John Garnaut
April 27, 2009

China is wise to Africa’s divide-and-rule tactics, writes John Garnaut in Beijing.

China has underscored its power in the developing world by revealing it was offered a huge African iron ore deposit seized from Rio Tinto but declined to accept out of “sensitivity” to international repercussions.

The late dictator Lansana Conte’s offering to Chinese companies including Chinalco has implications for the Australia-China relationship, particularly in the Pacific, and Chinalco’s $US19.5 billion ($27 billion) investment bid in Rio Tinto, which Canberra will soon have to block or approve.

Rio had sunk $US400 million into Guinea’s Simandou iron ore tenement and had planned to invest another $US10 billion to make it the largest iron ore mine outside Australia and Brazil.

At the same time, the Chinese Government built a 50,000-person sports stadium, a national assembly building and other landmarks in the Guinean capital, Conakry, and provided services including training for the army’s special forces.

Guinea is one of the world’s poorest and most ill-governed nations, with annual per capita income of just $US442 and ranking number 173 of 180 countries on Transparency International’s corruption perception index.

Wang Wenfu, who leads Chinalco’s overseas acquisition team, including its pursuit of 18 per cent of Rio, told the Herald that the Guinean Government last year offered to hand Rio’s iron ore tenement to Chinese state-owned companies in exchange for railways, roads, ports and hydro-electricity projects.

“The Guinea Government was trying everyone in China including Chinalco,” he said.

Ultimately, some time after the August Olympics attended by the late Mr Conte, Beijing declined.

“The Chinese Government encourages Chinese companies to go to Africa but they are also sensitive to the international results,” Mr Wang said. “Chinalco said no - it wouldn’t have been professional.”

The episode also shows how China is pulling back from a previously gung-ho attitude to investing in unstable developing nations. “China is getting better aware of the practices of African governments to divide and rule among Chinese companies and foreign powers,” said Zha Daojiong, professor of international relations at Peking University.

But China’s decision to knock back the multibillion-dollar iron ore-for-infrastructure deal has not yet helped Rio Tinto.

Late last year, Mr Conte handed the northern half of Rio’s Simandou tenement to BSG Resources Mining & Metals, controlled by a controversial Israeli diamond-mining billionaire, Benny Steinmetz.

“They will see us in court,” said Sam Walsh, head of Rio’s iron ore division.

One version of events is that Guinean politicians were said to have ended Rio’s tenement at Simandou because they were unhappy that Rio wanted to connect the proposed mine directly to an existing port in Liberia rather than build a railway to a new port on the Guinean coast. “For them, it’s if you invest in our infrastructure we’ll pay you back with mining resources,” Mr Wang said.

In another version, Rio was also considering the indirect railway-and-port option and lost its grip on Simandou only when some Beijing leaders systematically courted Mr Conte and undermined the Anglo-American miner after the China-Africa Co-operation summit in Beijing in November 2006.

China’s ambassador to Guinea, Huo Zhengde, promised in 2007 to “spare no effort” in assisting the country because the two nations were “good brothers and good friends”.

Chinalco’s Mr Wang said African countries wanted to work with the Chinese Government because of its long history of support, including scholarships for thousands of African students who are now rising to senior posts, and because of its unrivalled record in building fast and cheap quality infrastructure.

He said it showed how China’s influence in Africa could prove useful for Rio and Australia.

“It’s an example of how Chinalco could enhance the position of Rio Tinto,” Mr Wang said. “This sort of thing is happening wherever you go in Africa.”

Mr Wang said China might not be so accommodating of Australia’s international interests if the Government did not approve Chinalco’s investment in Rio. State-owned companies such as Chinalco tend to compete vigorously with each other and make their own investment decisions, while also being swayed by privileges given to companies and executives who fulfil government objectives.

Mr Walsh said Rio had talked with Chinalco - which has bauxite exploration activities in Guinea - about running Simandou as a joint venture. But the discussions were superseded by more comprehensive investment talks after BHP Billiton dropped its hostile takeover bid for Rio in November.

