WASHINGTON, DC—Chinese President Xi Jinping’s state visit to the US produced a two-month extension of the current bilateral trade truce—and little else. Nonetheless, both leaders signaled that they want a more stable relationship ahead of the Asia-Pacific Economic Cooperation summit in Shenzhen in November and the G20 in Miami in December. This creates an opportunity for emerging and developing economies in Africa and elsewhere.
For African countries, financial conditions have rarely been tighter than they are today. In sovereign-debt markets, they pay a premium on foreign-currency borrowing that macroeconomic fundamentals and default risk cannot fully explain. Kenya’s $1.5 billion ten-year Eurobond issuance last year was priced at 9.5%. In late 2024, Nigeria faced rates of 9.6% on 6.5-year Eurobonds and over 10% on ten-year notes. Sub-Saharan Africa routinely faces borrowing rates above 15%, compared to 3–5% in advanced economies.
US Treasury yields have increased significantly since those bonds were priced. Since the US Federal Reserve’s interest-rate hike last month, the ten-year Treasury yield has climbed above 5.3%—the highest level since 2002. Every basis point added to Treasury yields increases the cost of an African Eurobond. With another Fed rate hike possible this month, the next wave of African debt issuance—including a planned $815 million Eurobond in Kenya—will almost certainly cost even more.
Crucially, however, China is moving in the opposite direction: its ten-year government-bond yield has fallen to roughly 1.67%, and the gap with the ten-year Treasury is near a record high. Chinese capital markets are starting to look a lot more appealing.
Africa’s financing needs are huge, not least to meet rising energy demand. Though the continent boasts some of the world’s richest solar resources, and solar panels and batteries have never been cheaper (thanks in part to Chinese investment), capital costs have hampered renewable deployment in Africa. The International Energy Agency estimates that cutting capital costs by just one percentage point would save $150 billion per year in clean-energy financing globally.
Dollar borrowing at ultra-high rates constrains investment in domestic infrastructure, making renewables look artificially expensive compared to fossil fuels. It also contributes to a structural currency mismatch. China produces roughly 80% of the world’s solar modules, and imports of Chinese solar panels by African countries (not including South Africa) tripled from mid-2023 to mid-2025. These purchases are priced in renminbi or dollars, and the projects they power are often financed with expensive dollar debt, even as they produce local-currency revenues.
How can the US-China thaw help? When the two powers were locked in open confrontation, cooperation with either could look to the other like defection, creating real political risks. But détente means that Africa could combine American gas partnerships—crucial to provide baseload power, feedstock for fertilizer, and export earnings—with access to Chinese solar supply chains. A US that hosts Xi at a state dinner cannot justify penalizing African governments for doing business with China, and vice versa. Geopolitical maneuvering room would enable Africa to ensure that each partner does what it does best: the US supports natural-gas development, and China provides solar and storage hardware.
Crucially, Africa must finance each investment in the currency that matches it. This is where Asian capital markets come in. African sovereigns and corporates can tap China’s onshore and offshore bond markets through Panda bonds (renminbi bonds issued by foreign entities in mainland China) and Dim Sum bonds (renminbi bonds issued offshore, notably in Hong Kong). Both Indonesia and Portugal have issued Dim Sum bonds in the last 15 months. The interest-rate divergence has sharpened each of these bonds’ three advantages.
The first is cost. Panda issuers now have a pricing edge of nearly 300 basis points over comparable dollar Eurobonds. Every 100 basis points saved is worth roughly $10 million a year in debt service on a $1 billion issue. Renminbi-bond issuers may still achieve lower all-in financing costs than issuers of US dollar- or euro-denominated bonds, even after accounting for hedging costs. With the gap between US and Chinese ten-year benchmarks now around 350 basis points, this advantage will only grow.
Given that a large share of Africa’s clean-energy capital spending goes to Chinese products, the second advantage is that borrowing in renminbi aligns liabilities with procurement costs and reduces exposure to dollar swings. The same logic can extend to gas.
The third advantage is diversification. Chinese regulators have urged domestic financial institutions to reduce their exposure to US Treasuries, and Chinese institutional investors are searching for yield. Well-structured, guaranteed African paper can meet that demand while reducing the continent’s dependence on a single set of Western capital markets.
Recent precedents are encouraging. In 2023, Egypt’s debut three-year Panda bond raised CN¥3.5 billion ($478 million) at 3.5%—jointly guaranteed by the African Development Bank and the Asian Infrastructure Investment Bank (AIIB)—to fund clean transport and water projects. Afreximbank followed with a CN¥2.2 billion Panda bond in March 2025.
Beyond China, Japan’s Samurai market offers yen funding. Already, Kenya’s 2026–27 borrowing plan includes $881 million in Japan-linked financing, anchored by a $500 million Samurai bond. The time has come for Africa to begin building a genuine Asian funding curve.
There are still plenty of challenges ahead. Renminbi or yen debt is still foreign-currency debt serviced from local-currency revenues. Panda issuance also carries upfront costs, as the bonds are subject to Chinese ratings, audits, regulatory approvals, and rules on the use of proceeds. No financing structure can substitute for credible fiscal policy, macroeconomic reform, and investor confidence. And, of course, US-China relations could change.
To increase the chances of success, multilateral development banks should standardize and scale up partial credit guarantees for Panda, Dim Sum, and Samurai issuances. African treasuries should secure regulatory approvals and investor mandates before the upcoming G20 meeting. Meanwhile, the US and China should provide joint guarantees for African energy through the US Development Finance Corporation, the AIIB, and the New Development Bank, in addition to supporting the African Development Bank and the World Bank Group in their efforts to increase energy access.
With dollar borrowing costs soaring and Chinese rates near record lows, the cost of inertia is high. Developing and emerging economies should borrow where capital is cheapest, and lock in the savings before the window closes.
Copyright: Project Syndicate, 2026.
