China Econometer

Bolstering African Infrastructure

China has a decades-long history of financing projects in Africa, from a match factory in Guinea in 1960 and the 1,900 km Zambia-Tanzania Railway of 1975. Through the establishment of the Export-Import Bank of China in 1994, increased funding has become available to further develop African infrastructure and to bolster China-Africa trade, giving this bank a special position in the China-Africa relationship.

Closing deficits

Chinese activity on African development has greatly increased since 1994, coinciding with booming trade and investment between the two regions. Emerging economies such as China are beginning to challenge Western countries not just in pure business activity, but as sources of financing to ameliorate what the World Bank has defined as Africa's "infrastructure deficit." Facilitating this trend of increased Chinese involvement in Africa has been the Export-Import (Exim) Bank of China through the extension of loans and export credit.

Exim Bank was formed in 1994 by the State Council, China's Central Government, which still today remains the controlling party and sole owner. It is the only bank in China authorized to distribute concessional loans and is the foremost bank for granting Chinese companies export credit for transactions in developing nations.

Since Exim Bank's founding, its impact overseas has grown substantially. Its asset base of $292 million in 1994 has grown exponentially to reach $116 billion at the end of 2009. Africa may account for as much as one-third of this massive total. To put the significance of China's dedication to financing African trade and infrastructure development in perspective, consider the Export-Import Bank of the United States. Exim Bank of the United States reports a mere $7.8 billion in assets with only 7 percent of its total exposure in Africa.

Whereas Exim Bank of the United States directs its main efforts toward countries such as Nigeria and South Africa, Exim Bank of China maintains a far greater scope on the African continent. No less than 36 African countries have established relations with the bank, and although most financing activity has previously been directed toward Angola, Ethiopia, Nigeria and Sudan, projects announced in 2010 suggest a more diverse group of recipients. In this year alone, Exim Bank of China has agreed to fund an airport upgrade in Mozambique, development of Zimbabwe's water supply, and a concessional loan to Kenya's government, to name just a few.  

Nearly 80 percent of Exim Bank of China's financing activity in Africa is directed at infrastructure development, as these projects suggest. The World Bank has identified the African infrastructure deficit, the Exim Bank of China is working to close it. Clearly, it is not sparing much effort.

The ChinAfrica Econometer is produced by THE BEIJING AXIS, a cross-border business bridge to/from China in three principal areas: Strategy, Sourcing & Investment.

For more information, please contact: Barry van Wyk

barryvanwyk@thebeijingaxis.com

www.thebeijingaxis.com