Belt and Road: China’s global expansion

China’s $3tn Belt and Road initiative to bridge the infrastructure gap along trade routes to Africa, Asia and Europe signals its ambitions for maritime dominance and its more assertive and prominent role in global affairs.

‘Today, we celebrate laying one of the key cornerstones to Kenya’s transformation to an industrialised, prosperous, middle-income country,’ said Kenyan President Uhuru Kenyatta at the inauguration of the African nation’s Standard Gauge Railway (SGR) on 31 May 2017. Dubbed by Kenyatta as the ‘Freedom Express’ in honour of the day the country won self-governance from Britain, the $3.2bn railway is Kenya’s largest infrastructure project since securing independence more than 50 years ago.

Linking the capital Nairobi to the port of Mombasa, the railway will replace the so-called ‘Lunatic Express’, built by colonial Britain to open East Africa to imperial control in 1901. Like its predecessor, the Freedom Express has been criticised for being a huge waste of money. However, it may prove to be even more important as a strategic, long-term investment for its sponsor than the Lunatic Express was for Britain.
The Export-Import Bank of China financed 90 per cent of the new railway, which was constructed and, over the next decade, will be maintained and operated by China Road and Bridge Corporation. Despite the Kenyan government emphasising the numerous benefits of the Freedom Express – such as reducing transport costs and times by more than 60 per cent – the project underlines the country’s growing indebtedness to China.

China’s bill for the SGR represents the largest loan that Kenya has ever received: the equivalent to approximately six per cent of its gross domestic product. For President Kenyatta – seeking re-election this year – the unveiling of the SGR ties in with the narrative of improving Kenya’s infrastructure and economy. The railway will eventually connect Burundi, Ethiopia, the Democratic Republic of Congo, Rwanda, South Sudan and Uganda to the port of Mombasa, as Kenya tries to reposition itself as the strategic gateway to East Africa for trade with China and other nations.

For China, meanwhile, the investment represents an important component of its Belt and Road Initiative – a development strategy proposed by Chinese President Xi Jinping in 2013 to bridge the infrastructure gap along the land and maritime trade routes connecting China with Africa, Asia and Europe.

The new railway in Kenya is, in many ways, symbolic of China’s ability and desire to assume a more prominent role in global affairs. Under President Xi, the country is pursuing a significantly more assertive foreign policy to those of recent Beijing administrations. Its longstanding aversion to traditional realpolitik – whether that be building foreign bases, engaging in military matters overseas or securing alliances – is being reconsidered under Xi, as he continues to strengthen his grip on all aspects of Chinese policy.
One previously prohibited foreign policy was broken last year with the opening of a naval base in Djibouti in the Horn of Africa. Despite protestations that the base was simply a ‘logistics centre’, Beijing’s announcement that up to 10,000 military personnel will be stationed in the region until at least 2026 concerned many international observers. This was due to the manner in which the base was established and the potential implications of other Chinese port investments around the globe.

State-owned China Merchants Group initially took a stake in the Port of Djibouti’s container terminal in 2012, which subsequently led to a $9bn investment that included a liquefied natural gas terminal, a trade logistics park and a wharf for livestock. In 2016, Beijing finally confirmed what many had long suspected: that its Djibouti investment was for both commercial and military purposes.

Graham Wladimiroff, Legal Executive, Director and Compliance Business Partner at AkzoNobel and a former officer of the IBA Asia Pacific Regional Forum, says it is a characteristic of China that any initiative or action will almost always represent a number of wins, not just one.

‘The question of whether China is seeking economic, political or military power is probably best answered with “all of the above”. However, the degree will vary, and it is important to note that the primary motivator will typically be about safeguarding economic interest,’ he explains.

‘China’s setting up of a base in Djibouti may mainly be about securing economic interest in a part of the world where piracy, for instance, has been an issue. You need the military to fight piracy. I personally do not believe China has aspirations the way European colonial powers used to have, namely to “control” parts of the world.’ President Xi addressed this very concern at a two-day summit of world leaders in Beijing in May 2017, at which he presented his Belt and Road vision to drive trade and prosperity through Chinese-built infrastructure. ‘In advancing the Belt and Road, we will not retread the old path of games between foes. Instead, we will create a new model of cooperation and mutual benefit,’ he said.

While President Putin of Russia and President Erdogan of Turkey were among those in attendance at the summit, leaders from India, Japan, much of the European Union and the United States declined the invitation. They remain suspicious that Belt and Road has an ulterior motive, namely the acquisition of strategic assets and the fulfilment of geopolitical ambitions.

Pieter Steyn, a partner with Werksmans Attorneys and Vice-Chair of the IBA African Regional Forum, says that Belt and Road is clearly not a purely commercial programme. ‘It has a strong geopolitical motivation and raises questions in India, Europe, Japan and the US, as well as African countries and others. China is a world power and has legitimate global interests like any other.’