The most significant case of transnational state capitalism today is China’s Belt and Road Initiative (BRI) which seeks to expand/extend the country’s geoeconomic and geopolitical integrations globally. We conceptualise the BRI as manifest principally through industrial offshoring, infrastructure investments and exports from China. These vectors articulate with particular places, forming transnational couplings that shape development outcomes. We examine the BRI’s couplings and their development implications in the East African countries of Djibouti, Ethiopia and Kenya where China has engaged significantly. We demonstrate the contingent manner of BRI’s variegations; its pragmatism, flexibility, and limitations as a hegemonic or developmental project.

Introduction

Globalization is a generally deepening, recursive process of transnational linking and integration that is subject to distinctive ‘rounds’ of structural, processual change driven by political, economic and technological forces (Held et al., 1999). In the post-Cold War era, the process has been marked principally by the extension, expansion and integration of global financial, commodity, knowledge, and, to some extent, labour markets through industrial, geopolitical and technological transformations (Coe & Yeung, 2015; Graham & Anwar, 2019; Helleiner, 1994). The dominant, neoliberal model of globalization has been driven most significantly by so-called ‘core’ countries in North America, Western Europe and East Asia which have viewed it as vital to sustain economic growth and national security. This spatio-political settlement is in flux, however, as commitments weaken because of a resurgence of populist nationalism and the rise of emerging economies such as China, which follow more state-centric modes of capitalist development and internationalization.

The trend toward increasing state intervention in the economic globalization strategies of some countries is perhaps one of the most significant elements of the current ‘round’ of globalization. The flow of transnational state capital – through state-owned enterprises (SOE), sovereign wealth funds (SWF), mergers and acquisitions (M&As), and large-scale infrastructure investments (especially by China) – has increased dramatically in the past two decades, marking a new era of state capitalism where the state has substantial control over the ownership and use of capital, with significant implications for the structure and functioning of the global economy (Babic et al., 2017; Van Apeldoorn et al., 2012 ). Consequently, we are witnessing the emergence of new modalities of globalization driven by heterogeneous configurations of state and market actors that warrant significant conceptual and analytical attention.

One challenge with respect to the literature on state capitalism is that its applications and definitions cover an inconsistent range of ideas and concerns (Alami & Dixon, 2020a, 2020b; Dolfsma & Grosman, 2019; Musacchio et al., 2015). While some scholars have sought to classify varieties of state capitalism, such typologies tend to be abstract ideal types and unable to tell us much about their concrete and contingent manifestations, or the uneven developmental effects that such formations produce. Needed are more substantivist, situated and ‘thick’ case studies of capitalism’s variegations where the focus productively shifts from classifying and broadly generalizing to analysing and comparing dynamics, contingencies, and the implications of variegated (state) capitalisms in space (Peck, 2021).

We conceptualize the emergent modalities of geoeconomic and geopolitical integration associated with these changes as neoglobalizations that go beyond conventional forms of neoliberalism, reflecting a shift towards more state-centric forms of capitalism. As Alami et al. (2022, p. 996-997) argue, their emergence can be understood in part as:

?…?the changing role of state power?…?.mutations in the construction and expression of political authority in and through capitalist markets, the [re]organisation of political and economic?…?.transnational networks of state and business elites, a destabilisation of the global North/South axis?…??….

The variegated state-capital hybrids associated with these neoglobalizations are constituted by heterogeneous configurations of state/non-state actors (firms, agencies, civil societies) that are reconfiguring flows of capital, technology, knowledge and people in ways that challenge established North–South binaries. In doing so, a new, global D/development regime is emerging, one manifest increasingly in South-South forms of cooperation/alliance (Alami et al., 2021). Importantly, while these neoglobalizations may advance further the creation of a global market, as has been the case under neoliberalism, they differ in their modalities and goals, such as through a recentering of state (power) as a governing actor in global production and trade networks.One of the most significant variegations of state capitalism and neoglobalization today is China’s Belt and Road Initiative (BRI); a programme of massive infrastructural construction announced in 2013. Geopolitically, as a form of meta-governance (Jessop & Sum, 2018), the BRI represents a modality of transnational state capitalism that will shape international affairs and regional relations in the coming century and substantially influence whether China will be the world’s leading power by 2049: a Chinese government objective set to coincide with the ascent to power of the Chinese Communist Party one hundred years earlier (Pillsbury, 2014). While much has been written about why China has adopted the BRI, less is known about how this form of state capitalism reconfigures or changes the geographies of globalization (Mohan, 2021). These are significant lacunae as its impacts are potentially hugely consequential, particularly in the Global South.

This paper conceptualizes and examines the variegated ways in/through which Chinese neoglobalization operates; grounding the analysis through an empirical focus on the East African countries of Djibouti, Ethiopia and Kenya where China has played a central role in shaping infrastructure and industrial development in recent years. Our goal here is to examine and compare whether, how, why and where Chinese state capitalism is reshaping transnational integrations and their contributions to socioeconomic development. We focus on the constitutive features of the BRI’s transnational couplings, and the development outcomes these are producing.

The paper is organized as follows. We first provide a concise overview of the BRI and outline the constitutive features of the couplings related to its primary vectors. We then examine the couplings emerging in East Africa as the BRI progresses and shapes development outcomes. The paper concludes with a summary discussion and remarks regarding future research.

Belt and Road: China’s neoglobalization strategy

Since 2002, China’s engagements in the global economy have transformed from a focus on inward foreign direct investment (FDI) to a greater focus on transnational investments by the state and Chinese enterprises.1 Originally termed ‘Going Out’, China’s geoeconomic strategy encouraged and incentivized outward FDI by Chinese enterprises, established aid programmes aimed at building alliances with, in particular, resource-rich economies, and sought the opening up of markets for Chinese exports. Going Out was extended and deepened in 2013 with the announcement of the BRI; a truly global project that strives to integrate other countries into global production networks (GPN) governed by Chinese lead firms in order to take advantage of favourable, off-shore factor inputs, such as low-cost labour or high-quality raw material inputs (Bräutigam & Tang, 2014). In doing so, the BRI seeks to elevate the country’s position economically; a key objective of the ‘Made in China 2025’ Initiative (Li, 2018).

