– They can finance stuff like this on credit unchecked by ny public opposition to growing national debt
– Having started later than western countries, their public debt (41% GDP) is much lower
– High GDP growth rates further lower the effective burden of their debt
– They can act largely unencumbered by the historic debt of colonialism, while western countries face opposition both internally as well as locally in the project countries
– They have less qualms of working with some regimes with less-than-stellar records on human rights
– Lower regard for human rights means lower risk of political tensions between China and the host countries, which could otherwise endanger investments. Western countries, conversely, want to avoid a situation where they have to compromise on morals to protect their investments (c.f. China)
– China has a lot more experience with large infrastructure projects than any other country.
– China brings their own workers to these projects, which are paid far below any construction workers you could find anywhere in industrial countries
– The politics of China allow for "Grand Plans" and their quick approval. Democratic processes would almost certainly stop any such project in a western country because it's impossible to write a reliable business plan for them. These are bets made on a whim and to a certain degree driven by politics and emotions.
– Western democratic countries generally regard such projects to be the provenance of the market.
My strong opinion on this. Their secret is trade, China manufactures, they build, they create, they need more raw material than ever and Africa has that. That's why they are in Africa, they are making these deals so they can get their raw materials. That's one.
Second, China was "poor" not too long, it's fresh in their mind, they know how a poor place can just transform, and they see that possibility in Africa. Plenty of those that didn't make it in China figure they can in Africa by leveraging their connection to China. So it's not just rich Chinese in Africa, there are just average Chinese folks who move to Africa and do trade import/export and build small businesses too. They see the possibility and potential. Americans don't see that in Africa, most people alive in America today didn't witness when the majority of America was "materialistic poor" like Africa is today. Which was about 100+yrs ago.
I read another comment on HN about this recently. Their explanation was that it's due (at least in part) to the high savings rate of the Chinese compared to the USA (and other countries, I guess)[1]. The idea is that when people are stashing their money into bank accounts, the banks have a lot more money to work with.
For example, Americans will use their money to buy cars. The Chinese would save their money, and the banks can use that money to fund transit projects.
I don't know how true this is, but it makes sense in my brain. I'd love to do more reading about this as well. If it's true, that makes it mildly frustrating to me, since I save a lot of my income and refuse to own a car; I don't get any extra public transit out of that, though!
Because China is an export-oriented country. Now we can go into who provided credit for whom to build this railway track, I would assume (I can be wrong) it all involved a dizzying array of Chinese creditors and companies, from the steel, construction to the trains themselves.
They are not building out of charity but the benefit their own companies. Lot of LatAm countries like Ecuador have taken Chinese credit when Commodity markets are hot, are now regretting their mistake.
[edit]: From Wikipedia --
The new line was built between 2011 and 2016 by the China Railway Group and the China Civil Engineering Construction Corporation. Financing for the new line was provided by the Exim Bank of China, the China Development Bank, and the Industrial and Commercial Bank of China.[5] A total of US$4 billion was invested into the railway.[6]
>"I'm just amazed at how China is moving forward where other countries (looking at you, USA) simply cannot."
Can you explain this comment? China is not building rail networks in Africa for altruistic purposes, their primary interest in Africa's natural resources. How does that relate to the US in any way?
>"Also: environment is happier."
Have you been to a Chinese city recently? Beijing or Shanghai? They are choked with cars despite having good rail infrastructure. In fact China is the largest producer of cars the planet right now. There are times when your lungs hurt at the end of the day. People wearing air pollution masks is normal.
Also you are comparing a centrally planned economy full of SOEs(state owned enterprises) controlled by the Communist Party with a free market economy, they are nothing alike.
>"What's their secret"
There is no secret, the economy is centrally controlled by a single political party that can not be voted out of power.
Nothing secret. China as a country generates lots of savings and the money that is parked with government(banks) needs to be deployed to generate returns. So it will get invested all over the world.
Wanting to grow their geopolitical influence by winning hearts and minds. Wouldn't be surprised if China wasn't making this move for more influence in / around the Bab al-Mandab Strait - the narrow opening of the Red Sea into the Arabian Sea. It's formed by Yemen to the East and Djibouti to the west.
