China’s loans to Kenya grew 70 per cent last year, edging out France as Nairobi’s second largest bilateral lender and narrowing the gap with top lender Japan.

New data released by the Kenya National Bureau of Statistics (KNBS) shows Kenya owed China Ksh62 billion ($712 million) as at the end of last year, up from Ksh36 billion ($183 million) in 2012.

Comparatively, Japan’s lending to Kenya slumped to Ksh86 billion ($988 million) from Ksh107 billion ($122 million) in 2012 — a five year low.

The figures contained in the Economic Survey 2014 released on Tuesday show Kenya borrowed Ksh47 billion ($540 million) from France, up from Ksh36.7 billion ($421 million) in 2012.

Nairobi’s increased borrowing from Beijing is expected to go to a new level this week with the arrival of Chinese Premier Li Keqiang in Kenya, where he is expected to sign a raft of infrastructure financing deals including the construction of roads, pipelines and dams.

Kenya’s debt to China is also expected to rise as Nairobi progressively receives financing for deals closed last year such as the Mombasa-Nairobi standard gauge railway (SGR) as well as the construction of a second terminal at the Jomo Kenyatta International Airport.

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The share of loans from traditional lenders like the Japan, UK, US, Germany and Belgium meanwhile continues to fall as African countries, tired of what they see as strict conditionalities attached to Western loans, turn to new lenders like Beijing.

However, France and Germany have recorded a significant rise in lending to Nairobi, with outstanding loans rising from Ksh28 billion ($321 million) and Ksh16 billion ($183 million) in 2009 to Ksh47 billion ($540 million) and Ksh25 billion ($287 million) respectively as at the end of last year.

Because of the country’s evolving foreign policy, the government now places countries and institutions willing to finance infrastructure projects at the top of favourite partners list.

The search for new financing models has also seen Kenya turn to international markets, raising $600 million through a syndicated loans in 2010, with the country now targeting to raise $2 billion through a Eurobond within the next three months.

The country has also turned to domestic borrowing, raising billions of shillings through the capital markets. For example, its outstanding Treasury bills rose from Ksh133 billion ($152 million) at the end of 2012 to Ksh267 billion ($306 million) at the end of last year.

Over the past decade, Kenya has forged stronger relations with trilateral partners as well as sourcing funding from both domestic and international financiers while cutting the direct budgetary support offered by bilateral agreements.

It has thus increased borrowing from trilateral lenders like the African Development Bank (AfDB) and the World Bank, seen as attaching fewer conditionalities to borrowing.

The country sees dealing with these players as the quickest way to accelerate planned infrastructure upgrades.

According to the AfDB, Kenya needs to spend about $4 billion on capital projects every year to upgrade key transport, energy, water and sanitation infrastructure.