US troops sweating away in Djibouti will soon be seeing a lot more of their counterparts from a great economic and military rival: China.

Since 2014, this small chunk of the Horn of Africa, little bigger than the state of New Jersey, has been the only place in the world where the warships of the two countries’ navies are moored alongside each other.

Now work is underway constructing China’s first overseas military base here. It will house thousands of personnel at Obock, a northern port a couple of hours by boat across the Gulf of Tadjoura from Djibouti City, the capital.

A former French colony, Djibouti was once known for little more than French legionnaires, atrocious heat and the sordid nightlife of its seaside capital.

But the diminutive nation has turned itself into a geostrategic linchpin with political clout far outstripping its size and population of just 900,000.

Despite the construction billboards and flashy hotels popping up, for now there is still a palpable French colonial legacy in Djibouti, fused with a heady mix of Somali, Ethiopian and Arab influences. Credit: James Jeffrey

Nowadays it’s viewed as offering some of the most prime military real estate on the planet. It overlooks the southern gateway to the Red Sea on the way to the Suez Canal, one of the world’s biggest shipping lanes. Major militaries want a presence there both to shore up regional stability and to counter piracy threatening that key trade route. (Since peaking in 2011, when 151 vessels were attacked and 25 hijacked, piracy has steeply declined.) One foreign diplomat referred to Djibouti as “an oasis in a bad neighborhood.”

Since the US wound down its presence in Afghanistan, the US military’s African headquarters in Djibouti has been at the forefront of US strategy and national security policy in countering global terrorism. US President Barack Obama described the camp as “extraordinarily important not only to our work throughout the Horn of Africa but throughout the region.”

A similar perspective just so happens to be held by China, which — having invested huge amounts in East Africa, especially in Ethiopia, one of the world’s fastest growing economies — wants to be able to protect its interests and investments throughout sub-Saharan Africa.

China’s investment stock in Africa surpassed $30 billion in 2014 — 60 times more than 2000 levels — while over a million Chinese are thought to have migrated to the continent to seek out economic opportunities.

In addition, ever thirsty for crude oil, China wants to shield its heavy dependence on imports from the Middle East that pass through the Gulf of Aden into the Indian Ocean and then on to the South China Sea.

Those sparkling waters have themselves generated more and more tension between the US and China. Beijing insists on creating a network of man-made islands to bolster its force projection in the region; the US counters that the seas are international waters in which unrestricted movement is paramount.

Read more: China just put very powerful missiles in the South China Sea

To now have China encroaching at a global node for trade and security has not left the US pleased. But Djiboutian President Ismaïl Omar Guelleh — who just won election for a fourth term in office running what many call a centralized autocracy, flirting with dictatorship — chose to overlook their protest.

China signed an initial 10-year lease for their base, and will pay $20 million per year in rent. The US pays $63 million a year to lease Camp Lemonnier, at least through 2024. Since 2014 the camp has expanded from 88 acres to 500, with $1 billion slated to further expand it.

Djibouti is also receiving more than $12 billion of investment from China for new ports and airports rising from the sands, and what is being touted as the biggest and most dynamic free trade zone in Africa.

“We’ve been criticized for working with the Chinese, but they are doing business everywhere, it’s not just with us,” says Mohammed Ali, the secretary-general at Djibouti’s Foreign Ministry. “And if other countries are not investing here, what do you want us to do?”

Such are Djibouti’s grand ambitions, there’s talk about the capital becoming an African Dubai or Singapore.

But dreams of a Dubai-type future have little relevance for most Djiboutians, 42 percent of whom live in extreme poverty. Meanwhile 48 percent of the labor force is unemployed, according to 2015 figures from the International Monetary Fund.

Locals in Tadjoura, a small town across the Gulf of Tadjoura from Djibouti city, hit the beach. Credit: James Jeffrey

It remains to be seen whether the government uses the windfall from the Chinese base and other development to invest in Djibouti’s human capital.

“The government only cares about how to collect the country's wealth,” says a Djiboutian journalist previously arrested for reporting on domestic issues who asked not to be named. “They do not care about freedom of expression, human rights, justice and equal opportunities of people.”

Devoid of a single river or the likes of extractable minerals, Djibouti produces almost nothing. Its location has always been its most precious resource.

But ever since the French first set foot in Obock in 1862, it has continued to attract anyone and everyone concerned with the movement or control of merchandise, and that only seems set to increase.

In addition to the US and China, several European countries and Japan have all staked global military interests on Djibouti. Foreign military personnel stationed in Djibouti already number around 25,000, according to some estimates.

Next in the military base pipeline could be a Russian one. The US can take some solace from the fact that Djibouti did turn down a request from Iran’s military.

Meanwhile, US fighter jets and drones take off daily, above patrol boats and ships from various navies heading off to police these precious waters.