This sea route is the fastest way from Europe to Asia. Tons of oil from the Middle East flows through here.
China has a current account surplus (they export more goods than they import). To keep their exchange rate down, they export the capital back out, funding things like rail in Africa. It's not the free market. Much of the surplus savings/capital in China is inside state controlled banks and conglomerates. Average Chinese citizens have a hard time taking capital outside the country, which is a driving force behind their overpriced real estate and the popularity of bitcoin there.
Does this open up any investment or business opportunities?
I feel like the shipping and railroad industry is enormous and impenetrable, but there must be some smaller opportunities in here. Even if it's something sort of intangible, like "increasing transparency and fighting corruption". Because you know some percentage of this money went into the wrong pockets.
If you were just a programmer from a western country, how would you even begin to get started in developing markets? Not just this railway project, but Africa and Asia in general. I'm reading things like this [1]:
> China, India and the rest of the developing world will eclipse the west in a dramatic shift in the balance of economic power over the next 50 years.
So I want to be where the growth is happening. How do I do that? Do I need millions of dollars before I can achieve anything? Should I learn Mandarin, Hindi, or Swahili? In the past, I would have had to visit some of these countries and talk to some local entrepreneurs. Now I can just do my own research, meet people online, and have Skype calls. There's really no need to travel in order to find opportunities.
EDIT: I just watched the "Empire of Dust" documentary... That's really eye-opening. I hate to think about how much all of those workers are being paid. Even the Chinese managers. I guess business is business, and they just pay as little as possible. It also seems like it is very difficult to get anything done.
This opens up a lot of investment/business opportunities.
Ethiopia is land-locked and given its not-so-great relationship with Eritrea, uses Djibouti as its primary port. The time-savings of the railway will bring down port-to-Addis shipment times to 12 hours which is awesome considering it can take 3 days now (although the customs process will need to be improved to really speed it up)
It will also reduce the costs necessary to repair the roadways that trucks take to get to Djibouti and back. The incoming lane on these roads is often rutted like crazy due to the weight of the goods and truck drivers are not always the most reliable people.
Ethiopia is also home to one of the fastest growing economies in the world and it is extremely import-dependent. The lower the costs for transit, the lower the costs for the consumer.
RE: wanting to be where the growth is, you really need to be here to see it (I spend most of my time in Ethiopia) You don't have to know the local language and you don't need millions of dollars but you need to have an appetite for risk and be an extremely patient person. Nothing generally works out the way you think it will here so be open to other outcomes and be resilient through it all.
> So I want to be where the growth is happening. How do I do that? Do I need millions of dollars before I can achieve anything? Should I learn Mandarin, Hindi, or Swahili? In the past, I would have had to visit some of these countries and talk to some local entrepreneurs. Now I can just do my own research, meet people online, and have Skype calls. There's really no need to travel in order to find opportunities.
I don't know anything about Africa or China, but I just spent 1 month backpacking through India doing exactly this: meeting local entrepreneurs (tech industry, non tech, small business, street vendors, etc) and meeting people and families from the north to the south. To really get an appreciation for a market, how the consumers in that market think, and the obvious problems and opportunities around you, you HAVE to go there and see it for yourself. I spent the previous 2-3 years keeping an eye on Indian development from the West, but the 4 weeks I was there eclipsed any prior learning I did. Go visit.
English is absolutely required, but you are already there.
Otherwise, Mandarin isn't that useful actually, as most Chinese you work with will speak better English than your Chinese could ever be, and anyways, finding a bilingual Chinese is not that hard. I'm not sure, from a business perspective, if learning it is productive; but it makes sense from an enrichment perspective.
Considering many Indians don't speak Hindi natively or at all, I would strongly recommend one of the other options. Most higher-level business in India is conducted (or can easily be conducted) in English, and many upper-class or entrepreneurial Indians are more comfortable with English than Hindi.
GDP is per year while debt is spread over time, like 30 years. Assuming 5%/yr for the amount of interest and principle repayment, 5% x 60% = 3% of GDP for debt service per year. Not too bad. Assuming the project adds 1% to GDP growth, it would boost the GDP by 35% at the end. Adding 2% would boost by 81%. And the effect will continue after the debt has been paid off. That's a good investment.
