CHINA DEVELOPMENT BANK
China-Africa Development Fund celebrates its 10th anniversary
Content supplied by the China-Africa Development Fund Interview with Hu Huaibang, who is the chairperson of the China Development Bank.
THE China-Africa Development Fund, sponsored by China Development Bank, encounters its 10th anniversary on June 26th, 2017. This fund, the first nonequity investment fund in China, is an important measure within the framework of the Forum on China-Africa Cooperation. For a decade, the China-Africa Development Fund, guided by development financing, has made use of advantages in comprehensive investment and financing. It has contributed to China-Africa economic and trade cooperation in a market-oriented way and invested more than $4.4 billion in 36 African countries. This fund may encourage Chinese enterprises to invest over $20 billion and become the main platform for Chinese investment in Africa. It also has gained valuable experience in accelerating Africa’s industrialization process by investment and promoting the Belt and Road Initiative.
Reporter: Africa plays an important role in the Belt and Road Initiative, what do you think of the relationship between them?
Hu Huaibang: The Belt and Road Initiative is a “China Solution” for purpose of promoting the long-term development of the world and economic globalization. Countries along the Belt and Road will gather to build an open, inclusive, balanced and mutual-benefit economic cooperation framework.
It is conducive to promote orderly flow of factors, allocate resources efficiently and deepen market integration. This will, hence, create positive financing outcomes and bring new impetus into world’s economic growth and also contribute to a more balanced global economy. The Belt and Road runs through Europe,
Asia and Africa. Africa is a history and natural extension of the Maritime Silk Road, and new connotations and opportunities has been injected into its cooperation with China through the Belt and Road Initiative. Within the framework of the Belt and Road Initiative, China mainly focuses on infrastructure connectivity and productive capacity cooperation, and also pushes forward the development of countries involved.
Meanwhile, it strengthens the capacity of those nations to develop on their own by direct investment. These measures create job opportunities and tax revenue, which is urgently needed by Africa today. In addition, this is where the Belt and Road Initiative fits well with the demands of African countries to accelerate industrialization and achieve sustainable development.
Reporter: As China’s biggest foreign investment and financing co-operation bank and the world’s largest development financial institution, what role did China Development Bank play in supporting China-Africa economic and trade co-operation, as well as implementing the Belt and Road Initiative in Africa?
Hu Huaibang: Financing is of great importance for the Belt and Road Initiative, especially in some key projects. Many major projects require a large number of funds, long investment cycles but their returns on investments are low. Thus, we should provide them with long-term, sufficient, stable and low-cost funds for supporting.
Meanwhile, the countries along the Belt and Road, particularly in Africa, are mostly emerging economies and developing countries. These nations have been suffered with insufficient development experience and inadequate fiscal capacity. Similarly, their market mechanism and credit environment has yet to be perfected. As a result, the entry of financial capital was restricted and financing methods are needed for market and credit system construction.
Moreover, we will focus on solving bottlenecks that Africa faces in its course of development to promote the establishment of effective and sustainable financing mechanisms. Over years, China Development Bank has been adhering to the principles of complementary advantages, mutual benefit and common development. To promote bilateral and multilateral economic and trade cooperation, we took advantages of comprehensive financing to proactively expand international cooperation, encouraged and supported Chinese enterprises to “go global”. Africa is one of the key areas in international business of China Development Bank.
By the end of 2016, China Development Bank has already invested and financed more than $55 billion in 43 African countries, in areas such as agriculture, electricity, manufacturing, resource exploitation, communication, roads, aviation, ports, urban public facilities and people’s livelihood, etc. We pledged an investment of $4.4 billion to encourage Chinese firms to invest over $20 billion in Africa. Besides, we dedicated to boost economic growth and social development of African countries, and also contributed to expand the Belt and Road Initiative and deepen China-Africa pragmatic co-operation.
Reporter: As the practice of development-oriented finance, China-Africa Development Fund is our first fund cooperated with Africa and has been operating for 10 years. How do you evaluate the role China-Africa Development Fund plays in construction of the Belt and Road Initiative?
Hu Huaibang: China-Africa Development Fund is one of the “Eight Measures” announced by Chinese government on the Beijing Summit of the Forum on China-Africa Cooperation. It aims to encourage and support Chinese enterprises to invest in Africa. The China-Africa Development Fund inaugurated as a subsidiary of China Development Bank in June 2007.
For past 10 years, China-Africa Development Fund has been providing capital financing for investment projects in Africa, sharing risks with partners.
It realized sustainable operation of those projects and formed a two-wheel drive advantage in loan business of China Development Bank. China-Africa Development Fund has become the main platform for Chinese enterprises to invest in Africa and gained valuable experience for the Belt and Road Initiative. The influences exerted by China-Africa Development Fund on the construction of the Belt and Road Initiative is illustrated as follows.
First, creating new innovative models, setting good examples and strengthening policy communication. As the first multilateral foreign investment cooperation fund established between governments China-Africa Development Fund upholds the philosophies of “strategically required, financially balanced, and developmentally sustained” hence it links the investment and financing model to economic and social development plan of African countries in a positive way. It explores and forms an effective model for China-Africa strategies in a market-oriented way. This sets a standard for establishing similar foreign cooperative institutions under the the Belt and Road strategy.