Rio has said it plans to mine more than 70 million tonnes of iron ore a year in Simandou and possibly as much as 170 million, which would make it one of the largest iron ore mines in the world.

On December 27 Moussa Dadis Camara announced that Mr Conte had died and that he had seized power and dissolved the constitution and what remained of the institutions of government.

Mr Walsh said the new dictator had not overturned his predecessor’s decision to deprive Rio of its tenement rights.

“We’re now in a hiatus,” Mr Walsh said. “But we are confident we retain legal rights to the full Simandou tenement.”

Mr Walsh said Rio had been pulling back its work in the southern half of the tenement, where the company has focused on infrastructure, exploratory drilling and other development, until clarity was restored.

Mr Walsh acknowledged recent erratic behaviour by Captain Camara towards global mining companies but said the new military leader provided some cause for optimism because he was “pro-development and clearly working actively to remove corruption and bribery.”

Four former mining ministers have been investigated for corruption since Captain Camara took power.

Analysts say China’s calculus of risk and reward in Africa is changing. The investment rewards have crashed with commodities prices and some African governments have reneged on Chinese investment deals.

“Like all newcomers with deep pockets, they run the risk of being exploited or expropriated,” said Susan Shirk, a leading China official during the Clinton administration and now director of the University of California’s Institute on Global Conflict and Co-operation.

“China’s investments in Africa and Latin America may give it a new appreciation of the value of solid governmental and legal institutions,” she said.

Kidnappings and murders of their employees in Africa have raised the stakes for Chinese companies operating in conflict zones that Western miners would not touch.

Professor Zha said China has reached a turning point in Africa, out of self-interest. He pointed to the conflict-ridden mess of Chinese oil investments in Angola and Sudan with Angola - China’s single largest oil supplier - so problematic that “it’s just not worth it”.

“It’s not because China wants to be nice to other international governments … but because China is learning that African governments are pretty good at milking the cow.”

(business.smh.com.au)

CHINA UnionPay’s automatic teller machine (ATM) network has expanded to 61 countries and regions after it recently started service in nine Middle East and African countries, the company said yesterday.

The nine countries are the United Arab Emirates, Lebanon, Syria, Afghanistan, Iraq, Yemen, Jordan, Djibout and the Republic of Congo.

The economic and trade relations between China and the nine countries have become closer in recent years, with a total bilateral trade volume of US$22 billion in 2008. Some 250,000 Chinese visited those countries for work and travel.

“It not only marks an important step in expanding our business in the Middle East, West Asia and Africa, but also a crucial move for our global reach,” said Xu Luode, president of the company.

Xu said the company would continue to beef up international cooperation and provide both Chinese and foreign customers with efficient and safe bank card service.

(shanghaidaily.com)

By Wei Jing

WASHINGTON, (Xinhua) — The World Bank said Friday it welcomes China’s investment in Africa, where capital and liquidity are in great demand as a result of the global financial crisis.

With China’s capital surplus, how China spends this money — either to reinvest in the economy or invest for added value — will be the subject of great interest in the international community, James Adams, the bank’s vice president of the East Asia and Pacific region, told Xinhua in an interview on the eve of the bank’s spring meeting.

Although due to Africa’s low savings rate both in governments and households, China will be a natural capital investor in Africa, Adams said there are “always special issues and sensitivities about resources.”

He said some media reports on China’s investment activities in Africa are misleading and inaccurate.

An article published by the Washington Post on Thursday, titled “China uses global crisis to assert its influence,” tracked China’s recent loans to and investments in foreign countries. The story was picked up by some websites such as that of the American Iron and Steel Institute, an advocate for U.S. steel industry.

Adams said such an issue was not new. He noted that when the United States had large fiscal surpluses after the World War II and invested in Europe and subsequently in Asia, there were similar “sensitivities” about the U.S. investments.

The best way to quiet down such concerns is that China strives to be a good corporate citizen, be considerate of the countries it invests in, and uphold high standards in development projects, he added.

“People would say there is almost the implication that China was going to take over all the industries in Africa. It wasn’t true,” Adams said.

