China’s Loan Cancellation Amounts to 1.1% of Loan to Africa

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CEM REPORT | A study by researchers at Boston University has revealed that China’s waiver of 23 interest-free loans to African countries last month amounted to only 1.1% or less of Chinese lending to the continent.

The study using a database of Chinese state lending compiled by researchers released on Monday, notes that the waived loans were of 10 to 30-year maturities and were worth up to $610 million in total, .

Reuters reports that China has waived some loans to African countries since 2000 when it cancelled loans made in the 1980s and 1990s, although it generally takes a harder stance on restructuring lending to developing nations under its Belt and Road Initiative (BRI) launched in 2013 (details).

Recall that China’s foreign ministry said in August it had cancelled 23 loans to 17 African countries that matured in 2021, but did not give further details.

“(Interest-free loan) provision and cancellation are important diplomatic and symbolic tools in China’s lending practices,” said the report, by Jyhjong Hwang and Oyintarelado Moses.

They added that the loans are “more akin to foreign policy instruments than bottom line-oriented financial instruments”.

Interest-free loans from China to Africa, which have included funding for government buildings, stadiums and hospitals, are usually treated like grants, according to researchers and African government officials.

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