Let's say you make a $100k per year and take out a $60k mortgage, that seems very reasonable. If the railway is going to make their economy more productive and efficient then it seems like a really good idea.
You definitely would enjoy reading Confessions of an Economic Hitman, the first chapter of which I have personally verified with an Indonesian diplomat.
It's not necessarily a problem so long as the debt-financed spending accelerates growth. GDP is the amount the economy generates per year. Debt is relatively fixed (unless you borrow more or have a crazy interest rate). As long as the interest on public debt doesn't outpace the tax revenues set aside to service it, they should be fine. Djibouti is a relatively undeveloped country, so infrastructure development can bring them a long way.
Even that doesn't add up. First of all, I bet that figure represents only the debt specific to this China deal, on top of whatever other debt they already had. Secondly, Djibouti's GDP was $1.7 billion (or thousand million in British wording), but the only debt figure stated was $14 billion as China's overall investment. That's like 800% of GDP using those raw figures. The truth is probably somewhere else.
Not to worry. The Chinese leadership is thoroughly pragmatic and will eventually write off as much of the balance as necessary:
https://en.m.wikipedia.org/wiki/TAZARA_Railway
The lenders will remember that they don't have much leverage over Djibouti, unlike the Eurozone with its debt trap for Greece.
I dislike this way of describing debt. Because it sounds to most people like the country owes 60% of its GDP to foreigners, and only has 40% left to live on.
A different way to express the same situation is that the debt is 7 months of GDP.
It's not a totally rosy picture across the continent. In Kenya, Chinese infrastructure projects are hugely disruptive to local communities and wildlife and are poorly managed and implemented, seemingly providing short-term improvement but questionable over the long term.
http://africanbusinessmagazine.com/region/east-africa/rising...
The only reason that you see these deals being made is because the Chinese government is interested in Africa's natural resources [1], Chinese companies are competitive in construction (not really rocket science, plus slave labour certainly provides a financial advantage [2] [3]) and government officials stand to personally make money, as nothing gets done in Africa if you don't "properly compensate" the right government officials [4] [5] (european companies know this too, but bribery is sligthly more constrained by their governments).
The end product is usually low quality, with roads cracking open as soon as rain pours, but the goal was not to provide infrastructure in the first place, so no one is remotely concerned about any benefits nor about the impact on local communities, public safety, wildlife or the environment. Guess what happens to anyone that tries to protest on behalf of these issues. [6]
These deals are rarely rosy for the general population, who will still lack water, sanitation, food, jobs and education. Even the few that managed to survive outside of city centers will see their basic livelyhood (cattle, farming) disrupted by these "developments".
There is a pattern to evolution of societies. A lot of 'third world' countries including social structures are a lot like our societies were 100-200 years ago. Anyone doing even basic research will not fail to see the similarities. There is basic survival, greed, feudal systems, corruption and the primacy of religion and traditional social structures.
Prosperity breaks a lot of these and the evolution of the west came first from economic colonialism and the resulting wealth then spurred on the growth of technology and newer economic, social and political structures.
Without the benefit of colonialism a lot of emerging economies are 'stuck' and they have to deal with extremely powerful and organized entrenched power structures and play by their rules designed to maintain their primacy at all costs.
Isn't this what 'the great game' is? Its got little to do with human rights, humanity, environment or social consciousness. Its purely driven by power, self interest and greed. Its played out in backroom deals, corruption, financial systems, collusion, dirty tricks, geo politics and wars like we see in the middle east and Russia. This is the road China is learning to navigate in Africa. A road already taken by the west 400 years ago. Exciting times ahead.
1. Africa != Ethiopia and Djibouti. It's a massive continent
2. "Joyous Africans" conjures up some pretty bad stereotypes
3. The reason they're "joyous" is only because someone else helped them?
TL;DR: The railway from Ethiopia to Djibouti failed because no one could afford to maintain it. A few years later, the Djibouti government took out a loan for the value of 9 months production from the entire country, and paid some Chinese firms to build them a brand new one.