“We felt the obligation to get some of the facts out. From the bank’s perspective, Chinese investment in Africa is very welcome,” he added.

China’s experience in fiscal discipline, a balance in integration into the international economy and strong oversight in the country’s financial sector are “important lessons to other countries,” Adams said.

He said he believes African officials can draw much from China’s growth experience and apply it to their own countries.

NIAMEY,  (Reuters) - China has granted Niger a $95 million preferential loan to boost a uranium mining project the two countries have in the West African state, Niger’s government said late on Thursday.

Niger’s government is a 33 percent joint venture partner with the China National Uranium Corporation (SINO-U) in the SOMINA uranium mining operation, due to come on line by 2010, with an annual output of about 700 tonnes.

The entry into Niger of Chinese miners and Cameco Corp (CCO.TO), the world’s top uranium producer that now has a stake in GoviEx, a company with local exploration rights, follows years of dominance by French nuclear group Areva (CEPFi.PA).

“China has agreed to the Export-Import Bank of China granting Niger a preferential loan of 650 million yuan ($95.22 million) with a view to supporting the SOMINA uranium exploration project,” Niger’s government said in a statement broadcast on state television late on Thursday.

Niger will have to pay 2 percent interest on the loan, which must be paid back within 15 years, a government source said.

China has committed to investing some $300 million in the project, which is at Azelik, in the northern Agadez region, where Areva has mining projects but the Niger government has also been battling a two-year uprising by Tuareg rebels.

Niger already has two significant uranium mines providing 7.5 percent of global output from Africa’s highest-grade uranium ores, according to the World Nuclear Association website.

Earlier this year, Areva said it had won a licence to operate the Imouraren mine, which would more than double Niger’s uranium output to make it the second largest producer in the world. ($1=6.826 Yuan) (Reporting by Abdoulaye Massalatchi; Writing by David Lewis; Editing by James Jukwey)

China to finance Angola’s housing, agriculture projects

Angolan Prime Minister Antonio Paulo Kassoma and the Chinese ambassador in Luanda on Wednesday discussed China’s financial aid to Angola’s housing and agricultural projects.

After talks, Chinese Ambassador Zhang Bolun told reporters tha tthe two sides analyzed the implementation of the two projects. The amount of funding will be decided after both sides examine the final feasibility study, he said.

Zhang said China is also interested in cooperating with Angola in the construction of seaports, airports, bridges, telecommunication and agriculture projects.

Angolan Minister of Urbanization and Environment Jose Ferreira and the prime minister’s economic advisor Antonio Furtado were among officials attended the meeting.

Kassoma is the coordinator of the newly-established National Commission for Urbanization and Housing.

Last week, the Angolan government held the First National Conference on Housing in the capital Luanda. Angolan President Jose Eduardo dos Santos promised at the meeting that the government will create all necessary conditions to improve the people’s living standards and well-being.

Since the 27-year civil war ended in Angola seven years ago, the Angolan government has made increasing efforts to revive the national economy and carried out a nationwide economic reconstruction program. Recently, the government pledged to build one million houses for its 14 million population.

2009-04-22 14:54:33 GMT2009-04-22 22:54:33 (Beijing Time)  Xinhua English

(english.siamdailynews.com)

Macau, China, - Angolan driver, Luís Sá Silva at the wheel of a Renault Tatuus 2000 is due to take part in the second race of the Formula Renault 2.0 Northern European Cup on the 24, 25 and 26 April in Hockenheim, Germany.

Luís Sá Silva, who is a Macau resident, is taking part in the Formula Renault 2.0 Northern European Championship, which will run until October on the racetracks of Zandvoort and Assen (the Netehrlands), Alastaro (Finland), Oschersleben, Nurburgring and Hockenheim, (Germany), Most (Czech Republic) and Spa Francorchamps (Belgium) as part of German team Krenek Motorsport.

The Angolan driver, who is sponsored by China Sonangol and China Investment Fund, raced at the beginning of the month at Zandvoort in the Netherlands, but failed to finish the races, once due to running off the track and again due to a crash that forced him to give up.

