China’s investment makes big imprint on Portuguese world
Risks grow as Chinese companies expand role in Africa, Brazil
Toh Han Shih 31 January 2011
China is stepping up its trade and investment with Portuguese-speaking (Lusophone) countries, but the growing ties with some of the former Portuguese colonies have come at a price.
“Chinese investment projects are having a major impact on Africa,” said Hugo Williamson, the managing director of the Risk Resolution Group, an international risk consultancy.
“If one travels around Angola, you repeatedly encounter signs stating China’s role in building various infrastructure products. China’s presence, initially discreet, is now felt very prominently.”
In January last year, Angola hosted Africa’s flagship football tournament, the Africa Cup of Nations. In preparation for the games, China’s Shanghai Urban Construction Group was awarded a U$600 million contract to build four 40,000-seat stadiums - in Benguela, Cabinda, Luanda and Lubango.
But while China’s huge and growing economic ties with Angola and other Lusophone nations have lifted millions out of poverty, they have also become the focus of violence and social tension.
In Angola, protesters entered the premises of Chinese companies, committing robbery and threatening the Chinese staff. A Chinese businessman was badly beaten and robbed in the capital Luanda, and there have also been demonstrations in front of Chinese company buildings.
“Local sources say such attacks have grown in frequency in recent years and those reported are just the tip of the iceberg, with most cases going unreported,” Williamson said.
There are eight Lusophone nations in the world - Portugal, Brazil, Angola, Mozambique, Cape Verde, Guinea-Bissau, Sao Tome and Principe, and East Timor, all linked by historical ties to Portugal’s long-gone empire.
Shanghai Urban Construction Group chief Eddie Zhang told the BBC that he was hearing of a growing number of planned, “mafia-style” attacks on Chinese targets in Angola.
Williamson acknowledged the cases but cautioned against fears of a rising tide of xenophobia targeting Chinese in particular.
“These incidents need to be viewed in the context of the high crime rate in Angola and a rising Chinese population in the country. Incidental crime against some Chinese can be [mistakenly] construed as xenophobically motivated when that is not always the cause,” he said.
Thousands of Chinese have been employed in Angola on infrastructure projects launched since the nation’s 27-year civil war ended in 2002.
“A frequent source of resentment is China’s insistence on keeping local hires to a minimum when conducting infrastructure projects. Africa finds China’s unwillingness to hire Africans troubling,” Williamson said. “Many in Angola blame the Chinese ‘neo-colonial’ invasion for their rising cost of living, with Luanda now one of the most expensive cities in the world.”
China has had a warmer reception in Brazil, with trade helping Brazil haul 36 million of its 186 million people out of poverty in the past 10 years, said Antonio Jose Rezende de Castro, the Brazilian consul general in Hong Kong.
“This is no mean feat. A big part is the result of the exponential growth in trade with China,” de Castro said. “China was an extremely important factor in relaunching the Brazilian economy in the last 10 years.
“The fact, that you have such a huge market in China is a big boost for investment in Brazil. Lots of factories have come up in Brazil because of exports to China.”
After lacklustre growth of 2.9 per cent between 1996 and 2002, Brazil’s per capita gross domestic product soared 77 per cent from US$4,657 in 2002 to US$8,246 in 2009.
Over the same period, China overtook the United States as the Latin American country’s biggest trading partner.
Brazil exported US$20.2 billion in goods to China in 2009 and imported US$15.9 billion, according to Brazilian government data. From January to November last year, its exports to China increased to US$28.2 billion while imports amounted to US$23.4 billion.
Almost 85 per cent of Brazil’s exports to China were commodities, with iron ore representing more than 35 per cent of total exports, followed by soyabeans and crude oil, according to Geert Aalbers, Brazil general manager of consultancy Control Risks.
Aalbers said Chinese goods accounted for 13 per cent of Brazil’s imports last year, of which a large part were electronic components.
Social tension arising from Chinese investment was far lower in Brazil than in Lusophone Africa, de Castro said.
He said that since the country was at a more advanced stage of development, Chinese investors did not need to transfer so many Chinese workers to Brazil.
“This is not the case in some African countries, which lack trained personnel,” he said.
In November last year, five heads of Lusophone states and Prime Minister Wen Jiabao attended a meeting in Macau, underlining the importance China placed on Lusophone countries, de Castro said. Wen told delegates to the conference China’s trade with Lusophone nations should grow to US$100 billion by 2013.
The China Development Bank (CDB) pledged nearly US$1.5 billion in loans for Lusophone nations during the conference.
In addition, 1,500 Chinese students were going to Macau to study Portuguese, de Castro said. The students would be employed by the Chinese government in future dealings with Lusophone countries.
“Macau has 400 years of Portuguese tradition you can’t just throw away,” de Castro said.
