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Kenya spent 59% of all the money it collects in taxes to service the country's ballooning debt, a slight increase from the previous fiscal year.

The news adds further pressure on President William Ruto, who slashed subsidies and increased taxes in part to pay the debt. These moves triggered days of deadly street protests in the capital Nairobi.

Part of the reason for the increase in Kenya's debt servicing costs is attributable to the plunging value of the shilling that makes repayment of dollar-denominated loans more expensive. Another reason is loan repayments to the China Exim Bank.

Kenya's debt repayments to China surged by 46% this year to $756 million due to the expiration of grace periods on various loans taken out to build roads and railroads across the country.

As of March, Kenya still owes around $6 billion to the China Exim Bank, accounting for approximately 8% of the country's total public debt.

WHY IS THIS IMPORTANT? Chinese creditors, specifically the China Exim Bank, have refused repeated requests by the Kenyan government to defer debt repayments. This is the most glaring example of Chinese inconsistency in its oft-stated mantra "a friend in need, is a friend indeed" given the economic pain Chinese debt servicing is imposing on the Kenyan economy.

SUGGESTED READING:

• Bloomberg: Kenya Debt-Servicing Costs Take Biggest Portion of Tax Income in 10 Years by David Herbling
• Business Day: Kenya spends record Sh107bn on repayment of China by Constant Munda

Critics of Chinese lending practices in developing countries often point to Kenya's Standard Gauge Railway (SGR) as the prime example of Beijing's aggressive tactics that underlie the "debt trap" accusation.

But in Kenya, they're telling a very different story about how the country's largest-ever infrastructure development project became marred by massive corruption, incompetence and mismanagement.

Two of the country's leading independent media outlets, The Elephant and Africa Uncensored, teamed up to produce an in-depth investigation into the origins of Kenya's burgeoning debt crisis. 

Much of the focus in the two-part documentary video series posted on YouTube centers on the Chinese-financed and constructed SGR and how the cost ballooned tenfold to become a financial boondoggle. 

But contrary to the U.S. and Indian narratives that assign blame for Kenya's debt woes squarely on the Chinese, the people with firsthand knowledge of the railway deal say it was Kenyan politicians who actually bear the most responsibility:

• THE BUSINESSMAN: "I had begun to [pitch the project] in 2008 as a public-private partnership with the China Road and Bridge Corporation. Our proposal was that it was going to cost from Mombasa to the [Ugandan border] to cost about $385 million (compared to the $3.8 billion it ultimately cost)" -- Jimmy Wanjigi, prominent Kenyan businessman and political strategist

• THE LAWMAKER: Host: "Have you laid eyes on the SGR contract?"     Answer: "Have you? Have you yourself?"    Host: "I'm not on the public investment committee."   Answer: "I remember one of your colleagues in the media I can't remember who it was did ask that question to the former president and he said within two weeks he would release that contract and I have never laid eyes on it myself" -- Kimani Ichungwai, Majority Leader and Former Vice Chair of the Public Investment Committee

• THE AUDITOR GENERAL:  Host: Did you have a chance to audit the usage of [the SGR] loan?  Answer: "[PAUSE] you know... that's where the system started wrong" -- Edward Ouko, Former Auditor General of Kenya

WHY IS THIS IMPORTANT? This two-part documentary series is absolutely essential viewing for anyone who wants a more nuanced understanding of Kenya's debt crisis and how, in many ways, China's role in the situation is significantly smaller than how it's portrayed in the Western/Indian discourse. 

More importantly, this documentary highlights a strong local voice on an issue where Kenyans have largely gone unheard.

SUGGESTED VIEWING:

• Africa Uncensored: Indebted: Kenya’s Journey to a Debt Crisis Part 1 – The Men in the Arena
• Africa Uncensored: Indebted: Kenya’s Journey to a Debt Crisis Part 2 – The Feeding Trough

There's been a lot of discussion in recent years about how Chinese lenders required high-risk borrowers in Africa and other developing countries to put large pools of money in offshore escrow accounts as a kind of insurance measure that guaranteed the creditor would be repaid.