Skimming some of the sources in Wikipedia, it looks like the maintenance and rebuilding of the previous railway stalled not so much due to cost reasons but rather political reasons in the cooperation between Djibouti and Ethiopia. I guess it's easier politically to rally around a new shiny railroad than play "who pays who" for maintenance of a 100-year-old one.
We've already asked you to post civilly and substantively, and we ban accounts that won't, so please stop this. We detached this subthread from https://news.ycombinator.com/item?id=13602887 and marked it off-topic.
[+] [-] bcks|9 years ago|reply
[+] [-] rjeli|9 years ago|reply
https://www.youtube.com/watch?v=A0C4_88ub_M
[+] [-] ice109|9 years ago|reply
edit: this guy speaks 4 very different languages - english, swahili, french, and chinese. that's quite impressive.
[+] [-] r00fus|9 years ago|reply
I'm just amazed at how China is moving forward where other countries (looking at you, USA) simply cannot. What's their secret?
[+] [-] matt4077|9 years ago|reply
– Having started later than western countries, their public debt (41% GDP) is much lower
– High GDP growth rates further lower the effective burden of their debt
– They can act largely unencumbered by the historic debt of colonialism, while western countries face opposition both internally as well as locally in the project countries
– They have less qualms of working with some regimes with less-than-stellar records on human rights
– Lower regard for human rights means lower risk of political tensions between China and the host countries, which could otherwise endanger investments. Western countries, conversely, want to avoid a situation where they have to compromise on morals to protect their investments (c.f. China)
– China has a lot more experience with large infrastructure projects than any other country.
– China brings their own workers to these projects, which are paid far below any construction workers you could find anywhere in industrial countries
– The politics of China allow for "Grand Plans" and their quick approval. Democratic processes would almost certainly stop any such project in a western country because it's impossible to write a reliable business plan for them. These are bets made on a whim and to a certain degree driven by politics and emotions.
– Western democratic countries generally regard such projects to be the provenance of the market.
[+] [-] segmondy|9 years ago|reply
Second, China was "poor" not too long, it's fresh in their mind, they know how a poor place can just transform, and they see that possibility in Africa. Plenty of those that didn't make it in China figure they can in Africa by leveraging their connection to China. So it's not just rich Chinese in Africa, there are just average Chinese folks who move to Africa and do trade import/export and build small businesses too. They see the possibility and potential. Americans don't see that in Africa, most people alive in America today didn't witness when the majority of America was "materialistic poor" like Africa is today. Which was about 100+yrs ago.
[+] [-] grardb|9 years ago|reply
For example, Americans will use their money to buy cars. The Chinese would save their money, and the banks can use that money to fund transit projects.
I don't know how true this is, but it makes sense in my brain. I'd love to do more reading about this as well. If it's true, that makes it mildly frustrating to me, since I save a lot of my income and refuse to own a car; I don't get any extra public transit out of that, though!
[1] http://www.cnbc.com/2015/10/25/china-savings-rate-versus-the...
[+] [-] sremani|9 years ago|reply
They are not building out of charity but the benefit their own companies. Lot of LatAm countries like Ecuador have taken Chinese credit when Commodity markets are hot, are now regretting their mistake.
[edit]: From Wikipedia -- The new line was built between 2011 and 2016 by the China Railway Group and the China Civil Engineering Construction Corporation. Financing for the new line was provided by the Exim Bank of China, the China Development Bank, and the Industrial and Commercial Bank of China.[5] A total of US$4 billion was invested into the railway.[6]
[+] [-] bogomipz|9 years ago|reply
Can you explain this comment? China is not building rail networks in Africa for altruistic purposes, their primary interest in Africa's natural resources. How does that relate to the US in any way?
>"Also: environment is happier."
Have you been to a Chinese city recently? Beijing or Shanghai? They are choked with cars despite having good rail infrastructure. In fact China is the largest producer of cars the planet right now. There are times when your lungs hurt at the end of the day. People wearing air pollution masks is normal.
Also you are comparing a centrally planned economy full of SOEs(state owned enterprises) controlled by the Communist Party with a free market economy, they are nothing alike.