Over 30 drivers are taking part in the Formula Renault 2.0 Northern European Championship including Brazil’s Luís Derani and Portugal’s Félix da Costa.

Luís Sá Silva, who is18 years old, will also race in the Asian Formula Renault Championship (AFR), as occurred in 2008, with races in Shanghai, Beijing, Chengdu and Guangdong that will run until next November, according to a report from news agency MacauNews.

In 2008 the Angolan driver took part in 14 races of the Asian Formula Renault (AFR) Championship in Malaysia, Shanghai and Zhuhai and placed fourth amongst the 30 competing drivers.

As well as taking part in the Formula Renault 2.0 Northern European Championship Luís Sá Silva will also be part of German team Motopark Academy in the Portuguese Winter Championship due to take place in November and December on the Estoril and Portimao racetracks. (macauhub)

Johannesburg — A NUMBER of obscure Chinese vehicle brands have popped up in SA in recent years, with some of them already consigned to the history books. One little known brand that has been around for more than a year is CMC, which is imported and marketed by CCE Motor Holdings, based in Westwood, near Boksburg.

Its slogan is an ambitious “Driving innovation excellence”.

The operation is a 100% BEE company, with a management team that has more than 50 years’ motor retail experience. It has invested more than R200m in bringing a range of Chinese vehicles to the South African market to add to its other diversified business interests including electronics, real estate and construction .

Initially the company started out in the local motor business with the introduction of a range of one-ton pick-ups — the Tigo single cab and well-specified Cyrus double cab — as well as a bakkie-based SUV, the Sahra, and one of the Toyota Hi-Ace minibus taxi clones, known as the Amandla 2.2i. All these models are sourced from the Changfeng company, in which Mitsubishi has a 50% stake.

The bakkies and SUV have a choice of two or four-wheel drive and either petrol (a fuel-injected 2.2l ) or diesel (2.8l Isuzu) power plants. The minibus uses the 2.2l petrol engine and buyers of the similarly styled, upcoming Vista panel van version will have the choice of a popular Chinese- designed 2.6l turbo diesel as an alternative to the petrol engine.

These are being sold and serviced by a network of more than 40 independent dealers (most of them in the used car trade) and the after-sales experience is backed up by a stock-holding of replacement and service parts valued at R50m in a 10000m’ warehouse in Westwood. Parts availability is claimed to be 95%.

The LCV range will be extended in the second half of the year to include three CMC Volland medium trucks — two-, four- and six-ton — fitted with Isuzu, Iveco and Cummins engines respectively, as well as Cummins-powered Yutong commuter buses and luxury coaches with seating capacities from 22 to 65 people. Yutong is one of the largest bus manufacturers in Asia, with a 22% share of the Chinese domestic market in 2007. All these upcoming models have been tested in China and homologated by the SABS .

The pick-ups are covered by a three -year/90000km warranty, which will also apply to the trucks when they are introduced later, while the buses are covered by a two-year/400000km warranty. All the warranties are administered by SA Warranties.

The company’s chief purchasing officer, Imran Moola, who operates out of the head office in the Boksburg area, says he knows the company has entered the South African market at a difficult time, but he is confident it has the resources to weather the dramatic slowdown in vehicle sales until the upturn occurs.

“We have a conservative business plan, together with strict controls on cash flow, so believe we are well positioned to ensure our own and our dealers’ viability in these tough times,” explained Moola. ” We believe being able to pull through this period of slow sales will strengthen ourselves and our dealers in the long term.”