But little is known about how those escrow accounts work in practice and when borrowing countries are forced to draw on them (and replenish) during difficult times.

The International Monetary Fund, however, provided a glimpse into this practice in a report published this week on the debt situation in the Republic of Congo. Buried in the middle of the 130-page report was a passing mention of Chinese escrow accounts:

"The authorities continued accumulating excess deposits in the escrow account in China during 2020 that provides temporary guarantees for debt service to China. The authorities were able to use escrow account balances during the COVID-19 pandemic for debt service to China but reimbursed the escrow account again with the contractual amount in 2022 to meet their contractual obligations, including deposits guaranteeing the payment of three future semi-annual debt service installments."

WHY IS THIS IMPORTANT? Escrow accounts are widely used by Chinese creditors to offset some of the risk associated with lending to large sums of money to countries with relatively weak governance, like the Congo. It also demonstrates how determined Chinese creditors are to ensure that they get their money back.

SUGGESTED READING:

• AidData: How China Lends -- A Rare Look into China's Debt Contracts with Foreign Governments
• International Monetary Fund: Republic of Congo: Third Review under the Three-Year Arrangement under the Extended Credit Facility

A Malawian court convicted Lu Ke, the Chinese man featured in a BBC Eye on Africa documentary about the highly exploitative practice of showcasing African children in so-called "blessing videos."

The court on Friday sentenced Lu to 12 months in prison, which he's already served, and ordered him to leave the country before the end of the week.

He is also not permitted to return to Malawi.

Lu was featured in last year's landmark BBC expose Racism for Sale, which used hidden cameras to reveal widespread abuse and exploitation of Malawians, including children, to produce demeaning videos.

These so-called "blessing videos" are big business on Chinese e-commerce platforms where Chinese buyers place orders for people in poor developing countries to demean themselves by saying racist things in Chinese, dancing and other acts.

WHY IS THIS IMPORTANT? The fact that Lu was forced to serve his sentence in Malawi is notable, given that in previous instances of Chinese malfeasance in Africa, the culprits were often deported without incarceration. The key question is whether what happened to Lu will serve as a deterrent to others who produce these exploitative videos.

SUGGESTED READING AND VIEWING:

• [WATCH] BBC Africa: Racism for Sale - BBC Africa Eye documentary
• BBC News: Malawi racist videos: Chinese man convicted after BBC expose by Peter Jegwa

A Twitter video that claims to show the wife of the Chinese ambassador to Pakistan, Nong Rong, violently beating a woman on the streets of Islamabad is likely false, according to fact-checkers who were unable to authenticate the source or the date the video was shot.

The video was first posted by a Pakistani Twitter user but did not provide any information about its origins. From there, it took off on Pakistani Twitter, with thousands of people sharing it -- all without questioning its veracity.

However, the fact-checking team at the Indian news publication The Week concluded that it was highly improbable this was Nong's wife, given that he had already relocated from Pakistan around the time the incident purportedly occurred. 

There is no indication at this time that the video was part of an intentional anti-Chinese misinformation campaign.

WHY IS THIS IMPORTANT? Even in countries that are ostensibly very friendly to China, misleading videos like this and misinformation more broadly remain rife.

Read more on this story on The Week (India) website.

