China in Djibouti: A Future Uncertain

By Hunter Baldridge  

There is a consensus among observers that China’s growth and influence in Africa is one of the largest geopolitical moves of the 21st century. It will likely have long-lasting repercussions. As such, other state actors, like the U.S. or the European Union, must choose how to react to China’s new sphere of influence, or face the consequences of their own inaction.   

China has focused a large part of its foreign policy around the African continent. From a relatively small player, it has transformed itself into the largest trading partner in the region. In fact, since the launching of the Forum on China–Africa Cooperation in 2000, Chinese trade and investment in Africa has increased seventeen times and investment over one hundred times. This shift has had massive implications for international relations, state to state relations, and local job prospects, as well as the everyday lives of many. And since countries like the United States and Japan have ignored the continent of Africa for many years, this has led to a massive leadership gap for China to exploit. A prime example is Djibouti, which can be explored by studying the way in which it has utilized its strategic location in terms of military, trade, but also regarding and its shifting relationships where its influence has grown over the last twenty years.  

Djibouti’s Strategic Location  

Djibouti has a relatively small surface with a pivotal location. Unlike other African countries, it does not rely on natural resources. Instead, Djibouti’s influence stems from its geographic location, on the Bab-el-Mandeb Straight, in front of the Yemeni coast. As much as thirty percent of the world’s shipping routes and 3.8 million barrels of oil pass through this strategic strait daily, to reach the Red Sea. While the Horn of Africa is a notably unstable region, with states like Eritrea, Ethiopia, Somalia and Yemen up until recently suffering from a piracy issue that impacted global trade, Djibouti has remained relatively unscathed. 

Djibouti’s position as a relatively stable location in the Horn of Africa has attracted humanitarian and international military bases, including the Chinese. Historically speaking, Djibouti did not have formal relations with China until 1979; however, China had been very active since then in the region, working with Ethiopia diplomatically since 1970 and gaining more official recognition throughout the 1980s and 1990s from countries such as countries like South Africa and the Democratic Republic of the Congo. By the year 2000, with the founding of the Forum for Chinese and African Cooperation, a majority ofmost African nations, including Djibouti, had recognized the People’s Republic of China as the official China, including Djibouti. Seen from for the People’s Republic of China, this recognition had been a major national priority since the official founding of the country in 1949. In 2013, China’s Belt and Road Initiative kicked off a flurry of investment on the continent which has lasted up until today.  

Current president, Ismail Omar Guelleh, has increased Djibouti’s global and regional influence by utilizing China’s increased presence in Africa as a means of expanding his country’s its own security and executing his its regional goals. For example, in the 2000s, he allowed the United States, France, Germany, Italy, Spain, Japan, and Saudi Arabia to set up bases in Djibouti the country as a means to address regional piracy and terrorist networks in the neighboring countries. This offered Djibouti two benefits. First, increased state security and stability that brought the potential for more foreign investment. Second, the rental payments amassed from the bases were clear economic benefits. As of today, these payments account for eighteen percent of the nation’s GDP. China followed suit: the long-term goals of the Belt and Road initiative required maritime protection, so Beijing invested in the construction of their own base in Djibouti in 2017. China now pays Djibouti $20 to $100 million annually. But both the Chinese state media and Djibouti maintain that their base is a support facility, arguing its role as a logistical base primarily used for nonmilitary activities.  

Djibouti has witnessed a large injection of cash from global superpowers over the period from 2002 to 2021. Yet, the local populace has not seen the economic growth translate to improved living conditions. Djibouti’s poverty rate sits today at forty-two percent. Nevertheless, by authorizing the construction of the Chinese base, Djibouti’s government deepened their relationship with the People’s Republic of China.  

China’s Spending Big in Djibouti  

During the 2012 Forum in Beijing on China-Africa Cooperation, the Djiboutian government requested further funding from China for a number of development projects. These projects were designed to help alleviate their lack of foreign direct investment. Specifically, due to the lack of political reform and human rights issues, Western organizations such as the IMF have had been notably absent in the nation, something that further exacerbateded their high electricity and consumer costs. 

 A six-year injection of Chinese capital and development followed. The paramount project undertaken by China has been the $3.4 billion, 400 mile long, railroad between the Ethiopian capital, Addis Ababa, and Djibouti’s Red Sea port. This has cut travel times from three days to 12 hours. The Djibouti City Multipurpose Port and two new airports, which cost close to $1.2 billion dollars, are now both used for the import of goods and the export of products. These projects have enabled Djibouti to enhance its role as a regional trading epicenter. Lastly, and most importantly, the $3.5 billion dollar Djibouti International Free Trade Zone, which is supposed to create over 100,000 jobs by 2030, was started in 2018. Overall, $14.4 billion worth of infrastructure projects in the country have been financed by Chinese banks. This high level of foreign investment has expanded Djibouti’s gross domestic product by over three percent year over year, topping out at over eight percent in 2017. Likewise, Djibouti’s debt has increased by over 20% between 2015and 2020, with China owning 70% of their debt. According to Thierry Pairault, an expert on Sino-African relations at the Paris-baseds CNRS think tank, there was no one else to turn to.”With this example, one begins to witness the new-found influence of China at both the international and the state-to-state level: due to the lack of necessary funding from the IMF and Western institutions, Djiboutiit turned to China Beijing as its alternative funder. 

China’s Shifting Image  

Nevertheless, on the local level, peoples, as well as some governments, and international intergovernmental bodies, have started to sound the alarm on the potential dangers of doing business with China. For example, through polls Polls conducted in Djibouti, showed that the local populace had a high favorability view of China but were worried about how their nation would pay back their loans. Even the state-controlled media released articles slamming China for trying to “colonize” smaller countries with debt, in what they described as the Sri Lankan model. Which This latter relates to the 2017 Hambantota Port Deal, which took place in 2017 between China and Sri Lanka, and handed the China Merchant Port company a 99-year lease on the port they helped fund. Although China paid Sri Lanka $1.1 billion dollars for the port, and the government made the deal to service other outstanding debt, it has become a poster child of what many see as the dangers of doing business with China and the potential for a loss of sovereignty. 

This change in the nation’s perception towards China, and the way they viewed the nation’s actions towards them, can directly explain the increased urgency of the government to broaden its ties with other nations and organizations – even though this could be made at the expense of China. Already, a $50 million-dollar geothermal sight was developed and funded by the World Bank, a new national assembly building was built and financed by Iran, Turkey completed and paid for their largest mosque, and Canada and a Swiss company have paid for two 300 and 200MW solar plants. During the height of the pandemic, in May 2020, the IMF even gave Djibouti “a US$ 43.4 million loan to support the authorities’ response to the COVID-19 crisis, as well as debt relief under the CCRT”. The intergovernmental body stated back then that this which will generate additional resources of US$ 2.3 million over the next five months, and potentially up to US$ 8.2 million over the next 23 months.”  

Every relationship is a dynamic process, and as China’s identity in the eyes of the Djiboutian people changes, the global powers have moved in to gain a closer relationship by offering more stable loans after years of increased Chinese financing. But it remains to be seen whether they will succeed in being as attractive and as efficient as competitive China. 

Hunter Baldridge is a Masters student of Political Science and International Relations at Saint Louis University – Madrid Campus. 

To quote this article, please use the following reference:  H. Baldridge (2022), “China in Djibouti: A Future Uncertain”.

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