The Resilience of Chinese Construction Companies in Africa
For the majority of the past 25 years, Chinese construction companies operating in Africa have benefited from substantial financial support provided by Chinese banks. Between 2000 and 2019, these funders committed nearly $50 billion to infrastructure projects across the continent. Most of this funding came from Chinese development finance institutions.
However, six years ago, a shift began as Chinese lenders started to reduce their involvement. Since 2019, only $6 billion has been allocated for African infrastructure development. Despite this reduction in state-backed financing, Chinese companies continue to thrive on the continent, maintaining leadership positions in several African countries such as Ethiopia, Ghana, and Kenya.
To understand how these companies continue to expand despite the decline in state funding, researchers examined the factors contributing to their success. A recent study highlighted the main drivers behind their continued growth and adaptation in African markets.
Key Drivers of Success
The research was based on extensive fieldwork conducted in China, Kenya, and Ghana, along with interviews with Chinese construction company staff, African government officials, and various organizations. The findings revealed several key strategies that have enabled Chinese companies to maintain their dominance in the African construction sector.
1. Ties to the Chinese State
Chinese companies often leverage their connections with the Chinese state to establish their presence in specific markets. During the boom of Chinese-funded infrastructure projects, these ties were instrumental in entering new regions. Even today, they remain crucial for projects aligned with African countries’ development agendas.
2. Building Trust-Based Relationships
These companies also build trust-based relationships with other companies, governments, and international organizations. This helps them secure projects across borders and regions, allowing them to operate effectively in diverse environments.
3. Local Political and Business Networks
Another critical factor is the establishment of everyday relations with local politicians, officials, business people, and intermediaries. These relationships enable Chinese firms to navigate complex political landscapes and secure contracts.
The ability to shift between these strategies—sometimes relying on the Chinese state, sometimes on multinationals, and sometimes on local elites—has been central to their success.
The Role of Flexible Expansion Strategies
While state support was important for market entry, it did not guarantee long-term survival or expansion. Instead, it is the companies’ flexible expansion strategies that have made them successful. This adaptability allows them to respond to changing conditions and opportunities.
The research also highlights the crucial role played by African governments and local actors in shaping the activities of Chinese firms. Their policies and negotiation approaches actively influence how these companies operate.
Furthermore, the findings challenge the common assumption that Chinese companies are merely extensions of China’s foreign policy. Instead, many of these firms behave like their Western private counterparts, competing for contracts, partnering with international actors, and adapting to local conditions.
Case Studies: China Road and Bridge Corporation and China Harbour Engineering Company
In Kenya, the China Road and Bridge Corporation (CRBC), a subsidiary of China Communication Construction Company, established its local headquarters in 1984. Initially working as a subcontractor for other Asian companies, CRBC gained valuable experience in doing business in the Kenyan market. It later became the lead contractor for major projects like the Nairobi–Mombasa Standard Gauge Railway.
State-backed loans provided CRBC with large contracts and helped build credibility with Kenyan authorities. Similarly, in Ghana, the China Harbour Engineering Company (CHEC) entered the market through a Chinese-financed agreement in the 2010s. This loan allowed CHEC to establish long-term relationships and secure projects in the port sector.
During a pause in Chinese-funded projects, CHEC used its regional networks to seek out other opportunities in West Africa. By partnering with western multinationals, the company secured additional port projects, which further anchored its presence in the region.
Network Building and Resource Mobilization
Chinese firms operating in Africa have cultivated trust-based networks beyond the realm of the Chinese state. These networks include both Chinese and non-Chinese multinationals, regional organizations, international financiers, and African state actors.
In Ghana, CHEC relied on its connections with international partners to stay active during project stalls. By partnering with a consortium involving western multinationals, the company secured other port projects, which strengthened its position in the Ghanaian market.
In Kenya, CRBC expanded beyond Chinese-funded projects by winning international tenders. The company’s ability to redeploy equipment and staff from nearby projects lowered costs and increased competitiveness. For example, machinery and quarries used for the Nairobi-Mombasa railway were also utilized in the Kenyan government-funded Lamu port project.
Embedding in Local Environments
Chinese companies have embedded themselves in local political and business environments. In Kenya, CRBC’s directors worked closely with politicians and ministries to anticipate infrastructure needs. In some cases, the company conducted feasibility studies before tenders were issued, enabling it to present ready-made projects.
In Ghana, CHEC relied on local intermediaries to navigate the complexities of infrastructure development and secure contracts. Young professionals with ties to both Chinese managers and Ghanaian elites played a key role. The company also hired foreign consultants to enhance its reputation with local officials.
Implications for African Governments
This shift in the operations of Chinese companies means that they are no longer closely tied to Beijing’s priorities. Instead, they participate in public tenders, invest in public-private partnerships, and collaborate with other multinationals.
African governments will need to adopt a different strategy to negotiate the role of these firms in their economies. This approach should focus more on regulation of standards and alignment with industrial policy rather than geopolitical considerations.
The next phase of Africa-China infrastructural engagement will be driven by operational contexts, various alliances, and a competitive world market, rather than large Chinese loan packages.