The BRI is constituted principally by a land route – the Silk Road Economic Belt – and a sea one – the Maritime Silk Road Initiative – that traverse and connect 70 countries (Figure 1). At its core are investments in transportation corridors (e.g. roads, railways, ports), energy systems (e.g. electrical grids), information-communication infrastructure and production centres (e.g. industrial parks, special economic zones) (Maçães, 2019; Ruta et al., 2019). As of the end of 2021, BRI investments globally were estimated to total to about US$355 billion, reaching a low-point annually of about US$13.8 billion in 2021 (Nedopil, 2022). With the COVID crisis abating, some argue that investments will rise again in the coming years although it is unlikely that the BRI will achieve earlier estimates of at $1.2–$1.3 trillion by 2027 (Morgan Stanley, 2018; Nedopil, 2022) partly as a result of the projects inherent contradictions (See Carmody & Wainwright, 2022).

Figure 1. China’s Belt and Road Initiative (adapted from Mercator Institute for China Studies [MERICS], 2018).

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The BRI is a project where the Chinese state provides incentives and then private and state-owned companies undertake its implementation; although projects may involve multiple states and financial institutions (Han & Webber, 2020; Liu et al., 2020). One of the BRI’s distinctive elements is that projects are largely financed by public sector debt, both in terms of the lender (e.g. China’s Exim Bank) and the borrower (recipient states). For some, the BRI is a spatial fix to problems of over-accumulation in China which also helps to remedy the country’s need for natural resources and market expansion globally (Dollar, 2015; Flint & Zhu, 2019). Specifically, it aims to make lower-value Chinese exports more competitive through off-shoring while retaining the benefits of higher-value production domestically (e.g. employment, tax revenues), thus reflecting a strategy to sustain the territorially (domestically) embedded nature of Chinese economic development (Sun, 2017).

The BRI is framed by China as an alternative to Western-led globalization that will help bring peace, cooperation, development and improved governance to the world system (Liu & Dunford, 2016; Sidaway & Woon, 2017; Xi, 2017). It draws direct inspiration from romanticized notions of the ancient Silk Road that once linked China to Europe and beyond. Development is seen to come not from the imposition of governance structures such as those associated with liberal democracies, but through transnational relationships that are more inclusive, creating ‘win-win’ exchange scenarios. In the BRI’s vision statement five goals are central – ‘policy coordination, connectivity, unimpeded trade, financial integration and people-to-people bonds’ (National Development and Reform Commission, 2015).

The BRI ‘platform’ operates through hybrid state-market forces, structures and flows; a blend of top-down state control and bottom-up market competition (Naughton & Tsai, 2015; Petry, 2021). In doing so, it strives to, in part, extend the Chinese development model centred on SOEs, investment-led growth and state intervention to spur on the domestic private sector (Flint and Waddoups, 2021; Han & Webber, 2020; Liu et al., 2020). Camba (2020) sees two principal modalities or regimes at work with respect to what he calls the ‘Sino-centric capital export regime’ – one associated with state-backed capital, the other privatized and more flexible in nature. State capital can be seen principally in large-scale investments, development aid and concessional loans. Alternatively, ‘flexible’ capital flows are more diffuse, less visible, and, in some cases, illicit in nature (e.g. associated with gambling), serving as a means for China’s private sector to ‘extricate itself from the restraints placed [on it] by the CCP [Chinese Communist Party]’ (Camba, 2020, p. 3). Taken together, state-backed and flexible capital export flows enable China and Chinese businesspeople to establish transnational couplings whose particular territorializations in recipient states, and consequent development outcomes, are shaped by ‘localized sets of practices’, ‘spatial arrangements’ and ‘place-specific geopolitics’ (Flint & Zhu, 2019, p. 97).

Beyond these more concretized perspectives on the BRI, others have viewed it relationally, discursively and epistemologically. For Oliveira et al. (2020) the BRI is a relational, contested bundle of intertwined discourses, policies and projects that are often contradictory with one another. Discursively, Murton (2021) views it as more of a big ‘idea’ rather than a highly specified strategy; a vision for the future to be realized flexibly both temporally and spatially. Epistemologically, the BRI is seen by some as an analytical object that can contribute to the development of theories on geopolitics, security studies and uneven development, among others (Bunnell, 2021; Lin et al., 2021). Moreover, it can facilitate, as we demonstrate here, comparative research into evolving political-economic configurations of transnational capitalism given its global reach and significance in shaping development pathways/prospects; particularly in the Global South.

We contribute to these debates and dialogues through an examination of the BRI’s roll out in East Africa. Our analysis centres on the main vectors/couplings through which BRI touches down in countries – infrastructure, industrial offshoring and imports. The strength, quality and developmental significance of these vectors/couplings are determined by the arrangements of, and interactions between, their constitutive features: spatial forms, key actors, flows, practices and modes of governance. Spatial forms are material and place-specific manifestations of the infrastructures and sites necessary for transnational couplings to take place such as ports, logistics hubs, industrial parks, special economic zones, railways, information-communication technology (ICT) infrastructure, power grids, factories and pipelines. Key actors include states, investors, managers, consumers, migrants, enterprises, workers, intermediaries and others who are essential for the coupling’s existence. Flows are the materials, capital, commodities, people, ideas, meanings, policies and institutions that move through vectors, couplings and key actors, and which have a critical influence on development outcomes. Practices are fundamental features of couplings that reflect and influence how actors establish, maintain and utilize the transnational relationships made possible through Going Out. Ultimately, it is modes of governance that determine how couplings are structured, how they function, and in whose interests they serve. Governance entails actor-to-actor power relations and structural power factors that shape the establishment and evolution of couplings, and the asymmetrical benefits that these can generate. The characteristics of and interrelationships between these features are what constitutes transnational couplings, shaping the development outcomes they produce. Such an approach offers a means to conceptually frame, and empirically compare and contrast the features, processes, and outcomes associated with the BRI and Chinese state capitalism globally.

