Chinese State-Owned Enterprises and Market Capture in Africa
The Kribi Deep Seaport in Kribi, Cameroon, constructed by the China Harbor Engineering Company Ltd. (Photo: AFP/Xinhua/Kepseu)
China’s major state-owned enterprises (SOEs) are not simply companies but extensions of China’s national power. China has the largest state-owned enterprise sector in the world. Roughly 363,000 firms are wholly state-owned, 629,000 have at least 30 percent state ownership, and nearly 867,000 have at least some state ownership. Provincial and local governments control another 116,000. SOEs account for roughly 20 percent of China’s gross domestic product.
The Chinese government holds “golden shares” in publicly traded tech firms that are not strictly state-owned, like Tencent, Baidu, and Alibaba. These shares allow the Chinese government to block certain types of corporate decisions. It also exerts influence over wholly employee-owned entities, like Huawei, through regulations, subsidies, and state-backed loans.
Chinese SOEs wield significant leverage that can constrain African policy autonomy and priorities.
Among the most well-known Chinese SOEs are giant firms like Sinopec—the world’s largest oil refiner—and China North Industries Corporation (NORINCO), China’s top defense technology and manufacturing firm. These SOEs dominate strategic sectors and receive priority support under China’s industrial policy. With this support, China’s major SOE conglomerates build global supply chains, secure strategic minerals (including rare earths), construct critical infrastructure, build, finance, and operate ports, develop energy nodes, and support Chinese military and diplomatic efforts.
Chinese SOEs also act as intermediaries for credit by channeling funds or receiving preferential loans themselves from Chinese policy banks like the Export-Import Bank of China (China Exim Bank). Since 2000, China has lent African borrowers more than $150 billion, some of which was directed through SOEs.
Given the breadth of their engagement in finance and construction of Africa’s critical infrastructure, Chinese SOEs wield significant leverage that can constrain African policy autonomy and priorities—especially in contexts where political will to protect African public interests and enforce local laws, standards, and regulations is lacking. Many African economic sectors—including mining, railways, and power generation—can become dominated by large Chinese SOEs.
These advantages enable Chinese SOEs to edge out African companies and other investors, create supply chain dependence on Chinese firms, and reduce the bargaining power of host governments. This is particularly relevant in critical minerals, where Chinese firms control the midstream and downstream processing, refining, and manufacturing—leaving little to no value in the host country, which remains trapped in exporting raw commodities.
Chinese SOEs, similarly, often execute projects financed by large policy banks like the China Development Bank and the China Exim Bank, with the attendant risks of sovereign debt accumulation, revenue pledging tied to resource exports, and fiscal pressure if projects underperform.
Many projects are seen as serving China’s strategic interests more than the host country’s long-term development needs.
Chinese SOE contracts, furthermore, are often negotiated government-to-government. This can reduce parliamentary and public oversight and obscure confidential loan terms that weaken disclosure of project costs and environmental impacts.
Zambia provides a cautionary tale. Under the administration of President Edgar Lungu (2015–2021), Zambia increased borrowing from Chinese lenders as copper prices were crashing, while clamping down on public disclosure. When its debt to Chinese and other lenders had reached a critical point, the government publicly announced that its debt to Chinese financiers was $3.4 billion, when in fact it amounted to $6.6 billion.
Recognizing the centrality of Chinese SOEs to Chinese policy in Africa, in short, is essential to ensure African economic, developmental, and ownership interests are protected.
How China’s SOE Sector Developed and Went Overseas
The expansion of Chinese SOEs in Africa and other parts of the Global South was driven by Chinese government policy, underscoring the use of SOEs as tools of national power. China’s “Go Out” strategy (zouchuqu zhanlue, 走出去战略) enacted in 1999, incentivized state-owned enterprises to expand overseas through massive state subsidies (amounting to around $200 billion annually), tax credits, political risk insurance, and diplomatic support. China’s One Belt One Road, known internationally as the Belt and Road Initiative (BRI), is a central component of this strategy, built largely around China’s major SOEs.
Workers load trucks for export to Africa in Yantai port in China’s Shandong province. (Photo: AFP/CN-STR)
Strong Chinese government backing allowed Chinese SOEs to scale quickly and operate at low cost to gain control over strategic sectors such as minerals, banking, transport, and energy—enabling these firms to dominate domestic and international competitors. SOEs also execute government and Chinese Communist Party (CCP) directives, including foreign policy objectives.
