Ver Angola


Reconfiguration of the chinese model of financing abroad should affect Angola

China is reconfiguring its external financing model, aiming to reduce default risks and support for fossil fuels, which should affect Angola, according to a study by Boston University.


"Future financing opportunities from China can support Angola's energy transition and diversify its economy, which is highly dependent on oil exports,"  told to Lusa news agency Oyintarelado Moses, a data analyst at the Global China Initiative (GCI), a research unit from the Global Development Policy Center at Boston University.

China's cooperation with Angola has been dominated by the relationship between States: Chinese public development banks grant loans for the construction of infrastructure, in charge of Chinese state-owned companies, serving Angolan oil as collateral.

According to the study published last month by the GCI, the China Development Bank and Exim Bank, the country's two main public banks that finance development projects abroad, did not carry out new loans for energy projects in 2021.

The two banks issued a total of 234.6 billion dollars in loans to foreign governments and energy sector entities between 2000 and 2019, far exceeding the total amount of loans granted by the World Bank in the energy sector during the same period.

But, according to the GCI, the "one lane, one route" initiative, the gigantic infrastructure plan launched by Beijing, is being reviewed by the Chinese authorities, with a view to reducing funding for fossil fuel projects and directing money to sources cleaner energy.

Chinese President Xi Jinping announced last September that China will stop building coal-fired factories abroad and will "strongly" support green development in the poorest countries.

"This commitment will likely result in financial support for the development of renewable energies in Angola", Oyintarlado Moses told Lusa.

Beijing's new objectives also coincide with a sovereign debt crisis among the poorest countries, given the economic impact of the covid-19 pandemic, in the meantime exacerbated by the war in Ukraine.

"China is taking advantage of this period to take some steps and think about a 2.0 approach" in granting credit abroad, the study noted.

"We can expect a little more diligence and greater focus in countries that don't have as high debt levels as some of China's traditional customers," he said.

This greater risk aversion could mean less relevance in the future for the China Development Bank and Exim Bank, which accounted for 80 percent of China's loans to African countries over the past two decades, according to the GCI.

"By definition, China's development banks can take on more financial and political risks than commercial banks," said Oyintarelado Moses.

"But instead of a complete takeover by commercial banks, a more diversified set of financing instruments is likely to emerge," the analyst predicted, pointing to increased funding by China-led multilateral institutions and equity funds such as the New Development Bank, the Asian Infrastructure Investment Bank and the Silk Road Fund.

A study published last March by a Chinese university indicated that Angola is the country in the world where debt service to Chinese creditors will have the greatest weight in public spending this year.

The African country will allocate almost 5 percent of its Gross Domestic Product (GDP) to pay interest and repay loans previously contracted to Chinese entities, according to the report released by the Center for Finance and Green Development at Fudan University, one of the most prestigious universities. Chinese in Shanghai.

According to the financial rating agency Standard & Poor's, Angola owes around 21 billion dollars to China.


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