China and Kenya first established diplomatic relations in December of 1963.
Since then the two nations have maintained economic ties through bilateral agreements like the 1978 Agreement on Trade between the People's Republic of China and the Republic of Kenya.
In recent years, there has been an increasing focus on infrastructure projects in Kenya that can likely be attributed to China’s One Belt One Road Initiative. One Belt One Road (OBOR), also known as the Belt and Road Initiative, is a Chinese foreign policy approach launched in 2013 that emphasizes infrastructure investment. In particular, OBOR focuses on nations China views as being of strategic interest, such as the Eurasian countries along the old Silk Road.
The most recent, and most ambitious, Chinese-led infrastructure project in Kenya is the Standard Gauge Railway (SGR) line, linking Kenya’s capital Nairobi to Mombasa, a major seaport. The original agreement signed in May 2014 by Kenyan and Chinese authorities stated that China was to provide 90 percent of the estimated 3.8 billion USD needed for the project. Most of the Chinese funds were provided by the China Export-Import Bank in the form of two separate loans, a 1.6 billion USD concessional loan and a 1.6 billion USD commercial loan, totalling 3.2 billion USD.
At first glance Chinese investment in Kenya seems like a good thing.
Take the SGR Nairobi-Mombasa Line project for example. The new train line cut the travel time between the cities of Nairobi and Mombasa down to 4.5 hours, whereas it used to take anywhere between 9 to 12 hours by bus or on Kenya’s old railway system. With more efficient transportation between a major port and the capital, there are opportunities for commercial growth in Kenya as it is now easier to transport both people and goods through the country. Eventually, the plan is to extend the SGR through Kenya and through to other East African nations, increasing opportunities for cross-border economic cooperation as well. Furthermore, the loans provided by the Chinese Export-Import Bank do not seem designed to be predatory; the 1.6 billion USD concessional loan is good for 20 years, with a 7-year grace period and relatively low interest rate of 2 percent.
However, these Chinese loans to Kenya are often contingent on Chinese firms being contracted for the work. In the case of the SGR Nairobi-Mombasa Line, the China Road and Bridge Corporation (CRBC) built the railway. In theory, Chinese investment in Kenya should be generating more jobs for locals, but the reality is that large numbers of Chinese laborers are brought in by the Chinese firms. Furthermore, the locals that do get hired are not paid well. In 2016, Kenyan laborers working on the SGR Nairobi-Mombasa project protested and demanded a raise in salary from less than 2.50 USD to 5 USD a day.
It appears that Chinese infrastructure investments in Kenya are largely motivated by self-interest.
Better infrastructure gives Chinese firms more access to resources and new markets, and thus contributes to China’s continued economic growth. However, it is also apparent that Chinese investments are helping to the improvement of local quality of life, no matter how small the changes are; AidData classifies the intent of the Nairobi-Mombasa Railway project as “Mixed (Some Development).”What this classification suggests is that despite Kenya’s financial struggles that appear to be related to the SGR and Chinese loans, the Nairobi-Mombasa railway project has still facilitated important infrastructure developments in Kenya by improving people’s access to transportation services.
Ultimately, it might be too soon to tell whether Chinese investment in Kenyan infrastructure is hurting or helping. The Nairobi-Mombasa Line only just launched in May 2017, with more extensions underway. Kenya has reportedly secured another loan from the China Export-Import Bank in May 2017 for roughly 14 million USD, to extend the SGR from Nairobi to the city of Naivasha. Although China currently owns more than half (57 percent) of Kenya’s external debt, perhaps the Kenyan government can pay off the debt using the revenue from increased levels of trade, as the new railways operate and more are built. This situation seems highly unlikely though, as Kenya seems to be accumulating debts faster than it can grow its economy; the Kenyan government has even resorted to using loans to cover government budget deficits.