A report from Peking University in China, has it that Chinese loans to African countries have made a favorable contribution to the continent’s economic expansion, enhancements in infrastructure, and the development of human capital.
The report indicated that Chinese loans have had a positive impact on African economic growth, with a range of 0.176% to 0.300%. Furthermore, it noted a beneficial influence on infrastructure development, with a range of 0.027% to 0.084%.
The study, titled “A Study on the Effectiveness of China’s Sovereign Financing in Africa,” was carried out by the Department of International Department Cooperation at Peking University’s Institute of New Structural Economics (INSE) in China.
China has been a major lender, providing $160 billion in financial commitments to African countries, which accounts for 56% of loans issued over the last two decades. The objective of China’s financial support for African nations aligns with the United Nations’ 2030 Sustainable Development Goals.
The report utilized regression analysis, using Chinese loan data from Boston University, covering 49 African countries from 2000 to 2020. It employed regression methods to estimate the causal relationship between Chinese loans and six key dimensions: economic growth, job creation, infrastructure enhancement, export earnings, foreign direct investment, and school enrollment rates.
The report revealed a positive impact on export earnings, ranging from 0.244% to 0.33%, and on inflows of foreign direct investment, from 0.293% to 0.533%.
Furthermore, the report found that a 1% increase in loans led to a 0.118% to 0.212% increase in enrollment rates and a 0.143% to 0.167% increase in industrial job creation.
The report also included case studies, such as the Mombasa-Nairobi Railway in Kenya, which indicated that railway projects in the transport sector were associated with the highest average cost. Although these projects contributed to reducing carbon emissions by replacing road transportation, they were found to be less ideal for financial credibility.
The report highlighted the success of projects like the Soubre Hydropower Plant in Cote d’Ivoire and the Adama Wind Farm in Ethiopia, as they harnessed natural resources to overcome electricity shortages and reduce carbon emissions.
Additionally, projects like the Bole International Airport in Ethiopia and the Tanzania National Fiber Optic Backbone were credited with fostering regional public good growth.
A well-drilling project in rural Senegal improved basic hygiene conditions and offered alternative water purification methods.
In the education sector, the report commended the University of Ghana for developing a distance learning system, narrowing the digital divide, and enhancing human capital through digital capacity.
China has supported 33 training and education programs, totaling $1.6 billion, which encompass vocational training and the construction of public schools.
In terms of recommendations, the report advised African countries to establish systematic and long-term data collection at the project level of sovereign financing and implement a growth-oriented evaluation mechanism. For the international community, it called for advanced economies and industrialized countries to focus strategically on infrastructure projects in Africa.
At the macro level, the report recommended that Chinese creditors promote future financing for Africa, build a multilayer Chinese financial system, and enhance support for Africa to bolster global economic prosperity.
Mr. Wu Peng, Director-General of the Department of Africa Affairs at China’s Foreign Affairs, reiterated China’s commitment to honoring all promises made at the G20 summit to ensure sustainable infrastructure development in African countries.
Mr. Ibrahima Sory Sylla, the Senegalese Ambassador to China, welcomed the report for providing valuable guidance to African countries in evaluating projects accurately.
Mr. Ivan Zyuulu, the Zambian Ambassador-Designate to China, expressed appreciation for China’s support of Africa’s development and appealed for an extension of loan repayment periods.
Mr. Allan Joseph Chintedza, the Ambassador of Malawi to China, called on the International Monetary Fund, the World Bank, and the Chinese government to support Malawi’s transition from an agriculture-based economy to an industrialized nation.