By Han Wei and Shen Hu
BEIJING (Caixin Online) ? Roughly one million Chinese nationals are working or doing business in Africa, from Egypt?s Mediterranean shore to the Cape of Good Hope.
Theirs are the faces behind China?s soaring direct investment in Africa which, according to the Ministry of Commerce of the P.R.C., rose 87% to $1.1 billion during the first three quarters last year compared to the same period 2010.
More than 2,000 mainland companies are running mines and factories, building roads, operating telecom networks and selling Chinese-made goods across the continent. Many of these companies have only recently started pouring manpower and money into African projects. Many more are expected in coming years.
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China?s Ministry of Commerce said the value of all China-Africa trade between January and September last year topped $122 billion ? a record amount that was equal to total two-way trade for all 2010.
Central to China?s success and ambitions is South Africa, where mainland companies run textile mills and mining operations. Industrial and Commercial Bank of China /quotes/zigman/529252 IDCBY +2.14% ? /quotes/zigman/37346 HK:1398 0.00% ?owns 20% of South Africa?s Standard Bank Group Ltd. /quotes/zigman/488377 ZA:SBK +1.68% /quotes/zigman/542244 SBGOY +1.82% .?Moreover, South Africa is often a starting point for Chinese businesses that plan to expand into less-developed countries to the north.
Much of China?s investment push into Africa through South Africa came during the tenure of Zhong Jianhua as the Beijing government?s point man in Pretoria. Zhong worked as the Chinese ambassador to South Africa from 2007 to 2012, and currently serves as his government?s special envoy for African affairs.
In an interview with Caixin, Zhong said Chinese investment in Africa has only begun. The continent?s market potential is huge given its population of more than one billion, growing per capita income level, and natural resources. And China?s goal to internationalize its currency, the yuan, /quotes/zigman/4869230/sampled USDCNY -0.0413% ?may well hinge on Africa.
Zhong admitted, however, that Chinese trade and investment practices have generated controversy. African communities with Chinese investors, as well as the international community, have often found fault with how mainland companies handle labor relations, treat the environment or bend the law.
A Chinese company usually brings a bag of money to the table. It would send three people, maybe two of whom can?t speak English. This makes all the difference. People first pay $20 million to do feasibility studies, and this money may never be returned. Chinese companies might think $300,000 for this is too much. Some Chinese entrepreneurs think bribing a South African government official is enough.
-- Zhong Jianhua, China?s special envoy to Africa.
Even stable Chinese companies with years of experience in Africa occasionally struggle with labor and social issues, given the wide gap between Chinese culture and the varied cultures of Africa?s diverse population.
Speaking in Pretoria, Zhong described these challenges and how Chinese investors ? especially state-owned companies ? are addressing critics and moving ahead with business in Africa. His remarks follow:
Caixin: How is the African market unlike those in Southeast Asia and Latin America for Chinese companies?
Zhong Jianhua: Africa has a population of more than one billion and huge market potential. Africa?s latent demand in terms of population size and room for expansion is much higher than in Southeast Asia or Latin America.
When you start from a lower starting point, there is more room to move up. In Latin America, per capita gross domestic product has reached $6,000 to $7,000. It?s even higher in Southeast Asia. This is a lot different than the room for growth in per capita GDP in Africa, which is between $300 and $3,000. This is the significance of Africa.
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