By leveraging public finance and political support to pursue long-term influence, Chinese SOEs have been able to operate in high-risk and logistically challenging environments across Africa, Asia, and Latin America. Around 10,000 Chinese firms operate in Africa, accounting for roughly 12 percent of Africa’s total industrial output, and nearly 50 percent of Africa’s internationally contracted construction market. Chinese SOEs are active in 78 ports across 32 African countries as builders, financiers, or operators. Of 166 Chinese mining projects globally, 66 are in Africa.
At times, however, this has led to unviable economic investments that create heavy debt burdens on African countries.
Sierra Leone’s Mamamah International Airport is one example. The $318-million project, financed by the China Exim Bank and contracted to China Railway International Group by the government of President Ernest Bai Koroma, was cancelled in 2018 by President Julius Maada Bio due to concerns over adding to the country’s debt and the underutilization of the existing Lungi International Airport. Sierra Leone instead opted to renovate Lungi and construct a bridge to improve access.
Another example is Angola’s $3.5-billion Kilamba New City, built in the 2010s by China International Trust and Investment Corporation (CITIC) under a controversial resource-backed financing arrangement that allowed Angola to repay Chinese loans with mineral exports. The resulting housing and office space were severely underoccupied and widely labeled a “ghost town” due to high prices. The Angolan government later subsidized housing costs and provided long-term mortgages through its state oil company, Sonangol. With this infusion, Kilamba New City has seen increased use. However, it has faced ongoing criticism for deepening Angola’s debt, generating limited financial returns, and relying heavily on Chinese rather than local labor.
How Chinese SOEs Are Structured
Overall policy direction for China’s SOEs comes from the Leading Small Group (LSG) within the CCP—chaired by President Xi Jinping, signifying the importance of SOEs in China’s political system. The Leading Small Group and its subsidiaries are nerve centers of Chinese government decision-making, responsible for strategy and policy coordination across the party, government, and military. In many cases, CCP committees are embedded within SOE boards and key leadership positions, reinforcing party political control alongside corporate governance.
Senior executives and CEOs of major SOEs are vetted through CCP channels and hold ranks equivalent to ministers or provincial governors, giving them proximity and access to the ruling party where they can influence policy, advance their own agendas through CCP structures, or even disregard government directives.
Kilamba New City, built by China International Trust and Investment Corporation (CITIC), 30 kilometers from Luanda, Angola. (Photo: AFP/Griffin Shea)
With backing at the highest levels of the CCP, SOE executives can engage in rapid negotiations, deploy resources quickly in the interests of the party, and implement projects in countries considered strategically important to China. However, the emphasis on political considerations and the tendency to curry favor with local elites by supporting their flagship projects can sometimes undermine the economic rationale and profitability of a project, as Angola’s Kilamba New City demonstrates.
Implications for Africa from China’s SOE Investments
China Harbour and Engineering Company (CHEC) won the contract to build Egypt’s Abu Qir Marine Port Container Terminal Project in 2021 over other international contractors. It did so by linking the project to the Tianjin Economic-Technological Development Area (TEDA), another Chinese SOE that constructed an industrial park inside the Suez Canal Economic Zone, a key node of the BRI that is also funded and constructed by Chinese firms. However, there was no evidence of open bidding or parliamentary and public scrutiny, meaning the type, size, and terms of the loan are not publicly available. This makes it difficult to assess the costs and benefits of the deal to Egypt or to monitor the project’s performance.
What mattered more was Beijing’s strong political backing and the Egyptian government’s desire to expand the Suez Canal Economic Zone as a kind of legacy project. Egypt did insist on the use of local materials, Egyptian labor, the transfer of port-building technology, and the incorporation of professional military education and training. This bundled project also included the refurbishment of a terminal at Abu Qir Naval Base, located adjacent to Abu Qir Port. Hong Kong-based Hutchison Ports has a 38-year concession from the Egyptian Navy to operate the terminal at this base. This supports China’s dual-use activities in Egypt, as shown by the role this terminal played in the “Eagles of Civilization 2025” joint military drills conducted by China and Egypt.
Members of the Egyptian and Chinese militaries at the “Eagles of Civilization 2025” joint air exercise. (Photo: Egyptian Ministry of Defence)
While Egypt realized targeted outcomes from this project, these agreements cannot be considered a win-win because the loan terms and conflict resolution clauses are unknown. Hence, it is unclear how much debt Egypt incurred, the financial institutions involved in the project, or the implications for control over this strategic infrastructure should Egypt be unable to repay the loan.
