Chinese companies in Africa have government “seal of quality”, says Chinese consultant

27 February 2006

Beijing, China, 27 Feb – Portuguese-speaking African countries should encourage sChinese companies into their markets because they have already been subjected to selection by the Chinese government and financial system, an academic Chinese consultant said Monday in Beijing.

“The participation of Chinese companies in public tenders should not be feared by Portuguese-speaking countries, because they have already been submitted to tests by the Chinese government, and that is a great guarantee of quality,” said Huang Zequan, a consultant for Chinese companies that wish to move into African markets and an academic at Beijing University.

Huang said that this was a positive way of the government taking a role in the economy, as it reduced the risks that are inherent to a lack of information and provided a guarantee of quality to the companies that want to enter markets in which they are, as yet, unknown.

“There are two essential conditions for the government to allow companies to take part in public tenders in Africa. The first is to have a positive track record in finalizing contracts within the deadline and on budget, the other is whether they in fact have the machines, personnel and financial capacity to carry the project through,” Huang said.

“When a country launches a tender, it thus has the certainty that the company that has won it is the one that carries out the project, that does not subcontract it out to other companies, as do, for example, Western companies in Africa, such as the Spanish,” Huang said.

Huang also highlighted the role of China’s financial sector in reducing the uncertainty associated to contracting Chinese companies, “because it is the banks themselves that carry out the research about the companies, as an essential condition of providing funding.”

Several Chinese companies are now operating in Portuguese-speaking African countries, such as China International Fund, which is rebuilding the Benguela railroad, China Jiangsu International which is set to build the Palace of Justic in Luanda, or in Mozambique China Geo Engineering, which in October won the tender to build the water supply network in Xai-Xai and Chokwe and China Henan International which won the tender to supply water in Inhambane and Maxixe.

Huang explained that the financial sector and the State work together on the internationalization of Chinese companies in Africa.

Exim Bank is one of the banks focused on supporting internationalization and the operations of foreign companies in foreign markets.

“When an African country wants to build a project, it communicates that need to the Chinese embassy in its country which in turn tells the Chinese ministry for the sector. The Ministry then launches the tender in China.”

“The company only wins the tender after being subjected to inspection from the respective ministry, which suggests that the banks offer funding, which requires new research by the bank on the company,” Huang said.

According to Emmy Bosten, of the International Monetary Fund (IMF) in Mozambique, for the constructions in Mozambique in which the Chinese government launched limited tenders for Chinese companies, “the companies brought all the necessary resources duirectly from China including materials, equipment and human resources.”

In Angola alone, at the end of 2004, China supplied US$2 billion for rebuilding railroads, and building administrative buildings destroyed after 27 years of civil war, projects that were entirely executed by Chinese companies.

Following Saudi Arabia, Angola is the second largest supplier of oil to China, the world’s second largest consumer of the resource, and exports 25 percent of its production to the Asian giant.

Angola is also China’s second largest trade partner in Africa, with Chinese imports from Angola in 2005 reaching US$3.581 billion (an increase of 72.2 percent against 2004) and exports totaling US$196 million (a 90.2 percent increase year on year).

As for Mozambique, figures recently published by the Center for Investment promotion (CPI) in Maputo, showed that direct investment from China was the sixth highest in the list of the country’s partners, having increased from US$288,700 in 2004, to US$5.4 million in 2005.

In the same year, trade between the countries were at an all-time high, totaling US$148.5 million.

Meanwhile, Chinese deputy trade minister, Wei Jianguo, said Monday in Beijing that the government would reduce China’s debt to developing Portuguese-speaking countries, but gave no further details.

Wei did not specify which countries would benefit from debt reduction or the amounts involved. (macauhub)