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The most recent G20 meetings provided an opportunity for the US and China to negotiate once more about the trade-war. The delicate truce between the involved parties can be called an overall success for global trade in the short-run.
Until now the primary focus of BRI is the developing world (Asia - including South Pacific, and some parts of East-Africa). Welcomed by such nations, this is met with various levels of success, e.g. Cambodia, Ghana and Kenya. Yet, a certain pattern may be ascertained. The sitting head of state of a developing nation welcomes Chinese loans with open arms in order mostly to safeguard its political position domestically, e.g. Kazakhstan and Kenya. These loans are perceived to be more attractive than those from institutions, such as the IMF. As a consequence the public debt of the respective nation increases [China's geostrategic conception of the developing world]. Nonetheless, if not managed properly these loans could also be considered a debt risk for China itself. All in all, as the BRI grows, so are the domestic priorities with the unequivocal focus on economic development; realizing the 'Chinese Dream', or put into other words: the "Two Centenaries". First, to have a Xiaokung (= moderately well-off) society which shall be showcased in 2021; the Chinese Communist party's 100th anniversary. In short this means: the per capita income in 2020 doubling that of 2010; achieving an urbanization rate of 60%; the completion of the Chinese space station (Tiangong Programme); becoming an internet powerhouse; transitioning to clean energy by among others having a cap on coal usage; and possibly having a Chinese aircraft carrier. Second, the modernization target that China shall become a "modern socialist country that is prosperous, strong, democratic, culturally advanced and harmonious."
Be that as it may, recently China has become more vigilant regarding policy lending. It has to be noted that the BRI encompasses more than just providing monetary means to developing nations. It also includes educational and cultural exchanges, media cooperation and political cadre training. Yet, this lending works in favour of China in two ways; first, the increase of Chinese-funded projects within the developing world; second, the increase of export volume of Chinese products in the aforementioned regions.
However, recently a delegation from Kenya that came to China to secure more loans was met with some scrutiny from Beijing. The Addis Ababa to-Djibouti Railway, giving landlocked Ethiopia an access point to the Port of Dorelah, has become a challenging project with an alleged reported loss of $ 1bn in 2018. The Ethiopian minister of Transport Dagamwit Moges stated that the operational line achieved a revenue of € 19,71 mio (648.6 million Ethiopian birr) over the nine-month usage, while the projected revenue was € 26.1 mio (856.14 million birr); a downfall of around 25 percent [China is thinking twice about lending to Africa]. Additionally, China had questions not only about the sum of the loans, but also about corruption in Kenya. The financing of an upcoming census and a referendum on constitutional change was scrutinized as well. And also whether Kenyan president Uhuru Kanyetta is going to stand for office in 2022, whilst he is legally obliged to stand down by that time.
As John W. Frick puts it: “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.”
A. Cikmazkara
This week's Silk Road Headlines
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To increase awareness of and facilitate the debate on China's Belt and Road Initiative, the Clingendael Institute publishes Silk Road Headlines, a weekly update on relevant news articles from open sources.
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