China marches on in Africa despite downturn

China marches on in Africa despite downturn
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First Published: Wed, Jan 28 2009. 09 27 PM IST

Right call? A worker at the Huawei Technologies factory in China. The company is pushing south after establishing a presence in north Africa. Grischa Rueschendorf / Bloomberg
Right call? A worker at the Huawei Technologies factory in China. The company is pushing south after establishing a presence in north Africa. Grischa Rueschendorf / Bloomberg
Updated: Wed, Jan 28 2009. 09 27 PM IST
Dakar, Senegal: 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% a year this decade, soaring to nearly $107 billion (Rs5.2 trillion) in 2008.
Right call? A worker at the Huawei Technologies factory in China. The company is pushing south after establishing a presence in north Africa. Grischa Rueschendorf / Bloomberg
“China is in Africa for the long term, and strategically,” said David Shinn, a former US 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.”
Far from retreating, many Chinese businessmen are hunting for bargains.
Chinese and Indian firms have expressed interest in taking over Zambia’s top cobalt producer Luanshya Copper Mines Plc. since it halted operations in December, Zambian state media reported.
South Africa’s Standard Bank, itself 20% owned by the Industrial and Commercial Bank of China Ltd, or 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,’” said Thys Terblanche, the bank’s head of mining and metals investment banking.
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 this month. 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 Co. Ltd, China’s biggest telecom 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% growth in 2009. The International Monetary Fund says it may cut its forecast to about 5%, from the 9% it predicted in October.
While competitors lay off workers and delay new projects,China Nonferrous Metals Co. Ltd 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 TV 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 deals. “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.
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.
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First Published: Wed, Jan 28 2009. 09 27 PM IST