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Spending Spree – China pours investment into Portuguese-speaking countries
Brief:According to the Ministry of Commerce, China’s outbound direct investment in 2013 reached US$ 90.17 billion, an increase of 16.8 percent from 2012. The cumulative stock of Chinese investment in Africa reached US$ 22.9 billion in 2012, up from less than US$ 500 million a decade before.
China has overtaken the US to become the largest trading partner and foreign investor in Brazil. The municipality of Açu, 280 kilometres north of Rio de Janeiro, has been transformed from a seaside village into a huge port with a pier two miles long, which can handle Chinese ships that carry 400,000 tonnes of iron ore in a single journey. A vice-minister from Beijing who visited Açu described it as “a new highway to China”.
The port is a symbol of China’s investment in Portuguese-speaking countries (PSC), which has risen dramatically in the last five years. During that period, China has become one of the world’s largest foreign investors; the PSC have received a significant share.
The investment is led by major state companies, usually supported by loans from national banks; together with them have come private companies and individuals eager to seize the opportunities available.
According to the Ministry of Commerce, China’s outbound direct investment in 2013 reached US$ 90.17 billion, an increase of 16.8 percent from 2012. The cumulative stock of Chinese investment in Africa reached US$ 22.9 billion in 2012, up from less than US$ 500 million a decade before, according to Beijing Axis, an international advisory and procurement firm.
A magnet for Chinese funds
Among the PSC, Brazil has attracted the most Chinese money and in a wide range of sectors. This is no surprise, given the size and dynamism of its economy; it is a member of the BRICS – Brazil, Russia, India, China and South Africa.
After a slow start, the investment rose dramatically in 2010, when China overtook the United States to become the largest foreign investor in Brazil.
That year six major state-owned companies entered Brazil, with a total investment of US$ 13.09 billion. They included Sinopec, which acquired a 40 percent share of the Brazilian arm of Spanish oil-and-gas company Repsol for US$ 7.1 billion, while Sinochem purchased 40 percent of the Brazilian operations of Statoil of Norway for US$ 3.07 billion.
That year Chongqing Grain Group (CGC) also announced investment of US$ 2 billion million in an industrial soy complex in Bahia province, with the output to be sold in China. It has an annual capacity to crush 1.5 million tonnes of soybeans and make 300,000 tonnes of refined cooking oil; this will account for nearly one third of the province’s annual production value. CGC is also investing in a fertiliser factory and dry port for grain storage.
It was the largest agricultural investment abroad by a Chinese firm. The project made its first shipment of soybeans in September 2011.
China’s largest grain trader, China National Cereals, Oil and Foodstuff Corp, is in talks with Singapore-listed Noble Group about forming a joint venture in sugar, wheat and soybeans that are focused on Noble’s business in South America, including its four sugar mills in Brazil.
This potential investment and that of CGC aim to secure grains and other soft commodities to satisfy long-term growth in demand from the Chinese population. Two-thirds of the global soybean trade already ships to China.
Chinese firms are investing across the industrial spectrum. Lenovo has set up four factories to make computers, tablets, smart phones and televisions; in January 2013, it paid US$ 146.5 million to acquire local electronics brand CCE. Equipment makers like Sany Heavy, Xuzhou Machinery and Zoomlion have also announced plans for greenfield investments to make machinery and equipment.
Gree, the world’s biggest manufacturer of air-conditioners based in Zhuhai, has built a plant in Manaus, in the heart of the Amazon, to serve the Brazilian and other South American markets. Wuhan Iron and Steel owns a large stake in MMX, a Brazilian mining group.
Sinopec is expected to bid for offshore oilfields that will come on stream in 2014.
Bank of China, Industrial and Commercial Bank and China Construction Bank have set up operations in Sao Paulo to facilitate this incoming investment.
The auto sector is another in which Chinese firms have been very active. Since 2010, over a dozen Chinese auto companies have announced greenfield investments in Brazil. With the entry of Geely in 2013, China overtook the US and Japan as the country with the largest number of car brands in the Brazilian market.
One of the most aggressive is JAC Motor, which has opened 55 dealerships all over Brazil, selling cars built on the mainland; its hatchbacks and sedans start at US$ 24,000.
Great interest in Portugal’s energy and property sectors
In 2011, China Three Gorges (CTG) paid 2.7 billion euros for a 21.35 percent stake of Portuguese state power company EDP. At the time, it was the biggest acquisition by a Chinese company in Europe and more than a quarter of total Chinese investment in the continent that year.
It was a rare opportunity for a foreign firm to buy such a large share of a public utility and reflected the financial plight of the Portuguese government.
A few months later, China State Grid paid 387.15 million euros for a 25 percent stake in Portugal’s national power grid REN.
