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

This research paper examines the increasing risk of African sovereign debt defaults exacerbated by the Covid-19 pandemic, focusing on China's role as a primary bilateral lender and the limitations of international debt relief initiatives like the DSSI.

• Zambia's request on September 22 to pause a $120m repayment on three bonds totaling $3bn was treated as a default, resulting in a credit downgrade by Fitch Ratings. While the immediate crisis involved private sector debt, China holds an estimated 44% of Zambia's total debt.
• China is the largest official bilateral lender to Africa, with approximately 60% of this year's debt repayments from the world's poor countries destined for China. Other countries, such as Kenya, are seeking renegotiations for Chinese-funded projects, specifically a standard gauge railway that is reportedly losing $9.2m per month.
• The G7 and World Bank have criticized China's participation in the Group of 20’s Debt Service Suspension Initiative (DSSI). China prefers case-by-case negotiations over blanket suspensions and classifies some major lenders, such as the China Development Bank (a major lender to Angola), as commercial rather than official bilateral lenders to exempt them from the DSSI.
• While the author notes that asset seizures have not occurred in Africa or Sri Lanka's Hambantota Port, a recent deal in Laos provides a potential model for debt resolution. To avoid default on a hydroelectric plant loan, Laos entered a shareholding deal with China Southern Power Grid, making the Chinese entity the majority shareholder of the national power grid.
• African countries may accept deals that cede asset control to China to avoid being branded as defaulters and to maintain access to capital markets, as the DSSI does not apply to Eurobonds or private debt. The author suggests China may be flexible in negotiations because African political support in multilateral forums regarding Xinjiang, Hong Kong, and Huawei is highly valued.

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} }