'China Inc.' Becomes China the Builder in Africa
The railway station in Mbeya, part of the Tanzam railway.

'China Inc.' Becomes China the Builder in Africa


The gaotie crisscrossing today’s China is a transformative feat of construction. The high-speed railway, which connects formerly isolated hinterlands to bustling cities, stretches for 19,000 kilometers, longer than  all of the world’s high-speed lines combined.

But Chinese railway construction is not just a Chinese story. In 1975, China built the $500 million Tanzam Railway from Dar es Salaam in Tanzania to Kapiri Mposhi in Zambia, the single longest railway in sub-Saharan Africa. Forty years later, China helped build the first light railway on the continent in Addis Ababa, Ethiopia, which opened in October 2015.

In April 2016, the China-Africa Research Initiative (CARI) at the Johns Hopkins University School of Advanced International Studies (SAIS) released its exclusive database of Chinese loans to Africa (2000 to 2014). One of our biggest discoveries was that Chinese loans on the continent mostly go toward building connective infrastructure – roads, railways, and power lines – rather than pursuing natural resources via the petroleum or mining sectors.

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Dissecting the Data

Previously, the Rand Corporation, AidData, and Fitch Ratings produced data on Chinese loans to Africa, but in trying to confirm their data, we found many problematic errors. Most frequently, these organizations failed to check whether a project mentioned in a media report actually received funding. This led them to significantly overstate the number and value of Chinese loans. After scouring sources ranging from Chinese government reports to African newspapers in French, Arabic, and Portuguese, and drawing on our network of official sources in Africa, we revealed our own rigorously cross-checked figures, which lead to a number of conclusions.

First, China is only somewhat politically motivated when loaning to African countries. Indeed, recipients must follow the One China policy: the three countries that recognize Taiwan — Burkina Faso, Sao Tome and Principe, and Swaziland — received no loans. But there is little indication that loans are targeted toward client states. Although both Sudan and Zimbabwe are potential client states, only Sudan shows up on the list of the top 10 African recipients of Chinese loans.

Second, we found scarce evidence that Chinese loans are mainly purposed to access natural resources. While the top recipient of Chinese loans was resource-rich Angola, the next recipient was resource-poor Ethiopia, where almost 90 percent of loans went to connective infrastructure in transportation, communication, and power.

Finally, Chinese loans are building the continent. From 2000 to 2014, almost 50 percent of Chinese loans financed the two biggest sectors: transportation (receiving $24.2 billion of loans) and energy (mainly electric power) with $17.6 billion. Roads and railways made up just under 80 percent of loans in transportation. Hydropower, power lines, and gas pipes made up slightly over 80 percent of loans in energy. Taking a closer look, we found that the biggest Chinese loan-financed infrastructure project was Phase I of Kenya’s Mombasa-Nairobi Standard Gauge Railway, funded by $3.6 billion of loans. The second largest project was the aforementioned Addis-Djibouti Railway, funded at $2.5 billion. In addition, there is an important distinction on the construction sites of these projects: our data shows that foremen and technicians are generally Chinese but the workers are African, contrary to popular belief.

A Chinese Approach to African Needs

In sub-Saharan Africa, where only 16 percent of roads are paved and 24 percent of people have access to electricity, a lack of connective infrastructure hinders economic prosperity. Appropriately, the Program for Infrastructure Development (PIDA) under the African Union’s New Partnership for Africa’s Development (NEPAD) prioritizes “regional and continental infrastructure” in its 30 year strategy.

The need for connective infrastructure in Africa is evident, even for the Chinese. Without roads to transport construction equipment or electricity to power manufacturing factories, Chinese contractors’ projects, which originally had big hopes, often don’t materialize. One reason our estimate of Chinese loans is lower than that of others is because we do not count rumored projects that were later canceled or never materialized due to obstacles (including infrastructural ones).

In fact, out of the 1,246 reports of Chinese loan financing to Africa that we analyzed in our database, a significant number did not materialize. In the transport sector, only 47 percent of 233 total projects (worth $49.8 billion) ever materialized. The rest turned out to be mistakes, rumors, cancellations, or “inactive,” meaning an agreement was signed more than five years ago, but the project is still not in implementation. Similarly, in the energy sector, only 61 percent of 221 total projects (worth $30 billion) materialized.

The frequent cancellation and uncertainty of projects may partially explain why China’s approach to infrastructure in Africa resembles Deng Xiaoping’s “crossing the river by feeling the stones”: rather than a mammoth strategy from the start, additional loans go toward the implementation of “phases” that proceed step by step for successful projects. For example, the largest wind farm in sub-Saharan Africa, the 153 MW Adama Wind Farm in Ethiopia, was funded in phases: in 2011, a Chinese loan of $99 million financed the Adama Wind Farm I, and in 2013, the Ethiopian government signed an additional $293 million loan with China EximBank to build the Adama Wind Farm II. China’s approach in Africa is experimental, as in China.

From Infrastructure to Industrialization

Building roads and railroads remains a priority for China. Justin Yifu Lin, honorary dean of the National School of Development at Peking University and former Chief Economist of the World Bank, calls the growth of Chinese infrastructure in Africa “One Belt, One Road, One Continent”: as China’s Maritime Silk Road expands westward, east Africa is becoming the next destination to become more tightly connected to Asian markets and investment.

In fact, in east Africa, some Chinese investments like the labor-intensive Huajian shoe factory outside Addis Ababa may be the first visible African signs of manufacturing moving out of China, which is upgrading to more knowledge based, services oriented industries. But the take off of manufacturing depends on countries having the infrastructure to power the factories, and the roads and rails to transport inputs and outputs. For African countries committed to this kind of structural transformation, to move their countries up the value chain, China is saying: let us finance and build your roads and power plants.

The Here and Now

As the economic slowdown lingers, China’s excess industrial production and overcapacity continue to reach new heights. Despite efforts to cut steel production, at least one Chinese official pointed out that there has been “no improvement in overcapacity.”

But in Africa, there are strong demands and business opportunities for Chinese groups to build infrastructure that will use up China’s excess output. As Chinese construction companies lobby for more One Belt, One Road funding for Africa, China’s “going global” scheme of finding new markets for its goods and services becomes even more relevant. Given all of this, it is unsurprising that so many Chinese loans to Africa are focused on building infrastructure. But at the end of the day, the formula is even more straightforward: African governments borrow because their needs are dire. Chinese banks lend because Chinese companies win the contracts.

Recently, I visited Lalibela, a holy city of pilgrimage for Ethiopia’s Orthodox Christians. Just outside the collection of rock-hewn churches, I saw a blue gate, the unmistakable entrance to a Chinese construction site. What were they building? When I walked over to take a look, I found myself standing at the beginning of a road.

Janet Eom is the Research Manager at the China-Africa Research Initiative (CARI) at the Johns Hopkins University School of Advanced International Studies (SAIS). This year, SAIS-CARI is hosting its 3rd annual conference, “Orient Express: Chinese Infrastructure Engagement in Africa.” To register for the conference, please visit the Initiative’s website.

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