China’s top diplomat Wang Yi will travel to Africa next week. He is attending a meeting of BRICS national security advisors in Johannesburg on 24 and 25 July. In addition to South Africa, he will also visit Nigeria, Kenya, and Türkiye. (CHINESE MINISTRY OF FOREIGN AFFAIRS)

The Chinese Defense Ministry confirmed Saturday that Russian navy and air force assets will participate in upcoming joint exercises in politically sensitive waters near Japan. The Northern/Interaction-2023 drills are widely seen as a response to similar joint maneuvers by the U.S. and its allies in the Asia-Pacific region. (SOUTH CHINA MORNING POST)

U.S. Treasury Secretary Janet Yellen said she is "eager" to work with China on areas of mutual interest, including debt restructurings for poorer countries. Yellen said she hoped the Zambian debt restructuring deal reached with China and its bilateral creditors would serve as a template for other Global South countries. (REUTERS)

More African students are studying overseas than ever before, according to new data from the Carnegie Endowment for International Peace. Of the 624,271 students that went abroad in 2020, France was the top destination with 126,000, followed by China (81,500) and the United States (48,000). (CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE)

Forty specialist teams from eighteen countries including South Africa, Pakistan and Belarus took part in a sniper competition in China’s Xinjiang province. The three-day Sharp Blade 2023 competition was organized by the People’s Armed Police and featured twelve events, including exercises simulating infiltrating enemy lines, and shooting at moving targets while on a speedboat. (CHINA MILITARY ONLINE)

The Nigerian air force announced that a Chinese-made F-7Ni fighter jet crashed during a routine training exercise. The two pilots survived the crash by ejecting from the aircraft. The Nigerian air force ordered fifteen aircraft from China in 2005, and pilots underwent flight training in China from 2008. Since then, six of the aircraft have been lost in crashes, killing three pilots. (DEFENCEWEB)

India reportedly blocked attempts by Pakistan and China to insert language in support of the Belt and Road Initiative and the China-Pakistan Economic Corridor into documents guiding the Non-Aligned Movement. The NAM is a recently resurrected grouping of states which resist siding with either superpower in a geopolitical struggle. (THE ECONOMIC TIMES)

China rolled over a $600 million loan to Pakistan on Tuesday, providing the debt-distressed South Asian country with yet another financial lifeline. China has deferred repayment of more than $5 billion as part of an effort to help Pakistan bolster its ailing finances. (REUTERS)

South Africa can boost coal shipments to ports after last year's record decline if it secures locomotives that were idled following a dispute with a key Chinese supplier, said the head of the country's state-owned rail operator. Transnet Freight Rail CEO Sizakele Mzimela said resolving an impasse with China's CRRC E-Loco could help it ramp up shipments to about 81 million metric tons. (REUTERS)

China's powerful top regulator for state-owned enterprises, Gou Ping, promised more SOE support for African infrastructure development and energy decarbonization. Gou's pledge will no doubt be welcome news to many African countries that have seen a sharp drop in recent years in Chinese infrastructure financing. (CHINA DAILY)

China’s shipping giant Cosco will sell semi-submersible vessels to the Saudi state oil company Saudi Aramco’s $12 billion Marjan offshore oil facility. The collaboration will increase oil output at Marjan to 800,000 barrels per day. (THE NEW ARAB)

China Railway Rolling Stock Corp has exported the world’s first hydrogen-powered smart tram to Malaysia. It was built in Hunan and will travel to Malaysia via Shanghai. The tram system will be installed in the Malaysian city of Kuching, Sarawak State. (CGTN)

China's new envoy to the Democratic Republic of the Congo, Zhao Bin, traveled to the southern Lualaba province last week for his first tour of a Chinese mining facility.

Zhao led an embassy delegation to visit the Lualaba Copper Smelting Co., Ltd, a subsidiary of the state-owned mining major China Non-Ferrous Metal Corporation (CNMC) that has extensive operations throughout the DRC.

During his tour of the facility, Zhao received briefings on security at the mine as well as the social infrastructure that CNMC was mandated to build as part of its concession.

Read the full report on Zhao's tour on the Africa Yellow and Black WeChat page (in Chinese)

Nigerian TikTok users couldn't believe what they were seeing when a China-based importer who goes by the TikTok handle @timi_perfection posted a video that laid out everything he bought for just 50,000 nairas (about $63.)

Dozens of comments expressed doubt over how much he bought for seemingly so little. 

