Late in August, a Chinese consortium announced it would press ahead with a major dam in Eswatini even as Beijing urged its citizens to leave the country. The juxtaposition captures the complicated relationship between the Asian giant and the tiny African kingdom, Taiwan’s only formal ally on the continent of 54 countries.

A few months earlier, China had likened Taiwan’s president to a “rat” after he paid a surprise visit to Eswatini. “Lai Ching-te’s despicable conduct — like a rat scurrying across the street — will inevitably be met with ridicule by the international community,” a spokesperson for China’s Taiwan Affairs Office said ⁠in a statement.

Lai had originally planned to attend the 40th anniversary of King Mswati III’s accession to the throne and the king’s 58th birthday in April. The trip was postponed after Seychelles, Mauritius and Madagascar withdrew overflight permission, a move Taipei blamed on pressure from Beijing.

But against that backdrop – and despite an August 25 warning from China’s Foreign Ministry advising citizens not to travel to Eswatini and those already there to leave or relocate to safer areas such as neighbouring South Africa – the Chinese construction consortium Sakhalive JV pledged to continue its work on the $136mn dam.

“Sakhalive JV remains fully committed to the successful delivery of the Mpakeni Dam Project,” a consortium representative told the Times of Eswatini. “Construction activities continue in accordance with the approved programme and there are no plans to suspend, scale down or abandon the project.” None of its personnel had been evacuated or relocated to South Africa “at this stage”, the consortium said.

The construction contract, awarded in 2023, forms part of the Mkhondvo-Ngwavuma Water Augmentation Programme, one of Eswatini’s largest current infrastructure schemes. It is part of a wider programme intended to supply irrigation water to about 4,600 hectares of farmland.

The fact that Chinese engineers from Sinohydro Bureau 3 and Yellow River Engineering Consulting remain at work on the dam while their government warns of extremely high “security” risks in Eswatini illustrates an important distinction in the relationship: Beijing and Mbabane have no diplomatic ties, but business has never observed that boundary quite so neatly.

Africa’s last holdout

Eswatini’s relationship with Taiwan dates back to the kingdom’s independence in 1968. Its government has explicitly described the relationship with Taipei as one of “mutual respect, friendship and loyalty”, and has repeatedly and publicly rejected Chinese pressure to switch diplomatic recognition to Beijing.

The kingdom is not Taipei’s only de facto African partner. Somaliland, a self-declared republic that broke away from Somalia in 1991 and which is recognised as sovereign only by Israel, has maintained reciprocal representative offices with Taiwan since 2020 despite strong objections from Beijing and Mogadishu.

For China, persuading Mbabane to switch recognition would carry symbolic weight far beyond the economic importance of a country of about 1.2mn people with an economy the IMF projects at roughly $5.8bn in 2026. A switch would eliminate Taiwan’s last widely recognised diplomatic foothold on the African continent.

The relationship has become noticeably more acrimonious during 2026, in the lead-up to the Taiwanese president’s visit in May. Lai ultimately travelled aboard an aircraft belonging to King Mswati III.

China subsequently accused Eswatini of being “kept and fed” by Taiwan, language Mbabane rejected as insulting. The exchange marked a further escalation in months of increasingly sharp rhetoric over Eswatini’s ties with Taipei.

Beijing’s latest advisory said telecommunications fraud, online gambling and other criminal activity are rampant in the kingdom. Mbabane rejected the suggestion that it posed an exceptional or generalised security risk, arguing that a recent operation against suspected cybercrime demonstrated effective law enforcement rather than deteriorating security.

The spat is ostensibly about security and crime. But in the wake of increasingly sharp exchanges over Taiwan, the wider strategic backdrop is difficult to ignore.

The tariff ‘carrot’

Beijing has also made the diplomatic divide economically tangible.

From May 1, China extended zero-tariff treatment to imports from all 53 African countries with which it maintains diplomatic relations. Eswatini alone was left outside.

The tariff initiative is unlikely by itself to transform African trade with China because much of the continent’s existing exports already entered duty-free. Ronak Gopaldas and Priyal Singh, analysts with the South Africa-based Institute for Security Studies (ISS), nevertheless described the measure as a “geostrategic signal”, strengthening Beijing’s position as an economic partner while drawing African countries further into its orbit.

For Eswatini, the symbolism is unusually direct. Unlike all other African countries, the kingdom will not receive preferential access to the Chinese market for one explicit reason: its recognition of Taiwan.

Yet the immediate commercial cost should not be exaggerated.

Eswatini’s economy is far more closely integrated with neighbouring South Africa, the continent’s most-industrialised economy, than with China. US Commerce Department data show South Africa absorbing about 68% of its exports and supplying roughly 72% of its imports.

Beijing’s leverage lies less in the “stick” of withdrawing an existing economic lifeline than in the “carrot” of offering benefits Eswatini currently lacks: direct access to China’s market and potentially greater access to its state-backed financing and official investment frameworks.