The Chinese-financed and constructed $4-billion Mombasa-Nairobi-Naivasha Standard Gauge Railway (SGR) in Kenya is another example highlighting the risks involved in deals with Chinese SOEs. The China Road and Bridge Corporation (CRBC) secured this contract through a direct government-to-government agreement that bypassed public tendering as required by Kenyan procurement laws. The government of President Uhuru Kenyatta (2013–2022) was looking for a legacy project to boost its electability ahead of the 2017 general elections.
The Chinese government, meanwhile, sought to build another cross-border transport and cargo artery for its BRI projects in East Africa to complement the Addis Ababa-Djibouti SGR and planned projects in Tanzania and Uganda. China also aimed to showcase its rail-building competencies to secure more contracts in Africa while supporting the priorities of the Kenyatta government.
Platform at the Nairobi Terminus of the Standard Gauge Railway built by the China Road and Bridge Corporation (CRBC). (Photo: Macabe5387)
CRBC brokered the loan through its privileged contact with the China Exim Bank, arguably giving it a greater say over the project’s direction than the Kenyan partner. Illustratively, the government of Kenya allowed CRBC to conduct the feasibility study of the project—a clear conflict of interest. The project—the most expensive in Kenya since independence—also magnified Kenya’s debt and raised concerns about viability, as Kenya was unlikely to repay the loan by relying solely on passenger and cargo traffic, even if it enacted a mandate. Media reports also highlighted the inflated prices on inputs, leading to complaints that the diesel-powered SGR was far more expensive than Tanzania’s and Ethiopia’s electric trains.
Following years of coordinated media investigations and litigation by civil society groups, Kenya’s Court of Appeal issued a landmark ruling in 2020 that the project was illegally procured as it was not based on fair, open bidding. On appeal by Kenya Railways, the Supreme Court ruled in 2023 that the procurement was not illegal as it was a government-to-government agreement exempt from standard procurement laws.
That, however, did not stop civil society and the media from conducting more investigations examining how the project negatively impacted Kenya’s laws, livelihoods, environment, and debt.
Such illustrations underscore both the appeal and risks of large Chinese SOE-led infrastructure deals.
Contending African Views
For many African governments, Chinese state-owned enterprises are appealing because they provide what many other international lenders often do not: rapid financing, flexible loan terms, and the capacity to deliver large infrastructure projects quickly. Their investments in energy, roads, ports, and railways are frequently bundled with training programs for civil servants and engineers, scholarships for students, refurbishing or building government facilities, and some technology transfer, reinforcing the perception among officials that Chinese SOEs deliver a “total package” as opposed to their competitors.
Civil society groups, independent economists, and environmental organizations argue that Chinese-financed projects can create heavy debt burdens and long-term dependence.
Critics, however, offer a starkly different assessment. Civil society groups, independent economists, and environmental organizations argue that Chinese-financed projects can create heavy debt burdens and long-term dependence. They point to opaque contracts that weaken accountability, supply chains dominated by Chinese firms that limit local value addition, and frequent environmental and social harms.
From this perspective, many projects are seen as serving China’s strategic interests more than the host country’s long-term development needs.
Across Africa, communities, lawyers, and activists have increasingly developed a range of tools to protect the public interest, including:
- Public advocacy campaigns that use social media to expose evictions, accidents, and pollution
- Strategic litigation in domestic courts
- Parliamentary action and international arbitration forums
- Research partnerships that generate evidence-based reports
Activists have also organized protests, from Zambia’s mining towns to Kenya’s coastal villages, while opening new diplomatic channels to engage Chinese SOEs directly. Notably, these strategies now extend to filing cases in Chinese courts, reflecting a growing sophistication and diversification of civic efforts.
Enhancing Africa’s Public Interests
To maximize the benefits of external partnerships with Chinese SOEs while reducing risks, African governments must focus on stronger governance and strategic coordination. This begins with enforcing transparency and robust regulation in procurement, environmental standards, and labor protections. Whole-of-society initiatives are needed to enact laws and policies to improve public disclosure, competitive procurement, debt management frameworks that balance ceilings with strategic borrowing, and accountability. Agreements should include binding clauses on technology transfer and local content to ensure skills and value creation remain on the continent. Diversifying partners is equally important, so no single external actor dominates African countries’ development pathways.
Whole-of-society initiatives are needed to enact laws and policies to improve public disclosure, competitive procurement, and debt management frameworks.
These efforts require empowered oversight institutions, including debt management offices, environmental agencies, and audit bodies to monitor compliance and manage long-term risks. Inclusive planning is also critical: affected African communities and local leaders must be consulted early in the project cycle, not after construction begins. Finally, greater regional coordination can strengthen bargaining power, harmonize standards, and improve outcomes by allowing countries to negotiate with China and Chinese actors collectively rather than in isolation.