We now deploy this framing to explicate on-going engagements between China and East African countries as part of the BRI strategy. Our analysis is built primarily off of a detailed literature review of on-going developments, one that, in the case of Kenya, is supplemented by interviews and field research conducted between 2017 and 2019. In Kenya, interviews were conducted with about 36 individuals working in planning agencies, development organizations, universities, business associations, innovation hubs and municipal government in order to gauge the extent, depth and significance of China’s engagement, particularly in the Nairobi regional economy.2 While there are limitations to this approach, and a pressing need for further regional research, our examination reveals key features and outcomes of BRI in East Africa while illustrating the utility of key framing concepts. Moreover, the similarities and contrasts between countries demonstrates the flexibility, adaptability and consistency of China’s strategy and the often inconsistent, contingent and unsuccessful ways in which it articulates with the region’s political economies.

Vectors and couplings of the BRI in East Africa

East Africa, particularly Djibouti, Ethiopia and Kenya (see Figure 2, map), has emerged as a key ‘node’ in the BRI strategy, linking the Maritime Silk Road to Africa and on into Europe through infrastructure and industrial investments that will enhance and support the flow of commodities and raw materials to/from China. As Table 1 shows, China’s impress in East Africa has been highly significant since 2014. FDI flows have been, by and large, steady and FDI stocks have been rising – totaling US $5.3 billion at the end of 2020. Chinese sponsored loans fluctuate annually but recent trends in Ethiopia, Djibouti and Kenya demonstrate the levels of debt that accompany BRI-related infrastructure projects such as the ports and railways recently constructed in these countries; totaling US $11.3 billion in loans since 2014. Most strikingly, East Africa’s balance of trade with China has become increasingly negative as consumer and intermediate goods have flooded regional markets, often outcompeting domestic manufacturers. BRI construction projects have also facilitated labour migration, as nearly 13,000–20,000 Chinese workers were in these three countries between 2018 and 2020. The relatively small size of East African economies means that the impacts of BRI could be hugely developmentally significant and positive. In contrast, and given the geopolitical and economic positionality of East Africa vis-à-vis China, there are important questions as to whether BRI might facilitate greater exploitation, extraversion and dependence. All told, as we detail below, each of these countries has distinct institutional configurations, conjunctural features and engagements with Chinese state capitalism that are shaping the manner in which BRI is touching down and its development implications.

Figure 2. The East Africa region (Perry-Castaneda Map Library).

Djibouti: a Chinese entrepôt in the making?

Djibouti is one of the smallest countries in Africa yet one that has great geopolitical significance given its strategic location along the Bab el-Mandeb strait that separates the Red Sea from the Gulf of Aden (see Figure 2) and links the Middle East and Asia to Europe by sea. As a result, the country has garnered significant attention as a location for military, especially naval, bases, now hosting French, Japanese, USA and Chinese ones in addition to forces from Spain and Germany and recently approving the construction of a Saudi base. The China’s People’s Liberation Army (PLA) base – built in 2016 – was the country’s first overseas military installation; one that signalled the country’s desire to show its geopolitical muscle albeit in a rather pragmatic manner given it is intended to play a supporting role for overseas forces, to protect China’s geoeconomic and energy interests, and to contribute to anti-piracy activities through ‘naval multilateral’ efforts in the Horn of Africa (Sun & Zoubir, 2021).

Beyond its geopolitical importance, Djibouti is a key node in the BRI network, crucial for the success of Chinese industrial investments in East Africa and its trade flows to Europe (Zhou, 2017). Djibouti’s importance is particularly relevant given China’s infrastructure and industrial investments in Ethiopia (discussed below) given it is the latter country’s principal port, responsible for handling about 85% of all import/export flows (Wan et al., 2020). To facilitate such flows, China funded a multi-billion dollar ($505 million of which went to Djibouti) standard gauge railway (SGR) linking Djibouti’s port to Addis Ababa. Other Chinese investments have included a new multi-purpose port at Doraleh, smaller ports, roads, a freshwater conduit from Ethiopia, energy grid infrastructure, airports, a liquid natural gas (LNG) terminal, a salt terminal, a geothermal plant, a national stadium, a ‘People’s Palace’, and Africa’s largest free-trade zone (FTZ), adjacent to the Doraleh port (Styan, 2020; Sun & Zoubir, 2021). Key Chinese actors associated with these spatial forms include the Exim bank, SOEs in construction, transport, energy, telecommunications, etc., the China Merchant Group (the major investor in the Djibouti City port and the FTZ), the Dalian Port Authority, and other smaller, private firms and investors serving as subcontractors on construction projects or investing in manufacturing activities in the FTZ.

These investments have been funded by mainly state-backed capital from China as a means to strengthen political ties and advance geoeconomic and geopolitical interests (Doshi, 2021), although in a context of substantial strategic autonomy for Djiboutian state actors who are focussed on regime maintenance (Barton, 2021). Capital flows are not solely manifest in new-build infrastructure but also in the acquisition of equity stakes in, and/or partnerships with, Djibouti’s railway and port authorities and their operations. Particularly significant here has been the China Merchant Group (CMG) which committed a 23.5% equity stake in a partnership with the Djibouti Ports Authority to form Porte de Djibouti which will oversee the development of the FTZ at Doraleh. A principal aim of this initiative is to export the ‘Shekou model’ from Shenzhen province; a successful one that CMG developed in the 1980s through investments from Hong Kong (Wan et al., 2020). In Djibouti, the goal is to copy this model and integrate the ports, railway, city, and FTZ into a functional system that can help position the country as the leading transport, trade and logistics hub for commodity flows to/from the region; a Singapore in the Horn of Africa (Wan et al., 2020).

