China's Africa loans underestimated risk, says Beijing finance prof

THE slowdown in Chinese lending for African infrastructure projects was likely to happen because it mirrored past lending by other countries, and the Covid crisis has only accelerated the trend, a Beijing-based finance professor said, reported Hong Kong's South China Morning Post.

Michael Pettis, a senior fellow at the Carnegie-Tsinghua Centre for Global Policy and a finance professor at Peking University, said that 10 to 15 years ago the Chinese government was largely following the same path every country before it followed when first investing abroad.



'It was significantly underestimating risk, and would soon begin pulling back sharply on its lending once it discovered how risky these loans could be,' Prof Pettis said. 'Covid-19 - as it has done with so many other trends - seems to be accelerating this process.'



Chinese lending peaked in 2013 and has since been flat or declining, aside from a major deal by China Development Bank in 2016, when it recapitalized Angola's state-owned oil and gas company Sonangol.



China advanced US$17 billion in 2013, then $12 billion in the next two years, according to the China Africa Research Initiative at the Johns Hopkins University school of advanced international studies.


SeaNews Turkey