User:Daniel.chun.ernn.kam./China–Kenya relations

China–Kenya relations refer to the bilateral relations between the People's Republic of China and Kenya. The two countries established relations in 1963, suspended ties temporarily in 1967, but ultimately re-established diplomatic relations in 1978. Since then, they have significantly expanded their economic and investment agreements, such that China is currently Kenya's largest trading partner. While the robust trade, investment, and Chinese-led infrastructure projects have benefitted Kenya's overall development and have been labelled by both governments as "win-win" collaborations, local media and foreign analysts have increasingly criticized both the potential consequences of Kenya's loans from China as well as Kenya's overall economic dependence on foreign capital and products. The most ambitious collaboration, the Standard Gauge Rail that is planned to connect Nairobi, Kenya, Uganda, and Rwanda using Chinese financing and contractors, has attracted even more controversy due to financial complications, questions on the legality of its tinder process, and the alleged collateralization of Kenya's Mombasa port.

Political ties

Bilateral relations date back to 14 December 1963, two days after the formal establishment of Kenyan independence, when China became the fourth country to open an embassy in Nairobi.

Over the following decade, China-diplomatic relations became extremely fraught. The Kenyan government claimed that a potential coup was receiving Beijing's support, which China dismissed as propaganda. Local demonstrations in both countries soon followed in 1966, and both countries severed diplomatic ties and recalled their embassies in 1967.

After 1978, President Daniel Arap Moi's administration began to repair relations with Beijing. These efforts resulted in several high-profile visits and agreements to promote trade, investments, and technological exchange. Simultaneously, Military exchange between the two countries increased in the subsequent decade. General Liu Jingsong, commander of the Lanzhou Military Region, led China's first military delegation to Kenya in December 1996; Major General Nick Leshan, commander of the Kenya Air Force, paid a return visit in 1997.

President Uhuru Kenyatta at Nairobi's China Round Table, on 14 December 2015.

Since 2005, President Mwai Kibaki and his successor President Uhuru Kenyatta have implemented a "Look East" policy as an alternative to Western loans and investment, a foreign policy framework which encompassed a significant expansion of Chinese loans and Chinese-operated infrastructure initiatives. Additionally, Mwai Kibaki visited Beijing in August 2005, which President Hu Jintao reciprocated with a visit to Nairobi. During the two meetings, the two governments began coordinating six oil-exploration deals and numerous infrastructure projects. In 2008, the Kenyan president announced Vision 2030 to transform Kenya "into a rapidly industrializing middle-income nation by the year 2030", which has further reinforced economic relations with China. In 2011, Kenya and China signed 10 agreements encompassing large-scale collaborations in telecommunications, energy, tourism, healthcare, trade, construction, and education. From 2003-2013, trade between the two countries grew by 30% each year.

Economic ties

China is Kenya's largest trading partner, with bilateral trade rising rapidly from US$186.37 million in 2002 to $5.3 billion in 2018. Although Kenya's exports of tea, coffee, herbs, and avocados are increasingly attractive to Chinese consumers, Kenya's trade deficit recently reached $7 billion due to the significant investment, trade deals, and developmental assistance it receives from China. Although Chinese firms are recognized for their relative efficiency, affordability, and employment opportunities, trade with China has also attracted several points of criticism in terms of counterfeit Chinese goods, skewed tendering processes for construction firms, and the lack of protection of local industries.

Counterfeit products

Chinese products make up the vast majority of counterfeit goods in Kenya, resulting in an annual net loss of $368 million in trade. The Kenyan governments expends somewhere from $84-490 million to prevent and track down counterfeits. According to local surveys, although locals recognize Chinese products as affordable to consumers and beneficial to local SME's, the majority are also critical of the low quality of Chinese goods and the negative effects of misleading healthcare and agricultural products. At the same time, this was framed locally as more of a failure of local legislation rather than a direct criticism of Chinese imports.

In the Anti-Counterfeit Act of 2008, the Kenyan government launched numerous efforts to reduce counterfeit goods and educate the public on how to discern authentic products. However, according to the Consumer Federation of Kenya in 2010, 60% of Kenyan businesses did not view the government response as particularly effective. Despite the comprehensive legal implementation, understaffing and other logistical issues have hampered its efficacy.

Chinese operators constructing the SGR railway near Ngong, Kenya.

Construction disputes

The influx of Chinese construction firms have received mixed responses. In the 1970s, local construction companies collapsed, and were widely viewed as being too inefficient and corrupt to meet the country's growing needs. As a result, a wave of foreign firms began filling the vacuum of the Kenyan construction industry. Nairobi has since praised both the affordability, efficiency, and competition that Chinese firms have brought, and the public seems to generally appreciate the improvements to public infrastructure.

However, Kenyan contractors view foreign and often wealthier firms as an unfair playing field, and have increasingly lobbied for protectionist policies. Chinese projects are also often accused of lacking transparency in the tendering process, as well as allegations of backdoor interference from the Kenyan government disadvantaging local contractors. In the National Construction Authority Act of 2010, the Kenyan government expanded regulations regarding the registration of contractors and the fairness of tendering processes.

Competition with local businesses

As mentioned, the significant trade deficit and proliferation of more affordable Chinese products has constricted the market share of local producers. Local businesses are generally critical of Chinese products, as they are often unable to compete with their more efficient foreign counterparts. Some analysts have accused China of deliberately dumping cheap products at the expense of local industries, but others dispute this claim as non-comparative, and instead emphasize the significant price reductions for consumers provided by Chinese projects.

