Friend, trader, banker; China’s fast growing ties with Kenya

Friend, trader, banker; China’s fast growing ties with Kenya

Despite recent political turmoil Kenya’s economy has been powering ahead in recent years. Although it dropped to 4.9% in 2017 this is expected to increase to hit 5.5% in 2018. The East African country has been busy upgrading its infrastructure, improving its railways, power supplies and ports. Much of this new investment has been fuelled by Chinese credit. Beijing based banks are now responsible for the biggest chunk of Kenya’s bilateral debt (72%) leading many observers to question whether they are overdependent on China.

Kenya joins a host of other countries like Pakistan and Sri Lanka who have turned eastwards for finance. But now face criticism from the West and institutions like the IMF for taking Chinese money and becoming over burdened with debt.

China’s Role in Kenya

The crown jewel of China’s presence in Kenya is the rebuilding of the Madaraka Express railroad to connect the capital Nairobi to Mombasa its prinicpal port. Eventually the line will reach to Uganda, Rwanda and South Sudan making it the lynchpin of the East African transport network.

For China this represents the East African spur of the globe spanning Belt and Road Initiative. Like many major infrastructure projects it comes at a hefty price, US$ 3.1 billion for the first leg. Primarily financed by China, locals have complained that the railway not provided enough jobs, environmentalists have protested is violation of a national park, and others see it as part of the trend towards over-dependence on China.

The Madaraka Express has already cut journey times from Nairobi to Mombasa to 4 hours (down from 12). If successful in bringing wider economic benefits the railroad will stimulate growth in Kenya and if the lines to other African countries are completed successfully they will help encourage intra African trade which is woefully poor compared to other continents. However if Kenya’s economy takes a nose dive or the benefits of the rail line fail to materialise then hard questions will be asked of the Kenyan government. While the government in Nairobi might take much of the blame, but anger will also be directed at Beijing for “burdening” the country in this manner.

Chinese Trade with Kenya

There is already discord towards China as the flow of Chinese goods into Kenya. Everything from machinery to consumer goods has impacted negatively on local producers who are unable to compete with Chinese level pricing. This culminated in the recent refusal of Kenya to approve an East African Community trade deal with China. The high deficit Kenya faced was the primary reason. The African country only exports about US$ 100 million worth of goods to China, but imports US$ 3.7 billion worth of goods creating a huge imbalance.

One reason for this huge deficit is that there are few goods that China actually needs from Kenya. There is now a push to export more of the nation’s agricultural produce such as flowers, mangoes and avocados to a hungry Chinese populace. Another solution could be to develop Chinese tourism in the region. Kenya’s natural beauty and of course world renowned wildlife could provide a big draw for wealthy Chinese visitors who are increasingly willing to pay for new experiences. The other benefit would be to help educate Chinese consumers about the tragic consequences of the ivory trade through appreciating and learning more about elephants in their natural habitat.

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