Issue No. 316

Published 27 Jan

Partners in Poverty or Prosperity? The China-Ethiopia Relationship

Published on 27 Jan 29:42 min

Partners in Poverty or Prosperity? The China-Ethiopia Relationship
 

Upholding a long-standing tradition, the first week of 2026 saw China's Foreign Minister Wang Yi begin his tour of the African Continent, opening with a meeting with Ethiopian Prime Minister Abiy Ahmed in Addis Ababa. The value of this 36-year tradition extends well beyond symbolism; as Ethiopia’s position as a marginalised state solidifies within the Horn of Africa, and at a precarious moment for its allies, China has become essential to the growth of Ethiopia. While Western partners grow increasingly critical of Ethiopia’s domestic wars and the humanitarian consequences, and Ethiopia's peripheries burn, in contrast Beijing is deepening its economic embrace of Addis Ababa - taking advantage of the state of exile befalling Addis Ababa. 

Prime Minister Abiy Ahmed Ali arrived in the shadow of the political failings of Meles Zenawi’s developmental state. Pledging grand economic plans under his ‘homegrown economic reform’ scheme, Abiy would transform Ethiopia from a rigid developmental state into a dynamic market economy, promising to make Ethiopia a middle-income country by 2025. Inheriting a positive relationship with Beijing, Abiy maintained this partnership - by 2017, Chinese contractors were responsible for 80% of major infrastructure projects. Initially Abiy’s reform agenda appealed to Western partners, as he released political prisoners, liberalised politics, and brokered peace with Eritrea. Deterred by the 2020 Tigray Crisis, Western partners were largely replaced by Beijing, which turned a blind eye to the accusations of egregious human rights violations. In 2022 Ethiopia was suspended from the American Government’s African Growth and Opportunity Act (AGOA) for 'gross violations of internationally recognised human rights' during the Tigray war, losing preferential tariff-free access to the US market and saw its export growth curtailed by 43%. Human rights concerns surrounding the Tigray conflict in 2023 prompted the EU to suspend USD 108 million in budgetary support. More damaging still was the slashing of USAID - Ethiopia was Africa's largest recipient, receiving over USD 1.3 billion in 2023. Further unfavourable reviews on Ethiopia’s situation came from the International Monetary Fund (IMF) and the World Bank, chastising Ethiopia’s debt as ‘unsustainable’ and allowing a debt suspension due to its weak borrowing power. Rescuing an economy under siege, China stepped up alongside Russia and the UAE to fill the void left behind. 

​As the depth of Ethiopia’s dependency grew deeper, Beijing shifted its influence away from bricks and steel towards currency and finance. Beginning with flagship projects such as the Grand Ethiopian Renaissance Dam (GERD), and the Ethiopia-Djibouti Standard Gauge Railway (SGR), the relationship tended towards the economy and was consolidated by the 2023 ‘all-weather partnership’. Today, China holds roughly half of Ethiopia's bilateral debt and co-chairs the creditor committee determining the country's financial future. And China’s donations don’t stop there; with Ethiopia’s forex reserves covering barely one month of imports - one third of the IMF’s recommended minimum - Beijing controls access to the hard currency that keeps the government afloat.

Far beyond simply propping up the Addis’ economy, Beijing and Abu Dhabi are supporting Abiy’s vision for a new Addis Ababa. While the peripheries are left to crumble without sufficient funding, Ethiopia’s patrons are enabling an economy increasingly centered on Addis Ababa's beautification and on the symbolic consolidation of Abiy’s rule. The USD 10 billion Chaka palace project - likely funded by the UAE - sprawls across 503 hectares with artificial lakes and imported palm trees, while China funds the USD 700 million 'Addis Tomorrow' special economic zone, promising to transform the capital into 'one of Africa's top cities', and corridor projects connect elite enclaves. In a decisive shift away from the EPRDF's developmental state, Abiy’s new system of rule served elite interests and encouraged regime survival through corruption in a patron-client system. Where Abiy relies on Beijing’s engagement for the pursuit of his vision, China is free to consolidate its influence with little disturbance from patrons with conflicting interests.

For Beijing, collecting the broken pieces of Ethiopia’s economy has been an investment in its own geopolitical interests. Ethiopia’s proximity to China’s military base in Djibouti remains a key driver for Chinese interests in the country. Taking advantage of the land-locked crisis, the 2018 opening of the Ethiopia-Djibouti electrified Standard Gauge Railway became a crucial ‘lifeline’ for the two countries. The Initiative made significant openings for Ethiopian exports across East Africa and to the Gulf of Aden shipping routes, inextricably binding the benefactors to the donor. 

At a moment of particularly strained Ethiopian-Djiboutian relations, Beijing’s investment is significant, underpinning the economy of both countries. In a bid for autonomy from the co-dependency trap that is Ethiopia’s use of Djiboutian ports, Abiy met with Djiboutian President Ismail Omar Guelleh in the first week of January, during which Abiy threatened to diversify Ethiopian exports to include the port of Berbera and Kenya’s Lamu Port unless Djibouti lowers export costs. Although more likely an empty threat due to the impracticalities of access to the alternatives, this proposition would have no small impact on China-Ethiopia relations. Not only has China contributed significantly to the construction of Djibouti’s ports and to the infrastructure to enable Ethiopia’s access to it, but China is also at odds with the de facto state of Somaliland and Ethiopia’s indulgent approach towards it. Although Ethiopia is tempted by the idea of recognising Somaliland - a move in direct opposition to Beijing’s One-Somalia, One-China Policy - Beijing is showing no sign of abandoning its most reliant African partner. 

A long pause followed the Ogaden National Liberation Front's (ONLF) attack on the Chinese-operated oil exploration site in Abole in April 2007, itself symbolising the sustained underdevelopment of Ethiopia’s Somali-speaking region. Almost two decades on, the Gode Oil Refinery was opened in partnership with Chinese Golden Concord Ltd in 2025, and there is little prospect for change to the development of the region. A true embodiment of the centralised political economy built by Abiy and Xi Jinping, the peripheral Somali Regional State (SRS) is unlikely to see the economic benefits of the new refinery. This project was not the first nor the last in a lengthy list of projects exploiting Ethiopia’s - largely unrealised - natural resources, all with the aid of Beijing, Abu Dhabi, and Moscow. China shows a uniquely high tolerance for instability when strategic assets are at stake, and Ethiopia’s chronic economic dysfunction and untapped potential has made it more valuable to China’s expansive regional ambitions.

Once reputed for favouring ‘status quo states’, China’s recent track record reveals a calculated willingness to take advantage of dysfunction when it creates dependency. Beijing arrived in Addis Ababa at a time of growing difficulty; three insurgencies raged across the country, Western donors were turning their backs, and the economy was plummeting. China’s helping hand arguably rescued Ethiopia from looming disaster. But it has also left Addis Ababa dangerously dependent on its Asian saviour. If Abiy succeeds in pulling his country back from the brink, de-escalating internal conflicts and putting the economy back on track, both Addis and Beijing stand to benefit. But if Ethiopia continues to wage costly domestic wars and descend even deeper into China’s debt, it is a relationship that both parties may yet come to regret.

The Ethiopian Cable Team

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