Professor Deborah Brautigam
School of International Service
American University
Washington DC

(1) History Lessons
China’s Domestic Infrastructure
Focus in 1978: “120 Projects”
• 30 Electric Power Stations
• 6 Trunk Railways
• 8 Coal Mines
• 10 Steel Plants
• 5 Harbors
• 9 Non-ferrous Metal Complexes
• 10 New Oil & Gas Fields

• Deng Xiaoping (1975 “20 Points”)
“In order to hasten the exploration of our coal and petroleum, it is possible that on the condition of equality and mutual benefit , and in accordance with accepted practices of international trade such as deferred and installment payments , we may sign long-term contracts with foreign countries and fix several production sites where they will supply complete sets of modern equipment required by us, and we will pay for them with the coal and oil we produce .”

Japan’s Long-Term Trade
Agreement with China (1978)
• $10 billion modern complete plants & turnkey projects from Japan: line of credit
(deferred payment basis)
• Repay with $10 billion in exports of crude oil and coal

China’s Finance of African
Infrastructure: Past Examples
Tazara/ Tan-Zam Railway
(1976)
Kinkon & Tinkisso
Hydropower in Guinea
(1974)
Bouenza Hydropower in
Congo (1980)
Goma Hydropower in
Sierra Leone (1986)
Nouakchott Deep Sea Port
(1986)
Plaisance Airport Terminal
Mauritius (1983)
CAR Broadcasting Station
(1983)
Luapula Bridge Zambia
(1983)
Woretawoldya Highway
Ethiopia (1983)
Rebuilding Railway
Botswana (1986)
Hargeysa Water Supply
Somalia (1987)
Bardera Dam Somalia
(1987)
Nouakchott Water Supply
(1987)
Madagascar No. 35
Highway (1988)
Ouesso Water Supply
Congo (1990)

(2) From Aid to Economic
Cooperation: Building Business
China International Hydroelectric
Corporation feasibility study for Imboulou
(Republic of Congo) Hydroelectric Station
(1982)
2 nd Bamako Bridge (King Fahd Bridge), Mali, built by Chinese company … financed by
Saudi Arabia (1990-1992)

• West: aid (ODA) now de-linked from investment, trade
• China: a different model, mostly not aid/ODA
• Chinese government funds (“economic cooperation”) => investment, trade

(3) Chinese Overseas Finance:
Institutions & Instruments
( ODA /Non-ODA)
• MOFCOM Grants & Zero-Interest Loans
• Eximbank 1994
– Concessional rmb loans (ODA) 1995
– Export buyer’s credits 2000
– Preferential export buyers credits (not ODA)
– Export sellers credits => suppliers’ credits
– Guarantees
• Other Policy Loans (China Development Bank)
• Equity (China-Africa Development Fund)
• Commercial Banks (ICBC, China Constr. Bank)

China Eximbank Annual
Disbursements 2002-2009
(worldwide)
•
•

Commodity-linked
Infrastructure Credits: 4 Varieties
(A) Commodity-Backed line of credit for multiple projects (Angola, Eq. Guinea)
-- Deferred payment in commodities (oil)
-“Agency of restraint”

Resource-backed Infrastructure
Credits & Loans
• Widely misunderstood as ODA (official aid)
• Market-rate line of export buyer’s credit?
• Non-transparent
• Tied to Chinese goods & services
• “Request based”
• Secured by resources

Angola: 33 Projects for $1b
(2004-2007)
• Ag. Machinery & equipment $22m
• 4 Irrigation systems
$93m
• Luanda electricity system: $45m
• Water treatment system repair in 3 cities: $21m
• 5 agricultural training institutions
• 6 polytechnical colleges
• 5 secondary schools:
$26m
• Kifangondo-Caxito road: $211m
• 86 ambulances
• 6 provincial health centers
• Rehab. 7 regional hospitals …etc. etc.

(B) Commodity-Backed Single
Project Loan-Compensatory Trade
Agreement
-- Ghana Bui Dam package (cocoa)
-- Congo Imboulou Dam (oil)

(C) Commodity-Backed lines of credit combined with natural resource exploitation
• DRC: Gécamines JV
• Non-concessional

DRC Infrastructure & “Chinese corridor”
Source: Le Monde 2009

(4) Loan package to develop oil or mineral resource & related infrastructure
Sudan: 1996 concessional loan
Gabon? Mauritania?
So far, rather rare.

Table 1: Chinese Companies: Annual Turnover from Construction Projects in Africa, 1998-2008
25000
20000
15000
10000
5000
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: MOFCOM (courtesy of Jean-Claude Berthelemy)

Economic Cooperation Turnover,
Top 5 Countries
3500
3000
2500
2000
1500
1000
500
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Angola Nigeria Ethiopia Equatorial Guinea Sudan

• Lower embezzlement risks
• But high “kickback” risks with “requestbased” project finance
• Collusive bidding risks
• Independent consultant engineers & quality control
• Value for money?