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By: Richard Behar

China’s Mine Shaft

I ask Xiao Ye, an Africa statistical researcher for the World Bank, whether a clear chart or table exists laying out the full extent of China’s economic involvement in Africa. “I don’t know anyone who has done such a thing,” he responds. “As far as I know, China no longer releases [its] foreign direct investment to Africa country by country.” Or as Lucy Corkin, the China-Africa think-tank expert, explains, “You’ve got Africa, the big black hole of data, and China, the big black hole of data — put the two of them together and it’s a disaster.”

That opacity makes it hard to know how much control China’s Communist Party has over events in the sub-Sahara. Anglo-American’s Clem Sunter maintains that the party Politburo “can be likened to the board of the biggest multinational company in the world.” To keep that company growing, the Chinese government has vowed, for example, to transform the city of Chongqing into a megalopolis — the “Chicago of the East” — by 2020, making urbanites of some 12 million farmers. The problem is, there aren’t yet jobs for 12 million peasants in Chongqing. So the Politburo is urging some of them to move overseas. “To convince the farmers to become landlords abroad,” says Li Ruogu, the head of China’s Export-Import Bank, his office will provide capital, project development, and “product-selling channels.” More than 13,000 Chinese have arrived in Africa from Chongqing alone.

Chongqing is only one dot on the map, however, and China’s growth and population pressure have driven a systematic policy of commercial emigration. In 2001, the Politburo set down its global zou chuqu (“go out”) directive, instructing state-owned enterprises to seek long-term access to natural resources. Varying levels of financial help have accompanied this push, with state-owned Chinese construction companies in Africa getting goodies ranging from export credits to sweetheart credit lines to government guarantees for bank loans. At the same time, state-controlled banks have made cheap funds available to private Chinese companies that invest abroad. “It’s trickled down to your micro-entrepreneurs,” says Corkin. “It’s a huge diversification and fragmentation of Chinese commercial actors coming out of China.”

I met two of those actors on a couch in the InterContinental Lusaka lobby, the epicenter of foreign deal making in the Zambian capital. Frank He and Michael Huang — brothers in their late twenties — seem pretty typical of the Chinese entrepreneurs combing Zambia for opportunity. Back home, they have a company near Shanghai with 500 employees and annual sales of refined copper products of about $185 million; they leveraged that success into a $10 million budget for buying copper-mining rights here. They’ve already scooped up prospecting rights on a 1,300-square-kilometer plot for $1 million, as well as four others, including one they intend to take public in Canada this summer.

The Chinese government has been very encouraging of their Zambian adventure, Huang tells me. “They said they can protect me if we get into trouble.” Moreover, adds He, “if a Chinese entrepreneur invests a significant amount overseas, you could be entitled to a zero-interest loan.” He concedes that “if the commodity price goes down, you can lose, but that’s the risk of life.” If they win, they could reap gains of 100 times their stake.

Source: Fast Company Magazine