China holds all the cards as pandemic pushes African countries to default on loans

The pandemic has exacerbated existing infrastructure funding weaknesses in Africa, leading to potential debt defaults, as seen in Zambia's request to pause repayments on $3bn in bonds. China is a dominant creditor, with 44% of Zambia's total debt owed to it and 60% of this year's debt repayments from poor countries going to China. While China has joined the G20's Debt Service Suspension Initiative (DSSI), it prefers opaque, case-by-case negotiations and classifies some major lenders, like the China Development Bank, as commercial entities to exempt them from the initiative. The author suggests that African nations may enter deals similar to Laos's hydroelectric plant agreement—where a Chinese entity became the majority shareholder to forestall default—to avoid credit downgrades by agencies like Fitch Ratings and maintain access to capital markets, potentially increasing China's control over African state assets.

• Zambia has signaled a potential default by requesting a pause on a $120m repayment for three bonds totaling $3bn, which resulted in a credit downgrade by Fitch Ratings.
• China is a primary creditor for poor countries, holding an estimated 44% of Zambia's total debt, and is the recipient of approximately 60% of this year's debt repayments from the world's poor countries.
• China's participation in the G20's Debt Service Suspension Initiative (DSSI) is criticized for being opaque and incomplete, as it favors case-by-case negotiations and classifies the China Development Bank as a commercial lender to exempt it from the initiative.
• While 'debt-trap diplomacy' and asset seizures are often alleged, the author notes that no asset seizures have occurred in Zambia or Sri Lanka's Hambantota Port, though a deal in Laos saw China Southern Power Grid become the majority shareholder of the national power grid to avoid loan default.
• African governments may accept equity-for-debt deals with China to avoid the severe financial consequences of credit downgrades, as the DSSI does not apply to Eurobonds or private debt.

APA

South African Institute of International Affairs (2020). China holds all the cards as pandemic pushes African countries to default on loans. https://saiia.org.za/research/china-holds-all-the-cards-as-pandemic-pushes-african-countries-to-default-on-loans/

Chicago

South African Institute of International Affairs. China holds all the cards as pandemic pushes African countries to default on loans. 2020. https://saiia.org.za/research/china-holds-all-the-cards-as-pandemic-pushes-african-countries-to-default-on-loans/.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=China holds all the cards as pandemic pushes African countries to default on loans |date=30 September 2020 |url=https://saiia.org.za/research/china-holds-all-the-cards-as-pandemic-pushes-african-countries-to-default-on-loans/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2020china, author = {{South African Institute of International Affairs}}, title = {{China holds all the cards as pandemic pushes African countries to default on loans}}, institution = {South African Institute of International Affairs}, year = {2020}, month = sep, url = {https://saiia.org.za/research/china-holds-all-the-cards-as-pandemic-pushes-african-countries-to-default-on-loans/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }