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The Future of Chinese Rail Financing in Africa

China famously lent billions of dollars to countries across Africa to build expensive, new railways. Nigeria, Ethiopia, Djibouti and Kenya all used loans from Beijing to build new lines using a standard gauge (SGR) that will one day make it possible for these various railways to interconnect with one another.

While a number of African countries are still eager to build out railways, it appears that the days of easy access to Chinese financing are coming to an end. Chinese policy banks like the China Exim Bank and the China Development Bank are becoming increasingly reluctant to lend money for African rail projects. Over the past year, these banks have refused to finance part of Kenya’s SGR, Uganda’s new SGR, and Tanzania’s hugely ambitious plans to become a rail hub in East Africa.

Chinese employees of the new railway which will link Addis Ababa to Djibouti take pictures in front of the Chinese-made Ethiopian trains in Addis Ababa on September 24, 2016. Zacharias ABUBEKER / AFP

And all of this happened before the economic crisis in Africa brought on by the COVID-19 outbreak. If it was tough before COVID-19, then it’s no doubt going to be even more difficult now for African policymakers to persuade China’s development bankers that railways are a good investment.

At this point, it’s still too early to tell if the massive investments in African rail are going to pay off, either directly through increased passenger and cargo traffic, or indirectly by enhanced economic activity that the railway facilitates. Ethiopia, though, presents an interesting case study, according to Yunnan Chen, a senior research officer at the Overseas Development Institute in London.

Chen conducted in-depth research on China’s role in developing Ethiopia’s rail network for his dissertation. She spent several months doing fieldwork and interview dozens of stakeholders to carefully examine the strengths and shortcomings of China’s railway development model in Africa.

Yunnan joins Eric and Cobus to discuss her findings and to look ahead at what impact COVID-19 will have on the future of Chinese railway development on the continent.

Show Notes:

About Yunnan Chen:

Yunnan Chen is a Senior Research Officer at the London-based Overseas Development Institute and a PhD Candidate at Johns Hopkins School of Advanced International Studies. Her research focuses on the rise of China in global development, focusing on infrastructure finance in Africa. She worked at the Institute of Development Studies, Sussex, and Chinadialogue, London. She holds an MA in political science from the University of British Columbia, and a BA in politics, philosophy and economics from the University of Oxford.

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