Such practices are enabled by a top-down governance model that has met little or no resistance from the public. The CCP has courted Djibouti’s long-time president Ismail Omar Guelleh; an autocrat who wields significant personalized power and whose government operates with little transparency or oversight from civil society (Styan, 2020). Such a governance model aligns well with China’s mutual non-interference approach, one that does not openly criticize or question the sovereignty of the governments it engages with provided China’s pragmatic needs are realized. In this case, Guelleh is an ideal partner for China given he provides ‘stability, flexibility, and a strongman who can deliver’ (Vertin, 2020, p. 10). As such, the governance of the China-Djibouti transnational coupling operates principally through centralized, geopolitical relations as China exercises its ‘latent’ power (Sun & Zoubir, 2021).

BRI’s development outcomes in Djibouti have been mixed. While it is clear that Chinese investments have helped to boost gross domestic product (GDP) growth and generated employment in recent years, Djibouti’s external public debt increased from 34% in 2013–71% of GDP in 2018 (Vertin, 2020), with a reported 77% of this owed to Chinese sources (Dahir, 2019). Moreover, there are fears that loan defaults could result in the forfeiture of the Doraleh terminal to China. Employment gains are also quite underwhelming as job creation has not, by and large, materialized to the extent imagined given wage rates in Djibouti are significantly (4x) higher than in Ethiopia (Wan et al., 2020). Rising inequality has also accompanied GDP growth as port-associated elites siphon off the benefits from military bases and other logistics investments (Abegunrin & Manyeruke, 2020; Vertin, 2020). External dependency is also a major concern given 80% of the country’s development capital comes from FDI, principally from China (Wan et al., 2020).

As a variegation of China’s state-led neoglobalization strategy, the Djibouti case is an interesting amalgam of state-driven, top-down geopolitical and geoeconomic arrangements. According to its developer ‘The Touchroad Djibouti Special Economic Zone (TDSEZ) will be a fulcrum of the China-proposed Belt and Road Initiative’ (TouchRoad Group, 2016). Geopolitically, the presence of the PLA and China’s navy signal the country’s readiness and capacity to exert power and influence through ‘harder’ means. Geoeconomically, China views Djibouti as a key coordinating hub for trade with Europe, and a stable, closely allied port city–state where commodity and financial flows can be managed effectively through partnerships and top-down arrangements. Such a transformation took on greater meaning in 2018 when China encouraged and helped to facilitate the nationalization of the Doraleh port once run by Dubai Ports World (DP World, a 33% equity stake in the port since 2004), with Djibouti then handing 25% of its stake in Doraleh over to China Merchants Port Holdings, a subsidiary of CMG (Kuo, 2019; Paris, 2020; Styan, 2020).3 The Doraleh take over, coupled with CMG’s large investments in, and control over, the old city port and the international FTZ, means that China is likely to now have significant control over commodity flows into and out of Djibouti and Ethiopia; potentially establishing Djibouti as a proxy entrepôt state to help widen and deepen China’s trade relations.

Ethiopia: a showcase for Chinese state capitalism?

Like Djibouti, the relationship between China and Ethiopia is also close, cooperative and lacking in significant oversight from civil society. Moreover, the actors, spatial forms and flows are similar, albeit more diverse given Ethiopia’s size and significance as a site for industrial offshoring. Key Chinese actors include large SOE’s in the construction, railway, telecom and energy sectors, the Beijing based Asian Infrastructure and Investment Bank (AIIB), China’s Exim bank, the Ministry of Commerce, state-backed investor groups (e.g. Qiyuan industrial group), and numerous smaller subcontractor construction firms, and private, smaller-scale manufacturing firms who operate factories industrial parks and zones. These actors’ activities are shaped principally by Ethiopian state agencies such as the Ethiopian Railway Corporation, the Industrial Park Development Corporation (IPDC), the Ministry of Innovation and Technology and other sector-specific ministries.

Ethiopia is the third highest ranking recipient of Chinese development aid globally and state-backed capital has been channelled into a wide range of projects including the Djibouti-Ethiopia railway, a light railway system in Addis Ababa (jointly operated by Shenzhen Metro), numerous ring roads, power lines, wind farms, dams, fibre-optic cable systems, training institutes, polytechnic colleges, a Confucius Institute at Addis Ababa University, and a Telecommunications Institute (Meester, 2021). Significant levels of training and knowledge flows have accompanied these investments, with many Ethiopian officials and students traveling to China to study or receive training (Abegunrin & Manyeruke, 2020; Dittgen & Demissie, 2017; Fei & Liao, 2020; Meester, 2021). Further enabling policy and institutional transfer is Ethiopia’s Meles Zenawi Leadership Academy, a think tank and training centre for government officials and civil servants explicitly modelled after China’s Executive Leadership Academy and Beijing’s Administrative College (Meester, 2021).

This close relationship is a function of the Ethiopian government’s desire to pursue a developmental state model akin to China’s (Nicholas, 2017). China has welcomed such an alignment given Addis Ababa’s status as a hub for pan-African political and economic relations, serving important continental roles as the headquarters of the Africa Union and United Nations Economic Commission for Africa (UNECA) and a major economic hub in the Horn of Africa. China has thus viewed Ethiopia as a place where it can showcase its developmental model through a combination of large scale, and sometimes symbolic (e.g. the new African Union headquarters), infrastructure projects and industrial development investments (Benjamin, 2020; Fei & Liao, 2020). As Aberg and Becker (2019, p. 11) note, ‘Ethiopia enjoys political network centrality and the capacity to organize networking opportunities’ for China. For the Ethiopian government, such investments are welcome given its desire to attract FDI and exert significant top-down control over strategic sectors (e.g. railways, telecom) (Dittgen & Demissie, 2017). In the case of telecom, and in contrast to the World Bank, China did not pressure Ethiopia to liberalize initially, instead forming partnerships between Chinese SOEs (namely Huawei and ZTE) and Ethio Telecom in order to upgrade the latter’s network and services, although partial market liberalization is currently underway (Dione, 2021; Fei, 2020a).