Infrastructure and Debt-financing

Over the last couple decades, China's infrastructure investments and loans have been rapidly expanding. Between 2006 and 2017, Kenya has taken large loans of at least $9.8 billion (Sh1043.77 billion) from China, and as of 2019, China accounted for 72% of Kenya's overall foreign debt. As Kenya has become an increasingly crucial part of China's "One Belt, One Road" initiative, a significant portion of these loans are due to Kenya's two flagship infrastructure projects, the Nairobi-Thika Highway Project and the Mombasa-Nairobi Standard Gauge Railway (SGR). The latter has attracted significant concern of "debt-trap diplomacy" and the potential collateralization of Kenya's Mombasa port to China. Aside from these infrastructural projects, it has also been using Chinese-affiliated loans to develop its educational, construction, healthcare, and agricultural sectors.

Nairobi-Thika Highway Project

From 2009 to 2013, Kenya borrowed approximately $180 million from the Export-Import Bank of China in order to build the Nairobi Thika Highway Project. Beyond improving mobility for average citizens, it has also efficiently linked much of East Africa to Mombasa, the region's largest port.

The currently constructed section of Kenya's Standard Gauge Railway.

Mombasa-Nairobi Standard Gauge Railway (SGR)

The 485km railway was initially planned to link Kenya, Rwanda, Uganda, and South Sudan, and would have significantly expanded Kenya's trading capacities in what both Kenya and China hailed as a "win-win" developmental project. In 2013, President Uhuru Kenyatta stated that "the project will define my legacy as president of Kenya [and] will most definitely transform . . . not only Kenya but the whole eastern African region." Kenya funded 90% of the railway through a $3.6 billion loan from the Exim Bank of China, with an interest rate of 3.6% to be paid within 15 years.

However, the railway's construction has encountered several obstacles throughout construction. Michael Kamau, Kenya's Transport Cabinet Secretary, stated that negotiations with the Chinse had disregarded existing Kenyan procurement laws, and some analysts claim that the bidding process skewed unfairly towards the current operator, the China Road and Bridge Corporation. Local activists brought the case to the High Court in 2014, and although initially dismissed, a Kenyan court of appeal in 2020 ultimately ruled that the procurement process was illegal, albeit with an unclear impact on future construction. In the investigation, it was revealed that using a Chinese operator over local contractors was stipulated in the conditions of the Exim Bank of China's loan.

In 2017, the first section of the railway completed construction, but financial difficulties have only intensified. During construction, Kenya paid around $5.6 million per kilometre of track, four times more than their starting estimates. From 2017-2018 the railway was running at a loss of $7.35 million per month due to unexpectedly low usage. In response, the Kenyan government has had to regularly raise prices of the railway, which has in turn reduced usage of the railway in terms of both passengers and cargo. Subsequently, China declined to provide the additional $3.6 billion loan necessary to complete the second section of the railway.

In 2018, a document allegedly leaked from the Auditor-General's office showed that, in order to secure loans related to SGR in 2013, the government had collateralized Kenyan assets to the China Exim Bank, including the Mombasa port and Inland Container Depot in Nairobi. If the railway fails to attract a pre-specified quantity of cargo, the contract would allow the China Exim Bank to claim the port's sovereignty as principle. While the Auditor-General, Edward Ouko, has declined to confirm or deny the authenticity of the report, the President Uhuru Kenyatta, the national Treasury Cabinet Secretary Ukur Yatani, and Transport and Infrastructure Cabinet Secretary Brian Kamau have all dismissed the report as a fabrication. The authenticity of the document remains unconfirmed, and the National Assembly’s Public Investments Committee is currently conducting an investigation into the matter. In addition to the Mombasa port, Kenya could also be made to give China control of the Inland Container Depot in Nairobi.

Debt-trap diplomacy criticisms

Local news outlets and external analysts have frequently analogized the collateralization of the Mombasa port to the Sri Lankan Hambantota International Port, in which Sri Lanka ceded the port to China in order to repay its loans. This comparison fits into a broader accusation of the PRC's "debt-trap" diplomacy, which some analysts label as a form of neocolonialism. Specifically, the Daily Nation and the Standard, two major Kenyan news companies, have numerous articles centred on the theme of debt-trap diplomacy, and the Kenyan public is generally more critical of Chinese mega-projects than the government.

Ian Taylor, co-editor of the Journal of Modern African Studies, highlights that sovereign guarantees are not unusual in other bilateral financial institutions, and posits that an actual takeover of the port seems unlikely, since China would be wary to take over a financially "loss-making enterprise" as well as compromise its international reputation. Maddalena Procopio, another analyst on China-Africa relations, cautions against overly dismissing Kenyan agency in negotiations, and emphasizes that the Kenyan government has itself actively sought and initiated these BRI projects as well as historically pushed back against disadvantageous Chinese investments.

In 2018, Kenyan President Uhuru Kenyatta banned Chinese fish imports in response to public outcry over the unregulated importation of fish from China with Kenyan fishermen lamenting on how the foreign fish had flooded markets. In response, the Chinese government threatened to completely pull funding for the SGR project as well as to impose trade sanctions. The Kenyan government soon after lifted the ban of Chinese fish imports, which attracted further criticism of debt-diplomacy from local media.

In February 2021, China postponed $245 million of Kenyan debt repayments for 6 months, a week after the Paris Club had offered similar relief, as the country struggles with the economic impact of COVID-19.