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The Belt and Road and Chinese enterprises in Ethiopia: risks and opportunities for development

Research reports

Written by Linda Calabrese, Zhengli Huang, Rebecca Nadin

Image credit:Davide Scalenghe (www.davidescalenghe.com)

China’s Belt and Road Initiative (BRI) has the potential to open up new development pathways through infrastructure development, stimulating investment and job creation and promoting economic transformation in host countries. However, this is not a given – as a powerful external change agent, the BRI also has the potential to increase a range of economic, environmental and political risks within host countries.

Ethiopia has a close economic and political relationship with China, and is the recipient of a large amount of investment by large and small Chinese enterprises, as well as lending by the Chinese government, policy and commercial banks, and state-owned enterprises. These investment and lending flows create both risk and opportunities. The risks are two-fold: to the Ethiopian development process, and to Chinese investors themselves. This paper seeks to join the two, articulating the risk perceptions and appetite of Chinese investors, and the potential impact these will have on Ethiopia’s economic development.

The report also identifies the opportunities that the relationship with China, and more specifically with a wide variety of Chinese firms, offers to Ethiopia in terms of job creation, increased production and exports and infrastructure development, both nationally and regionally. At the same time, it highlights the potential risks in terms of a potential overreliance on China, and debt sustainability.