Over the past two decades, Chinese financing in Africa has boomed and waned, and undergone cycles of change. Initially dominated by lending from state-owned policy banks for large infrastructure and energy projects, notably in coal and hydropower, the landscape began to significantly transform in the early 2010s. This transformation accelerated around 2015, when Chinese policy narratives signalled a wider strategic steering towards more diversified – and sustainable – investment approaches.
This shift has encompassed not only a diversification of financial sources, with an increasing role for state-owned commercial banks and Chinese contractors, particularly Chinese state-owned enterprises, but also a transition towards more commercially oriented financing models, such as public-private partnerships.
Chinese financiers are pivotal players in Africa’s energy sector, with the two major policy banks, the China Development Bank (CDB) and the Export-Import Bank of China (Exim Bank), alone having provided USD 54.7 billion of energy finance on the continent. Therefore, understanding their evolving financing approaches is crucial for assessing their impact on the continent’s energy transitions and broader energy-access objectives. Here, we explore the various Chinese financiers operating in Africa and examine the implications of their strategies for Africa’s energy future.
Financial trends and policy steering
Since 2000, Chinese lending to Africa has surpassed USD 180 billion. Annual commitments peaked in the mid-2010s. However, a closer examination reveals a notable shift.
In a recent working paper for the Overseas Development Institute, my co-author Yunnan Chen and I demonstrated how commercial creditors are increasingly claiming a larger share of China’s lending portfolio. According to figures from AidData’s latest Global Chinese Development Finance Dataset, state-owned commercial banks and enterprises have emerged as significant players. They contributed approximately USD 75 billion in loans from 2000 to 2021 – rising dramatically from 2011, when this figure stood at just USD 1 billion.
By 2018, when Chinese financing to Africa reached USD 34 billion, commercial banks and suppliers (such as the Industrial and Commercial Bank of China and the state-owned enterprise Sinohydro) were accounting for about one-third of the total.
Until 2021, through years when the Covid-19 pandemic disrupted project pipelines, this trend towards a growing share continued. In 2019 and 2020, commercial banks’ commitments in Africa not only matched but occasionally surpassed those from traditional policy banks.
Conversely, policy banks have seen their financing flows decreasing, grappling with economic and regulatory headwinds post-2017, such as a drop in China’s foreign reserves, and internal reforms. This included increasing guidelines, regulations and mandates on financial, environmental and social sustainability in relation to Chinese overseas investments. This downturn coincided with a sharp reduction in the offerings of risk insurance for overseas financiers, and a wave of restructurings involving debt-burdened borrowers such as Ethiopia, Ghana and Zambia.
These shifts in Africa mirror a global trend: policy finance institutions are experiencing diminished appetites for risk, and reduced lending volumes. China is recalibrating its financial strategies abroad towards greater involvement from commercial actors and innovative infrastructure financing models. Since 2015, the narrative has decidedly shifted towards embracing diversified commercial models. Africa must now navigate this more commercially driven – and precarious – financing environment.
A keyword analysis of China’s Africa policy documents, carried out as part of my recent working paper, reflects this. From 2000 to 2015, the emphasis was predominantly on grants, aid and concessional loans as the main financing channels for infrastructure financing. Between 2000 and 2014, China-Africa policy frameworks leaned heavily on policy-based finance, leveraging grants, interest-free loans, concessional loans and preferential credits for project finance. We found terms related to “policy-based finance” consistently outnumbered those associated with “commercial-oriented finance” in policy documents.
From 2015 onwards, while policy-based finance continues to hold significance, there has been a noticeable surge in the incorporation of commercial financial tools, in both language and practice. We noted references to commercial-oriented instruments – such as commercial creditors, equity investors and export-credit insurance providers – have risen sharply, surpassing mentions of policy-based finance.
This shift signals and reflects China’s move towards more market-driven financing approaches in Africa’s infrastructure sector, fostering a more diversified and sustainable investment environment.
The variety of Chinese financiers
Chinese creditors in Africa deploy a range of financial instruments to underpin infrastructure projects, provided by both policy and commercial banks. Exim Bank (the pioneer and most entrenched Chinese financier in Africa, having issued USD 104.8 billion in loans to the continent) offers the most extensive suite of financing options, including concessional loans, preferential buyer’s credits and export buyer’s credits.
Specifically, while less than 5% of Exim Bank’s overall portfolio is channelled through concessional loans and preferential buyer’s credits, a substantial 38% of Exim Bank’s Africa portfolio is primarily directed through these channels, featuring below-market interest rates as low as 1-2%. The concessional loans are subsidised by the Chinese Ministry of Finance; the bank itself subsidises preferential buyer’s credits.
