More Problems More Money? Does China Lend More to African Countries with Higher Credit Risk Levels?

Over the past decade, China has provided billions of dollars in concessional and non-concessional finance to countries around the world. In light of these trends, both researchers and pundits have focused on China’s motivations for allocating development finance, particularly in Africa, due to debt sustainability concerns. This paper aims to contribute to the understanding of the ways in which creditworthiness may impact the Chinese government’s decision to allocate development finance. In doing so, it examines the impact of African countries’ creditworthiness levels on Chinese development finance commitments and whether it impacts the development finance they receive from China and the West differently. It also explores the impact of African country creditworthiness on Chinese loan cancellations and forgiveness. This paper finds that a disproportionate share of Chinese government loan commitments to African countries are made to governments with high credit risk levels. In that same vein, it finds that China makes more development finance commitments to African countries with lower levels of creditworthiness compared to other Western donors. Finally, this paper finds that African countries’ creditworthiness impacts both loan forgiveness and, to a lesser extent, cancellations. As African countries’ creditworthiness decreases, their likelihood of having Chinese loan commitments cancelled, or some outstanding debt to Beijing forgiven, increases. These findings highlight the need for a more nuanced characterization of Chinese development finance activities in Africa by researchers, pundits, and policymakers. It also underscores the importance of greater transparency from—and coordination with—China in its approach to debt sustainability and its attitude towards risk on the African continent, as well as the importance of building African debt management and capacity to ensure responsible borrowing.