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1 [1] (September 4, 2019)

handle is hein.crs/govbaxw0001 and id is 1 raw text is: ConresionlRsac evc 0 September 4, 2019 China's Engagement in Djibouti Overview Djibouti is pursuing an ambitious agenda to transform itself into a commercial trade hub for the Horn of Africa region. This effort is being financed largely by the People's Republic of China (PRC), which is playing a growing role in the tiny country. China's engagement is multi-faceted, ranging from major infrastructure investments to the establishment of its first overseas military base in the country. China considers Djibouti part of its Belt and Road Initiative; in late 2017 the two countries declared that they had established a strategic partnership. U.S. policymakers have raised concern about China's role in Djibouti, given U.S. strategic interests in the region and the proximity of China's base to U.S. military facilities there. Djibouti is strategically located on the Bab el Mandeb strait (Figure 1), a chokepoint between the Red Sea and the Gulf of Aden. It has become a hub for foreign militaries in the past decade, hosting bases for the United States, France, Japan, Italy, and, most recently, China. Djibouti's economy depends heavily on trade through its busy international port complex, and profits from shipping and land leases are important revenues source for the government. For more on the country, see CRS In Focus IF1 1303, Djibouti. China's engagement in Djibouti is emblematic of its broader shift toward a more expansive foreign policy, including in Africa, under Chinese Communist Party General Secretary and State President Xi Jinping. In 2015, Xi pledged $100 million in military aid to the African Union to support regional peacekeeping initiatives over a five-year period. China's role as a peacekeeping troop contributor has grown. It now has the largest number of peacekeepers deployed-roughly 2,500, a majority of them in Africa-of the five permanent members of the U.N. Security Council. China hosted its first China-Africa Defense and Security Forum in 2018, a sign of its interest in expanding security relationships on the continent. At its 2018 Forum on China-Africa Cooperation (FOCAC), China announced a China-Africa Peace and Security Fund and pledged to support programs on law and order, peacekeeping, anti-piracy, and counterterrorism. China's naval presence in the Gulf of Aden, where it has played a prominent role in multinational efforts to counter Somali piracy, dates back a decade. Djibouti has been a key resupply node for those operations. China's Economic Investment in Djibouti Djibouti has expanded its economic ties with China, to which it owes a growing amount of sovereign debt. According to the International Monetary Fund (IMF), Djibouti's public external debt is estimated to have risen from 50% of GDP in 2016 to 104% by the end of 2018, much of it based on Chinese lending. Former U.S. Africa Command (AFRICOM) Commander General Thomas D. https://crsreport Waldhauser estimated in early 2018 that Djibouti owed at least $1.2 billion to China. The debt has raised concerns among U.S. officials that the country may be increasingly vulnerable to Chinese influence or manipulation. Some Djiboutians have also expressed alarm about the lack of transparency around Chinese loans. China reportedly has provided nearly $1.5 billion in financing for major infrastructure projects in Djibouti since 2000. Among the projects being built by Chinese firms is a $3.5 billion free-trade zone (FTZ), expected to be Africa's largest. The first phase was completed in 2018, and is expected to create 200,000 new jobs and handle over $7 billion in trade from 2018 to 2020. Three Chinese companies have stakes in the FTZ, alongside Djibouti's port authority. Other Chinese-backed investment projects include the development of port facilities and related infrastructure, including a railway and two airports (a $420 million contract) and a pipeline to supply Djibouti with water from neighboring Ethiopia (a $320 million contract). Ethiopia, a landlocked country of over 100 million people, relies on Djibouti for the transit of 90% of its formal trade, recently facilitated by a new rail line between the two countries. The line was built and is operated by two Chinese companies, and financed in part by China's Export-Import Bank. A division of Chinese technology company Huawei, Huawei Marine, is linking Djibouti with Pakistan via an undersea fiber-optic cable that is part of the company's new 7,500-mile Asia-Africa-Europe cable, financed by China Construction Bank. In Pakistan, the cable would connect to a land-based link to China. U.S. officials have expressed concern that data carried by these cables may be vulnerable to espionage. Huawei reportedly is considering plans to sell Huawei Marine Networks to other buyers in China. Figure I. Djibouti Source: CRS, using ESRI and U.S. State Department data. ongressgc