Beyond infrastructure and basic services, Chinese capital flows have enabled the construction of large-scale industrial zones where Chinese manufacturers have offshored production activities. Chinese built manufacturing centres include the Eastern Industrial Zone, Bole Lemi Industrial Park, Hawassa Industrial Park, Mekelle Industrial Park and Huajian Light Industry City, each of which was constructed through state-backed capital channelled through investment groups (e.g. Qiyuan Industrial Group in Eastern Industrial Zone), large-scale construction SOEs (e.g. China Construction and Engineering Corporation), and smaller private and SOE construction firms, and in partnership with Ethiopia’s Industrial Park Development Corporation (IPDC) (Bräutigam & Tang, 2014; Fei & Liao, 2020; Giannecchini & Taylor, 2018; Nicholas, 2017). Once built, these parks and zones are occupied by smaller-scale, private-sector manufacturers from China who typically invest $5 – $20 million to set up factories producing textiles, apparel, construction materials, metal works, food products and miscellaneous light manufactured goods for domestic consumption and export (Fei & Liao, 2020; Nicholas, 2017). Park developers and firms are attracted by a wide range of incentives including customs duty waivers, tax exemptions and subsidized utility rates. In some cases, investing firms also get financial and other forms of support from provincial or municipal authorities in China, particularly from wealthier provinces (Fei, 2021). Adding to the attractiveness is the fact that Ethiopian-based manufacturers can gain access to preferential trade agreements such as the USA’s African Growth and Opportunity Act (AGOA) and the EU’s Everything but Arms Initiative.

The other major pull factor drawing Chinese firms are costs, with Ethiopia having the lowest wages in the world for textile and clothing workers (Barrett & Baumann-Pauly, 2019). Average wages are now approximately one-eighth of what they are in China; a ratio similar to that when Japan began its catch-up phase with Britain (Frankema & Van Waijenburg, 2018). Specifically, Ethiopian garment workers have an average base wage of only US $26 a month – which is less than 8% of the average for equivalent workers in China – thus making Chinese investment asset seeking (i.e. cheap labour) rather than market-oriented (Barrett & Baumann-Pauly, 2019). All told, Ethiopia is seen as a place to locate lower-value industries from China in order to sustain competitiveness and help alleviate surplus capacity at home; a spatial fix through offshoring (Fei, 2021; Fei & Liao, 2020; Meester, 2021; Nicholas, 2017), although this has been compromised by the ongoing civil war there.

Another attraction is the relative ease through which Chinese firms are able to operate autonomously and collectively in industrial zones. There are three main reasons for this mode of governance. First, domestic Ethiopian investors are by and large excluded from Chinese built SEZs which means that these parks operate principally as what Gonzalez-Vicente (2019, p. 501) calls ‘sovereignty regimes’ that ‘enable the creation of spaces of exception for accumulation’. Chinese firms are freer to operate profitably given the subsidies and incentives available; conditions that are unavailable to domestic firms. Second, labour expatriation from China is a critical management strategy, particularly with respect to managerial and more-skilled positions; one that enables manufacturers more easily export Chinese production practices and cultures (Fei, 2020b). While the majority of workers are Ethiopians, they remain subject to precarious working conditions, given few opportunities for promotion as most cannot speak Chinese, and are expected to adhere to Chinese standards for work and productivity in order to keep their positions (Fei, 2020c).4 Third, Chinese investors have benefited from their ability to collectively organize and voice concerns to Ethiopian regulators as needed, particularly as these relate to obstructing calls for labour union organizing (Fei & Liao, 2020).

The development implications of the BRI in Ethiopia are arguably some of the most potentially positive and significant to be found in Africa today. Particularly encouraging has been employment creation in manufacturing enterprises such as the Huajin shoe company which employs over 4000 Ethiopians (Dittgen & Demissie, 2017). Upgraded energy, transport and other infrastructures have generally been viewed as positive developments, albeit with significant debt implications as Ethiopia is presently the second most indebted African country, owing China alone $13.5 billion (Tarrósy, 2020). Moreover, major investments in the Djibouti-Ethiopia railway and the Addis Ababa light railway have yet to operate profitably and the railway, in particular, is struggling due to operational problems and the inability to increase its freight transport volume to a level that might enable repayment of the 30-year loan that funded it (Carrai, 2021; Tarrosy & Vörös, 2019). Even if the railway does achieve expected volumes, the net result may be a furthering of the trade gap as imported Chinese and other countries’ manufactured goods flow more easily into Ethiopia’s markets, crowding out domestic manufactures (Abegunrin & Manyeruke, 2020).

As for the prospects of industrial upgrading and positive spillovers from SEZs to domestic manufacturers, thus far the indications are that these have by and large not materialized. There has been growth in manufacturing value-added – particularly between 2012 and 2018 – but the Ethiopian economy has not been structurally transformed as its primary exports remain raw materials (e.g. coffee, sesame seeds) and SEZ based manufacturers have not developed the kinds of backward linkages needed to spur multiplier effects (Nicholas, 2017). As Giannecchini and Taylor (2018, p. 31) observe, investments in SEZs like the Eastern Industrial Zone follow a ‘scattergun approach’ given there is little or no direction given to, or economic development logic associated with, the manufacturing activities that are established in zones, particularly with respect to the kinds of technologies and backward linkages.

