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Egyptian President Abdal Fattah al-Sisi, shown here shaking hands with Chinese president Xi Jiping, visited China last year in the hope of securing investment deals.

On Eve of African Summit, Chinese Investment in the Continent Wanes

Dec. 2, 2015
A slew of deals are expected to be announced for power plants, infrastructure and agriculture projects, but analysts say Chinese largesse across Africa has already been reined in this year.

JOHANNESBURG, South Africa—Chinese President Xi Jinping arrived in South Africa on Wednesday ahead of a two-day summit with regional leaders as Africa seeks further massive investment despite the Asian giant's economic slowdown.

A slew of deals are expected to be announced for power plants, infrastructure and agriculture projects, but analysts say Chinese largesse across the continent has already been reined in this year.

China drove the commodity boom as it bought up oil, iron ore, uranium and copper around the world over the past decade, but its growth has dipped this year, triggering a sharp slump in prices.

Xi said in a statement that the summit, which starts on Friday, would be "a milestone in advancing China-Africa relations across the board."

"I look forward to. .. injecting fresh impetus into the future of China-Africa friendship and cooperation under the new conditions."

On Wednesday, Xi met with South African President Jacob Zuma in Pretoria before the sixth Forum on China-Africa Cooperation (FOCAC) opens in Johannesburg's financial district of Sandton.

Zuma hailed Xi's "historic visit" and said the two countries had signed deals worth $6.5 billion in sectors ranging from mining to tourism.

But Africa is already feeling the pinch, with Chinese investment falling by more than 40% in the first half of 2015, according to official data.

"The rhetoric will probably be very excitable, as usual. You have got to separate the rhetoric from reality," Ian Taylor, professor of international relations at the University of St Andrews, told AFP.

Exports Squeezed

Among many African countries hit by the Chinese slowdown, Zambia exemplifies the impact of falling commodity prices.

Its economy relies on exports of copper, which has fallen in price by 30% this year.

"We have to find other export products to China," said Commerce Minister Margaret Mwanakatwe, who will attend the summit.

"The price of copper going down has led to job losses in the mines and the kwacha (local currency) to depreciate [by 45%]."

Zambian President Edgar Lungu last week ordered no new road projects to be started to save on spending.

"China's packages towards Africa are going to be more diversified," said Yun Sun, China expert at the US-based Brookings Institution research organization.

"The Chinese always emphasize that its economic engagement in Africa is not altruistic.

"In some cases, Beijing is willing to put up with a loss, but I think Xi is going to be very careful. Their foreign reserves aren't unlimited."

Nigeria, the continent's largest economy, has been another major player in China's recent involvement in Africa.

At least 40 official development projects have been financed there by Beijing since 2004, including a $2.5 billion loan for rail, power and telecommunications projects.

The Chinese have also provided military aid and equipment, and are building a new terminal at Abuja airport.

"They're not going to let up on their very well-flagged goal of being on the front foot across the continent," said Ryan Wibberley, an emerging market equity dealer at Investec in Cape Town.

Ahead of FOCAC, China emphasized it had delivered more than $117 million of aid to affected areas during the Ebola crisis in West Africa, and also sent hundreds of medical workers to help.

Xi--accompanied by his wife Peng Liyuan--landed in South Africa after a brief visit to Zimbabwe, where Chinese projects have helped prop up an economy plunged into crisis under President Robert Mugabe's rule.

Copyright Agence France-Presse, 2015

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