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Standard Bank says China’s investment in African resources still at an early stage
2015-02-27
Brief:China’s investment in African resources remains at a relatively early stage and is likely to increase further over the next decade, despite the economic slowdown being experienced in the world’s second largest economy, according to Standard Bank, the continent’s biggest lender by assets.
“Africa is an increasingly important priority for Chinese companies looking to invest in the continent, especially those with a strategic interest in metals and mining and related infrastructure, such as power, road, railways and ports,” says Dr George Fang, Standard Bank’s Beijing-based Head of Mining and Metals in Asia. “Over the next five to ten years we’re likely to see even more investment by Chinese firms looking to tap Africa’s resource superstructure, as well as other sectors.”

This is aligned with the macroeconomic long term view of China’s economic trajectory and vision of Beijing's leaders. Consider, for example, an economic belt known as “The New Silk Road.” This trade route runs from China, broadly westward through central Asia and includes the pacific maritime trade routes to Europe. This vision was articulated by the Chinese government in 2013 as a roadmap to further integrate China into the world economy and it emphasises Africa’s geostrategic and commodity rich significance. Africa is central as both a conduit and destination within this trade route and the renminbi is foremost in leading transactional value along the route.
 
Notwithstanding the more than 2,500 Chinese companies that are already operating in Africa, Dr Fang says the country’s institutions have significantly elevated their appetite to invest in the continent. This is evidenced by data from the Chinese Ministry of Commerce showing that the nation’s OFDI flows to Africa increased nearly 8 times from $317 million in 2004 to $2.52 billion in 2012.

China’s lenders also remain significant lenders to projects on the continent, as evidenced by China Exim Bank’s decision in May last year to provide 90% of the USD3.8bn project cost to construct a 609km railway line linking the Kenyan port city of Mombasa to Nairobi, Uganda, Rwanda, Burundi and South Sudan. “China has been rapidly expanding its global footprint via international acquisitions as it gradually evolves into a capital exporting country,” said Dr Fang. “The economic slowdown of growth in China is unlikely to hinder global commerce but it is likely to unlock further opportunities for African mining and other sectors as well.”

“Chinese interests are clearly set on a path of one road, one belt and now we could add ‘one continent’” says Fang. “In fact, China’s investment in Africa is already well down the road and it’s not just about resources.

tseglobalmarkets.com
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