During President Hu Jintao’s trip to Portugal in November, China and Portugal signed deals totalling €718 million (HK$7.61 billion).
“Lusophone Africa is incredibly important to China, driven by China’s increasing energy and raw material requirements,” Williamson said.
China’s trade with Africa amounted to US$106.8 billion in 2008 and was expected to reach a similar level last year, a huge leap from US$3.5 billion in 1990. A significant portion of this is with Lusophone countries.
“Of particular importance is the relationship China has with Angola. Between 2001 and 2010, the only country to grow faster than China was Angola, largely through Chinese investment,” Williamson said.
“Over the next five years, seven of the top 10 fastest growing economies are expected to be in Africa, again largely due to China’s investment.”
Angola is China’s leading African trading partner and its top supplier of oil, with 45 per cent of Angolan oil going to China. So far, two Chinese state banks, China Exim Bank and ICBC, have disbursed more than US$8 billion in loans to Angola as part of China’s “aid for oil” policy towards the African country.
Elsewhere in Lusophone Africa, China was Mozambique’s third-biggest trading partner after South Africa and Portugal, and had pledged to spend US$800 million upgrading Mozambique’s agricultural sector, Williamson said.
Last year, it was announced that China would establish an investment bank in Maputo to fund infrastructure projects. “This reveals China’s zeal to control business activities,” he said.
As for Brazil, significant Chinese investment is a recent phenomenon, with relatively negligible levels until 2009, increasing to more than US$10 billion last year, making China the largest foreign direct investor in the Latin American nation, according to Aalbers.
“The Brazilian government will welcome China’s interest in investing, given the country’s massive infrastructure requirements for the World Cup in 2014 and Olympic Games in 2016,” he said.
That investment has included Chongqing Grain Group’s purchase last year of a farm in Brazil for soyabean production.
“The food produced on the farms is meant for China,” de Castro said.
Meanwhile, several newly discovered oil fields will come on stream in Brazil by 2015, making the country one of the biggest oil producers in the world.
De Castro said the Brazilian government was auctioning areas for offshore oil exploration and Chinese oil companies such as Sinopec Corp were interested in being there.
However, there were areas of potential sensitivity in Brazil, Aalbers said.
Chinese currency policy and its impact on bilateral trade was one delicate area. Another was the acquisition of rural land, given the potential risks to the environment and indigenous rights which Brazil had a strong tradition of protecting, he added.
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China’s investment makes big imprint on Portuguese world
Risks grow as Chinese companies expand role in Africa, Brazil
Toh Han Shih
31 January 2011
China is stepping up its trade and investment with Portuguese-speaking (Lusophone) countries, but the growing ties with some of the former Portuguese colonies have come at a price.
“Chinese investment projects are having a major impact on Africa,” said Hugo Williamson, the managing director of the Risk Resolution Group, an international risk consultancy.
“If one travels around Angola, you repeatedly encounter signs stating China’s role in building various infrastructure products. China’s presence, initially discreet, is now felt very prominently.”
In January last year, Angola hosted Africa’s flagship football tournament, the Africa Cup of Nations. In preparation for the games, China’s Shanghai Urban Construction Group was awarded a U$600 million contract to build four 40,000-seat stadiums - in Benguela, Cabinda, Luanda and Lubango.
But while China’s huge and growing economic ties with Angola and other Lusophone nations have lifted millions out of poverty, they have also become the focus of violence and social tension.
In Angola, protesters entered the premises of Chinese companies, committing robbery and threatening the Chinese staff. A Chinese businessman was badly beaten and robbed in the capital Luanda, and there have also been demonstrations in front of Chinese company buildings.
“Local sources say such attacks have grown in frequency in recent years and those reported are just the tip of the iceberg, with most cases going unreported,” Williamson said.
There are eight Lusophone nations in the world - Portugal, Brazil, Angola, Mozambique, Cape Verde, Guinea-Bissau, Sao Tome and Principe, and East Timor, all linked by historical ties to Portugal’s long-gone empire.
Shanghai Urban Construction Group chief Eddie Zhang told the BBC that he was hearing of a growing number of planned, “mafia-style” attacks on Chinese targets in Angola.
Williamson acknowledged the cases but cautioned against fears of a rising tide of xenophobia targeting Chinese in particular.
“These incidents need to be viewed in the context of the high crime rate in Angola and a rising Chinese population in the country. Incidental crime against some Chinese can be [mistakenly] construed as xenophobically motivated when that is not always the cause,” he said.
Thousands of Chinese have been employed in Angola on infrastructure projects launched since the nation’s 27-year civil war ended in 2002.
“A frequent source of resentment is China’s insistence on keeping local hires to a minimum when conducting infrastructure projects. Africa finds China’s unwillingness to hire Africans troubling,” Williamson said. “Many in Angola blame the Chinese ‘neo-colonial’ invasion for their rising cost of living, with Luanda now one of the most expensive cities in the world.”