Despite the uncertainties and mixed outcomes, Ethiopia remains committed to pursuing continued and deepened transnational cooperation with China, while the latter sees Ethiopia as a crucial showcase for BRI’s potential as a ‘globalized’ development strategy. However, there are important questions as to whether this alliance will continue and if it will deepen Ethiopia’s dependence on China (see Carmody et al., 2020). Such entrenched dependency is particularly problematic in part because Ethiopia has had a highly effective, developmental-state-type industrial policy that is in jeopardy as the state prioritizes serving China’s, rather than domestic needs (Chandra, 2013; Oqubay, 2015). Thus, it is best to view the state ‘in relational terms as an institutional complex through which different social forces act’ (Ziso, 2018, p. 2).

Kenya: the significance of Chinese imports

Kenya is the East African Community’s largest economy, one that has been influenced significantly by Chinese infrastructure investments, industrial offshoring activities and import flows in the past decade. With respect to infrastructure, China has supported numerous road building projects (e.g. Ngong road and major ring roads in Nairobi), power grid upgrades, ports and information communication technology (ICT) projects (e.g. data centres) throughout the country. As is the case elsewhere, most of these projects have been enabled by concessional loans and other forms of state-backed capital from China (namely Exim bank) with Chinese SOEs and subcontractors managing construction and project implementation. The most significant, completed infrastructure project to date is the multi-billion dollar, Chinese-funded standard gauge railway (SGR) that connects Kenya’s main port of Mombasa to Nairobi. The 300-mile railway opened in October 2017 and the express train has reduced passenger travel time from 7?hours by bus to 4?hours and 30?minutes with (rail) freight transport times reduced from 24 to 8?hours. The SGR’s operations are currently run by Afristar Operations, a subsidiary of the China Road and Bridge Corporation (CRBC), but this relationship is coming to an early end as Kenyan authorities are terminating the contract five years early (in 2022) due to cost and debt concerns (Nyabiage, 2021).

While welcomed originally as part of the Kenyan Government’s Vision 2030 development plan, the SGR has been controversial both in terms of the US $2.5 billion of debt associated with its construction, and with respect to its impacts on the logistics and transportation industry in Kenya (Carmody et al., 2022; Taylor, 2020). When asked about the project, interviewees were by and large skeptical noting particularly that it was of lower quality compared with the railway linking Addis Ababa to Djibouti, that it was operating at a net loss, and that its actual costs were far greater (4–5 times) than expected due in large part to corruption, exaggerated land prices and lack of transparency with regard to its financing and implementation. All told, the general sentiment was that, despite being billed as a panacea for industrial development, the SGR was too expensive, a ‘failure’ and/or simply ‘not worth it’ in the end.

Kenyan trucking companies and truckers too have been unhappy with the SGR, particularly with recent mandates from the KPA requiring importers to use the SGR for freight shipments to Nairobi’s Inland Container Depot (ICD), a policy that has resulted in increased transport costs and scaled down operations, that caused protests in Mombasa (Kitimo, 2020). Given this poor performance with respect to freight transport, it has been rumored that the port of Mombasa might have to be given to China if Kenya defaulted on the debt associated with loans used to build the railway (Mwangi, 2019; Niba, 2019; Tarrósy, 2020), although recently debunked (Bräutigam et al., 2022). Funds for the final sections of the railway to Uganda and onto South Sudan have yet to be granted by China but Kenya was recently given a restructured repayment deal for the loans granted for approved/existing SGR lines (Carrai, 2021; Mwangi, 2019; Omondi, 2021). Moreover, the planned extension of Kenya’s SGR has been further jeopardized as strategic attention is now shifting to a potential alternative route that would extend the Djibouti-Ethiopia railway to Port Sudan; a project likely to garner significant interest from China if deemed feasible (Muchira, 2020; Omondi, 2021).

The problems associated with the SGR reflects the particular ways in which Going Out/BRI strategies intersect with Kenyan politics and institutions. Such entanglements differ in significant ways from Ethiopia and Djibouti where the effective implementation of large-scale projects has been relatively straightforward given the alignments between China and these states. In Kenya, however, Chinese SOEs have been forced to adapt and govern projects through localization strategies that often increase costs significantly (Carrai, 2021). Two of these stand out as particularly important: input procurement and land-acquisition practices. Although Chinese (Exim bank) concessional loans typically mandate that 50% of all contracts go to Chinese firms, Kenyan law stipulates that 40% of all inputs and/or labour be sourced from Kenya for inward FDI projects. As a Ministry of Industry, Trade, and Enterprise official noted, ‘40% sourcing is simply not happening’ given there is insufficient capacity amongst Kenya manufacturers to supply higher-value inputs and/or component parts to construction projects and FDI sponsored manufacturers. In 2017 a UNDP official noted that 80% of building materials are being imported, including cement, with much of it coming from China. Moreover, interviewees further noted that ‘local content is deceiving’ with ‘fake Kenyan companies’ often created to comply with procurement laws. In other cases, local sourcing is possible, such as in logistics (e.g. trucking) and some basic construction material sectors (e.g. gravel), but here Chinese SOEs may be forced to do business with ‘politically connected [Kenyan] oligarchs’ who effectively force SOEs to acquire materials and services from their firms (Wang & Wissenbach, 2019).5 All told, as one respondent observed, while there are marginal gains with respect to employment creation and value capture in some, low-value sectors of Kenya’s economy, BRI-related infrastructure projects disproportionately benefit Chinese banks, construction firms, and importers, ‘creating multiplier effects in China, not Kenya’.

