Why China is investing $5 billion in Kenya's infrastructure

In its search for more oil, China's found a partner in Kenya.
Written by Tyler Falk, Contributor

China is continuing to expand its presence in Africa.

Kenyan and Chinese officials announced a deal worth $5 billion for China to build a railroad, an undisclosed energy project, and to assist with wildlife protection.

A good deal for Kenya, right? Sure, but while China is the one spending big on infrastructure improvements, it could have more to gain by investing in its second-largest trade partner.

Two recent bits of news tell the story. The first: China is set to become the world's largest oil importer as early as October. The second: with new oil discoveries in Kenya, the country will be the first oil exporter in East Africa by 2016 -- with deposits topping 10 billion barrels, or three times more than the United Kingdom's remaining oil reserves. Put more simply: China wants oil and Kenya's got it.

Plus, as Jake Maxwell Watts points out at Quartz, part of the investment is in a railroad that connects the port of Mombasa -- one of the busiest in Africa -- to Malaba, a town that sits on Kenya's border with Uganda, where China also has a vested interest:

As Reuters reported last week, Uganda is borrowing crippling quantities of cash from China and has given it almost exclusive rights to build infrastructure in the country, promising loan repayments at a later date with money made from oil not yet drilled. In short, China is lending Uganda the money to pay Chinese companies to build infrastructure that ultimately will be used to move oil to China.

But China's presence in East Africa hasn't stopped in those two countries. Just this week, Chinese telecom company ZTE signed a deal $800 million deal to expand Ethiopia's mobile phone network, part of a $1.6 billion deal that also includes another Chinese company, Huawei.

And China's economic influence on the African continent continues.

Photo: Flickr/noodlepie

This post was originally published on Smartplanet.com

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