The Mpakeni Dam itself demonstrates the limits of diplomatic isolation. Chinese contractors can still win and execute projects in the kingdom without Beijing maintaining formal relations with Mbabane.

Corporate participation, however, is not as beneficial as gaining access to the wider system of Chinese state-backed financing, preferential market access and official cooperation available to Beijing’s African diplomatic partners.

Taiwan’s small trade, deeper footprint

Taiwan faces the opposite problem. Its market is vastly smaller than China’s, and bilateral merchandise trade with Eswatini is modest.

According to Taiwan’s International Trade Administration, bilateral trade amounted to just $6.47mn in 2025, down 21% from the previous year. Eswatini exported only $320,000 of goods to Taiwan. Taiwanese exports to the kingdom totalled $6.15mn.

But measuring the relationship by trade alone understates it.

Around 20 Taiwanese companies operate in Eswatini with cumulative investment of about $110mn, according to Taiwan’s trade authorities. They include export-oriented businesses in garments, textiles, packaging and related industries. Taiwanese authorities say some large garment manufacturers employ thousands of local workers.

Taipei is also trying to deepen that economic presence. In April, Taiwanese Foreign Minister Lin Chia-lung visited the proposed first phase of the Taiwan Industrial Innovation Park, and the countries are also cooperating on a strategic oil-reserve facility as well as energy projects.

The contest is therefore as asymmetrical as it is symbolic. China can offer scale. Taiwan offers a relationship built over nearly six decades, involving investment, development assistance, scholarships, technical cooperation and unusually direct access to senior political leaders. Eswatini, in turn, consistently advocates Taiwan’s participation in the UN system and other international bodies.

For King Mswati’s government, switching recognition would not simply mean acquiring a new economic partner. It would mean trading an established and relatively personalised relationship for access to a much larger but less exclusive one.

Economic pressure makes the choice harder

That calculation comes as Eswatini faces a difficult economic backdrop despite relatively healthy headline growth.

The World Bank estimates the fiscal deficit widened to 6.3% of GDP in 2025 as Southern African Customs Union revenues fell 21%. Government debt rose to about 44% of GDP, while foreign-exchange reserves stood at about 2.7 months of import cover.

Fiscal estimates differ between international institutions. The IMF expects the deficit to widen to about 6.9% of GDP in 2026 and gross government debt to reach around 50% of GDP.

The kingdom also continues to struggle with high unemployment, poverty and inequality. The IMF’s latest Article IV cited 2023 unemployment of roughly 34%, rising to about 58% among young people.

Those vulnerabilities increase the appeal of greater access to Chinese investment, markets and financing, even if the actual gains from changing diplomatic recognition are difficult to quantify.

There are also signs that the issue is being debated within Eswatini’s leadership.

Taiwan’s Foreign Ministry said in June that it was aware of a Swaziland News report that US economist Jeffrey Sachs had argued at an Eswatini cabinet retreat that the kingdom should establish diplomatic relations with China on economic grounds. Taipei stressed that the reported comments, if made, represented Sachs’ personal views and said parliamentary concern over the issue demonstrated continued support for Taiwan inside Eswatini.

A political calculation as much as an economic one

Economics is only part of the calculation because foreign policy in Eswatini cannot readily be separated from the monarchy.

King Mswati III occupies the dominant position in the political system, and relations with Taiwan have been cultivated at the highest level for decades. Lai’s use of the king’s aircraft during his May trip illustrated the unusually personal nature of those ties.

That system exists alongside significant socioeconomic pressures.

The African Development Bank estimates that about 34% of Eswatini’s population lives in extreme poverty and says limited structural transformation continues to constrain the inclusiveness of growth.

Political tensions that erupted violently in 2021 have not entirely disappeared. Peter Fabricius of the ISS argued in June that the grievances behind those protests – including unemployment, poverty, public services and political exclusion – remain unresolved.

Human rights lawyer Sibusiso Nhlabatsi told ISS that the appearance of tranquillity was “overwhelmingly deceptive”, arguing that dissatisfaction had not disappeared even as open political mobilisation had weakened.

Large infrastructure projects, factories and industrial parks consequently matter politically as well as economically because they can create jobs and provide visible evidence of development.

The Mpakeni Dam has brought those competing pressures into unusually sharp focus. China’s diplomatic pressure has been intensifying without Beijing yet severing commercial ties.

That distinction matters. A travel warning and exclusion from tariff preferences can raise the costs of Eswatini’s diplomatic choice while leaving Chinese companies free to pursue business in the kingdom. More aggressive measures (a bigger “stick”) could begin hurting those companies as well as Eswatini.

Mbabane therefore has reasons not to rush into the Chinese fold. Taiwan’s trade contribution is small, but its investments and high-level ties are established. The potential benefits of recognition by Beijing may be greater, but they are difficult to quantify.

King Mswati III’s government appears willing to absorb some economic and diplomatic pressure to preserve a relationship it has maintained since independence. Mpakeni shows why Beijing’s leverage, formidable as it is, remains less than absolute.