Adetailed new study has brought fresh clarity to China’s sovereign lending strategy across the developing world, particularly in Africa, challenging long-held perceptions of coercive or predatory practices. The report, based on data spanning 2000 to 2021, examines over $420 billion in Chinese loans across 57 countries. It finds that nearly half of this lending is secured through what it terms “collateralised” mechanisms—mostly relying not on hard assets like ports or airports, but on revenue streams from commodity exports and highly structured escrow account arrangements.
The research, published by experts from Georgetown University, AidData, Oxford University and the Kiel Institute, offers the most comprehensive account to date of how China manages credit risk in environments often regarded as financially fragile. Contrary to the often-cited “debt-trap diplomacy” narrative, the findings present a different picture: one in which Chinese creditors are acting with foresight, legal discipline, and financial prudence, using internationally recognised mechanisms to safeguard their investments while continuing to support much-needed infrastructure in emerging markets.
At the centre of China’s secured lending strategy is the use of liquid, observable forms of collateral—mainly export revenues from oil, copper, cocoa, and other primary commodities. These earnings are routed into escrow accounts, often held in Chinese banks or managed under strict multi-party agreements, to ensure prompt repayment of debts. This approach is particularly relevant in Africa, where many governments face volatility in public revenues and underdeveloped financial systems.
In Angola, for instance, oil revenues serve as the repayment base for multiple infrastructure projects under a long-standing facility with China Eximbank. Ghana has similarly used cocoa export earnings to secure funds for road construction and energy infrastructure. In such cases, the revenues are not linked to the specific projects being financed. Instead, they act as a dependable source of repayment, allowing the borrower to access large-scale financing without immediate budgetary outlay.
The report underscores that this type of “unrelated collateral” is not inherently problematic. Rather, it reflects a commercially reasonable adaptation to the lending context. Infrastructure projects in low-income countries often take years to generate returns—if they ever do. By decoupling the source of repayment from project-specific income, Chinese lenders reduce their risk and provide borrowers with more immediate access to capital. This is particularly valuable in countries with limited fiscal space and weak credit ratings, where multilateral or Western commercial banks may be reluctant to lend.
Another key finding of the report is China’s frequent use of “quasi-collateral” arrangements. These are legal structures that provide creditors with effective control over revenues without requiring formal ownership or public disclosure of liens. For instance, through offtake contracts and payment routing clauses, state-owned enterprises in borrower countries agree to deposit export proceeds into lender-controlled accounts. These arrangements are legally enforceable and give Chinese banks visibility and priority access to funds, without requiring recourse to courts or asset seizure.
In African contexts—where debt enforcement can be politically and legally complex—this strategy offers a pragmatic and mutually beneficial solution. It ensures that the lender is repaid while allowing the borrower to retain control over physical infrastructure and national assets. In contrast to some narratives that depict China as aggressively acquiring strategic holdings in default scenarios, the report finds that only a very small fraction of loans involve physical collateral like land or equipment.
Furthermore, the use of “cross-collateralisation”—where the same revenue stream secures multiple loans—has allowed African governments to establish longer-term relationships with Chinese institutions under master agreements. Rather than negotiating each loan from scratch, countries such as Angola, Ghana, and Equatorial Guinea have adopted framework structures that reduce transaction costs and provide predictable financing over time. The report documents at least 52 such pooled collateral arrangements, demonstrating the systematic nature of this model.
Importantly, the report does not argue that these practices are exclusive to China. Rather, it suggests that China has adapted elements of export and project finance—common in commercial settings—to sovereign lending in a development context. Tools such as debt service reserve accounts, payment routing, and escrow controls are well known in global finance. What makes China’s model distinct is its application of these tools to bilateral sovereign lending, in ways that address both repayment risk and the development needs of the borrower.
Critics often cite the opacity of these arrangements, and the report does call for greater transparency, particularly regarding escrow account balances and contract terms. Yet it also recognises that confidentiality is not unique to Chinese finance; many sovereign debt agreements around the world are shielded from public view. Rather than exceptionalising China’s behaviour, the report encourages policymakers to focus on improving disclosure norms across the board.
In fact, for many African countries, China’s approach has filled a critical financing gap. Where traditional creditors impose conditions related to governance reforms, market liberalisation, or austerity, Chinese loans are generally free from such stipulations. The emphasis instead is on ensuring repayment through commercial safeguards, not political preconditions. This has enabled countries with urgent infrastructure needs—but limited access to concessional finance—to build roads, power plants, ports, and water systems at scale.
As the global economic landscape shifts and the need for climate-resilient infrastructure grows, China’s model may continue to evolve. Already, some African countries are renegotiating terms to extend maturities or rebalance risk. The report suggests that China has shown willingness to adapt its practices, including through loan restructuring and payment rescheduling where needed. Nonetheless, the basic logic remains: protect repayment by managing risk at the source, using revenue-linked safeguards rather than confrontation or conditionality.
For Southern African policymakers, these findings offer valuable insights. As Zambia restructures its debt, and as Zimbabwe, Angola, and Mozambique pursue ambitious development plans, understanding the nature of Chinese financing is essential. Far from being a monolith, it is a layered and legally sophisticated system—designed to support development while ensuring financial sustainability. It reflects not exploitation, but a recalibration of risk in a complex global lending environment.
