Well, we had that here in Europe too, but through EU/IMF loans. They enjoyed pushing countries to a "social catastrophe". So it happens in the best of "families" too.
https://www.independent.co.uk/news/world/europe/greek-debt-c...
https://www.nytimes.com/2015/07/12/world/europe/greece-debt-...
https://www.theguardian.com/business/2013/jun/05/imf-underes...
Banks typically don't want to see you go out of business when you borrow their money, such that they have to take your collateralized assets or similar. They'd prefer you fulfill the terms of the original loan. Regardless, it still happens routinely that debtors default; sometimes the creditor also lends more good money after bad, hoping the situation turns around. Ethiopia would be considered a risky or subprime debtor, as are most of the very newly developing countries like that which China is lending large sums to. They're not lending money to borrowers like Germany or Canada, with many decades of consistently sound economic operation and stability. Those types of economies don't much need China's capital. The nations that have weak access to global capital markets, or generally weak foreign investment, are drawn to China's money for obvious reasons. China is frequently a lender of only resort (particularly at the scale they're willing to deal).
If Ethiopia cannot repay the loans, by definition the Chinese are losing out in economic terms, even if they get control of physical assets etc. If the assets were worth more than the loans, someone else would be willing to bid more for them than the Chinese. If they are worth less, the Chinese would have been better off just buying them outright.
If the African nation in question defaults on big loans to China, their economy is going down. Millions of people will be severely harmed, possibly for decades. It's not just China that loses some money. To say nothing of the fact that China often requires repayment in physical assets of the country (such as taking physical ownership of a port for their own use, or oil, or cocoa), they don't just walk away if they're not getting cash repayments.
First the country straps itself trying to repay China. That means they start missing payments on other smaller debts, they start squeezing the funding of their welfare systems and basic government functions. Everyone begins to suffer.
Redirected government funding - which they can't afford to redirect - begins to harm the economy. Their credit rating gets downgraded, nobody will lend to them at this point. Only China is left, and they want harsher terms now, more of the national resources (see: the Venezuela model). Their currency tanks, inflation skyrockets, the people suffer immensely. The economy goes into perma recession, no foreign capital trusts the situation, investment plunges.
Cycle and repeat the downward spiral, until you reach a point of social catastrophy.