The two sides inked the agreement at a ceremony held at the ministry of finance on Friday attended by Zambian officials and Chinese diplomats.
Jacob Lushinga, Director-General of the Development Bank of Zambia, said at the ceremony the money would be lent to small and medium enterprises in the agricultural manufacturing and mining sectors and that 50 projects were expected to benefit from it.
The targeted sectors were among the priority sectors in the country's development plan, Lushinga added.
The loan, with concessional terms, will be paid back at an annual interest rate of 5.5 percent, according to the official.
Chinese Ambassador to Zambia, Yang Youming, said the loan was a sign of enhanced economic cooperation between the two countries.
Finance Minister Alexander Chikwanda said the money would help accelerate Zambia's economic development.