China Rail Group Signs $12bn Nigeria Deal in the Latest Round of China’s Railroad Diplomacy

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Railways may be the oldest form of mass land transport, but currently they raise global attention once more as China is expanding its “railroad diplomacy” around the world for a variety or reasons.

On November 19, Cao Baogang, the vice-president of China Railway Construction Corporation (CRCC) as well as of China-Africa Construction Limited and Idris Audu Umar, Nigeria's Transport Minister,  signed a contract for a railway project in Nigeria. CRCC was awarded the contract for the construction of about 1400 km railway line along the West African nation’s coast. This is the biggest overseas engineering contract China ever signed, worth almost US$12 billion.

The route would connect the financial capital Lagos with the eastern city of Calabar, crossing Nigeria’s oil production region in the Niger Delta. The project will lead to exports of equipment from China worth US$4 billion, including construction machinery, trains and steel products. It would create up to 200000 jobs in Nigeria during construction and a further 20.000 to 30000 jobs after the railway begins service, according to China’s official news agency Xinhua.

In 2008, CRCC ran into problems with a railway project in Nigeria when the Nigerian government took over the US$8 billion venture after falling oil prices made it hard for the government to arrange financing for the project, which involved a line from Lagos to Kano in the north.

To expand its influence abroad, China is pushing exports of its rail technology; although it sometimes fails to succeed. In early November, a Chinese-led consortium won a $3.7 billion contract to build a bullet train in Mexico, which would have become the first of its type in Latin America. A few days later, the contract was abruptly canceled amid concerns over an unusually speedy bidding process.

Chinese railway companies have been aggressively bidding for projects in a number of markets including Southeast Asia, Europe and North America. In October, for example, local authorities and Chinese leaders agreed on a new Hungaro-Serbian High-Speed Railway projectand at about the same time Massachusetts transportation authorities signed a $567 million contract with train manufacturer China CNR Corporation for more than 280 Boston subway cars.This deal was of particular interest as it was the first of its kind in the United States and a symbolic move into a type of market typically dominated by Western and Japanese firms. 

China's pursuit of foreign rail deals is telling in a number of ways. First, it is demonstrating to the world, that China is confident enough to handle those mega projects. Second, further expansion abroad is aimed at boosting Beijing's influence in global markets and should definitely help lift China's manufacturing sector, which is of particular importance as China’s economy is currently at a low and is expected to slow during the coming decade.

And last but not least those projects – if realized in a proper way – can also have a positive effect on China’s soft power and image-management in local populations. Not only do they provide the opportunity for local job creation (which, however, is often not the case as China brings in its own workforce), but also (if realized) could eventually simplify and unburden people’s everyday life in a very direct and immediate manner. This potential image shaping factor could have an impact that other Chinese soft power instruments, such as Confucius Institutes or media outlets, can hardly arrogate for themselves.

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