The China-Africa story is certainly not new: trade flows and investments have been growing steadily for years. Trade volumes in 2011 were over $130bn and Standard Chartered estimates they will reach $1.7 trillion by 2030. What is new, however, is the scale of the growth and the growing direct involvement of Chinese banks. China is often stepping in where European institutions hit by the crisis are forced to retreat.
The Industrial and Commercial Bank of China (ICBC), the world’s biggest lender with a market capitalisation of over $200bn, has just opened its first representative office in Africa in Cape Town. The reason, says its chairman and executive director, is: “to send a message to people that our co-operation in Africa is getting deeper and deeper and we feel very clearly that between Africa andChinathe exchanges in trade are increasing every day.” Jiang Jianqing added that his goal is to increase Africa’s share of ICBC’s international trade finance from the current 5% to 20% in the next decade.
In 2008 ICBC, which employs nearly 400,000 people, paid $5.5bn for a 20% stake in Standard Bank, the continent’s largest, in order to exploit its extensive footprint in Africa. ICBC’s decision to open its own office now has therefore baffled some South African analysts, who speculate the relationship between the two banks may have deteriorated. The move is in stark contrast, for example, to Barclays’ decision to hand over responsibility for implementing its Africa strategy to Absa, the South African bank it controls. Last year Barclays moved its Africa division to Absa’s Johannesburg HQ and made Absa CEO Maria Ramos its Africa CEO.
Other Chinese banks are better at sharing. Bank of China, the most international of Chinese banks, for example, has had a branch in Johannesburg since 2000, like the China Construction Bank. In April last year it branched out into West Africa, but not on its own: it entered into an alliance with Ecobank Transnational, a pan-African bank with a presence in 32 African countries. The Ecobank China desk, which opened in Accrain Ghana, has an equal number of employees from Ecobank and Bank of China.
Western banks with an established presence in Africa are also fighting their corner. Over the years many banks have tried to exploit the opportunity to provide services to the growing number of Chinese companies investing in the continent. Standard Chartered, for example, uses its established presence and contacts in Asia to facilitate trade flows and drum- up business. “With our expertise in Africa, we provide Chinese companies with local knowledge and help them understand the opportunities and risks of investing in Africa,” says Stephen Priestley, regional head for Africa of StanChart’s Origination and Client Coverage group. “Our staff is our great asset. It would be very helpful for Chinese companies if their bank had staff who can speak Chinese. We have eight Mandarin speakers in Africa dedicated to working with Chinese companies, who understand sophisticated banking products.”