Chinese investment in Africa’s energy sector reaches 20-year low

China Africa Djibouti

Due to growing financial distress concerns among numerous African nations and Beijing's domestic economic difficulties, China has slowed down supporting energy projects in Africa, bringing total loans to the continent down to less than $1 billion, the lowest level in over two decades.

China's President Xi Jinping's resolve to "green" his expansive Belt and Road Initiative (BRI) and support smaller-scale (less than $50 million) projects that are economically viable and have more positive social and environmental effects have strengthened Beijing's shift in lending policy towards Africa.

Beijing has substituted money for energy projects with new initiatives in the environment and education sectors, according to the most recent statistics from Boston University's Global China Initiative (GCI).

Despite the fact that traditionally, Chinese funds have gone mostly to the African energy industry, the GCI policy brief report dated September 2023 reveals that in 2021 and 2022, no sovereign loans for energy projects were identified.

Almost half of the $59.95 billion in loans that Chinese lenders have given to African countries thus far have gone toward fossil fuel projects (oil, coal, and gas/LNG).

“Given the heavy fossil fuel composition of Chinese finance for energy projects in Africa and China’s commitments to greening the BRI, it is likely that what appears to be a hiatus from funding energy projects may just be a pause, as lenders scope out greener projects,” according to the report.

For example, between 2000 and 2022, the energy industry in Africa accounted for 35 percent of Chinese finance, with the remaining sectors receiving 29 percent, ICT (8 percent), Financial Services (6 percent), Industry, Trade and Services (5 percent), and others (17 percent).

But in the last two years (2021–2022), the pattern has changed, with less money going into energy-related enterprises, financial services, commerce, and industry.

Rather, the transportation industry accounted for 45 percent of the financing, with the Environment (21 percent), ICT (12 percent), Education (10 percent), Defense and Military (6 percent), and Others (6 percent) following closely behind.

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