“Our Most Reliable Partner” China – Ethiopia Relations

 

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In 1995 Ethiopian President Meles Zenawi made his first visit to the Chinese capital and a year later his counterpart Jiang Zemin returned the favour. Since then a strong relationship between the two countries has developed; economic and military relations have flourished and by 2006 the Ethiopian trade minister could declare that “China is our most reliable partner”.

These exchanges led to a rapid uptick in trade between the countries, but one that lies heavily in China’s favour, with Ethiopia exporting around $100 million worth of goods in exchange for over $1 billion worth from China, following the typical pattern of Sino-African trade, namely raw materials for Chinese factories, in exchange for machinery and consumer goods for Africa. At the same time a new wave of investment arrived into Ethiopia, for example Chinese companies built and financed the $365 million dam on the Tekeze river and another on the Omo river, although they do not appear to have supported the controversial Grand Renaissance Dam which threatens to flow of the Nile to the two Sudans and Egypt. Chinese firms have been heavily involved in road and rail projects in Ethiopia, but most notably and symbolically the new African Union building which is based in Addis Ababa was built and financed by the Chinese government. However it is not all construction projects for Chinese firms, ZTE the telecoms giant is a major presence in the country, helping to rollout mobile services across a vast landmass.

Ethiopia has a plan to be a middle income country by 2025 and is at least partly using China as a model, certainly it is no democracy, as the opposition are routinely monitored and protests crushed. But as former leader (before he died in 2012) Meles Zenawi remarked “There is no connection between democracy and development”. While that is true and the Ethiopian economy has enjoyed a rapid economic growth rate over the last decade the question remains whether the government can deliver its promise of middle income status in a decade and will China help or hinder this process. On one hand there are signs that Chinese factories are relocating to the country to take advantage of easy access to European markets and cheap labour, this includes the Huajian group which is developing its shoe production and leather processing facilities in the country. Where Huajian led others like H&M the Swedish clothes giant have followed – as Ethiopia has rapidly become a big destination for multinationals involved in textiles, floriculture and manufacturing, something that was unthinkable even a few years ago.

But critics would point to Ethiopia’s huge trade deficit with China (it primarily exports low value sesame seeds), the high environmental cost of industrialisation as well as the damage caused by Chinese funded dams. Those in the pro-Beijing camp would argue that industrialisation is the only realistic way out of the nation’s poverty and that it is patronising to assume that Ethiopia has no agency, a large African state is fully capable of negotiating and receiving a good deal from Chinese engagement.

Ethiopia has also learnt from Beijing that it is possible to achieve strong economic growth through strategic state intervention alongside a thriving private sector, but at the same time it is also a heavy user of western donor money and is seen a poster boy for the development industry thanks to its high GDP growth rate (although it is not clear these are connected). The next few years will reveal whether Ethiopia’s growth rate can be sustained and it become an “African Lion” emulating the success of East Asian economies or will the economy crash and the last decade prove to be false dawn. Whatever happens, China’s role in Ethiopia will remain both crucial and controversial.



Categories: China - Africa

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  1. Ethiopia: Africa’s Economic Powerhouse? | Frontier Market Strategy

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