Why African governments are seduced by China’s economic diplomacy

By Kang-Chun Cheng
Posted on Tuesday, 22 March 2022 16:59

Kenya Railways attendants prepare to receive a train on the outskirts of Nairobi
Kenya Railways attendants prepare to receive a train launched to operate on the Standard Gauge Railway (SGR) line constructed by the China Road and Bridge Corporation (CRBC) and financed by Chinese government as it arrives at the Nairobi Terminus in the outskirts of Kenya's capital Nairobi May 31, 2017. REUTERS/Thomas Mukoya

Although the west often associates corruption and uncouth practices with China’s deepening engagements across Africa, even within the confines of World Bank-financed contracts, Chinese firms are accounting for an increasing proportion of total contracts won. Could it be that the economic diplomacy of Chinese investments is equally attractive to African nations?

Roads are only missed in their absence.

Joel Mwangi, a driver in Kerugoya, the largest town in Kenya’s west-central Kirinyaga County – a region known for its agricultural production given the fertile land – says that new tarmac roads have made life that much easier.

“The Chinese have done well in that sense,” he says. “The roads are very okay here. You can now travel the 20 kilometres from Kerugoya to the centre of town in 20 minutes, which used to take up to an hour.”

The roads have eased supply chain logistics for food growers and shippers alike and are a big step up from its predecessors, pot-hole studded roads that wash out with seasonal rains. Many openly credit the Chinese for such development.

Africa’s Hunger for infrastructural development

In a recent study by the Center for Global Development (CGDev), researchers found that China’s development banks (China Exim Bank and China Development Bank) outstripped the amount lent by the US, Germany, Japan, and France combined over the 13-year period of 2007-2020 by more than double: $23bn versus $9.1bn. The study focused on 535 public-private infrastructure deals funded in sub-Saharan Africa.

Despite this impressive funding, a gap between public-private investment and sub-Saharan Africa infrastructure finance needs persists. From 2007-2020, the total domestic and external finance for financially closed infrastructure projects (including private participation) remained stagnant despite professed commitments to increase the total financing volume, most notably, the World Bank’s “Billions to trillions” vision.

A topic of great speculation

Elijah Munyi, an assistant professor of International Relations at Nairobi’s United States International University-Africa, says the visual nature of China’s investment in Kenya has sparked many conversations.

“Although it’s easy capital access from the Chinese perspective, each year here, we’re debating the merits of national borrowing capacity. Kenyans would like to have a borrowing limit, but every year, Parliament pushes to extend the ceiling,” says Munyi.

He points out the myopia of framing engagements with African nations solely through infrastructure, a known Chinese specialty. “Of course, the numbers might throw one off. It doesn’t capture the broader capital input in investment, such as agriculture, health, education, which are areas that the West – the US and Europe – tend to focus on more. But the West is putting in a lot of money. It may not be World Bank money, but it’s collateral money.”

He believes China still perceives itself as a developing country: “China does not want to grant a collective trade to Africa like the African Growth and Opportunity Act (AGOA) because doing so could be viewed as a declaration of not being a ‘fellow’ developing country.”

Reasons for dominance

Chinese contractors have also accounted for an increasing proportion of the total value of World Bank contracts, projects generally backed by recipient governments and the World Bank.

Charles Kenny, the director of technology and development and senior fellow at CGDev, recently wrote about how an estimated 31% of all construction projects in Africa valuing $50m or more in 2020 are Chinese-funded.

Kenny argues that reasons for China’s dominance may actually be benign. World Bank contracts, for instance, follow guidelines determined by competitive procurement approaches.  “A good part of the explanation for China’s outsize role may be that the country’s construction firms are simply very competitive,” Kenny writes.

He continues: “That shouldn’t come as a huge surprise: China has been building a lot of late. Its companies still have considerably cheaper labor costs than firms based in high-income countries.”

It’s a south-to-south scenario. The Chinese are also more open to bargaining, which comes off as diplomatic to African nations since there’s room for negotiation.

Meanwhile, global labor-productivity growth in construction has been lagging over the past two decades, averaging 1% a year as opposed to 2.8% for the total world economy, according to one McKinsey study.

Developing reciprocal relations

Justin Siocha, a communications practitioner specialising in Chinese economic aid in Africa, believes that China will only continue becoming more attractive across the continent.

“Despite the publicised issue of ‘debt trap diplomacy,’ where China lends more than what the recipient can pay back, the style of non-political interference is preferable to African nations,” he says. “Since China has always been hands-off, recipient countries believe that it’s better to stay with China. They respect us and don’t talk down to us like we’re small boys, unlike the western ‘big brother’ attitude. They offer us debt relief. We’re comfortable with them.”

Due to the state-owned status of the Export–Import Bank of China (Exim Bank), the low interest rate is unbeatable by comparison to other multinational organisations such as the IMF, says Siocha. “It’s a south-to-south scenario. The Chinese are also more open to bargaining, which comes off as diplomatic to African nations since there’s room for negotiation.”

Siocha further points to how China has strengthened its diplomatic grip in Africa as part of the process. It’s nationalist approach –  taking into consideration geopolitical and economic long term benefits – plays to dethroning traditional colonialist superpowers via China’s own brand of economic diplomacy. “Many African leaders are in power for 20, 30 years,” he says. “Establishing these long-lasting relations helps with business down the line.”

Although the study delineates China’s ‘dominance’ across the infrastructure finance landscape, it does not account for the accumulating dissatisfaction and pushback that China encounters from African partners along the way, says John Calabrese, the director of American University’s Middle East-Asia Project. “Nor does it account for the fact that, even before the pandemic, Beijing had begun to reassess and scale back its overseas investment commitments.”

With regards to the rest of the world shifting the mindset from ‘big-brother’ to a more reciprocal or mutually-beneficial one, Calabrese suggests furthering contact and revitalising existing multilateral approaches. “More opportunities by prominent members of the US business community and other influencers to experience Africa firsthand – seeing the success stories – and to interact with ‘real’ Africans, the talented and accomplished counterparts [could bring about] such change,” he says.

Africa will continue developing at whirlwind speed. Entire neighbourhoods in Nairobi seemingly crop-up over fortnights. “China has provided a niche for infrastructure capital, which in turn has changed the African view of demand and loans,” says Munyi.

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