For Chinese cos, politics comes second
China’s government may have high-profile political and strategic reasons for seeking closer ties with Africa, but its companies are on the continent mostly for the money.
By Agencies |
BEIJING: China’s government may have high-profile political and strategic reasons for seeking closer ties with Africa, but its companies are on the continent mostly for the money, analysts say. A case in point is the move by the Industrial and Commercial Bank of China to buy 20% in South Africa’s Standard Bank, which at $5.5 billion is the biggest Chinese financial acquisition ever.
“Chinese companies of course operate as economic entities, and they very much pay attention to the bottom line,” said Barry Sautman, an expert on Sino-Africa ties at the Hong Kong University of Science and Technology. “They’re not usually driven by political orders. Instead they are driven by economic opportunities, and the action on the part of this Chinese bank in terms of investing in Standard Bank is driven precisely by that consideration.”
China increasingly sees Africa as the land of new opportunity. Bilateral trade was $55.5 billion last year, 10 times the volume of less than a decade ago.
It is against this backdrop that ICBC’s surprise deal, announced late last week, makes sense as it gives it access to Standard Bank’s comprehensive network of 713 branches in South Africa and 240 in the rest of the continent.
“ICBC’s cooperate clients, both large and small, have many investments in Africa. It would be good for ICBC to have a foothold there,” said Yukkei Lee, a Hong Kong-based analyst with Core Pacific Yamaichi.
But this is China, and the players are different. It is hard to say where economics ends and politics begins — and ICBC remains majority-owned by the government.
“(There is) extremely close linkage in terms of ownership and personnel between the Chinese large state-owned companies, including the state-owned big banks and the Chinese government. Essentially they are all run by individual senior members of the Communist Party.”
However, the clear economic rationale for ICBC’s agreement with Standard Bank serves as a reminder that China’s interest in Africa is not only based on the thirst for oil or the need to maintain diplomatic allies. China’s activities on the continent have always been multi-faceted, encompassing both political and economic objectives for the past half century, local academics argued.
“History shows that Africa needs us and we need Africa,” said Jiang Zhongjin, a professor at the Center of Africa Studies at Nanjing University. “But our basic principle is to take care not to hurt each other’s interests, and let both sides make money,” he said.
“Chinese companies of course operate as economic entities, and they very much pay attention to the bottom line,” said Barry Sautman, an expert on Sino-Africa ties at the Hong Kong University of Science and Technology. “They’re not usually driven by political orders. Instead they are driven by economic opportunities, and the action on the part of this Chinese bank in terms of investing in Standard Bank is driven precisely by that consideration.”
China increasingly sees Africa as the land of new opportunity. Bilateral trade was $55.5 billion last year, 10 times the volume of less than a decade ago.
It is against this backdrop that ICBC’s surprise deal, announced late last week, makes sense as it gives it access to Standard Bank’s comprehensive network of 713 branches in South Africa and 240 in the rest of the continent.
“ICBC’s cooperate clients, both large and small, have many investments in Africa. It would be good for ICBC to have a foothold there,” said Yukkei Lee, a Hong Kong-based analyst with Core Pacific Yamaichi.
But this is China, and the players are different. It is hard to say where economics ends and politics begins — and ICBC remains majority-owned by the government.
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Similarly, it is hard to pin down the primary motive that drove China to sign a deal last month to loan five billion dollars to the Democratic Republic of Congo to develop infrastructure and mining partnerships. “In China it’s virtually impossible to truly separate commercial interests from political decisions,” said David Marshall, a Hong Kong-based analyst with Fitch Ratings. “(There is) extremely close linkage in terms of ownership and personnel between the Chinese large state-owned companies, including the state-owned big banks and the Chinese government. Essentially they are all run by individual senior members of the Communist Party.”
However, the clear economic rationale for ICBC’s agreement with Standard Bank serves as a reminder that China’s interest in Africa is not only based on the thirst for oil or the need to maintain diplomatic allies. China’s activities on the continent have always been multi-faceted, encompassing both political and economic objectives for the past half century, local academics argued.
“History shows that Africa needs us and we need Africa,” said Jiang Zhongjin, a professor at the Center of Africa Studies at Nanjing University. “But our basic principle is to take care not to hurt each other’s interests, and let both sides make money,” he said.
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What has changed, and made China more visible, is its growing economic muscle, reflected in foreign exchange reserves now surpassing $1.4 trillion.Download
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