Whether Timi's haul was really bought for so little may be in dispute but what he did reveal is the reality that it's traders like him who are helping to flood the Nigerian market with low-cost Chinese goods.

His entire TikTok feed is filled with videos of shoes, headscarves and other apparel that eventually find their way to local markets throughout Nigeria.

And while shoppers no doubt enjoy the low prices that Timi passes on to his customers, those same imports also make it extremely difficult for local producers to match the infamous "China Price" that traders like Timi leverage to their advantage.

WHY IS THIS IMPORTANT? There is a widely-held misperception that Chinese merchants are importing vast quantities of low-cost Chinese-made goods is the reason why the West African country's apparel industry is in such dire straits.

While that certainly does happen, there's considerable evidence that it's actually Nigerians like Timi based in Chinese cities like Guangzhou and Yiwu that account for a considerable portion of the low-end apparel trade that's causing so many problems for local manufacturers.

SUGGESTED READING:

• People's Gazette: Influx of cheap, bogus Chinese adire threatens major Nigerian tribe’s livelihood, tradition by Adebola Ajayi
• Legit.ng: Young Nigerian Man Ships Goods From China With Only N50k, Video of Many Things He Got Causes Stir by Joseph Omotayo

Reports began circulating late last week that Iraq had finalized a deal to purchase 12 JF-17 Thunder fighter jets from Pakistan for $664 million.

The news lit up Pakistani Twitter as hundreds of posts emerged celebrating the deal that would make Iraq the fifth country to buy the Chinese jet manufactured in Pakistan under license.

But the story may not be true.

“The Minister of Defence Thabit Al Abassi did not and will not engage Pakistan for the purchase of the JF-17,” an unidentified Iraqi Air Force told the publication Arabian Business.

Other sources told the news site that the rumor about the sale can be traced back to the previous Iraqi defense minister, who left office last October.

SUGGESTED READING:

• Arabian Business: Iraqi Air Force denies purchase of JF-17 thunder fighter jets from Pakistan by Awad Mustafa
• Iraqi News: Iraq to purchase 12 JF-17 Thunder fighter aircraft from Pakistan by Amr Salem

It's been three weeks since Qin Gang was last seen in public, sparking a wave of rumors (many emanating from Taiwan) that the Chinese Foreign Minister has been benched for allegedly having an affair with Phoenix News TV journalist Fu Xiaotian.

Initially, the Ministry of Foreign Affairs attributed Qin's absence to "health reasons" but then seemingly backed away from that line after officials scrubbed the press briefing summaries of any reference to questions about Qin's disappearance.

There are also allegations, all of which have yet to be substantiated that Qin and Fu had a child while he was married to someone else and while they were in the United States, which, if true, would put President Xi Jinping into an awkward situation given that a child born to a Chinese citizen in the U.S. would be an American citizen.

Qin's disappearance is also having a meaningful impact on Chinese diplomacy because the Foreign Minister has not shown up to several key events, including last week's ASEAN foreign ministers conference in Jakarta. His boss, Wang Yi, has attended in his place.

Why the Allegations Against Qin Are Serious According to Sinocism Editor Bill Bishop

• QIN'S APPOINTMENT CREATED ENEMIES: "Xi personally promoted Qin ahead of more senior/qualified folks, causing a lot of upset inside the foreign affairs system. The knives are clearly out for Qin."

• PUTS XI IN A VERY BAD BIND: "Xi has made a big deal about cadres being upstanding and setting good examples in their personal lives. Having an out of wedlock child in the US, so likely now a US citizen, should be seen by most people as a significant security risk/point of leverage."

• BE CAREFUL ABOUT ONLINE RUMORS: "The rumor mill is churning about all sorts of things, feels a bit like last summer and those coup rumors. I think people see openings to spread all sorts of stuff right now."

FOOTNOTE: It's very important to remember that at this time, there are only unverified rumors circulating about Qin's absence, many of which are propagated by wholly unreliable sources. It's entirely possible that Qin has indeed suffered a severe medical incident of some kind. The bottom line is that we just don't know and the Chinese government isn't saying anything.

