Out-Law News 1 min. read

China ‘planning to double equity investment fund for Africa’


China plans to double a special development fund for Africa to $10 billion and expand financial support for small firms on the continent, according to the Forum on China-Africa Cooperation (FOCAC).

The China Africa Development Fund hit its initial target of pooling $5bn for equity investments in Africa towards the end of last year.

However, the FOCAC said this week that China is set to “gradually expand” the fund in the future, which will also see the expansion of special loans to support small and medium-sized enterprises in Africa from $1bn to $6bn.

In a related move, China’s government is keen to step up partnerships between financial institutions in China and Africa, the FOCAC said.

China’s ambassador to Rwanda Pan Hejun told journalists on 15 August that “cooperation with financial institutions remains one of the plans on the table”. Pan said China is also considering venturing into the local banking sector in Rwanda, in line with investment plans for the continent.

Pan said: "There will be other forms of partnerships which will be extended in Rwanda in the years to come. Banks in China will have various forms of cooperation to help the sector's capacity to lend and facilitate developmental projects.”

Pan said Chinese investment plans for Africa would build on the $60bn funding package announced by Chinese president, Xi Jinping last December.

Xi told the FOCAC in Johannesburg in December that the plans included financial backing for projects involving industrialisation, infrastructure, financial services, "green development and trade and investment facilitation".

According to the FOCAC plan of action drawn up last year, “China will encourage Chinese financial institutions to provide financing and insurance support for China-Africa cooperation in energy, mining, agriculture, processing, manufacturing, shipping, metallurgy, construction, information and communication technology, electricity, railways, highways, ports and airports”.

In addition, China pledged to “enhance cooperation in currency exchanges and financial services, and encourage both Chinese and African enterprises to invest and trade in local currencies”.

Last March, China's ambassador to Ethiopia said his country’s investment plans for Africa would not be threatened by the economic slowdown in his country. La Yifan said Africa could actually benefit from the situation as Chinese firms seek out investment prospects overseas while China’s economy “adjusts”.

La said: "While the Chinese economy is shifting gears, all those major industries that have powered the explosion of Chinese infrastructure over the past 30 years have to find a place (to invest)."

A report for the World Bank (40-page / 2.70 MB PDF), presented at last year’s Investing in Africa Forum in Addis Ababa, said China and sub-Saharan Africa (SSA) trade had "rapidly intensified since the late 1990s and in 2013 China became SSA's largest export and development partner".

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