Events in Libya will pave the way for new deals in Africa. And this is only beginning. More moves along the way happen and soon.
China’s future in Africa, after Libya
By 2015, China will be investing an eye-popping $50bn per year in Africa and bilateral trade with the continent will be $300bn annually, according to research from Standard Chartered.
But the future of Chinese companies in Africa may be under review, given the way that recent events in Libya have played out. China had a large presence there: more than 30,000 Chinese workers were living and working in Libya before the unrest broke out, according to Chinese officials.
Because China has never imposed economic sanctions on Libya – and in fact the two countries once saw themselves as revolutionary allies, decades ago – Chinese companies were very active across the Libyan economy, from construction projects, to railways, to telecoms.
The full extent of that engagement has become clear as the companies involved have pulled out: China Railways Construction Corp, which suspended operations in Libya this week, had been building three rail projects there worth $4.2bn, the company said, of which $3.6bn has not been completed.
Meanwhile China State Engineering Corp has suspended a $2.7bn housing project, leaving it half finished, and is repatriating its workers. China’s largest dam builder, Sinohydro, is doing the same.
At least 27 Chinese construction projects have been attacked, according to the Ministry of Commerce. The workers involved in these projects have captured headlines back in China over the last week, as stories of their violent encounters with looters leaked out over the Internet.
One construction worker from Zhongtai Construction Group, Xu Lifen, described how his camp was looted evening of February 20th: “They had knives, basic rifles, and even some AK-47’s. We were helpless and terrified, but of course we couldn’t just stand by,” he told the Nanfang Daily, a Chinese newspaper. “We were all thinking, the only way out of here is to fight, so we grabbed some rebar (steel bars) and eventually beat them back.”
So what do these tales of violence mean for the future of Chinese investment in Africa?
“It is not too difficult to foresee a future of Chinese companies becoming more selective when approached by a government in North Africa,” says Zha Daojiong, professor at Peking University and expert on China’s overseas energy investments. “We were probably a little bit naïve, collectively speaking, in assuming that as long as we get the government-to-government level right, we were in good hands.”
Chinese companies will continue to be drawn to Africa because of the continent’s rich resources, such as iron ore and oil, two commodities that China needs. But a key area to watch will be how their strategies change – and whether that forecasted $50bn of investment in the continent may end up being a bit lower given what’s happened in Libya. |
