Energy, banking and agriculture boost China’s ties with Portuguese-speaking countries

28 December 2009

Macau, China, 28 Dec – A decade of accelerated expansion of the China-Portuguese-speaking economic area ended in 2009 with new ties in energy, banking and agriculture, despite an expected drop in trade between China and the Portuguese-speaking world.

The fall in the price of raw materials that are the basis of trade with Angola (oil) and Brazil (soy) led to a significant fall in trade between Portuguese-speaking countries and China at the start of the year, but recovery began in the second half.

Figures from China’s Customs Services showed that from January to October, trade totalled US$50.23 billion, or 26 percent less than in 2008 (record of US$77 billion, or 66 percent more than in 2007).

Looking further back, there are many reasons to commemorate the first decade of Macau’s return to China (1999) in the economic area: Between 2003 and 2006 trade rose almost three-fold to a total of US$34 billion.

Last year Angola became China’s biggest trading partner in Africa, and in 2009 Brazil’s main trading partner was China.

Due to the drop in tax revenues from oil, Angola went through a period of financial difficulty, but the country’s reconstruction continued.

At the end of the year the Angolan government launched the “Camama Infrastructures Project” (Luanda), a US$174 million project in the hands of a Chinese consortium, to build 145,000 homes. However Chinese construction companies also concluded dams, roads and built stadiums for CAN-2010.

Angola and China as of this year have a new framework cooperation agreement that aims to “stimulate promotion of associations between Chinese and Angolan companies, based on a principle of complementarities and joint ventures.”

China has provided Angola with loans of US$4.5 billion to support the national reconstruction process, in which around 50 large Chinese groups and over 50,000 Chinese citizens are taking part, according to recent figures.

However, Angola is increasingly a foreign investor, whether that be in energy, or the financial sector, in Portugal – Galp Energia, Millennium Bcp, EDP and Zon – or in Guinea Bissau (bauxite,, Port of Buba).

Angola’s direct foreign investment totalled US$1.2 billion last year, which is around four time the amount invested in 2007, reflecting an unprecedented expansion of oil revenues, according to the United Nations Conference on Trade and Development (UNCTAD).

Another significant part of Chinese-Portuguese-speaking relations is increasingly, agriculture, and Angola, Mozambique and Guinea Bissau may come to have an important role in supplying food to Beijing, according to researcher Loro Horta.

“Considerable attention has been paid to Chinese interests in oil and other African mining resources, but it is perhaps in agriculture and food processing that China will have a more significant impact on the continent’s future,” the academic said in a study published in June.

In order to boost agricultural production in Angola, the China Development Bank opened up a credit line of US$1.2 billion.

In Mozambique 2010 is scheduled to mark the opening of the first Centre for Research and Transfer of Agricultural Technology in Mozambique, which aim to increase rice production in the country five-fold, to 500,000 tonnes per year.

Brazil’s agricultural research agency Embrapa, is also due over the next few months to open an office in Mozambique, responsible for coordinating a US$10.7 million project to boost local research institutions, adapt seeds to the region’s soil and climate, preserve natural resources and train up local scientists.

In the energy sector, Sao Tome and Principe, boosted its importance in China’s foreign energy policy due to Chinese oil company Sinopec acquiring Addax of Switzerland, which gives the Chinese company control of half of the four blocks of the Sao Tome-Nigeria joint development zone (JDZ) and may boost its development.

In the case of Brazil, Petrobras signed a loan contract for US$10 billion with the China Development Bank, which will make it possible for the Brazilian oil company to invest in exploration of large reserves discovered off the southeast coast of Brazil.

Petrobras, in exchange, has guaranteed the future export of oil to China (150,000 barrels per day in the first year), mainly the heavier type of oil which local refineries have difficulty processing.

The China Development Bank has also provided funding of US$2.2 billion for Chinese regional airlines to buy aircraft from Brazilian aircraft manufacturer Embraer.

Another highlight is the role of the Macau branch of the Bank of China in creating a Chinese-Portuguese-speaking financial network, via agreements with banks in countries such as Angola or Mozambique.

Lao Chak Kuong, the assistant director-general of Macau branch of the Bank of China , recently said that Cape Verde and Guinea Bissau were also on the horizon, via cooperation with similar institutions.

Another financial network is being created by Geocapital, which this year went into Cape Verde, via Caixa Economica, after entering the markets of Guinea Bissau, Angola and Mozambique.(macauhub)