Second, solving bottlenecks that Africa faces in its course of development and enhance facilities connectivity. China-Africa Development Fund has invested in fields of ports, aviation, electricity under the Three Networks and Industrialization strategy. The total installed capacity of Ghana power plant project, for example, accounts for over 20% of national electricity in Ghana. This has alleviated the power shortage of the country and won high praise from the President of Ghana. Africa World Airlines project, the first passenger air project invested by Chinese enterprises in Arica, has also fostered the connectivity between western African countries. We jointly established China Overseas Infrastructure Development and Investment Corporation with domestic engineering giants to promote infrastructure construction in Africa.
Third, implementing productive capacity co-operation first to ensure a free flow of trade. Based on demands of industrialization in Africa, China-Africa Development Fund encourages domestic high-quality production capacity - ranging from automobile, electronics, machinery, cement to glass industry to invest there. Every year, we provide African market with 11 thousand middle-heavy trucks, 300 thousand air conditioners, 450 thousand refrigerators, 560 thousand televisions and 1.6 million tons of cement to continuously boost economic growth in Africa. So as to gather precious experience in international capacity cooperation.
Fourth, supporting development of Africa by financing and intellect raising and promoting its capital financing. Up to now, China-Africa Development Fund has decided to invest 90 projects in 36 African countries at a price of $4.4 billion and $3.2 billion were actually invested in areas such as equipment capacity, infrastructure, energy minerals, industrial park and agriculture. This will bring Africa more than $20 billion in investment. Over the past 10 years, China’s direct investment stock in Africa surged from $2.56 billion in 2006 to $34.69 billion in 2015.
Fifth, stimulating development of people’s livelihood and strengthening people-to-people connectivity. Based on the actual development of African countries, China-Africa Development Fund plays an active role in supporting the development of local industrial projects, especially in some weak areas such as agriculture, forestry and small and medium enterprises. This effectively activates the vitality of substantial economy, creates job opportunities and improves people’s livelihood. Cotton Planting projects in Malawi, Mozambique and Zambia, for instance, allowed 20 thousand farmers to increase their income by adopting “company + farmer” pattern. Similarly, the Suez project in Egypt has attracted a total of $950 million in investment and created nearly 2000 job opportunities locally.
Reporter: In the process of China-Africa investment, how did China-Africa Development Fund pursue both righteousness and benefits and fulfil its social responsibilities?
Hu Huaibang: Since founded, China-Africa Development Fund has been adhering to the cooperative principles of sincerity, real results, affinity and good faith and implementing proactively the brand-new cooperative concept of righteousness and benefits. We have been emphasizing on social benefits generated by investment in Africa. Meanwhile, to promote mutual-benefit partnership with Africa, we also devoted to reinforce cultural exchanges with African countries and guide the locals to form a rational cognition towards investment coming from China.
First, improve economic “blood-making” capability of African countries through investment and financing. For a decade, conbining the developmental demands of African countries, China-Africa Development Fund has encouraged Chinese enterprises to invest in Africa and helped to solve the three bottlenecks - inadequate infrastructure, lack of professional and skilled personnel, and funding shortage. This speeded up the process of industrialization and agricultural modernization, and supported the realization of a sustainable development in Africa.
Second, insist on responsibility-oriented investment and fulfil social responsibilities by investing projects in Africa. Having been putting into operation, all investment projects will create additional income of 2 billion dollars in export and 1 billion dollars in tax revenue. This will benefit the locals directly. According to incomplete statistics, in addition, projects involved has provided local communities with a growing body of public facilities including 9 highways (approximately 500 miles), 4 hospitals and 9 schools. These achievements have received widespread praise from the senior government officials and all walks of life in Africa. Third, make joint efforts with government agencies, partners and social forces to fulfil social responsibilities. For example, China-Africa Development Fund cooperated with organizations including China International Poverty Reduction Center to alleviate poverty in Africa. And it also organized public benefit activities such as “Increasing Love for Decreasing AIDS” to build a platform for cultural exchanges between young people of two countries. In 2014, it donated 450 thousand dollars, on behalf of China Development Bank, to Liberia, Guinea and Sierra Leone the worst-affected areas of the Ebola crisis, so as to meet their emergency needs and support their efforts to overcome the epidemic and rebuild their homes as early as possible.
Reporter: As an important financial force in China-Africa cooperation, what new measures and plans will China Development Bank and China-Africa Development Fund take to enhance the China-Africa economic and trade cooperation?
Hu Huaibang: The Africa continent encompasses now the largest number of developing countries in the world, China is the world’s largest developing country and the two countries have always belonged to a mutually beneficial community of shared future. Next, we will make use of our comparative advantages in planning and counseling and serve as a financial bridge to advance construction of the Belt and Road Initiative.
First, we will actively implement China-Africa “Ten Co-operation” plans and effectively allocate 60 million dollars, announced by President Xi Jinping at the Forum on China-Africa Co-operation (FOCAC) in 2015. We will take advantage of China-Africa Development Fund and other small and medium enterprises lending platforms to foster cooperation with Africa in investment and finance. Second, we will focus on projects that improve the people’s livelihood in Africa and support the projects contributing to medical facilities, educational training and local living environment. Third, creating new investment and financing models, strengthening connections with international capital market and boosting cooperation with third parties are also considered to be undertaken to improve African economic development with other investors all around the world.
Hu Huaibang, the chairperson of the China Development Bank, says the China-Africa Development Fund has become the main platform for Chinese Enterprises to invest in Africa and gained valuable experience for the Belt and Road Initiative.