Jiang Jianqing

.”Amongst the crowds at the World Economic Forum in Cape Town’s CTICC, it is only the trail of young assistants, fighting through the throng to keep up, that mark Jiang Jianqing out as a dignitary. Looking every inch the civil servant, Mr Jiang is in fact one of the main attractions, a co-chair of the conference and chairman of the world’s largest lender by market value, the Industrial and Commercial Bank of China. ICBC made waves last year by taking a 20 percent stake in Standard Bank, becoming the largest shareholder in Africa’s biggest indigenous bank by assets. The $5.6bn cash deal was both the largest foreign acquisition by a Chinese bank and the largest single foreign investment into an African company. Since then, the two banks have cooperated in 60 deals on the continent, among them the recent $825m co-financing agreement for a power station project in Botswana. The Standard Bank investment – and its unprecedented scale – were indicative of the focus that Beijing has, for the past decade, been putting on bilateral relations between China and Africa. China is now the continent’s second largest trading partner, with trade between the two increasing at around 38 percent a year on average since the turn of the century. The target of $100bn in bilateral trade volume by 2010, set by Beijing at the China-Africa summit in 2006, has already been surpassed, Mr Jiang explains, so it is natural to assume that soon China will top the list. The Botswana project demonstrates ICBC’s continued interest in infrastructure, and Mr Jiang says that he still believes there is upside in a sector that has seen cooling interest from Western institutions. “Before the crisis, major large scale projects of infrastructure building were financed by institutions from Western Europe or the United States. So because of the credit crunch, many Western financial institutions are leaving Africa because of a shortage of available funds, so they stopped financing infrastructure in Africa,” he says. “What we have been doing here, and other Chinese banks have been doing here, is a natural choice, and it’s a choice made on a commercial basis.” That the bank feels obliged to explain its commercial motivation is significant. For many, Chinese interest in Africa can be characterised as one-dimensional: China, the state actor, finances infrastructure to facilitate the smooth flow of commodities back to the factories of Shenzhen. This portrayal, fair or otherwise, is persistent. However, over the past few years of Chinese investment, both the manner and type of investor have changed, Mr Jiang says. Resources are a major part, but not the only one. “Chinese companies are investing in a broader range of sectors in Africa, for example in manufacturing industries and services, and also in financial institutions, such as ICBC did,” he says. “The scale of Chinese corporations investing in Africa is also quite different from the early stages. If in the early stage only big state-owned companies were doing business, today what we see is that Chinese private companies, and small and medium-sized enterprises also joined the army of Chinese investment institutions here.” Agriculture is likely to be a major focus for the bank in coming years, Mr Jiang says, and he acknowledges that there is a potential for this too to become controversial. “Agriculture has a very strong and sustainable growth prospect. This is a sector which will be affected by the crisis. As far as I know, Africa’s arable land occupies 13 percent of the total land of the world, however, less than 2 percent of the 13 percent of the arable land has been utilised at this moment,” he says. To achieve tangible growth, however, requires a lot of capital and operational skills. In capital terms, ICBC certainly has an advantage over its Western competitors. The focus, however, is likely to be on whether it is only the profits, and not the produce, that will be returned to China. A number of recent deals for farmland in Africa, financed by state-backed enterprises from Asia and the Middle East, have renewed accusations that the continent is once again facing a “neo-colonial” land grab, and that rather than being an investment in food security, mass agriculture could end up being simply another extractive industry, with few or no fringe benefits for local populations. Just as the commodity boom of 2008 was largely fuelled by real demand in China, the food price hikes that went alongside it were partly based on an understanding that China’s growing – and consuming – population would require more grain and more grain-fed protein. The country remains a huge importer of grains, soybeans and edible oils. Separating the commercial perspective from the food security one is difficult, but Mr Jiang seems used to handling accusations of neo-colonialism. “500 years ago, a big Chinese fleet of 200 ships had arrived in Africa, led by the famous explorer Cheng Ho,” he says with a smile. “However, that trip was only for the purpose of friendship, rather than colonisation. China has shared the same experience with Africa. We are also a country that has many experiences of being colonised. From this perspective, I believe that China’s support to Africa, and our investment in Africa, are very sincere and very honest, and quite long-term oriented. “In today’s world, China is from time to time still being prejudiced against, or is still being blamed unfairly, or has received some inaccurate criticism. That’s why I think Chinese companies in Africa should do everything to honour their responsibilities. By responsibilities I refer to two aspects. One is that as a commercial institution, they should seek reasonable commercial returns. The second aspect is that at the same time they should all become good corporate citizens,” he explains, adding a small barb to his answer: “If we can do that, we can totally disregard those unfair or inaccurate accusations from outsiders, particularly those from people who are living in a country which has once been a coloniser.” What is undeniable is that the economy that spurred ICBC to prominence has itself suffered from the ongoing global downturn. GDP growth has accelerated every year in China since 2002, and 2007’s 13 percent was the highest since 1994. 