The second issue relates to practices and governance of land in Kenya, and the difficulties this posed for purchasing properties along the SGR route. Kenyan land laws are rather complex and provide significant legal protections to landowners that created numerous disputes over compensation which greatly increased costs for the Kenyan government while delaying construction (Carrai, 2021; Wang & Wissenbach, 2019). Several respondents noted the corruption, lack of transparency and exaggerated costs that accompany most projects where large land deals between foreign investors, state agencies and landowners are involved. Land speculation, often driven by politically connected people who acquire land before big projects like the SGR begin, forces the state to pay disproportionately higher prices for the lands guaranteed to projects. Powerful local elites may thus leverage Chinese engagements for their own ends. Moreover, legal battles over land rights often ensue further increasing the monetary and transaction costs of implementing projects, and further slowing the pace of construction/development. Such challenges, the growing belief that loan defaults are likely, increasing scepticism among Kenyans as to net value of big infrastructure projects, recent scandals involving Chinese imports (e.g. garlic and fish), and racial tensions are cooling relations between Kenya and China.6 While this has significant implications for big-ticket projects like the SGR, it has not, in fact, slowed the impact of BRI’s industry and import vectors.

Industrial and trade cooperation remain a significant part of the Kenya-China alliance with a recent exposition in Nairobi promoting FDI and GPN integration opportunities (Xinhuanet, 2019). Like Ethiopia, Kenya is taking an increasing interest in Chinese investments in new export processing zones (EPZ), viewing China as a role model for how to kick-start industrialization (Njoroge & Musyoka, 2017). According to an official in the Konza Techno City Development Authority, Kenya is, in part, striving to take the ‘Chinese route?…?importing the knowledge economy’. In reality, however, Chinese entrepreneurs are making investments in mature industries such as the building materials sector where BRI-related projects and property speculation in Nairobi and other cities are creating high demand (Xia, 2019). Such investments, as one respondent noted, generate ‘low-level jobs’ for Kenyans primarily. As of 2018, there were an estimated 396 Chinese companies operating in Kenya, employing 50,000 workers in 2018 alone (Gu & Qiu, 2019; Otieno, 2019). Many of these firms produce a diverse range of products including aluminium and ceramic building materials, furnishings, batteries, automotive and machinery assembly, and diapers (Xia, 2019).

Chinese-owned businesses in EPZ/SEZ and elsewhere often remain dependent on suppliers back home for intermediate inputs and for labour expatriation: they otherwise operate independently and without subsidization from state authorities back home. Especially challenging is the frequency and intensity of worker disputes or strikes, an issue that many Chinese manufacturers have had little experience dealing with given labour regimes at home. This has forced some managers to screen hires for potential labour activism, a practice that does not bode well for the long-term social upgrading of Kenyan workers (Xia, 2019). Troublingly, one (Kenyan) respondent suggested that Kenya needs to follow a more ‘militaristic’, no tolerance training regime for workers, one akin to Ethiopia’s approach, in order to sustain and increase FDI in manufacturing.

As in Ethiopia, Chinese FDI in Kenya is also rather scattergun, not guided by any clear industrial policy or strategy. Chinese firms instead come to Kenya to take advantage of low wages, preferential trade agreements like AGOA, and the incentives and subsidies that accompany investments in EPZs. As representatives from KenInvest (Kenya’s investment authority) noted, the majority of investments are in construction with many of these enterprises small-to-medium sized, started by Chinese migrants with flexible capital and a desire to build businesses outside the restraints and heightened competition found at home (Xia, 2019). Subsidies, tax breaks and other investment incentives – unavailable to domestic firms – are essential drivers of this FDI, with several respondents noting that the survival of these firms is dependent on them. As in Ethiopia, AGOA has been particularly significant in driving investment with a Kenyan researcher noting that ‘without AGOA the Kenyan textile industry will not survive’. A main difference in Kenya being the more diffuse nature of investments given state-backed, large-scale investments have not materialized to the extent observed in Ethiopia. Kenya is thus experiencing a more decentralized and contested engagement with Chinese state capitalism with respect to industry, albeit one that is having significant crowding-out effects on domestic manufacturers. All told, as one interviewee, a commercial banker, noted, Kenya’s EPZ strategy is not having the promised impacts as domestic industrial capacity remains higher than the demand for it while Chinese-owned firms gain greater control over the manufacturing sector.

Such crowding out effects are made worse by Chinese imports, with interviewees noting that consumers increasingly prefer imports in a range of markets with China successfully adapting to different market segments from higher to lower end. Kenya imports more than twice as much from China as Ethiopia exports, marking a different type of dependence – on inward couplings and flows. This is evident in the massive trade deficit (see Table 1) that exists between the countries, averaging just over the US $5 billion between 2018 and 2020. It is also evident in freight flows on the SGR; for every 7.8 tonnes of imported cargo coming into the Mombasa port from outside, just 1 tonne from within Kenya returns (Taylor, 2020). As one respondent noted, the railway has simply improved the accessibility and flow of Chinese imports into Kenya rather than stimulating the development of domestic manufacturing. Hardware, furniture and clothing importers are emblematic of this trend with a standard practice being to enable traders/dealers to travel to China where they can purchase goods and load/send shipping containers full of imports back to Kenya. Such an imbalance is particularly significant given that many/most of these imports are in mature industries for materials and consumer goods that Kenyan firms could, ideally, meet demand for. Instead, Chinese imports have made it extremely difficult for Kenyan manufacturers to compete on the basis of price or quality, and this has stifled manufacturing growth and employment generation.7 Worse still, even in cases where Kenyan innovators have developed novel technologies to market locally – e.g. app-driven cashless payment systems for local transporters or smart-technologies for supplying cooking gas to slum residents – the hardware components associated with these innovations have to be outsourced internationally, often to China, given the ‘capabilities are lacking in Kenya’.

To summarize, BRI in Kenya operates with through many of the same/similar actors, spatial forms, flows, practices and modes of governance as seen in Djibouti and Ethiopia. Here, however, Chinese state-backed capital, while significant, is prone to become entangled in the clientelist networks of political elites that surround large-scale infrastructure and other investments. In this context, flexible capital and imports play a more significant role as BRI operates in a more diffuse, bottom-up and less coordinated manner. Private and often smaller-scale capital flows for industry and real estate investments, coupled with a flood of imported consumer and other manufactured goods from China that are facilitated in part by Chinese migrants to Kenya, characterize key vectors and couplings in this case. Kenya’s engagements with BRI thus demonstrate its flexible and malleable nature while at the same time highlighting the fact that Chinese neoglobalization operates in ways that significantly challenge notions that it is a highly coherent, centralized and/or totalizing process.

