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Chinese business in Africa breaking free of Beijing

by Staff Writers
Johannesburg (AFP) Dec 12, 2010
Chinese businesses are enjoying increased autonomy and economic freedom to invest in Africa, analysts say, challenging diplomatic perceptions that Beijing is playing puppet master on the continent.

With China's role in Africa the subject of considerable tension with the United States, the reality, according to financial experts, is that the sheer scale of Chinese interests makes overarching control impossible.

"To assume that everyone in Beijing is on the same page is incorrect," said Martyn Davies, chief executive of Frontier Advisory in Johannesburg, an investment firm specialising in emerging markets.

"That somehow there's this grand strategic plan and everyone is directed like pieces on a chessboard, as is often characterised, is not entirely the case."

Chinese capital has poured into countries including Nigeria, Angola, Zambia and South Africa at an intrepid pace over the past decade to capture the continent's natural resources and fuel its booming economy back home.

Bilateral trade rose to 106.8 billion dollars (80 billion euros) in 2008 from 10.6 billion dollars in 2000, at an annual growth rate of more than 30 percent. Beijing claims trade will again top 100 billion dollars in 2010.

"Chinese oil companies have especially significant freedom to operate -- indeed they can sell to the spot market," said Alex Vines, head of the Africa Programme for Chatham House.

"Chinese construction companies are different, but there are so many of them, the government has difficulty keeping track of them outside China."

China's thirst for commodities is matched by Africa's need for electricity, roads and clean water.

According to the World Bank, Africa requires 93 billion dollars a year in infrastructure investment over the next 10 years to ensure its people have access to basic services, making Chinese efficiency attractive to governments.

The result has seen China dole out cheap money to state-owned companies to secure mining rights and infrastructure projects in Africa, outmanoeuvering Western states and local competition.

A diplomatic cable published by the whistleblowing website Wikileaks this week indicated that the United States in particular is irked by China's Africa policy.

The message quoted a senior US official in Nigeria describing China as "a very aggressive and pernicious economic competitor with no morals."

However, many analysts believe Beijing is playing an enabling rather than controlling role, enticing Chinese businesses into Africa through financial perks, without the need to maintain direct links on the ground.

Chinese and African banks have formed joint ventures and other arrangements to stimulate trade.

In 2007, the Industrial and Commercial Bank of China purchased a 20-percent stake in South Africa's Standard Bank for 5.6 billion dollars in cash, at that time the largest foreign direct investment in Africa.

"Chinese firms are not relying solely on Chinese finance to do the kind of business that they're involved in," said Chris Alden, an Africa expert at the London School of Economics.

"They're bidding for and increasingly getting tenders, World Bank tenders or other public tenders ... that are not linked with Chinese financial incentives or interests."

Beijing also arranges contracts where commodities such as oil and minerals are exchanged for infrastructure, something the United States and other Western states have not traditionally done.

Chinese Vice-President Xi Jinping, tipped as the next leader of the communist state, last month spent a week in South Africa, Angola and Botswana lining up such deals.

And as Chinese goods, such as textiles and electricals, perforate African retail markets and trade becomes less commodity-driven, uncovering a Beijing master plan grows increasingly tricky.

"I've got 15 people in the room there who are on the sharp end of Chinese sovereign wealth investment in Africa," said Davies, who broke from a recent bilateral business seminar to speak with AFP.

"They're not these sinister, human rights disregarding, environmentally destructive sort of investors like people make them out to be -- just quite the opposite."



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