For both companies, it was a strategic investment and the opportunity to manage a major business sector in a developed country with a liberal economy and earn the confidence of eastern governments and companies, some of whom are suspicious of the intentions of Chinese state firms.
Given the weak state of Portugal’s economy, these investments may not yield a profit; but both firms see the overall benefits, in experience and recognition, as outweighing the losses.
In July 2013, the Bank of China opened its first branch in Portugal, in the central business district of Lisbon. At the opening ceremony, ambassador Huang Songpu said that he hoped the bank could continue to help Chinese companies gain a firm foothold in Portugal.
Other Chinese banks may follow; they are also considering taking a stake in one of the large Portuguese banks, like Millennium BCP.
Chinese account for the largest number of applicants for the vistos dourados (golden visas) scheme announced by the government in October 2012. Under the scheme, foreigners purchasing property worth more than 500,000 euros qualify for a five-year visa to Portugal and consequently the European Union.
As of December 2013, 356 residence permits had been granted to investors, including 279 Chinese. Portugal is competing with Spain, Cyprus, Greece and the Netherlands to attract such wealthy immigrants.
Angola and Mozambique attractive destinations
China is one of the biggest investors in Portuguese speaking countries in Africa.
According to the Investment Promotion Centre of Mozambique, China was the second largest foreign investor in 2013, with US$ 299 million. It ranked second to South Africa, US$ 364 million, and ahead of Portugal, US$ 171 million. The cumulative total of Chinese investment in the country is more than US$ 3 billion.
There are three major industrial projects – Henan Haode Mozambique Industrial Park, aimed at the textile and clothing sector, in Marracuene district, with US$ 26.5 million.
China Chemical Engineering Second Construction Mozambique is working in Matutuine in the south in construction and public works, an investment of US$ 7 million, and Gigante África – Sociedade Unipessoal, Lda., is producing and selling furniture, an investment of US$ 4.5 million.
More than two thirds of the investment has gone into industry, followed by construction, services and agriculture. The south, especially the city and province of Maputo, has received over 70 percent of the investment.
China Hyway Group is involved in construction, mining, manufacturing, furniture and steel; it owns several factories producing furniture, steel, brick and coating in Angola and Mozambique. It has its African headquarters in those two countries. It has an annual output of US$ 1.4 billion, with 80 percent produced in Africa and employing a maximum of 20,000 local workers.
China is Angola’s most important economic partner, and is active in many fields. According to the Heritage Foundation, Chinese investment in Angola reached US$ 1.1 billion by the end of June 2011, the largest in a PSC country outside Brazil.
Since the end of the civil war, China has played the biggest role in rebuilding infrastructure, including roads, railways, bridges, schools and hospitals. It has paid for this with loans from state banks, which Angola has repaid in the form of oil.
Its oil production this year is expected to reach 1.91 million barrels a day, up from 1.86 million in 2013. In March 2010, Sinopec announced the purchase of a 55 percent stake in Sonangol Sinopec International for US$ 2.46 billion; this consortium with Angola’s national oil company was established in 2004.
Many other major Chinese firms have projects in Angola. They include Huawei Technologies, ZTE Corporation, China International and Trust Investment Corporation (CITIC), Sinohydro Corporation, China Railway 20 Bureau Group Corporation (CR-20), Dongfeng Nissan, China Road and Bridge Corporation, Wuhan Iron and Steel, China General Machinery and Equipment Import and Export Corporation, SinoMach, Jiangsu International and China National Offshore Oil Corp.
Tens of thousands of Chinese live in Angola working on these different projects; some stay only for the duration of the project in which they are involved, while others plan to remain for the long term.
One focus for investment is agriculture, in which more than two thirds of the population are employed. But less than 10 percent of the 35 million hectares of arable land is used; the country still has to import half of its food.
Chinese firms introduce their farming methods and technology to improve efficiency; these include pumps to water the fields and the improvement of irrigation methods.
In 2009, Sinohydro, China’s largest dam-builder finished the Matumbo irrigation project in South Kwanza province, providing water to 15,000 hectares. Chinese firms are interested in the production of cotton, coffee, banana and sugar cane. Investment in these crops will help to employ thousands of rural families and lift them out of poverty.
Private investment in Timor-Leste
The largest private investor in Timor-Leste is the Chinese Timorese Gape family, which has invested in construction, shopping centres and the retail sector, creating thousands of jobs.
An estimated 2,000 Chinese live in Timor; they are mainly small-scale businessmen, willing to go to the most remote villages on the mountainous island. They bring consumer goods to people in these areas. Cheap Chinese cars and motorcycles are popular.
Some Chinese companies have expressed interest in investing in Timor. The Chinese presence there is smaller than in Angola and Mozambique. 


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