VZCZCXYZ0004
RR RUEHWEB

DE RUEHNR #1176/01 1280959
ZNR UUUUU ZZH
R 070959Z MAY 08
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 5722
INFO RUEHFR/AMEMBASSY PARIS 2736
RUEHLO/AMEMBASSY LONDON 2813
RUEHBJ/AMEMBASSY BEIJING 0434

UNCLAS NAIROBI 001176 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR AF/E AND AF/RSA 
 
E.O. 12958:  N/A 
TAGS: ECON ECON EINV ENRG EFIN PREL PGOV KE CH
SUBJECT: CHINA'S ENGAGEMENT IN AFRICA - KENYA RESPONSE 
 
Refs: A. State 41697, B. Nairobi 4246, C. 07 Nairobi 1002, D. 07 
Nairobi 0075 
 
¶1.  (SBU) Summary: China's engagement with Kenya is primarily a 
private sector-led effort, focused on trade generally, and the 
supply of goods and services in key infrastructure sectors like 
roads, info-tech, and energy.  The Chinese government appears not 
heavily involved in those areas where the U.S. is most active, such 
as health, education, the environment, governance, human rights, 
counter-terrorism, and private sector development.  We have regular 
contacts with Chinese officials (last fall the U.S. and Chinese 
Ambassadors sponsored a U.S.-China "ping pong diplomacy" tournament; 
we lost), but we have no cooperation on specific projects.  End 
summary. 
 
¶2.  (SBU) In response to ref A, Embassy Nairobi directs Washington 
to refs B, C, and D.  Ref D is a baseline cable on the China-Kenya 
trade relationship.  Ref C touches on the Chinese investment, or 
lack thereof, in Kenya, and ref B provides insights into how Chinese 
technology companies are doing business in the country. 
 
-------------------------------------------- 
Chinese Engagement in Kenya - Private Sector 
-------------------------------------------- 
 
¶3. (U) Chinese engagement in Kenya, as discussed in refs B-D, is 
largely driven by private sector activities, with frequent support 
from the Chinese government in the form of concessional financing. 
As emphasized and analyzed ref D, Kenya's relationship with China is 
underpinned by rapidly growing bilateral trade.  In 2006 (the latest 
year for which data is available in Kenya), Kenya's exports to China 
grew by 21 percent; imports from China grew an even greater 29 
percent.  But Chinese exports to Kenya are growing from a much 
larger base, and the trade relationship is heavily skewed in China's 
favor. It exported almost 20 times more to Kenya than it imported in 
¶2006. 
 
¶4.  (SBU) As noted ref C, there is little foreign direct investment 
by Chinese firms in Kenya in the sense of new green field investment 
in factories that generate jobs and technology transfer for Kenya. 
Most Chinese firms find it easier to simply export goods to Kenya 
from their manufacturing bases in China.  But within Kenya, Chinese 
firms are very active in several key sectors: 
 
-- Road Building: Chinese engineering firms, backed by concessional 
financing from the Chinese government, continue to win contracts to 
build or rebuild Kenya's decrepit road network.  A Chinese firm is 
currently widening the key artery linking downtown Nairobi and the 
international airport, and Chinese firms are ready to begin 
construction of two long-overdue bypass highways around the city. 
 
-- ICT infrastructure: As noted ref B, Chinese technology companies 
are extremely competitive in winning government tenders to build or 
supply Kenya's rapidly expanding telecom and broadband networks. 
Huawei and ZTE each have contracts to build sections of a national 
terrestrial fiber optic backbone network now under construction. 
 
-- Natural Resources: Please see ref C for details on the 
involvement of the Chinese National Offshore Oil Company (CNOOK) in 
oil and gas exploration in Kenya.  Interest by China in hydrocarbons 
in Kenya appears to have waned after the expensive failure in 2007 
of an Australian company to discover oil or gas off the Kenyan 
coast.  In July, 2007, CNOOK handed back to the Kenyan government 
four of six exploration blocks it had been awarded in April, 2006. 
A Chinese firm is also a major investor in a titanium mine project 
whose long delays may cause the original Canadian investor to divest 
its interest in the project. 
 
-- Energy: A Chinese engineering firm has the contract to enhance 
the capacity of the primary pipeline that carries oil and gas from 
the port of Mombasa into the interior of East Africa. 
 
