ADDIS ABABA, Ethiopia — Taxis and buses were once the only way to get across this teeming, ancient city of 4 million residents. But recently a light rail system provided by a new financial angel — China — is transforming how Ethiopians commute.
“This is a new Ethiopia,” said Mahlet Adem, who owns a jewelry shop at the Shiro Meda textile market in Addis Ababa. “The economy of this country has grown following the completion of two rail lines. Moving goods from one place to another is nowadays very easy.”
Ethiopia is only the second sub-Saharan country after South Africa to lay down an electrified rail network. The $475 million joint venture between Ethiopia and China opened in September. Slated for completion in 2019, the planned 22-mile-long system will carry 60,000 passengers per hour to 49 cities and towns across the capital region.
At 27 cents per ride, the light rail is already spurring growth. A taxi ride across town costs around $2.50. Bus rides are 90 cents. Stations have become hubs for commerce.
“It’s really very great that the cost of transportation has gone down,” said Mr. Adem. “There’s also more business space in the city due to increased infrastructure. This country is moving fast.”
The rail system is a high-profile example of Chinese investment that has been crucial to Ethiopia’s annual growth of around 10 percent in the past decade. China and its companies have invested almost $900 million in Ethiopia over the past five years, according to the Ethiopian Investment Agency. Trade between the two countries is around $1.3 billion a year.
“You cannot compare the current Ethiopia to the one you saw 20 years ago,” said Getachew Betru, chief executive of the Ethiopian Railways Corporation. “Everything has changed from the transport sector to other infrastructure.”
And Ethiopia isn’t alone — Chinese President Xi Jinping this week traveled directly from the Paris climate summit for a visit to Zimbabwe and South Africa, a trip resulting in billions of dollars in new deals and multiple meetings with African leaders who traveled to meet with Mr. Xi.
But the new relationship is proving to be double-edged: As the Chinese economy has slumped this year and demand for resources in the world’s most-populous country slackens, Ethiopian growth is forecast to decline to 7.5 percent in the next few years, according to the International Monetary Fund. The IMF also recently noted that Ethiopia could benefit, however, as Chinese consumers import more goods like Ethiopian coffee and leather.
Ethiopia is still desperately poor. More than 80 percent of the population currently lives in rural areas and relies on subsistence farming, according to the U.S. Agency for International Development.
Backwater no more
Ethiopians are optimistic, however, that the Chinese investments are already proving a spur to other developed countries’ banks and financial institutions to help industrialize the country and modernize its agricultural sector. After a long period as a backwater in the global race for prosperity, sub-Saharan African nations such as Ethiopia are finally generating excitement among investors as the site for the next big economic takeoff.
Another China-backed freight rail system recently opened, replacing the old French-built railway that formerly connected landlocked Ethiopia to the Red Sea port of Djibouti. Ethiopian officials hope this will boost the country’s commercial exports. New lines to neighboring Kenya and Nigeria — more than 2,000 miles away — are also on the drawing board.
Across the country buildings and stadiums are under construction. Crews are completing eight soccer stadiums in Addis Ababa and other large cities.
The state-run Commercial Bank of Ethiopia is letting foreign banks into the country too. South Africa’s Standard Bank opened an office in Addis Ababa recently “to gain a foothold in one of Africa’s fastest growing economies,” executives said in a statement. Germany’s Commerzbank is among a slew of Egyptian, Kenyan, Indian and other foreign banks that recently opened offices as well.
The investment does not go only one way. Chinese products have flooded Ethiopia. Chinese exports to Ethiopia grew from $50 million in 1996 to $430 million in 2006, according to the investment agency’s most recent statistics, and China has emerged as the largest trading partner and source of foreign investment for a slew of African countries. Concerns about corruption and the lack of political liberties that have caused some U.S. and Western investors to hold back are not nearly as big a concern for the Chinese, analysts say.
A walk through Shiro Meda textile market and other open-air bazaars in Addis Ababa reveals stalls full of Huawei smartphones, shoes, jewelry, clothes and household goods manufactured in China.
“The Chinese have made life easier here — everything goes out at a cheaper price, like phones and other commodities,” said Sammy Ogali, the assistant chairman in charge of the market. “Ethiopia is booming because of its cheap products.”
Still, some Ethiopians were critical of China’s outsize role in the Ethiopian economy.
Kedir Gatahw, 35, who sells soaps and detergents at an outdoor market, said the Chinese goods that have flooded into Ethiopia are inexpensive, but they are also low-quality.
“The problem with these Chinese products is that they don’t last for long,” he said. “They are not efficient, and you keep on having to buy them. I have bought three phones this year because they keep on breaking.”
But China is also bringing jobs to Ethiopia.
China has established textiles and manufacturing industries in Ethiopia, for example. In the north of the capital, in the town of Suluta, the China-Africa Overseas Leather Products factory employs more than 4,000 locals.
“The Chinese have changed our lives since they came in the country and opened up various manufacturing industries,” said Bahren Fantaw, who works in a leather factory. “They have employed so many people. I think they’re growing the economy of this country.”
And despite the recent Chinese slowdown, the country’s building boom shows no signs of easing in the near-future, said Workneh Gebeyehu, Ethiopia’s transport minister.
Plans are being made to build a second international airport in Addis Ababa, at a cost of an estimated $4 billion, which could serve as many as 120 million passengers per year when it opens in about a decade’s time, he noted.
The new airport is separate from the ongoing $350 million expansion of the current Bole International Airport in Addis Ababa. That expansion is set to increase capacity from 6 million passengers annually to 22 million in three years.
China’s investment in the country’s airports and other infrastructure would bring more than inexpensive phones and other goods into the country, Mr. Gebeyehu added. The construction and engineering work would bring vital skills to Ethiopian citizens who might someday start their own smartphone firms.
“This is not just a relationship simply based on diplomatic negotiation but is a kind of relationship that is based on technology transfer, education and assisting each other,” he said.