Why is CHINA building ghost projects in Africa? – What is the New Silk Road initiative all about?
In recent years, china built ghost cities, that is, cities with thousands of uninhabited buildings or with a population size far below what was expected. Well, it seems that China is now building other ghost projects, but this time in Africa, Europe, and Asia. CHINA building
Such is the case of a railroad in Kenya that starts in the port of Mombasa and ends abruptly in a small town near Nairobi, the capital of Kenya. Another case is this track in Montenegro, whose purpose was to link a port with Belgrade, the capital of Serbia, but which also ends uselessly in a small, remote mountain village. So the questions are. CHINA building
why did china abandon these projects in the middle of nowhere? What is the new silk road initiative all about, and why is china already facing the consequences of its policies? The new train line announced by the Kenyan president was his favorite government project. It would be funded and built by China and was intended to reduce freight costs and connect Kenya’s port of Mombasa with landlocked countries such as Uganda, Rwanda, and south Sudan. CHINA building
However, construction of what was to be a flagship infrastructure project for east Africa stalled in a small town after china withheld the 4.9 billion dollars needed to allow completion of the rail line to Uganda. For the first line, china had already loaned 3.6 billion dollars to Kenya. Rail revenues were supposed to repay the loan, yet that line is now operational but not generating a profit.
The first full year of operations generated 57 million dollars in revenues well below the annual operating costs of 120 million dollars. Now china is suddenly demanding a financial viability study to approve more loans. CHINA building
The problem is that Kenya was already having difficulty repaying the initial loan to china. Stories like these have also happened in countries like Zimbabwe, with a solar power project on the road in Montenegro that china financed its initial part, and now the country has nothing to pay with other countries such as Sri Lanka, Laos and Kazakhstan have also been crippled by debts to China, there are three hypotheses as to why china does not complete these projects. CHINA building
The first is that China is using them to indebt these countries into debt and subjugate them to its favor. This has been called a debt trap, diplomacy in which the objective is to tie poor countries together by promising them financing for oversized projects, and when they are unable to pay their debts, Chinese companies take over strategic assets such as power grids, ports or the right to exploit natural resources.
For example, Laos has been struggling to repay loans to china for several years and ended up ceding majority control of its national power grid to a Chinese state-owned company. So these loans from china may put pressure on debtor countries not only to divest assets but also to obtain future contracts or diplomatic support. A second hypothesis is that china would be shielding itself in case of a military conflict with the united states. CHINA building
This map shows the Chinese investment projects in different parts of the world. These are ports, railways, and highways that are strategically located on transportation routes that china uses to import most of its oil and raw materials, which is reasonable. CHINA building
To a certain extent, china seeks to protect its access to natural resources, raw materials, and trade routes in case of a conflict, and the united states try to isolate it. But what is striking is that in a paper on military strategy, china’s institute for aerospace studies calls for the need to structure strategic points overseas to provide support for its military activities. CHINA building
China’s primary objective may not be to use these points militarily, but the possibility and intent are there. All of these infrastructure projects are part of what china’s president has called the project of the century, the belt and road initiative, better known as the new silk road, which seeks to connect china to the rest of the world. CHINA building
As shown in the image, this set of investment initiatives would extend from Asia to Europe and through Africa with the aforementioned Kenya project. The plan is so ambitious that more than 60 countries have signed projects or have expressed their intention to do so. In this way, China would reduce its trade relationship with the united states by creating new export markets for its products and promoting the participation of Chinese companies in the construction of its projects.
Sometimes, china even grants loans with the requirement that they are built by Chinese companies. Therefore, it is not surprising that one in five infrastructure projects in Africa are financed by china and one in three are built by Chinese companies, but if all those projects are part of such an ambitious and important plan for china, why doesn’t it finish building them?
The third hypothesis could answer this question, and that is that simply geopolitical and geostrategic ambitions are put above the practical and financial viability of the projects, in other words, politicians in Kenya, as in the rest of the world, like physical projects and the flashier and bigger the better, the more memorable they will be to the people. CHINA is building
so the leaders of a country like Kenya take on Chinese loans for big construction projects to increase their domestic support and so that they can promote them as great achievements, regardless of whether the projects are viable or not and Chinese leaders do not initially demand strict financial feasibility studies of projects to expand their economic and political influence around the world. CHINA building
In other words, Chinese leaders have no internal counterweight or political opposition, so they can dispose of public resources as they please. If a private company had been chosen to build the railway line in Kenya, it would probably have done dozens of financial viability, studies before building it. On the contrary, no one in china is going to criticize Xi Jinping for those billions of dollars that indebted countries are going to stop paying.
At times. China seems to undertake mega constructions to show the world that it can do them, but it does not stop to consider whether it should do them and that ideology seems to be taking its toll, as is precisely the case of the ghost cities. CHINA building
In this case, local governments expropriated land to sell its use rights to developers at very low prices so that they could build as many apartment buildings as they could to show the central government more local economic growth. Now the construction sector in china is in crisis because of its high level of indebtedness. CHINA building
Another case was seen at the Winter Olympics in Beijing. Initially, china expected to spend about 3 billion dollars, but ended up spending between 16 billion and 38 billion dollars, among other things, because Beijing and its nearby mountains did not have water to produce artificial snow, obviously the most important element for winter games. CHINA building
And finally, we mention another case: that of high-speed trains china has the largest network of railways in the world and is famous for building them in record time. One of the most profitable lines is the one from Beijing to shanghai. Beijing has 21 million inhabitants and shanghai has 26 million. CHINA building
The issue is that regional governments have tried to imitate these high-speed trains, ignoring that sometimes the cost is higher than the benefit because the population density is much lower in intermediate cities. CHINA building
As a result, china’s state railways are facing a high debt burden to continue operating even on lines that are not profitable. This state-owned company has debts of 850 billion dollars, which is equivalent to 5 percent of china’s GDP or twice the size of Argentina’s economy. So, as with ghost cities,
rail projects are often used by local governments as a quick tool to boost economic growth without first considering their financial viability. And the central government follows the same path. Building projects around the world as a tool to expand its influence in world geopolitics, regardless of the cost.