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China offers ‘low-interest loans’ and new investments for Africa ahead of summit

Out-Law News | 03 Dec 2015 | 11:27 am | 2 min. read

China has pledged "to help break Africa's twin development bottlenecks of inadequate infrastructure and human resources", ahead of a summit of Chinese and African leaders opening in South Africa on 4 December.

The second two-day summit of the Forum on China-Africa Cooperation (FOCAC) in Johannesburg aims to "strengthen the linkage of China-Africa development strategies, and industrial capacity cooperation", said China’s ambassador to Kenya Liu Xianfa.

The FOCAC summit, which is being held on the African continent for the first time, will also be a platform for Chinese companies to promote their expertise as they prepare to step up investment and seek new opportunities in the region, according to China's vice-commerce minister Qian Keming.

Qian told China’s state Xinhua news agency: "At the summit, Chinese companies will exhibit their competence in railways, aviation, electricity, telecoms, machinery and smart manufacturing... and China will export advanced industrial production capacity to African countries."

In addition, Qian said, "to finance bilateral cooperation, China will set up funds and give African countries more low-interest bank loans". China has deliberated for a year on a "package of cooperation proposals" that it plans to formally announce at FOCAC, Qian said.

According to Qian, China has already provided African countries with loans worth more than $20 billion since 2012 to support infrastructure, investment, small and medium-sized enterprises, agriculture and manufacturing. The minister said China’s government has also "rolled out about 900 assistance programmes in Africa covering agriculture, health, education and other fields and offered training to over 30,000 local people since 2012".

China’s president Xi Jinping arrived in Zimbabwe on 1 December, and will join African leaders at the FOCAC ministerial conference preceding the summit on 3 December. Xi said China is now Zimbabwe's fourth largest trading partner and the biggest source of investment, with two-way trade reaching $1.24bn in 2014.

A member of the World Economic Forum’s Global Agenda Council on China, Martyn Davies, said earlier this year that there is an African "incline" towards China’s commercial sphere of influence.

Davies, who is also the chief executive officer of Frontier Advisory, a research, strategy and advisory firm that specialises in emerging markets, said: "As China’s strategy towards Africa matures, so too must Africa’s strategy towards China. Beijing is no longer just an actor in Africa’s resources sector but is broadening the scope of its commercial foray into the continent. African governments need to respond accordingly and be more agile in their policy-making vis-a-vis China's engagement."

In July, the central banks of South Africa and China signed an agreement to establish a yuan clearing business in South Africa. The South African Reserve Bank said that under the terms of a memorandum of understanding with the People's Bank of China, the banks will "coordinate and cooperate on the supervision, oversight and clearing" of yuan in South Africa.

A report for the World Bank presented at July's Investing in Africa Forum (40-page / 2.70 MB PDF) said China and sub-Saharan Africa (SSA) trade had "rapidly intensified since the late 1990s and in 2013 China became SSA's largest export and development partner".

The bank also said FDI from China to Africa in 2013 was estimated at $3.5bn (2-page / 108 KB PDF) and cumulative investment stock at more than $25bn. China has direct investment in 50 African countries, "and is increasingly diversifying out of primary sectors", the bank said.