2008 saw the first signs that growth would be curtailed, falling to 9 percent, according to IMF statistics. 2009 is forecast to be lower still, dropping to 6.5 percent, with a slight recovery in 2010. While this is still significantly in advance of the ailing Western economies, it is not the runaway growth which formerly underpinned the country’s interests in natural resources. Global demand for China’s goods has fallen by 20 percent in 2009, which has been reflected in the current price regime for commodities. The world that propelled China into Africa no longer exists. “No institution can escape being hurt by this crisis,” Mr Jiang admits. “Chinese financial institutions and corporations have also been affected.” However, he believes, the $600bn stimulus package launched in January, which is aimed at stimulating local consumption, has begun to have some effect. “This has, to some extent, offset the weakening of external demand and the harm to the Chinese economy. “This has also been reflected in the situations of our clients are facing. Before the government package was launched, our clients in the export sector had been affected to the greatest extent, and also our clients in the sector of raw materials, in steel and cement, had also been affected significantly. After the government measures had been put in place, our clients were able to turn around very quickly.” It is perhaps too early to see evidence of a turnaround, but some analysts are already suggesting that China will recover strongly, ahead of Western markets, on the back of this demand. Key commodities are already seeing their prices drift back upwards on the back of stockpiling and improving demand, and oil, too, is heading north. Regardless, Mr Jiang says that he sees in this global downturn an opportunity to rethink the old supply-demand relationships on which China’s companies depend. “This year, the crisis also requires Chinese companies to adapt their models and business structures,” he says. “The world is so big and the world market’s demand is still big for Chinese products and services. We find that for example, Africa has a large demand for Chinese products and services.” As well as transport infrastructure, telecoms equipment could be a massive opportunity, he says. He also admits to being struck by an observation made on stage at the WEF by Ngozi Okonjo-Iweala, managing director at the World Bank and a former finance minister of Nigeria. Ms Okonjo-Iweala suggested that as China’s economy moves from being a factory servicing global demand and rises up the value chain, Chinese companies could benefit from moving their manufacturing capability to Africa. “I believe what she proposes is very good advice,” Mr Jiang says. “For example, you could move some light industries, textiles, clothing and industries that deal in the consumption sectors to Africa, so as to benefit from the low costs.” Taking this opportunity could lead to a hastened integration between African economies and China, with each taking an increasing share of each other’s trade. However, there are still cultural barriers to cross. “Chinese companies can speed up the integration with African economies,” he says. “However, we must face the reality that, while some companies have already become pioneers, there are many Chinese companies that are lacking knowledge about this place. That is why ICBC came here. We would like to provide the link between the two markets. “This investment is not a one-way street. It’s a two-way road. Chinese companies can invest in Africa, and vice versa,” Mr Jiang adds. “There are many companies in Africa that have good technologies and good skills and management.” He is keen to give an example. “Recently, ICBC and Standard Bank were working together to follow a project which sent Sasol, from South Africa – the expert in transforming oil into gas – to China, because in China now we need cleaner energy, and Sasol’s technology can bring the very necessary things we require. So we’re doing this $1bn investment project in China. Natural resources companies are just a very small portion of what African companies can bring in terms of their technology and capabilities to China.” As for ICBC itself, Mr Jiang says that it has no specific expansion plans on the continent, regardless of the distressed opportunities available. “At this moment, the main way for ICBC to do business in Africa is through our partnership with Standard Bank. So, we don’t have at this moment any plans to extend ourselves in Africa,” he says. However, he recognises that, while the bilateral relationships between Africa and China and Standard Bank and ICBC are likely to dominate discussions, neither bank is simply a regional one. ICBC has previously said that its acquisition strategy will be broadly across emerging markets, and Standard Bank has international operations along the same lines. Its Russian operations were recently bolstered by its investment into Troika Dialog, the Moscow-based bank. By chance or by judgement, ICBC could be participating in a far broader South-South integration. “You know, when we were making the investment into Standard Bank, we didn’t actually think as far [ahead] as that,” Mr Jiang says with a smile, before giving a civil servant’s answer. “And both sides are quite happy with this partnership. Although it is not a long partnership, we are both, together, getting excited every day by finding continuously more opportunities to work together.” When pressed as to where those opportunities may be, he says: “Across Africa, as well as in other parts of the world.”