DAKAR Jan 28 Chinese businessmen are taking a
long-term view and pursuing strategic expansion in Africa even
though China's multiplying investments on the continent have
lost some lustre in the global downturn.
Beijing and Chinese companies have pledged tens of billions
of dollars to Africa in loans and investments mostly to secure
raw materials for the world's fastest-growing large economy.
That long-term interest remains intact, despite a worldwide
economic slump that has hit China's exports to the rich world
and a sharp decline in Africa's mineral shipments to China.
China-Africa trade has surged by an average 30 percent a
year this decade, soaring to nearly $107 billion in 2008.
"China is in Africa for the long term, and strategically,"
said David Shinn, a former U.S. ambassador to Ethiopia and
Burkina Faso who teaches at George Washington University's
Elliott School of International Affairs.
"They will not veer from this, in my view," he said.
Far from retreating, many Chinese businessmen are hunting
Chinese and Indian firms have expressed interest in taking
over Zambia's top cobalt producer Luanshya Copper Mines since it
halted operations in December, Zambian state media reported.
South Africa's Standard Bank, itself 20 percent owned by the
Industrial and Commercial Bank of China (ICBC), said last month
it was advising Chinese mining clients on buying opportunities
in Africa and elsewhere.
"They are looking at 2009 and saying 'This is a time we see
as a very big buying opportunity. We've got the backing from
government, we've got the financial means'," Thys Terblanche,
the bank's head of mining and metals investment banking, told
Beyond mining, Chinese state companies are pushing ahead
with strategic energy sector investments and infrastructure;
private outfits are continuing to expand in technology areas.
"Some developed Western countries hit by the financial
crisis are reducing their investment in Africa. Objectively,
this is a powerful opportunity for Chinese businesses to expand
their investment and market share in Africa," Cui Yongqian, a
former Chinese ambassador to the Democratic Republic of Congo
and Central African Republic, told a China-Africa trade forum
Trade with Angola, China's biggest source of African crude
oil, reached $25.3 billion in 2007 and Beijing has offered
Luanda $5 billion in oil-backed loans.
Shenzhen-based Huawei Technologies, China's biggest telecoms
equipment maker, is pushing south from its established stamping
ground in North Africa.
"I see no reason why they would want to decrease their
investments in the telecommunications sector, because that's
profitable for them," said George Washington University's Shinn.
"It will vary according to sector and country ... It's very
dangerous to generalise about the China-Africa relationship," he
said. "They will certainly make tactical retreats where the
economy requires it."
Even China's slower economic growth far outpaces that of
other major economies. Beijing says it can achieve 8 percent
growth in 2009. The IMF says it may cut its forecast to about 5
percent, from the 9 percent it predicted in October.
While competitors lay off workers and delay new projects,
China Non-Ferrous Metals Corporation is opening a copper smelter
this month in Chambishi town, which Zambia has transformed into
a tax-free economic zone to attract Chinese investment.
Zambian President Rupiah Banda and China's Trade Minister
Chen Deming launched a second economic zone this month near the
capital Lusaka, where Chinese firms will assemble electrical
goods such as television sets and cellphones for export.
"Zambia is still an attractive investment destination (and
this will give) confidence to existing firms operating here not
to start scaling down their operations," Banda said.
Zambia's Copper Belt is witnessing a growth in Chinese
"In Zambia, mining investment is large-scale and long-term,"
said Xing Houyuan, director of multinational business at China's
Academy of International Trade and Economic Cooperation, which
is affiliated to Beijing's Commerce Ministry.
"I don't see any likelihood of a pullback ... Companies
won't give up investment plans because of the short term. The
biggest impact is likely to be on projects that are still in the
planning stage, where the money had not really been committed
yet," Xing said.
In Liberia, China Union has just signed a $2.6 billion
contract to develop the Bong iron ore deposit.
CONGO AND GUINEA
China also insists the slowdown will not dampen interest.
"We will continue to have a vigorous aid programme here and
Chinese companies will continue to invest as much as possible in
Africa because it is a win-win solution," Chinese Foreign
Minister Yang Jiechi said in South Africa in mid-January.
However, the global slowdown has forced some Chinese
businesses to close operations in Africa and prompted a re-think
of some of the multi-billion-dollar mega-deals that blazed a
trail across the world's poorest continent.
Democratic Republic of Congo and Guinea are cases in point.
DR Congo rode the boom in commodities to attract a wave of
foreign investment in its rich but long-neglected copper,
cobalt, gold and other mineral resources after post-war
elections in 2006. Now that dream is fading.
"We have one processing mill and several workshops in Congo.
We have closed them. There are many Chinese-invested firms in
Congo and I understand most of them have shut down their
operations," said a marketing director at a private firm in
China's eastern province of Zhejiang, which supplies cobalt and
nickel compounds for use in mobile phone batteries.
"I don't think we will resume production in the factories in
Congo any time soon. We expect the economic slowdown could
worsen in this year and weigh on the prices further," he said,
requesting anonymity because he was not authorised to speak to
Africa's heavy dependence on resource exports means it feels
any squeeze more painfully. Global trade fell an annualised 3.7
percent between September 2008 and November last year, its
biggest drop since 2001.
Congo's franc has fallen 20 percent against the dollar in
less than four months and foreign reserves are at a five-year
low. The government is seeking a $200 million bailout from the
International Monetary Fund's Exogenous Shocks Facility.
A much-trumpeted $9 billion package of Chinese loans,
investment and infrastructure projects in return for Congolese
minerals contracts may be cut back to $6 billion, a diplomat in
Kinshasa said, partly to appease the IMF which has expressed
voiced concern at Congo taking on such huge debts.
Guinea, the world's top exporter of bauxite aluminium ore,
had hoped for its own multi-billion-dollar deal with China to
build hydropower dams, roads and bridges in return for mines.
Talks have dragged as the economic climate has worsened,
hampered by Guinea's instability and a coup last month after the
death of President Lansana Conte, said Ahmed Tidiane Diallo,
director-general for mining projects at the Mines Ministry.
Gabon, similarly eager to cement a 1.6 trillion CFA franc
($3 billion) contract to develop the 360-million-tonne Belinga
iron ore deposit, has accused its Chinese partners of dragging
their feet amid the uncertain economic environment.
(Additional reporting by Joe Bavier in Kinshasa, Saliou Samb in
Conakry, Eric Onstad in London, David Lewis in Dakar, Lucy
Hornby and Chris Buckley in Beijing, Moumine Ngarmbassa in
N'Djamena, Antoine Lawson in Libreville, Alfred Cang in
Shanghai, Mabvuto Banda in Lilongwe, Daniel Wallis in Nairobi;
Editing by Louise Ireland and Pascal Fletcher)