White paper: China-Africa Economic and Trade Cooperation
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E-mail Xinhua, August 29, 2013
II. Improving the Level of Investment and Financing Cooperation
A poor economic foundation and insufficient construction funds have always been factors limiting the development of African countries. The Chinese government encourages and supports enterprises and financial institutions to increase investment in Africa, striving to improve the quality and level of China-Africa cooperation.
Since 2009, Africa has seen a decrease of foreign direct investment, but an accelerated growth of direct investment from China during this same period. From 2009 to 2012, China's direct investment in Africa increased from US$1.44 billion to US$2.52 billion, with an annual growth rate of 20.5%. Over the same period, China's accumulative direct investment in Africa increased from US$9.33 billion to US$21.23 billion, 2.3 times the 2009 figure. The rapid growth of China's direct investment in Africa is indicative of Africa's development potential and investment appeal, and also points to the mutually beneficial nature of China-Africa cooperation.
While increasing aggregate investment, China is also improving the level of its investment in Africa. Currently, over 2,000 Chinese enterprises are investing and developing in more than 50 African countries and regions, and cooperation fields have expanded from agriculture, mining and building industry to intensive processing of resource products, industrial manufacturing, finance, commercial logistics and real estate.
[Figure 2: Distribution of China's Direct Investment in Africa (by the end of 2011)]
In recent years, China has improved its mechanisms for investment in Africa. By the end of 2012, China had signed bilateral investment treaties (BIT) with 32 African countries, and established joint economic commission mechanisms with 45 African countries. The China-Africa Development Fund, established as one of the eight pledges China made at the FOCAC Beijing Summit, had by the end of 2012 agreed to invest US$2.385 billion in 61 projects in 30 African countries, and had already invested US$1.806 billion for 53 projects. According to preliminary statistics, the agreed upon investment projects will bring US$10 billion worth of investment to Africa, increase local exports by about US$2 billion annually, and benefit more than 700,000 people. China's financial institutions have actively expanded financing support for Africa. At the Fourth FOCAC Ministerial Conference in 2009, China announced the establishment of "a special loan for small and medium-sized African businesses." By the end of 2012, the special loan service had promised to offer loans totaling US$1.213 billion, with contract value of US$1.028 billion and loans granted worth US$666 million, providing strong support for the development of agriculture, forestry, animal husbandry, fishing, processing and manufacturing, trade and logistics, and other industries closely associated with people's livelihoods in Africa.
Energy and mineral resource exploitation is the major impetus for the economic booms of many African countries. In this area, Chinese enterprises have helped African countries establish an upstream-downstream-integrated industry chain, transforming resource advantages into economic growth opportunities, and actively participated in local public welfare infrastructure construction. In the Democratic Republic of the Congo, Chinese enterprises have built highways, hospitals and other public infrastructure while extracting copper-cobalt ores. In the Republic of South Africa, Chinese mineral exploitation and processing enterprises have set up endowment funds to sponsor medical care, poverty reduction and education in local areas, and built advanced water treatment facilities. Chinese enterprises have sponsored the "Brightness Action" and organized first-rate ophthalmologists to perform cataract extraction surgeries for 623 patients in Zimbabwe and Zambia.
Manufacturing is China's key investment field in Africa. From 2009 to 2012, Chinese enterprises' direct investment volume in Africa's manufacturing sector totaled US$1.33 billion. By the end of 2012, China's investment in Africa's manufacturing industry had reached US$3.43 billion. Mali, Ethiopia and other resource-poor countries have also attracted a large amount of Chinese investment. Chinese enterprises have invested in sugar refineries in Mali, set up glass, fur, medical capsule and automobile factories in Ethiopia, and invested in textile and steel pipe manufacturing projects in Uganda. All of these investments have compensated for these countries' unfavorable natural conditions and resources, increased their tax revenues and employment, and extended the value adding chain of "made in Africa" products.
Chinese enterprises' investments have brought about changes to all dimensions of Africa's social development. For example, those that invest in cash crop cultivation in Zimbabwe have provided interest-free loans to local farmer households, improved production infrastructure, offered technical guidance for the whole production process, organized local employees to visit China, and funded local schools and orphanages. These have promoted the positive interaction and common development of Chinese enterprises and local society.
Service industries that produce zero pollution and consume little energy have become a new highlight of China-Africa cooperation in recent years. Chinese enterprises have invested in finance, trade, science and technology services, power supply and other fields in Africa. By the end of 2012, China's direct investment in Africa's financial sector had reached US$3.87 billion, accounting for 17.8% of its total investment volume in Africa. To some extent, this was able to make up for the lack of sufficient development funds available to local enterprises. In the field of commerce and trade, the construction of the Angola International Trade Center, jointly initiated by Chinese and local enterprises, has been started. When completed, the project will be the largest commercial logistics, convention and investment service center in southwest Africa. There are now also a large number of small and medium-sized Chinese investors engaged in agricultural and sideline product processing and petty commodity production in Africa. Their products and services are closely linked with African people's livelihoods, playing an active role in meeting local needs, boosting local employment and promoting China-Africa trade contacts. As the mutual understanding between Chinese and African peoples is deepened and the cooperation between Chinese and African governments enhanced, these small and medium-sized Chinese investors will further incorporate into local society and share the fruits of development with local people.
In recent years, as the economic strength of African countries has increased and China-Africa relations have grown closer, African enterprises have started to invest in China. By the end of 2012, the volume of African countries' direct investment in China totaled US$14.242 billion, increasing by 44% over 2009 levels. Of that, the figure for 2012 was US$1.388 billion. Investing countries included Mauritius, Seychelles, South Africa and Nigeria, and their investments covered petrochemical industries, manufacturing and processing, and wholesale and retail, among other fields.China-Africa investment and financing cooperation has solidified the foundation of Africa's economic development, increased Africa's capacity of independent development, improved Africa's competitiveness in the global economic sphere, and advanced Chinese enterprises' internationalized development. In the future, China will further expand investment and financing cooperation with Africa, fulfill its commitment on the provision of US$20 billion-worth of loans to Africa, which will be used for infrastructure construction, as well as the development of agriculture, manufacturing and small and medium-sized enterprises. China will give guidance to its enterprises on the establishment of processing and manufacturing bases in Africa, and increase investment in business services, transport, consultation management and other service industries. China will also encourage its enterprises to carry out multiple-field investment cooperation in Africa, and help African countries improve their external economic development environments.
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