-- Airport construction: A Chinese engineering firm won the Kenya 
Airports Authority (KAA) contract for the Sh2.6 billion first phase 
of the expansion of Jomo Kenyatta International Airport (JKIA) and 
is likely to win the contract for the second phase. Phase 1 involved 
construction of a taxiway, an apron, work on the new terminal 
building, extension of the fuel hydrant system and fencing.  Phase 2 
will expand the cargo apron loading capacity.  Another Chinese firm 
won the KAA contract for the Sh3 billion reconstruction of Kisumu 
Airport.  The project will expand the terminal, car park, apron and 
taxiway, lengthen the runway to three km and widen it, enabling the 
Kisumu to handle Boeing 737 aircraft and become an international 
airport. 
 
----------------------------- 
Chinese Government Engagement 
----------------------------- 
 
¶5.  (SBU) In the absence of greater transparency on the part of the 
Chinese embassy in Nairobi in terms of its activities and assistance 
and exchange programs, it is difficult to ascertain exactly where 
and how the Chinese government is engaging in Kenya.  An in-house 
survey of relevant USAID/Kenya offices yielded virtually no 
indication of current Chinese involvement in the health, 
primary/secondary education, environment, or security sectors.  The 
Chinese government does provide sponsorship for around 80 Kenyans to 
study at Chinese universities each year, and has also developed a 
cultural exchange program under which Kenya acrobats (usually 
children) study that sport in China.  The Chinese embassy provided 
nearly $5 million in 2007 to repair the Moi International Sports 
Center in Nairobi, which the Chinese government built in the 1980s. 
The Chinese Foreign Service Institute hosted the Kenyan Foreign 
Service Institute Director and some of his staff for two weeks in 
January 2008 to see how China trains its diplomats, and the Chinese 
Institute will provide further training to Kenyan diplomats. 
 
¶6. (SBU) On the military side, the Chinese donated about $3 million 
late in 2007 to the Kenyan military to acquire spare parts for 
aircraft the Chinese had sold to Kenya several years earlier.  The 
Chinese and Kenyan militaries are also scheduled to conclude a sale 
this year of a small number of troop transport helicopters.  The 
Chinese do not have a resident defense attache in Nairobi, but they 
do offer a limited number of military training slots, similar to the 
U.S. IMET program, each year to the Kenyan military. 
 
------------------------------------- 
Current Level of Engagement with U.S. 
------------------------------------- 
 
¶7.  (SBU) Given the apparent lack of Chinese involvement in sectors 
in which the U.S. Mission is active (e.g. health, education, the 
environment, governance, counter-terrorism, and private sector 
development), bilateral engagement in Kenya between the U.S. and 
China is limited.  As noted previously, the key structural 
difficulty in working with the Chinese is that the Chinese embassy 
has thus far declined to join the Nairobi donor umbrella 
organization, the Donor Coordination Group, chaired by the World 
Bank.  It is thus problematic to know precisely what kinds of 
assistance China is providing to Kenya and where therefore other 
donors such as the U.S. might be able to work together with it. 
 
---------------------------------------- 
Areas of Potential Bilateral Cooperation 
---------------------------------------- 
 
¶8.  (SBU) That said, at a standing-room-only seminar on April 24 
entitled "China in Africa: Opportunities and Challenges," Chinese 
Ambassador to Kenya Zhang Ming spoke candidly to the many civil 
society members in attendance about China's policies and activities 
in Africa generally, and Kenya specifically.  He expressed interest 
in greater engagement and cooperation with civil society and other 
donor governments in the following areas, which Embassy Nairobi will 
further explore with Zhang and his staff in the months ahead.  These 
included: 
 
-- Media Capacity Building: Xinhua news agency's headquarters in 
Africa is in Nairobi. 
-- Bird Flu: Given the global nature of the bird flu threat, China 
is interested in helping in detection and surveillance 
-- Peacekeeping: There are 1,500 Chinese UN Peacekeepers, 350 of 
whom are in Darfur.  Citing AFRICOM, Zhang asked if there was room 
for military cooperation in Africa. 
-- Corporate social responsibility and labor rights. 
 
Ranneberger