The Export-Import Bank of China sees plenty of opportunity to extend loans in Africa, focussing on raw materials and oil, while commercial banks are steering clear of the risk, its chief executive says.
“There are a lot of areas to operate – particularly in the raw materials and oil sector. Certainly this is the area we will focus on,” Exim Bank Chairman Li Ruogu told European and Chinese executives, bankers and officials meeting in Luxembourg.
This month European Union trade chief Karel De Gucht rejected what he called China’s “cheque book” approach to doing business with Africa, saying the EU would continue demanding good governance and transparent use of funds from its trading partners. “China does not interfere in the internal affairs of Africa. What we want to do is foster their own development capacity,” Li told the conference.
“Democracy and human rights, these are fantastical terms. Without economic governance they are nothing,” he added. Exim Bank is one of China’s three policy banks that extend credit in line with government initiatives. “Very few foreign commercial banks are considering providing finance in Africa. They may see the risk aspects more than they see the benefits,” Li told Reuters.
“We take a long-term view. We don’t expect profits this year or next year; we see things in decades,” he said. “If the Europeans follow the Chinese example they may have an opportunity in Africa,” Li added.
He said Exim Bank would also focus on Africa’s agriculture sector, where it sees a potential for recovery and future exports, potentially supplying China’s booming demand for basic commodities. “Africa has very good agricultural land and yet they’ve been importing food from other countries. We are going to develop agriculture cooperation so that the Africans can rely on themselves for food and even export, maybe to China.”
An EU-Africa summit scheduled for next week in Tripoli is is expected to include European attempts to improve commercial and diplomatic relations with Africa, which were damaged by a long-standing row over regional trade accords. China’s presence in Africa has revived European interest in a continent with 1.4 billion inhabitants and an average GDP growth rate of 8 percent, said Kolapo Lawson, chairman of pan-African banking group Ecobank Transnational.
“The Chinese have taken advantage of Africa’s growing middle class by supplying the needs of consumers,” Lawson said. Europe’s growing interest, following on the heels of China, is allowing African governments to demand better terms in negotiations, Lawson said. Ecobank, west and central Africa’s leading regional banking group, has entered a cooperation agreement with the Bank of China to deepen trade relations, he said.
“One would say it’s a very happy relationship, and it’s a relationship that one has a great deal of optimism in contemplating.”