The Sustainability of Chinese Debt Funded Infrastructure in Africa

Abstract Book of the 11th International Conference on Applied Research in Management, Business and Economics

Year: 2026

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The Sustainability of Chinese Debt Funded Infrastructure in Africa

Malvin Mpofu, Mrs. Tatenda Danda

ABSTRACT:

China has emerged as an oasis of development finance, with most African countries having accessed several loan facilities between the year 2000 and 2023. Chinese engagements during the Forum on China-Africa Cooperation (FOCAC) have enhanced cooperation between China and Africa in areas that include finance, trade, politics and culture. In demonstration of unconditional cooperation, China has advanced funding to economies termed as distressed by Multilateral Lending Institutions. Notably, most developing African countries have struggled to repay Chinese debt and have sough debt relief, with some receiving debt forgiveness. Chinese participation in infrastructure projects remains visible across Africa despite poor performance of previous facilities. This study, therefore, seeks to investigate the sustainability of Chinese debt funded infrastructure in Africa. The study focuses on the period 2003 to 2023, which gives a span of 21 years. Data on Chinese debt for infrastructure finance is attained from the dataset on Chinese Loans to Africa (CLA) compiled by the Boston University Global Policy Center (BUGPC). The study models economic growth on Chinese loans, FDI, external debt, oil prices, gross capital formation and inflation. The diagnostic tests performed on the panel dataset detected heteroscedasticity and serial correlation and remedied these issues by estimating the model of the study utilising the Generalised Least Squares (GLS) method, which incorporated an AR (1) structure to account for serial correlation. The results of the study showed that Chinese infrastructure loans have no statistically significant impact on economic growth. Similarly, external debt and inflation do not have a valid impact of growth. On the other hand, foreign direct investment, oil prices and capital formation have a positive impact on economic growth. The study recommends the harmonisation of investment policies by the resource endowed African economies and a shift from bargaining for debt, to attraction of Chinese FDI. Additionally, the study advocates for the development of Local Currency Bond Markets (LCBMs) in a move that will avail long term finance for sustainable infrastructure development.

Keywords: Development; Finance; China; Sustainability; Governance; Growth