>"What's their secret"
There is no secret, the economy is centrally controlled by a single political party that can not be voted out of power.
Source: https://en.wikipedia.org/wiki/List_of_countries_by_motor_veh...
[+] [-] geodel|9 years ago|reply
[+] [-] omegaworks|9 years ago|reply
This sea route is the fastest way from Europe to Asia. Tons of oil from the Middle East flows through here.
[+] [-] anigbrowl|9 years ago|reply
[+] [-] seagullz|9 years ago|reply
And it's old story: http://www.thirdworldtraveler.com/Pilger_John/Have_Nice_War_...
[+] [-] dangjc|9 years ago|reply
[+] [-] ChrisjayHenn|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] earthtolazlo|9 years ago|reply
[+] [-] jimmywanger|9 years ago|reply
China has very little regard for civil liberties and human rights, whereas the US government has to at least pay lip service to it.
[+] [-] luckystartup|9 years ago|reply
I feel like the shipping and railroad industry is enormous and impenetrable, but there must be some smaller opportunities in here. Even if it's something sort of intangible, like "increasing transparency and fighting corruption". Because you know some percentage of this money went into the wrong pockets.
If you were just a programmer from a western country, how would you even begin to get started in developing markets? Not just this railway project, but Africa and Asia in general. I'm reading things like this [1]:
> China, India and the rest of the developing world will eclipse the west in a dramatic shift in the balance of economic power over the next 50 years.
So I want to be where the growth is happening. How do I do that? Do I need millions of dollars before I can achieve anything? Should I learn Mandarin, Hindi, or Swahili? In the past, I would have had to visit some of these countries and talk to some local entrepreneurs. Now I can just do my own research, meet people online, and have Skype calls. There's really no need to travel in order to find opportunities.
EDIT: I just watched the "Empire of Dust" documentary... That's really eye-opening. I hate to think about how much all of those workers are being paid. Even the Chinese managers. I guess business is business, and they just pay as little as possible. It also seems like it is very difficult to get anything done.
[1] https://www.theguardian.com/global-development/datablog/2012...
[2] https://www.youtube.com/watch?v=A0C4_88ub_M
[+] [-] fegul|9 years ago|reply
Ethiopia is land-locked and given its not-so-great relationship with Eritrea, uses Djibouti as its primary port. The time-savings of the railway will bring down port-to-Addis shipment times to 12 hours which is awesome considering it can take 3 days now (although the customs process will need to be improved to really speed it up)
It will also reduce the costs necessary to repair the roadways that trucks take to get to Djibouti and back. The incoming lane on these roads is often rutted like crazy due to the weight of the goods and truck drivers are not always the most reliable people.
Ethiopia is also home to one of the fastest growing economies in the world and it is extremely import-dependent. The lower the costs for transit, the lower the costs for the consumer.
RE: wanting to be where the growth is, you really need to be here to see it (I spend most of my time in Ethiopia) You don't have to know the local language and you don't need millions of dollars but you need to have an appetite for risk and be an extremely patient person. Nothing generally works out the way you think it will here so be open to other outcomes and be resilient through it all.
PM if you have any questions.
[+] [-] narak|9 years ago|reply
I don't know anything about Africa or China, but I just spent 1 month backpacking through India doing exactly this: meeting local entrepreneurs (tech industry, non tech, small business, street vendors, etc) and meeting people and families from the north to the south. To really get an appreciation for a market, how the consumers in that market think, and the obvious problems and opportunities around you, you HAVE to go there and see it for yourself. I spent the previous 2-3 years keeping an eye on Indian development from the West, but the 4 weeks I was there eclipsed any prior learning I did. Go visit.
[+] [-] seanmcdirmid|9 years ago|reply
Otherwise, Mandarin isn't that useful actually, as most Chinese you work with will speak better English than your Chinese could ever be, and anyways, finding a bilingual Chinese is not that hard. I'm not sure, from a business perspective, if learning it is productive; but it makes sense from an enrichment perspective.
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] vinay427|9 years ago|reply
[+] [-] kevindong|9 years ago|reply
This seems absolutely insane to me.
[+] [-] ww520|9 years ago|reply
[+] [-] SilasX|9 years ago|reply
https://en.wikipedia.org/wiki/List_of_countries_by_public_de...