Discussion

As detailed above, the BRI’s vectors lead to the establishment of transnational couplings that are mediated and constituted by actors, spatial forms, flows, practices and modes of governance in East Africa. Couplings in turn translate into development outcomes such as employment creation or the disarticulations associated with enclave-oriented development and splintered urbanization. While there are many similarities with respect to the features that manifest BRI’s couplings in the region, here we focus on major contrasts in order to highlight the contingent and conjunctural factors that produce variegations of Chinese state capitalism and neoglobalization.

In Djibouti, the BRI is principally organized through state-backed capital that operates in close alignment with a personalized, autocratic government willing to cooperate with China. Here we see the geopolitical ramifications of Chinese state capitalism most clearly as a key focus has been on securing a foothold in the region in order to secure China’s economic interests while at the same time signalling symbolically as to the legitimacy, scale, and power of its globalization project. Given the political alignments, and lack of any critical civil society response, BRI operates here in a top-down, yet circumscribed manner – as a strategy for establishing and securing an entrepôt state through which resource, financial and commodity flows between China and Chinese firms and markets in Africa, Europe, and beyond can be expanded and managed.

Ethiopia, in some contrast, represents the most complete, successful variegation of Chinese state capitalism in Africa today; a place whose political institutions, history and development priorities are all well aligned with BRI’s formal strategy. Here we see a well-coordinated blend of state-backed and flexible, private capital operating in infrastructure and industrial vectors through support and the political backing of a state driven to emulate the Chinese development model. While some infrastructure investments (e.g. Djibouti-Ethiopian railway) are underperforming, China’s commitment to Ethiopia is more fundamentally about industrial offshoring on a large scale; a means to exploit low wages, preferential trade agreements and the power of coalitions of Chinese manufacturers able to operate in semi-sovereign spaces where domestic regulators have limited power. Ethiopia is also seen by China as a symbolic showcase of what its state-capitalist project can do developmentally, manifest in modernized, upgraded infrastructures and large-scale formal manufacturing operations.

While Kenya is a less coherent and coordinated context for BRI’s realization, its impacts remain highly significant. Here state-backed capital from China for infrastructure, especially the SGR, becomes entangled with patronage networks of political and other elites, and a more democratic political system, thus limiting the control that Chinese SOEs have over project construction and implementation. The net result has been increased costs, delays in construction, controversies related to debt and corruption, and public doubts about the value-added of big projects sponsored by China. In this context, the BRI’s other vectors – smaller-scale, private industrial investments and imports from China – have taken on a highly significant role, establishing couplings in support of offshoring and China-based manufacturing firms back home. These couplings have, in effect, crowded out Kenyan manufacturers, leading to a dynamic of deindustrialization and/or downgrading of domestic firms away from production and into importing.

Beyond there being contingent, particular forms of Chinese state capitalism and neoglobalization in Djibouti, Ethiopia and Kenya, consistencies remain with respect to some of the development outcomes and disarticulations these couplings are producing. On the positive side, Chinese investments and industries are stimulating economic growth and employment generation in the region, while providing upgraded infrastructures and services in a wide range of essential sectors – energy, water, transportation, logistics, telecommunications, etc. The money for such investments would likely be impossible for these countries to independently raise on such a scale and time frame, thus meaning that such infrastructure improvements and industrial facilities would likely not exist. In this respect, it is clear that Chinese neoglobalization is transforming physical and industrial landscapes throughout the region.

Such impacts are encouraging but they only tell a part of the story given the uneven developments that have accompanied BRI’s vectors and couplings. While we do not subscribe to a debt-trap diplomacy thesis regarding China’s intentions (see Carmody, 2020), debt levels are a great concern, with underperforming loans raising serious questions about the ability for states to meet payment obligations. Pre-COVID growth rates, while often robust, belay increasing inequalities, dependencies and structural disarticulations such as the enclaved nature of Chinese manufacturing firms and industrial zones which have, by and large, not developed significant backward linkages or generated knowledge and technological spillovers for domestic enterprises. Moreover, employment creation for Africans has been limited to largely low-skilled positions, as more-skilled and management jobs remain dominated by Chinese expatriates in most sectors.

While the full implications of the BRI for development pathways remains to be seen, there are few signs at this stage that it will result in the kind of immanent, structural changes needed to transform East African political economies such that they are able to facilitate growth, distribution and more even forms of socioeconomic development. The main reason for this is that the BRI’s transnational couplings, perhaps unsurprisingly, ultimately amount to a set of rather cautious, conservative and pragmatic endeavours aimed at securing and ensuring the strategic flows (e.g. resources, exports and imports) needed to sustain and upgrade China’s domestic economy while advancing its geopolitical interests through more discursive/symbolic gestures that signal to an alternative development model. It is an enclaved approach, one that depends on and thrives through/in spaces of production and investment that are insulated, oft hidden and/or protected from wider public scrutiny or attention through large-scale, top-down, infrastructure and industrial projects, or more subtle, diffuse and difficult to trace flows of flexible capital and imports. Such modes of governance are understandable given the risks of handing control over projects to foreign actors (namely political elites) with their own self-interests at stake, and because of the tensions and potential flare-ups of anti-Chinese sentiment that have accompanied the expansion and extension of Chinese state capitalism. BRI is thus ultimately a pragmatic, loosely coordinated strategy or discursive framing (Narins & Agnew, 2020), not the hegemonic, monolithic and/or uniform project that is often parodied in the op-ed pages of Western media. These realities limit the prospects for BRI to profoundly transform extant development trajectories in the East Africa, and the Global South more generally.