China: Banking on Africa

A few interesting articles, courtesy of Bloomberg and The Financial Times, detailing two recent Chinese investments into the African banking sector, namely Industrial & Commercial Bank of China Ltd.’s move to buy 20 percent of Standard Bank Group Ltd. (Africa’s largest bank) and China Development Bank’s partnership with United Bank for Africa, one of Nigeria’s biggest lenders.  While past Chinese investments have primarily targeted African natural resources, some analysts feels these recent deals indicate a trend towards smart “business-first” thinking by Chinese firms:

“…From the regulators’ point of view, this kind of diversification is a great idea,” says Michael Pettis, a finance professor at Peking University. “Chinese banks are too highly concentrated in China and it’s not in their best interest that banks depend exclusively on Chinese growth. That kind of dependence is highly pro-cyclical and can feed booms and busts.”

Standard Bank has offices in 18 African countries, including Nigeria and Kenya, and 21 other nations such as Argentina and Taiwan. The Johannesburg-based bank has 713 branches in South Africa and 240 throughout the continent. The deal is a sign that even if the Chinese Communist Party has strategic reasons for investing in Africa, companies are heading there for the economic potential…

…Standard Bank is gaining access to the fastest-growing major economy and fattening its capital base. China is getting a foothold into Africa’s nascent investment-banking and insurance industries. It’s also a way for China to use its growing cash piles overseas rather than making fresh domestic loans that may go bad or fuel inflation.….One interesting element of ICBC’s deal is how different it is from the usual overture from Western banks. It didn’t come laden with demands about how much control ICBC will have over Standard Bank. It didn’t require pledges for financial change. It’s merely one bank buying a piece of another with transparent terms and conditions. It’s a sign Chinese managers are willing to treat Africans as peers.”

This entry was posted on Wednesday, October 31st, 2007 at 7:42 am and is filed under China, Nigeria, South Africa.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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