July 2010 Archives
China and Africa have become increasingly linked economically, particularly over the last decade. As a whole, Africa has become China’s fifth largest trade partner—behind only the United States, Japan, South Korea and Germany. The USD 90.9 billion exchanged between the two represents around 6% of Africa’s entire GDP. China to Africa investment has also picked up to the point where the People’s Republic has become the continent's second-largest foreign investor. Furthermore, China is the largest international contributor to Africa’s infrastructure development, its contractors receiving over 40% of all project revenues awarded to overseas-based firms. Key to this push into Africa has been China's banks, most notably Export-Import Bank of China (China Exim Bank) and China Development Bank (CDB).
China Exim Bank and CDB are two of three banks established by the Chinese government to further national economic policies (the third being Agricultural Development Bank of China). China Exim Bank’s main focus is on international loans and export credit, and is the only Chinese bank authorised to distribute concessional loans. As much as 80% of its funding activity in Africa is dedicated toward infrastructure projects.
Since Exim Bank’s founding, its impact overseas has grown substantially. Its asset base of USD 292 million in 1994 expanded dramatically to USD 116 billion by 2009’s end, with African assets accounting for as much as one-third of the total. If the Export-Import Bank of the United States is used as a benchmark, China Exim Bank’s footprint in Africa is substantial. The American bank claims a mere USD 7.8 billion in assets, with only 7% of its total exposure in Africa.
China Exim Bank issues loans in a wide range of African countries. Although Angola, Ethiopia, Nigeria and Sudan have been the traditional recipients, recent projects announced in 2010 suggest a more diverse group. In this year alone, China Exim Bank has agreed to back an airport upgrade in Mozambique, to the development of Zimbabwe’s water supply, and to a concessional loan for the Kenyan government, just to name a few.
Whereas China Exim Bank focuses on infrastructure development in Africa, CDB is more focused on investment. Yet CDB is less focused on international affairs than is China Exim Bank. Although its USD 560 billion asset base is larger, only around 5% of its loans are extended to parties overseas. Only recently has CDB played a significant role in Africa, this due to its establishment of the China-Africa Development (CAD) Fund in 2007. USD 5 billion was proposed for the fund which is now finding its way toward minority stakes in African businesses, particularly those in primary industries.
In 2009, CAD Fund invested USD 148 million on the continent. Deals announced so far in 2010 include USD 226 million for a South African wind farm, USD 284 million for a copper mine in DR Congo (deal still pending), and USD 228 million toward a platinum company, also in South Africa.
Based on the activity of China’s financiers in Africa, 2010 may prove to be the most remarkable yet for China-Africa economic ties, and China Exim Bank and China Development Bank are setting the pace for another record breaking year in the story of “South-South” trade.