Turning Chinese Emerging Market Investments into Win-Win Situations
China’s rise to rank as the world’s second largest economy offers significant opportunities, but it also challenges Chinese companies to help make their projects abroad sustainable. After IFC helped China over the last few years to adopt its Green Credit policy – directing domestic investments towards environmentally-friendly projects – we are now assisting the Chinese private sector in investing in other parts of the world profitably and sustainably.
“We believe strongly in the tremendous contribution Chinese institutions and enterprises can make to the development of Africa,” said Dorothy Berry, IFC VP for Human Resources, Communications, and Administration, at the opening of a workshop on prospects of the African banking sector among the China-Africa Development Fund, Bank of China, and IFC. “China-Africa relations will play a key part in tomorrow’s global economic system as the weight of today’s developing and emerging economies grows.”
Last fiscal year, IFC arranged a $115 million financing package for Ghana Vodafone including $27 million and $45 million syndicated parallel loans from China EXIM Bank and China Development Bank respectively. The transaction marked the first time that Chinese banks participated in an IFC mobilization for an Africa project. Using the banking sector as a conduit to anchor environmental and social standards in project development represents a new avenue for IFC’s China-Africa work.
In Asia, IFC invested $100 million together with China EXIM Bank, China Investment Corporation, Bank of China International and China Communications Construction Company, to establish the China-ASEAN Fund which focuses on infrastructure projects in ASEAN countries.
“IFC is committed to helping Chinese companies and banks invest abroad in line with environmental and social standards,” Sérgio Pimenta, IFC’s Director for East Asia Pacific, told the opening plenary of the 10th anniversary conference of the Association for Sustainable & Responsible Investment in Asia last month. “This will contribute to making Chinese projects sustainable and in the long-run more profitable.”
Popular View Not Always the Full Picture
There are potential opportunities to support Chinese investments in Latin America as well. Earlier this month in Beijing, IFC’s China & Mongolia Country Manager Hyun-Chan Cho told over 300 Chinese and international participants at the 3rd Latin America China Investors Forum: “Clients and partners tell us how much they appreciate our role in knowledge sharing across the world. We introduce best practices and better standards which greatly benefit Chinese operations domestically and abroad.”
International observers already see China’s investment behavior changing. “I beg to differ from the popular view that Chinese investments in Africa tend to benefit the Chinese alone,” BNP Paribas’ Senior Africa Advisor, Ambassador Ibrahima Cheikh Diong said at an IFC-sponsored luncheon panel during the conference by the Association for Sustainable & Responsible Investment in Asia in Hong Kong. “Chinese investments are often easier to secure than Western support and African countries have begun to strengthen their ability to ensure that Chinese projects are mutually beneficial.”
Others see investments with few or no strings attached as less sustainable. “However, you cannot paint all African countries or all Chinese investments with the same brush,” Babatunde Onitiri, who recently moved from his post as IFC’s country manager for Mozambique to Singapore, told the same lunch gathering. “There are different needs from different players. That’s why IFC’s additionality lies in the help we can give both sides to understand each other better so that they can make win-win business decisions.”
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