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Xi and Modi just visited Rwanda and supplied millions of dollars, here's why

Key Points
  • Chinese President Xi Jinping and Indian Prime Minister Narendra Modi have just paid separate visits to Rwanda, pledging over $300 million in loans to the tiny, landlocked African country.
  • Rwandan President Paul Kagame is spearheading a pan-African single market. His country is currently in a trade spat with the U.S. over second-hand clothes.
  • Xi and Modi are both travelling in Africa ahead of a BRICS summit in South Africa which begins on Wednesday.
Chinese President Xi Jinping (C), accompanied by Rwandan President Paul Kagame (L), arrives at the Urugwiru State house in Kigali, Rwanda, on July 23, 2018.
Simon Maina | AFP | Getty Images

The leaders of the world’s two largest emerging economies have both just visited the tiny, landlocked African country of Rwanda – separately – and showed themselves to be friends with deep pockets.

Chinese President Xi Jinping landed in Rwanda’s capital Kigali on Sunday, where he met with his Rwandan counterpart Paul Kagame.

China granted Rwanda a loan of $126 million for the building of two roads, the latter country’s Minister of Finance Uzziel Ndagijimana told Reuters.

On Monday evening, after Xi’s departure earlier in the day, Indian Prime Minister Narendra Modi touched down in Kigali. Meetings resulted in the signing of two loan agreements each worth $100 million, for investment in agriculture and the development of special economic zones.

The meetings signified the first time a Chinese or Indian leader has visited Rwanda.

China and India are the world’s two most populous nations, with 1.6 billion and 1.3 billion inhabitants respectively. India is likely to be the world’s fastest growing major economy in 2018, a mantle China once held. The latter is now the world’s second largest economy after the U.S.

Rwanda’s recent history has been marked by civil war and ethnic conflict. It was ravaged by the genocide of its Tutsi ethnic group in 1994, in which over half a million people were killed. Home to approximately 12 million people, it is now in the process of transitioning into a middle income economy and reducing its dependence on foreign aid. The East African country is also promoting itself as a technology hub.

Indian Prime Minister Narendra Modi (C) and Rwandan President Paul Kagame (R) greet locals at the Rweru Model Village in Rwanda on July 24, 2018.
Simon Maina | AFP | Getty Images

Kagame is currently chairperson of the African Union. “As such, Rwanda becomes shorthand for engagement with Africa generally,” Jared Jeffery, political analyst at South Africa-based research firm NKC African Economics, told CNBC via e-mail. He added that the deals inked with China and India were a significant sum for the small Rwandan economy.

“Modi’s visit is arguably more notable than Xi’s as India’s ascendancy in Africa is less meteoric than China’s,” Indigo Ellis, Africa analyst at consultancy Verisk Maplecroft, told CNBC via e-mail. She added that Kagame views cooperation between the world's developing countries "as the future."

The Rwandan president is spearheading the establishment of a single market across the African continent for goods and services which would encompass a combined gross domestic product of $2.5 trillion. The majority of the African Union’s 55 members have signed up, although Nigeria, the continent’s largest economy is yet to endorse the proposal.

The issue of trade may have another dimension for Kagame. “It seems that the visit (from Xi) was an opportunity to take a subtle dig at the U.S. – with which the country is having a small trade spat over second-hand clothing” Jeffery added.

“China relates to Africa as an equal,” Kagame said on Monday, a statement “implying that others did not,” Jeffery pointed out.

“Kagame is sending a strong message to the U.S. – that Rwanda does not need Washington’s ‘paternalistic’ version of aid when China and India are ready and willing to invest in his country,” said Ellis.

Xi and Modi are travelling in Africa ahead of a BRICS summit in Johannesburg, South Africa, which begins on Wednesday. Xi’s Africa itinerary began in Senegal over the weekend, and will also include a stop in Mauritius after the South Africa meeting. Meanwhile, Modi travelled to Uganda on Tuesday.