By contrast, the CDB is also mandated as a policy bank, but operates without subsidies and focuses on non-concessional lending. It typically engages in master facility agreements. These entail an initial financial package (often for relatively large amounts), which is negotiated with the borrower. Individual projects are then financed under the agreement over several years.
Commercial creditors, on the other hand, primarily offer standard market instruments, with less variety compared to their policy bank counterparts. State-owned commercial banks such as the Bank of China, the Industrial and Commercial Bank of China (ICBC), and China Construction Bank mainly provide commercial loans alongside export buyer’s credits. The Bank of China has maintained a presence in Africa since 1997, China Construction Bank since 2000 and ICBC since 2008 (following its substantial, USD 5 billion investment in South Africa’s Standard Bank that year).
Chinese state-owned enterprises, including Sinohydro and ZTE, and private companies, such as Huawei, typically extend supplier’s credits for their services. This is especially the case for large-scale infrastructure projects in transport, electricity and power sectors. Additionally, Exim Bank’s “seller’s credits” (monies extended to suppliers themselves) form part of these supplier’s credit offerings.
Our analysis demonstrates that Chinese commercial creditors in Africa levy higher interest rates, offer shorter loan maturities and impose more restrictive grace periods than their state-owned policy bank counterparts. Typically, commercial banks charge a median interest rate of around 3%, compared to approximately 2% from policy banks. Moreover, the interest rates from commercial banks exhibit greater variability, spanning from 2% to 7%, whereas policy banks maintain a narrower range of 1% to 5%. Additionally, commercial banks generally impose shorter loan terms, with a median maturity of 10 years, starkly contrasting with the roughly 15-year median provided by state-owned policy banks.
This means credits from commercial creditors are more expensive, potentially imposing a greater debt burden compared to policy-bank funding for the same amount of resources. However, our report suggests commercial credits may be easier to access. This is because policy-bank funding typically supports medium- to long-term projects, which begets a more extensive finance scrutiny process.
Different focuses, different impacts
The energy sector has been a focal point for Chinese policy banks’ financing in Africa. However, each bank’s focuses have resulted in differing lending – and differing impacts. A recent analysis I published in the Development and Change journal reveals a stark contrast in emission outputs between power generation projects funded by Exim Bank, and those financed by the CDB.
According to the China’s Global Power Database (managed by the Boston University Global Development Policy Center), Exim Bank and CDB jointly financed African power-generation projects with a cumulative capacity of nearly 21 gigawatts between 2000 and 2023. These projects account for roughly 8% of Africa’s total power generation capacity, which reached approximately 240 gigawatts in 2024.
However, this database reveals the environmental impact of these projects varies significantly: CDB-financed power generation projects are estimated to emit just under 60 million tonnes of carbon dioxide annually, compared to 7.5 million tonnes from Exim Bank-funded projects. The former are reportedly linked entirely to the Kusile and Medupi coal-fired power plants in South Africa, which have been supported by loans to the continent’s largest electricity producer, Eskom, owned by South Africa. In 2021, China pledged to end support for overseas coal power plants, though progress towards this has slowed.
The divergent outcomes between Exim Bank and CDB can be attributed to differences in their financial instruments and decision-making processes. Exim Bank’s concessional lending operates within a highly institutionalised policy-making framework. It involves key agencies, such as China International Development Cooperation Agency and the Ministry of Commerce, which aims to align the strategic and developmental objectives of both African and Chinese bureaucratic actors from the outset. This alignment places less emphasis on commercial viability in favour of long-term developmental goals.
By contrast, CDB predominantly employs commercial lending practices, with a less institutionalised decision-making process, and less involvement of external agencies. This autonomy allows CDB to prioritise profitability, often favouring projects with higher immediate returns – but greater environmental costs.
Moreover, the energy sector remains a primary attraction for commercial creditors in Africa, owing to its inherent capacity to generate stable and predictable revenues. This aligns well with the risk-return profiles preferred by these financiers. From 2000 to 2023, both the AidData and Boston University Chinese Loans to Africa datasets identified the energy sector as the top category for commercial creditors in Africa. Key players in this sector include ICBC, Bank of China, and Chinese contractors such as Sinohydro and PowerChina. Commercial creditors provided financing totalling between USD 7.8 billion (according to Boston data) and USD 12.6 billion (AidData).
Renewable energy projects – particularly those in solar, wind and hydroelectric power – typically secure long-term power purchase agreements with governments or large corporations, ensuring a steady cashflow over extended periods.
