China is now the largest non-traditional contributor of aid to sub-Saharan African countries. In the 1960s Africa provided China with an opportunity to increase its political and diplomatic reach.

What is China's role in the economy in Africa? ›

China has far surpassed the U.S. as an economic player in Africa. China is Africa's largest two-way trading partner, hitting $254 billion in 2021, exceeding by a factor of four U.S.-Africa trade. China is the largest provider of foreign direct investment, supporting hundreds of thousands of African jobs.

What drives China's growing role in Africa? ›

Aside from intergovernmental loans, there are other debt-creating financial flows from China to Africa, mainly trade credits, some of which are medium- and long-term. 13 Trade credit may be provided by suppliers or financial institutions. Of these the Export-Import Bank of China (China Exim Bank) is the most active.

What is China's relationship to Africa? ›

African countries firmly support China in its endeavor for national unification. And most of them support China's "one China" policy. China and African countries have carried out many exchanges in the fields of parliament and political parties.

Who owes China the most? ›

At the end of 2021, of the 98 countries for whom data was available, Pakistan ($27.4 billion of external debt to China), Angola (22.0 billion), Ethiopia (7.4 billion), Kenya (7.4 billion) and Sri Lanka (7.2 billion) held the biggest debts to China.

Who does China trade with most in Africa? ›

Nigeria is now Africa's largest importer from China, while South Africa is the biggest exporter, followed by Angola and the Democratic Republic of the Congo.

Which country owes most debt? ›

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National Debt by Country / Countries with the Highest National Debt 2023.
Data Year2020
Debt (millions US$)$2.38 Mn
Debt (%GDP)89.18%
Debt Per Capita$1,724
49 more columns

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Who does the US owe the most money to? ›

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Chinese lending to Africa began in 1960, with a loan to Guinea to finance trade and economic projects, including a cigarette and match factory, followed by one in 1963 to Algeria to buy arms and medical equipment and to train soldiers for its anti-imperial fight against France.

How much does Nigeria owe China? ›

By September 2022, the bilateral debt profile rose with Nigeria owing China $4.09bn. It also owed France $526.48m, Japan $57.11m, Germany $153.06m, and India $27.17m.

Who paid Africa debt? ›

The International Parliamentary Conference "Russia - Africa in a multipolar world" has brought together 40 African nations in Moscow. Russian President Vladimir Putin said Monday that Russia has written off debts of African states worth more than 20 billion dollars.

Is China in a debt crisis? ›

China's debt is nearly 44% of its GDP and its local governments owe nearly $5.14 trillion. With the economic slowdown and collapse of land sales revenue, provinces and local governments in China are facing an embarrassing situation.

Does the US hold Chinese debt? ›

Overall, foreign countries each make up a relatively small proportion of U.S. debt-holders. Although China's holdings have represented just under 20 percent of foreign-owned U.S. debt in the past several years, this percentage only comprises between 5 and 7 percent of total U.S. debt.

Why is China selling U.S. debt? ›

China reduced its holdings of US Treasury debt for the sixth straight month in January, which analysts said was mainly due to the US Federal Reserve's rate hikes and China's long-term security-driven diversification of its foreign exchange reserves.

What would happen if the US defaulted on its debt to China? ›

In a default, interest rates on U.S. treasuries would skyrocket (because investors would demand a higher rate in exchange for taking the risk that they might not be paid back), and treasuries might no longer be usable as collateral (because their underlying value would not be clear).

Who owns United States debt? ›

There are two major categories for federal debt: debt held by the public and intragovernmental holdings. The debt held by the public has increased by 107% since 2013. Intragovernmental holdings increased by 39% since 2013.

How much of America does China owe? ›

Get ready for this statistic – China owns 981 billion dollars in U.S debt.

How much property does China own in the United States? ›

China owns roughly 384,000 acres of U.S. agricultural land, according to a 2021 report from the Department of Agriculture.

Which African countries are at high risk of debt distress? ›

At the end of 2021, the International Monetary Fund (IMF) and World Bank considered 16 low-income African countries to be at high risk of debt distress, the analysis noted. Chad, the Republic of the Congo, Mozambique, Sao Tome and Príncipe, Somalia, Sudan and Zimbabwe were already in debt distress, it added.

Which African countries are at risk of default? ›

In 2021, six countries — Chad, Eritrea, Mozambique, Republic of the Congo, South Sudan and Zimbabwe — were seen as debt distressed as African governments issued a record $7.5 billion in sovereign bond, 10 times more than in 2016. The IMF changed the ratings for Zambia and Ethiopia from moderate to high risk.

What is the major crisis in Africa? ›

The current African crisis, characterised by economic recession, political decline and social tension, poses fundamental problems not only for indigenous regimes and developmental theories but also for extra-continental actors, particularly Western countries and corporations, plus international organisations.

Is there a country that is debt free? ›

There is only one “debt-free” country as per the IMF database.
Which Countries Have The Lowest National Debt?
RankCountryDebt-to-GDP Ratio
1Macao SAR0%
2Hong Kong SAR0.3%
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6 more rows

What is the biggest country debt in the world? ›

Japan's public debt

While the United States has the largest national debt in fiscal terms, Japan has the largest relative debt of any developed economy when compared to its GDP. In 2021, the nation's soaring debt is roughly 12.5 trillion U.S. dollars, while it's GDP is just 5.1 trillion.

Which country lends the most money? ›

Country/RegionExternal debt US dollarsDate
United States31 trillionJanuary 2023
United Kingdom8.73 trillionJune 2022
France7.04 trillionJune 2022
Germany6.46 trillionJune 2022
91 more rows

Is China responsible for the debt crisis in Africa? ›

China has been blamed by Western leaders for the failure to make progress on debt restructuring, but the data shows this is not the case it says. The organisation says that 12% of African governments' external debt is owed to Chinese lenders compared with 35% owed to Western private lenders.

Why is China investing in Africa good? ›

With China's investment, opportunities to utilize this rich resource base are becoming greater. For example, Africa now supplies more than one-third of China's oil and 20% of its cotton. On top of this, Africa is home to half of the world's manganese, which is beneficial for making steel.

What are three reasons why China is investing in Africa? ›

China imports massive quantities of vital natural resources from sub-Saharan Africa. These include oil, liquefied natural gas, timber, gold and copper, uranium, and precious base metals such as cobalt and lithium.

Is China the biggest investor in Africa? ›

China is now the African continent's largest trading partner, accounting for $282bn in commerce in 2022. It is also the main country of origin for African manufacturing imports, providing 16% of Africa's total in 2018. China has created 25 economic and trade cooperation zones in 16 African countries.

What is the link between Africa China investment and growth? ›

The link between China's FDI and African economic growth reported a negative/declining effect in both short and long run. In the long run, the effect of world FDI on growth was significant but not the in the short run.

How many African countries support China? ›

As of 2023, Eswatini and the self-declared Republic of Somaliland are the only two African states to have official relations with Taiwan, although Eswatini is the only African UN member that officially recognizes the Republic of China rather than the People's Republic.

How does the US owe China so much money? ›

U.S. debt to China comes in the form of U.S. Treasuries, largely due to their safety and stability. Although there are worries about China selling off U.S. debt, which would hamper economic growth, doing so in large amounts poses risks for China as well, making it unlikely to happen.


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