China has had a warmer reception in Brazil, with trade helping Brazil haul 36 million of its 186 million people out of poverty in the past 10 years, said Antonio Jose Rezende de Castro, the Brazilian consul general in Hong Kong.
“This is no mean feat. A big part is the result of the exponential growth in trade with China,” de Castro said. “China was an extremely important factor in relaunching the Brazilian economy in the last 10 years.
“The fact, that you have such a huge market in China is a big boost for investment in Brazil. Lots of factories have come up in Brazil because of exports to China.”
After lacklustre growth of 2.9 per cent between 1996 and 2002, Brazil’s per capita gross domestic product soared 77 per cent from US$4,657 in 2002 to US$8,246 in 2009.
Over the same period, China overtook the United States as the Latin American country’s biggest trading partner.
Brazil exported US$20.2 billion in goods to China in 2009 and imported US$15.9 billion, according to Brazilian government data. From January to November last year, its exports to China increased to US$28.2 billion while imports amounted to US$23.4 billion.
Almost 85 per cent of Brazil’s exports to China were commodities, with iron ore representing more than 35 per cent of total exports, followed by soyabeans and crude oil, according to Geert Aalbers, Brazil general manager of consultancy Control Risks.
Aalbers said Chinese goods accounted for 13 per cent of Brazil’s imports last year, of which a large part were electronic components.
Social tension arising from Chinese investment was far lower in Brazil than in Lusophone Africa, de Castro said.
He said that since the country was at a more advanced stage of development, Chinese investors did not need to transfer so many Chinese workers to Brazil.
“This is not the case in some African countries, which lack trained personnel,” he said.
In November last year, five heads of Lusophone states and Prime Minister Wen Jiabao attended a meeting in Macau, underlining the importance China placed on Lusophone countries, de Castro said. Wen told delegates to the conference China’s trade with Lusophone nations should grow to US$100 billion by 2013.
The China Development Bank (CDB) pledged nearly US$1.5 billion in loans for Lusophone nations during the conference.
In addition, 1,500 Chinese students were going to Macau to study Portuguese, de Castro said. The students would be employed by the Chinese government in future dealings with Lusophone countries.
“Macau has 400 years of Portuguese tradition you can’t just throw away,” de Castro said.
During President Hu Jintao’s trip to Portugal in November, China and Portugal signed deals totalling €718 million (HK$7.61 billion).
“Lusophone Africa is incredibly important to China, driven by China’s increasing energy and raw material requirements,” Williamson said.
China’s trade with Africa amounted to US$106.8 billion in 2008 and was expected to reach a similar level last year, a huge leap from US$3.5 billion in 1990. A significant portion of this is with Lusophone countries.
“Of particular importance is the relationship China has with Angola. Between 2001 and 2010, the only country to grow faster than China was Angola, largely through Chinese investment,” Williamson said.
“Over the next five years, seven of the top 10 fastest growing economies are expected to be in Africa, again largely due to China’s investment.”
Angola is China’s leading African trading partner and its top supplier of oil, with 45 per cent of Angolan oil going to China. So far, two Chinese state banks, China Exim Bank and ICBC, have disbursed more than US$8 billion in loans to Angola as part of China’s “aid for oil” policy towards the African country.
Elsewhere in Lusophone Africa, China was Mozambique’s third-biggest trading partner after South Africa and Portugal, and had pledged to spend US$800 million upgrading Mozambique’s agricultural sector, Williamson said.
Last year, it was announced that China would establish an investment bank in Maputo to fund infrastructure projects. “This reveals China’s zeal to control business activities,” he said.
As for Brazil, significant Chinese investment is a recent phenomenon, with relatively negligible levels until 2009, increasing to more than US$10 billion last year, making China the largest foreign direct investor in the Latin American nation, according to Aalbers.
“The Brazilian government will welcome China’s interest in investing, given the country’s massive infrastructure requirements for the World Cup in 2014 and Olympic Games in 2016,” he said.
That investment has included Chongqing Grain Group’s purchase last year of a farm in Brazil for soyabean production.
“The food produced on the farms is meant for China,” de Castro said.
Meanwhile, several newly discovered oil fields will come on stream in Brazil by 2015, making the country one of the biggest oil producers in the world.
De Castro said the Brazilian government was auctioning areas for offshore oil exploration and Chinese oil companies such as Sinopec Corp were interested in being there.
However, there were areas of potential sensitivity in Brazil, Aalbers said.
Chinese currency policy and its impact on bilateral trade was one delicate area. Another was the acquisition of rural land, given the potential risks to the environment and indigenous rights which Brazil had a strong tradition of protecting, he added.
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