There's another table but it doesn't let you sort by that figure: https://en.wikipedia.org/wiki/Government_spending#As_a_perce...
[+] [-] guelo|9 years ago|reply
[+] [-] contingencies|9 years ago|reply
[+] [-] zhemao|9 years ago|reply
It's not necessarily a problem so long as the debt-financed spending accelerates growth. GDP is the amount the economy generates per year. Debt is relatively fixed (unless you borrow more or have a crazy interest rate). As long as the interest on public debt doesn't outpace the tax revenues set aside to service it, they should be fine. Djibouti is a relatively undeveloped country, so infrastructure development can bring them a long way.
[+] [-] DrScump|9 years ago|reply
[+] [-] everybodyknows|9 years ago|reply
[+] [-] BurningFrog|9 years ago|reply
A different way to express the same situation is that the debt is 7 months of GDP.
[+] [-] brdltbrncle|9 years ago|reply
[+] [-] privateprofile|9 years ago|reply
The only reason that you see these deals being made is because the Chinese government is interested in Africa's natural resources [1], Chinese companies are competitive in construction (not really rocket science, plus slave labour certainly provides a financial advantage [2] [3]) and government officials stand to personally make money, as nothing gets done in Africa if you don't "properly compensate" the right government officials [4] [5] (european companies know this too, but bribery is sligthly more constrained by their governments).
The end product is usually low quality, with roads cracking open as soon as rain pours, but the goal was not to provide infrastructure in the first place, so no one is remotely concerned about any benefits nor about the impact on local communities, public safety, wildlife or the environment. Guess what happens to anyone that tries to protest on behalf of these issues. [6]
These deals are rarely rosy for the general population, who will still lack water, sanitation, food, jobs and education. Even the few that managed to survive outside of city centers will see their basic livelyhood (cattle, farming) disrupted by these "developments".
PS: I've worked in Angola, Kenya and Nigeria.
[1] http://www.newyorker.com/news/news-desk/china-in-africa-the-...
[2] https://www.theguardian.com/commentisfree/libertycentral/201...
[3] https://jamhuri-news.com/how-china-contractors-drove-kenyan-...
[4] https://qz.com/513090/in-south-africa-corruption-is-a-public...
[5] http://www.standardmedia.co.ke/article/2000175560/eacc-arres...
[6] http://www.reuters.com/article/us-angola-protest-idUSKCN0X70...
[+] [-] ryanqian|9 years ago|reply
The People in Africans they deserve the world industry's help , again, in real.
[+] [-] throw2016|9 years ago|reply
Prosperity breaks a lot of these and the evolution of the west came first from economic colonialism and the resulting wealth then spurred on the growth of technology and newer economic, social and political structures.
Without the benefit of colonialism a lot of emerging economies are 'stuck' and they have to deal with extremely powerful and organized entrenched power structures and play by their rules designed to maintain their primacy at all costs.
Isn't this what 'the great game' is? Its got little to do with human rights, humanity, environment or social consciousness. Its purely driven by power, self interest and greed. Its played out in backroom deals, corruption, financial systems, collusion, dirty tricks, geo politics and wars like we see in the middle east and Russia. This is the road China is learning to navigate in Africa. A road already taken by the west 400 years ago. Exciting times ahead.
[+] [-] guard-of-terra|9 years ago|reply
Is it only me who has problems with this attitude?
As if we didn't have enough frustration from airports located an hour away.
[+] [-] debt|9 years ago|reply
[+] [-] anonyguy1969|9 years ago|reply
[+] [-] anonyguy1969|9 years ago|reply
[+] [-] fegul|9 years ago|reply
1. Africa != Ethiopia and Djibouti. It's a massive continent 2. "Joyous Africans" conjures up some pretty bad stereotypes 3. The reason they're "joyous" is only because someone else helped them?
Yikes.
[+] [-] thisrod|9 years ago|reply
[+] [-] kalleboo|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] popobobo|9 years ago|reply
[deleted]
[+] [-] sctb|9 years ago|reply
[+] [-] justicezyx|9 years ago|reply