WHY IS THIS IMPORTANT? Qin's disappearance from public view creates added uncertainty when there's already a lot of anxiety in the diplomatic sphere related to China's activities in the South China Sea, its contentious ties with India and, of course, the ongoing tensions with the United States.

Also, how Xi deals with the situation, regardless of what happened, could be quite revealing about the current culture within elite policymaking circles in Beijing.

SUGGESTED READING:

• Kyodo News: Extramarital affair behind Chinese minister Qin's absence: media
• Sinocism: Some thoughts re the Qin Gang rumors. by Bill Bishop (subscribers only)

Chinese diplomats around the world tried to put a positive spin on the country's latest trade figures which indicate a marked drop in the first half of the year compared to the same period last year.

The General Administration of Customs released its H1 2023 figures late last week. They revealed a 12.4% plunge in the value of exports (measured in USD), the biggest drop since the beginning of the pandemic in 2020.

Imports fared a little bit better but were still down by 6.8% in the January-June period.

Analysts are not expecting the situation to improve much in the second half of the year, with demand softening in many of the world's largest markets, including the United States.

“We see little respite for China’s exports in the second half, as the U.S. is likely to enter a mild recession, while the Eurozone economy probably will remain weak,” Duncan Wrigley, chief China economist at Pantheon Macroeconomics, wrote in a note after the data release.

All of this, of course, is bad news for Global South countries, many of which rely on China as their largest export market for commodities. A persistent slump in Chinese demand for raw materials will create second order effects in developing countries already facing considerable economic headwinds.

Regional Breakdown of H1 2023 Chinese Trade Results:

• ASEAN: Southeast Asia remained China's largest export destination even though shipments plunged 17% last month and 1.5% in the six-month period from January through June compared to the same window last year. Imports from the 10 ASEAN countries dipped 4% to $34 billion in that period. (CNBC)

• AMERICAS: Latin America was a bright spot in the report, with two-way trade increasing 7% year-on-year, powered in part by a 6% growth in Chinese exports to the region. Analysts attribute the bump in part to automakers rushing to expand operations in the LatAm market. (CAIXIN)

• AFRICA: Overall trade between China and Africa edged up 3.1% to $140 billion ($87b in exports/$53b in imports), but most of those gains were fueled by increased demand for Chinese goods among African importers. African shipments to China plunged 12.4% in that same period due in part to a disruption of cobalt/copper shipments from the Tenke Fungurume mine in the DR Congo. (GENERAL ADMINISTRATION OF CUSTOMS)

• BELT & ROAD: Across all 151 BRI member states, two-way trade with China increased 9.8% year-on-year and accounted for just over a third of the country's total global trade. (XINHUA)

WHY IS THIS IMPORTANT? These figures reveal the quandary that confronts many developing countries that rely disproportionately on selling to the huge China market, which also leads to enormous vulnerabilities when the Chinese economy slows, as is now happening.

SUGGESTED READING:

• CHANNEL NEWS ASIA: China economic data likely to show recovery is fading quickly
• The Wall Street Journal: China’s Drop in Exports Signals Deepening Slowdown in Global Trade by Jason Douglas

A weeks-long tour of Africa by a trio of Chinese warships continued with a stop in the Republic of Congo on Friday, where they were greeted by Defense Minister Richard Mondjo.

The PLA Navy ships previously made stops in Nigeria, Ghana and Gabon.

