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Chinese loans to Africa: A blessing or a curse to Africa’s economic development?

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  • Appiah-Otoo, Isaac
  • Chen, Xudong
  • Appiah, Ebenezer
  • Ayenyebo, Daniel Kwabla

Abstract

This study examines the impact of Chinese loans on Africa’s economic growth, exploring the investment mechanism, the causality relationships involved, and country-specific effects. Utilising a panel of 24 African countries from 2000 to 2019 and a two-step system generalised method of moments model, we find that Chinese loans significantly drive Africa’s economic growth. The study also reveals that Chinese loans indirectly lead to Africa’s economic growth by boosting investment. Furthermore, there is a unilateral causality from Chinese loans to Africa’s economic growth, with South Africa experiencing the largest economic impact from Chinese loans. This study advances the external debt and economic growth scholarship by empirically measuring the effect of Chinese loans on economic growth while also demonstrating the investment path through which Chinese loans influence economic growth and the causal links between the two variables. The study recommends that policymakers capitalise on Chinese loans to address the savings-investment gaps facing Africa to promote economic growth, while also implementing sustainable debt management practices.

Suggested Citation

  • Appiah-Otoo, Isaac & Chen, Xudong & Appiah, Ebenezer & Ayenyebo, Daniel Kwabla, 2025. "Chinese loans to Africa: A blessing or a curse to Africa’s economic development?," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1032-1044.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1032-1044
    DOI: 10.1016/j.eap.2025.06.046
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