Chinese Steel, African Rails

Power shot of Li Keqiang and Angolan President
Jose Eduardo dos Santos  

One topic I've been over in some of my courses is China's foreign investment in Africa.  Though it can be problematic to lump all the countries in sub-Saharan Africa in one category, China clearly has high hopes for the continent as a whole.

Chinese Premier Li Keqiang's visit to Africa this past week was lauded by Chinese media outlets, though Western sources remain more skeptical.  Still, the visit underlined the importance of the region.  More and more high-level leaders have been visiting China in recent years, with Wen Jiabao and Hu Jintao having made several multi-country trips during their time in office.  Seniority means a lot in the PRC.

In the US, various ministry-level delegates would suffice to act as the president's proxy and could be somewhat autonomous in their negotiations.  But in China, the fact that Li Keqiang himself visited (as opposed to sending a representative from the Chinese Ministry of Commerce (MOFCOM)) means that the top leadership wants to make sure the deals get brokered correctly.  It also shows the world that China respects the continent enough to treat it as an equal.

The results of the trip?

A framework contract for a 13.1 billion dollar railway project in Nigeria by China Railway Construction Corporation.  For some reason this deal is getting much less attention than the 3.8 billion dollar railway upgrade in east Africa, perhaps because of the latter's potential to develop the area, link several countries, and connect with ports on the Indian Ocean.

Both projects will be built by Chinese companies and funded by Chinese money.  One major source is the China Exim Bank, which has allowed half of its lendings to go to Africa since 2011 (source).  China must believe that they will get a return on their investment.

China will likely be using Chinese materials for the construction of these projects.  It so happens that China has an overcapacity of steel, as well as cement, coal and solar panels, so these infrastructure deals may be clever ways to dump overstock into foreign projects.  As the old saying goes,  一石二鸟 (yi shi er niao) literally meaning two birds, one stone.

Li Keqiang and Nigerian President Goodluck Jonathan.
Is Mr. Jonathan comfortable with that embrace?

It's unclear that the infrastructure projects going on in Africa will allow local residents to get on the ladder of development.  It's also unclear that it won't.  What is certain is that China's investment in Africa will be scrutinized by the world.  China has come under heavy criticism from the international community due to their involvements in Africa, being branded as "neo-colonialists."  But  according to Ugandan President Yoweri Museveni, the Chinese "don't give lectures on how to run local governments and other issues I don't want to mention."

My opinion?  The international community should watch but keep quiet.  After all, what have Western nations been doing to help develop Africa?  Throwing money at the problem in the form of foreign aid may allow us to sleep better at night.  But China actually has the wherewithal to do on-the-ground work in the dark continent.  I say kudos.

Ethiopian Prime Minister Hailmariam Desalegn 
and Li Keqiang, working on the railroad

Li Keqiang and Kenyan President
Uhuru Kenyatta

First Lady's Visit

Personally I'm waiting for President Obama's visit to Asia next month, the one which was postponed due to a government shutdown in the US, but since the First Lady is here we might as well do some analysis.  She met with Zhu Shanlu, who is the head of the CCP for Beijing's Peking University.  There is a thread of communist party leaders that run throughout institutions in China.  The party secretary of a city or district often has more power than the local leadership.  It would be as if a representative of the Democratic party for Kansas City has just as much pull as the mayor.  Even at a university, the party representative is the one who gets to hand over the Chinese history book- not the dean.

Real Estate Investment

Buy some property, get a passport.  For Bulgaria.  Or Portugal.  That was the vibe at the Shanghai Real Estate Expo in March, 2014.  Lots of people were inquiring about how much was needed to invest to get citizenship status abroad.  Lots of parents are interested in sending their children abroad.  One company told me that 500,000 USD gets you a lifetime passport in St. Kitts, plus a pretty nice apartment.  That grants you visa-free access to lots of other countries where you can send your children to school, as well as a nice life in a tax haven.  Meanwhile, a nearby booth was offering houses in Detroit for less than 50,000 USD.  Both had lots of visitors.  They'll offer you a free ticket so you can go check out the house you bought, but the U.S. won't hand out passports for residential investment.  Now if you invest in a hospital or school, that's a different story.

Tencent takes share of JD.com

I’ve seen JD.com advertised on the Shanghai metro in places like this.  The ad, which is illuminated by backlighting is actually placed on the opposite side of the platform, so that it is partially hidden when the train comes along.  STDecaux (not sure about that name choice but it’s totally global and sounds pretty French) won a contract to supply Shanghai Metro with their advertising, and though I can hardly remember the brands they advertise (unless they’re floating in my subconscious, in which case kudos to you, STDecaux) I always notice the STDecaux symbol just because the ads are so creative and breathe a very welcome life into an otherwise typical metro station. 

Anyway, one of my favorite Chinese companies, Tencent, just bought a stake in JD.com.  JD.com always has the wacky ads with Chinese girls in pajamas bitching at their husbands about some financial isssues.

The ad says: 骗女生后果很严重! = There are serious consequences to lying to your lady!

So now Tencent has:

• 1.      Online retailing through JD.com.  This could make them a major competitor to Taobao, the more everyday-Joe arm of Alibaba.  Like Amazon, but you can do everything on Taobao: buy things and have them delivered to your door and negotiate with the vendor on pricing through those cute little chat windows, pay bills, book a taxi or train ticket, find a job, meet friends, get married probably,  etc.  I have no experience with JD.com.  One beef with Taobao is that every time you click something you have a new tab, so you quickly lose track of where you were.  Another beef is that they're not too friendly to foreigners.  Perhaps JD.com can be competitive there.  
• 2.      Social media and  instant messaging through Wechat, which is awesome and makes my social life possible.
• 3.      Still more messaging and email service through QQ, which, like, everyone and their mom’s got in China. Also they're acquiring large parts of gaming companies like Riot Games and Epic Games, putting their product in the hands of millions of bored metro passengers.

I like this quote from WSJ, with the speaker referring to Alibaba, Baidu and Tencent:

"The three Internet kingdoms are battling it out to decide who's going to be the king of the Internet space." 


Second favorite Chinese company:  Xiaomi.  Little Rice, or something.  More on them later.  

Overkill

A friend pointed this advertisement out to me in Guangxi province.  How do you even eat that?  Structurally, is it safe?  How can the sausages be stabilized?  It seems to be only available in the Chinese market.  The "Bu chi su” 不吃素 written below means "don't be a vegetarian."  Damn good advertising.