The Solomon Islands signed a police cooperation agreement with China, as part of upgrading their ties to a strategic comprehensive partnership. This resulted from a state visit by Prime Minister Manasseh Sogavare to Beijing, and follows alarm in the U.S. and Australia due to a joint security pact signed last year. (REUTERS)

Solomon Islands Prime Minister Manasseh Sogavare arrived in Beijing on Sunday for his first visit since signing a controversial security pact with China. Sogavare again pledged to "remain neutral" in the escalating U.S.-China duel and said infrastructure development will be the focus of his talks with Chinese officials. (REUTERS)

The Honduran government is looking to China to help finance a $20 billion railway project that will connect the country's Pacific and Atlantic coasts. Economic Development Minister Fredy Cerrato made the request on Friday during talks with Chinese officials about various proposed infrastructure projects. (REUTERS)

Chinese Foreign Minister Qin Gang is expected to meet with his Japanese counterpart Yoshimasa Hayashi on the sidelines of an ASEAN forum in Indonesia. The meeting, if it happens, comes at a time of heightened tensions between the two Asian powers over territorial disputes, maritime security and the release of radioactive water from the damaged Fukushima nuclear facility. (JAPAN TIMES)

Netflix removed the Chinese-made drama series “Flight to You” from its service in Vietnam, after Hanoi banned it for containing a map echoing Chinese territorial claims in the South China Sea. In the same week, the Korean pop group Blackpink faces an online backlash and a possible boicott of their Vietnamese tour, after the Chinese company promoting the event also included the nine-dash-line map on their website. This follows the Vietnamese government’s move last week to ban the upcoming Barbie blockbuster due to the presence of a hand-drawn version of the controversial map, which contradicts Vietnamese claims in the region. (VARIETY)

The mining giant China Molybdenum (aka CMOC) confirmed that it has restarted shipments of copper and cobalt from Tenke Fungurume, one of the world’s largest cobalt mines. This follows the resolution of a revenue dispute with the government Democratic Republic of Congo in April. Tenke Fungurume supplied a tenth of global cobal supplies in 2021. (REUTERS)

Chinese Foreign Minister Qin Gang is reportedly sick and will not attend this week's ASEAN summit in Indonesia. China's top diplomat Wang Yi will attend in his place. Qin also missed last month's BRICS foreign ministers gathering in Cape Town. (ASSOCIATED PRESS)

Chinese oil refiners will reduce their purchases of Saudi Arabian crude in August in favor of more affordable supplies from West Africa and Latin America. Chinese oil inventories are also bulging after months of binging on low-cost Russian imports. (REUTERS)

Kenyans are the world's most active TikTok userswith more than 54% of those surveyed using the Chinese social media app for news and entertainment. Japan was the lowest with only a 9% usage rate, according to this year's Reuters Institute Digital News Report. (REUTERS INSTITUTE)

U.S. Secretary of State Antony Blinken will meet with China’s top diplomat, Wang Yi on Thursday on the sidelines of Association of Southeast Asian Nations (ASEAN) gatherings taking place in Jakarta. The meeting, together with U.S. Treasury Secretary Janet Yellen’s recent trip to Beijing, an upcoming one by climate czar John Kerry, and this week's rare visit by Xie Feng, China’s U.S. ambassador, to the Pentagon are seen to be paving the way for a meeting between Presidents Joe Biden and Xi Jinping later this year. (REUTERS)

Indonesia’s Foreign Minister Retno Marsudi held closed-door talks with her Chinese and Russian counterparts on the sidelines of ASEAN ministerial meetings in Jakarta on Wednesday. A meeting between her and China’s top diplomat Wang Yi preceded the trilateral talks, after which she had a separate twenty-minute one-on-one with Russian Foreign Minister Sergei Lavrov. Marsudi told reporters the trilaterlal talks focused on ASEAN relations, while her talks with Lavrov covered food and energy security, and possible visits. (JAKARTA GLOBE)

Industrial and Commercial Bank of China (ICBC) opened its first batch of RMB-denominated bank accounts in Argentina. The initial group of account holders are mostly resource companies, for example the lithium developer Liex SA. According to Association of Argentinian Banks the demand for RMB accounts is rising among both companies and individuals and other banks are reportedly also investigating the option of starting similar services. (CHINA BELT AND ROAD NETWORK WECHAT PAGE - in Chinese)