The Dilemma of Western Loans: Pushing African Countries into the Arms of China

Chinese loans are significantly more expensive than western ones, but they are popular in Africa. Unlike the West, one does not feel patronized by China’s money. But China is lending less and less to African countries.

Wien. How can rich countries ensure that poorer countries have enough money to fight poverty and climate change at the same time? This was the question at a meeting in Paris last week, to which French President Emmanuel Macron had invited. Even if the summit, which was attended by representatives from 40 countries and several multilateral organizations, did not produce any results.

A new paper by the German Institute for Economic Research (DIW) in Berlin shows which approach would tend to be unsuccessful: If Western loans to poor countries are linked to nature and environmental conditions, the probability that they next borrow money from China increases – without such conditions.