Notably, Chinese companies have been instrumental in developing renewable power projects that directly support the mining sector. For instance, the Copperbelt Energy Corporation (CEC) in Zambia – a key energy generator and distributor in the copper-rich region – developed the Zambia Riverside Solar Power Station in partnership with Sinohydro. Originally commissioned in April 2018 as a one-megawatt solar power station, the privately owned facility was later expanded. In December 2021, CEC signed an engineering, procurement and construction contract with Sinohydro to add an extra 33 megawatts over the following 12 months. CEC is responsible for transmitting and distributing the generated power to its customers in Zambia’s Copperbelt Province.
A key rationale behind these partnerships is that commercial partners view the mining industry as a reliable customer base: it requires substantial and consistent electricity to supply its energy-intensive operations. This symbiotic relationship enhances the financial viability of energy projects, by guaranteeing a reliable revenue stream, thereby mitigating perceived risks for lenders. Mining companies, often backed by robust financials and long-term operational plans, serve as dependable counterparts for energy developers and suppliers operating within African nations.
This strategic alignment not only ensures steady returns for commercial financiers, but also fosters a more resilient energy infrastructure, which underpins industrial growth. By catering to the energy needs of key industries like mining, commercial creditors can invest with greater confidence – their capital is supporting sectors with strong repayment capacities. For the energy and mining sectors, this presents a mutually beneficial dynamic that reinforces the attractiveness of projects to a diverse array of Chinese creditors. This also helps to support energy transitions and economic activity on the continent.
But this interplay is not without potential negative impacts, as mining-related investments scale up with increasing electricity capacity. This requires careful attention to their environmental and social risks.
What changing Chinese energy finance means for Africa
The diversification of Chinese creditors presents nuanced implications for energy finance – and especially clean energy – across African nations, contingent upon their respective fiscal capacities.
For countries grappling with tight fiscal spaces, or governments seeking to mobilise finance for renewable energy projects that support rural livelihoods, Exim Bank’s concessional credits are the most advantageous option. These concessional loans, characterised by low interest rates and extended repayment periods, provide essential capital without exacerbating debt burdens. By offering favourable terms, Exim Bank enables fiscally constrained countries to embark on vital renewable energy initiatives. They can enhance energy access and promote sustainable energy development, without compromising national fiscal stability.
Meanwhile, African countries with greater fiscal flexibility and stronger economic fundamentals can capitalise on the bankability and commercial viability of their energy projects to attract a wider variety of Chinese creditors. These nations can leverage robust, revenue-generating projects, supported by stable power purchase agreements with governments or large corporations, to secure diverse financing sources from state-owned commercial banks, private financial institutions and equity investors.
Zambia’s Lusaka-Ndola dual carriageway offers a recent example of how commercially viable projects can attract substantial investment from a range of Chinese creditors. The USD 650 million project to upgrade the road – which broke ground in 2024 after years of delays and false starts – involves Zambian pension funds as key financiers alongside Chinese constructors, including Zhejiang Construction Communications Group and China Railway Seventh Group. The use of national pension funds spurred controversy locally, highlighting the need for transparency, plus careful design and communication around the profitability of such projects. But it also showed how arrangements that bring in institutional lenders can foster a more resilient and multifaceted financing landscape, which could be replicated in the energy sector.
Additionally, projects that support key industrial sectors, such as mining, manufacturing and transportation, are particularly attractive to commercial financiers – be they from China, the US, Europe or elsewhere. They view these sectors as reliable customers, capable of ensuring steady electricity demand and revenue streams. By focusing on the commercialisation and bankability of projects, these countries can enhance their appeal to diverse Chinese financiers.
The evolving landscape of Chinese lending in Africa, characterised by a diversification of creditors and their varying financial capacities, is signalling a recalibration of Chinese energy finance strategies on the continent. This shift is critical as Africa pursues an ambitious target of 300 gigawatts of energy capacity by 2030, complemented by growing green pledges from China. At the 2024 FOCAC summit for China-Africa cooperation, Xi Jinping announced intentions to launch 30 clean energy projects in Africa.
Moving forward, Chinese energy finance is likely to become more sophisticated. Exim Bank’s concessional funds may support livelihood-related, less commercially viable projects. The CDB and commercial creditors may increasingly finance renewable projects that offer robust financial returns. But despite these expected differences between the Chinese creditors, all of them are anticipated to move away from the traditional focus on large-scale hydropower and coal projects. This could potentially pave the way for a more diverse and sustainable African energy portfolio.
