Friday, July 10, 2015

Will China Provide $1 trillion in finance to Africa by 2025? NO WAY


Will China provide $1 trillion in finance to Africa by 2025? No way. 

I really wanted to avoid analyzing this silly story, even when I was bombarded by colleagues sending me the link to the November 2013 South China Morning Post story quoting China Eximbank' chief country risk analyst as saying that China will provide $1 trillion in finance (investment, soft credits, commercial loans) to Africa by 2025, i.e. over the next 12 years. I wrote about it in another post on Zimbabwe, but never tackled it head on.

Let's unpack that a bit. For 2011, the SAIS China Africa Research Initiative has confirmed around $9 billion in Chinese loans (and loan commitments) in Africa. These are still mostly from China Eximbank, although China Development Bank is increasingly active. Chinese FDI in 2011 was $3.17 billion by official figures. According to Derek Scissor's China Investment Tracker, FDI was over $10 billion in 2011 (this only includes deals valued at $100 million and above).  So if we figure that Chinese finance in 2011 was about $20 billion, is it likely that we will see an additional $1000 billion ($1 trillion) by 2025?

No. As the article points out, this would mean $83 billion per year, on average. The China Eximbank official said that China Eximbank will provide "70 to 80 percent" of this amount. The entire continent's infrastructure deficit is estimated to be about $93 billion annually, but absorptive capacity and bankable projects are far below that figure.

Perhaps this another example of bad translating. How many times have I seen a translator struggling to convert Chinese numbers (based on 10,000 or "wan" where one million is 百万(or "a hundred ten thousands") into the system we use of thousands, hundred thousands, and millions? Although many stories have now spun this as a "pledge" or "commitment" of finance to Africa, I haven't seen a retraction, but I also haven't seen the figure repeated again by any Chinese official.

Update, July 28, 2015. A reader, Xiao'ou Zhou, commented that in fact China Eximbank did issue a denial of this story (in Chinese) on December 5, 2013.  They also noted that there is no such position as "chief country risk analyst" at the Eximbank. Thanks for the good research, Xiao'ou.




7 comments:

  1. So, what is your point, or the purpose of this article? As the old saying goes, "Are you bragging or complaining?"

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  2. Yes. You are right. It is a translation error. The real number is US$100 billion which was introduced by Premier LI Keqiang when he delivered a speech at AU headquarters last May. Its Chinese version is 1000亿美元, which equals to US$100 billion. As Chinese investment stock in Africa is US$25 billion by 2014, the actual goal is to invest US$75 billion in the following 6 years. I think it is reasonable.

    You can watch full speech video at http://secure-web.cisco.com/1fJu6GWl0EZUOIh0Z28QqkBY8ly6Ixf6qxRE1VRyNj3TFSip8TXMTLFBWEQXqgtDSQUj5_QyBstbEXJ8FslqC1nml3bdcqt3T0124tA1v2_JE95s-aWSx1m0A9ZU4GZRoQw3kQB5d_zElrSKQPdY7rcJA_ov2Sam-M6lCaDPP_JDAyrMQLs6ouKkEmBJWGfBI6y_bOEoFrXssHdIyMwRJUWLjYI7D71TTEY70uIQ8UPI/http%3A%2F%2Fenglish.cntv.cn%2F2014%2F05%2F06%2FVIDE1399330321280142.shtml

    The former Chinese Special Representative to Africa and Ambassador LIU Guijin also explains how the goal will be met in a interview. Here is the link (in Chinese) http://secure-web.cisco.com/1O7gGEpHtRZZMLVQPJ2mdHWKYIZ_smzMqQARtf-XnRfldGqysrxAcG8JtLJBhgyHcxmOys9rFHuxMTKQIC1z4E7AG_fysUrQyHij-VXUEMowmoGqJgtF8TrMflx2j8uhyWLxEp94PaQqk-omxSWmIpZjylH2qjBn_pcFYeR7c0I31eQj47HEWqU-TsMdOyGf-ydDW9uKOY841--gL6I-bPpQ8dmfp5pEwU9kGomOqH-mYNbltl0Dlvye3sfSvwAMx/http%3A%2F%2Fwww.chinairn.com%2Fnews%2F20140509%2F09192581.shtml

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  3. The "anonymous" comment above was sent by Jerry CHEN from the African Studies Center at Zhejiang Normal University. Much appreciated.

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  4. Here's a 2013 estimate from a Latin America focused investment banking analyst: https://lnkd.in/erdFuD3
    The focus of the presentation isn't Africa. The estimate for Africa of investment originating from China is 3.4 billion USD (pg 5). This is surely too low of an estimate but goes to show how wide apart are estimates of where ODI from China goes.

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  5. I am Xiao'ou Zhu. The Eximbank of China clarified that it is an unreal report, and there is no position within Eximbank called country risk analyst. Here is the Chinese link:
    http://www.eximbank.gov.cn/tm/medialist/index_23_23380.html

    However, certain contractors do have the strategy to leverage subsidized loans from Chinese policy banks to get commercial loans from private investors, not only from mainland China. Sometimes, it’s a firm development strategy to boast in Media… Yet in the press, everything is generalized as ‘China’...

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  6. Still seems to be getting a lot of airtime? See here: http://www.ft.com/cms/s/3/716545c0-9529-11e5-ac15-0f7f7945adba.html#axzz3t5g7xJdA


    EM SQUARED November 30, 2015 12:02 am
    China by far the largest investor in African infrastructure
    Steve Johnson

    Beijing bank pledges to invest $1tn, dwarfing private sector funds

    Signage for the ShanDong ZhongJiao Navigation Engineering Co.. stands at an entrance to the construction site of a new port near Boke, Guinea, on Tuesday, Sept. 8, 2015. Building the port only took about eight months and allowed China Hongqiao Group Ltd.’s project to start shipping in July.

    State-run development finance is behind 80 per cent of infrastructure funding in Africa, with China heading the list of investors, according to a report.
    Despite steady growth in private sector funding in the past decade, the grip of the public sector could tighten further, with the Export-Import Bank of China having pledged $1tn to Africa in the coming decade, according to analysis by Baker & McKenzie, a law firm, and the Economist Corporate Network.


    firstFT
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    The Chinese lender’s pledge, if it materialises, would dwarf the investment flows currently provided by all public and private bodies globally.
    ....etc

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  7. Yes ... Which goes to show how spectacularly wrong some analyses of Chinese engagement in Africa continue to be!

    ReplyDelete