(allafrica.com)

The Vice President, Dr. Goodluck Ebele Jonathan has described ties between Nigeria and China as a long history of warm and cordial relationship with strategic benefits for both countries economically and politically.
Speaking at a dinner he hosted in honour of a Chinese delegation led by the country’s Minister for Religious Affairs, Mr. Ye Xioaowen, at the Presidential Villa, Dr. Jonathan said China is a major factor in global politics and economy, emphasizing that after the G20, there is the G2, comprising US and China as major players.
The VP however advised China not to make the same mistake older economies made by not carrying developing countries along, considering that Nigeria was also a strong player in world politics.
His words: “There is no doubt that China is a major factor in global politics and economy. China should however not make the same mistake of the older economies who came to Third world countries and felt they should remain where they were. Irrespective of what Nigeria is going through, Nigeria remains a major economy in Africa and in the world”, Jonathan stated.
He noted that Nigeria and China are friends and strategic partners politically and economically, adding that “the world cannot move forward without Africa .”
Speaking also at the meeting, the Primate of All Nigeria, Anglican Communion, Rt. Rev. Peter Akinola, said Nigeria has a lot to learn from her partnership with China , reputable for a developmental history spanning five thousand years. He described China as a secular state, since it recognizes about five religious groups and none of these groups had risen up against one another.
Xioaowen, who was accompanied by the Chinese Ambassador to Nigeria , Amb. Zu Jianguo, appreciated the VP and the Federal Government for hosting them. He said that China and Nigeria are important countries in the world, noting that the relationship between the two countries have contributed and would continue to contribute to their strength and wellbeing.

(triumphnewspapers.com)

By Sulaimon Salau

THE federal government has frowned at illegal trans-shipment of nuclear materials in and out of the country, just as it unveiled plans to checkmate the menace by installing radiation monitoring facilities across national boarders.

The Presidential Adviser on Petroleum Matters, Emmanuel Egbogah, who disclosed this at the official commissioning of the first Radiation Portal Monitor in Nigeria, at the export wing of Muritala Mohammed International Airport, Lagos, over the weekend, said, although Nigeria has a nascent nuclear power programme, it has a matured, robust and rapidly growing peaceful nuclear non-power application.

Egbogah however noted the federal government would no longer tolerate illegal and mishandle of radioactive materials in the country, as serious sanctions await defaulters.

He lamented that the petroleum industry, being the largest user of radioactive sources in the country has engaged in importation of the materials into Nigeria for over 50 year without any form of regulatory control, until recently. He warned that when the imported materials are declared no longer useful for the designed purposes, the importer must ensure that it is immediately exported to the countries of origin.

Citing the case of Halliburton Nigeria Limited in May 2003, AES Nigeria Limited and Greenik Maritime Nigeria Limited (December 2004), which repackaged radioactive sources and declared it as mould for export, only to be discovered in Germany. Egbogah said these companies were eventually arrested and convicted by the federal high court in Abuja.

These lapses, he said are traceable to inadequate radiation detection capability at the port and the inadequate training of the officials and both the sea and air ports.

“So what we are doing is to make sure that these materials are used in compliance with the rules and regulations. We have also shown the case of SGF and Western Atlas whom have acted unduly. It is a pity that we don’t have protective facilities against such extremely dangerous materials. When we allow our people to work with these materials without adequate knowledge about the safety precautions and its implications, they would die ignorantly. You will realize that what we are doing is critically important to safety of life, which is in line with the seven point agenda of our government. So what we are doing is to make sure that we realize this level of protection and security for our people.” He explained.

Egbogah stressed that the commissioning of the Radiation Portal Monitor improve the situation, as the international communities, particularly the airlines would start to air freight some radioactive sources from Nigeria to Europe and North America legally.

Besides, the presidential adviser said provisions have been made in the 2009 budget to secure adequate fund to enable the government install more of the facility in the country, both import and export. “The money is their and we have start the spending today, part of it is spent on this facility.” He said.

This would go a long way towards the first nuclear power plant in the country.

The monitor, which was provided by the Nigerian Nuclear Regulatory Authority (NNRA) and the International Atomic Energy Agency (IAEA), was aimed at detecting radioactive sources at the airport cargo shed of the Nigeria Aviation Handling Company (NAHCO), which handles about 80 per cent of all radioactive cargo moving in and out of Nigeria.

The agencies hinted that plans are in the pipeline to extend the project to other ports such as Tin Can Island and Apapa ports.

Commenting on the development, the Director General of the Nigerian Nuclear Regulatory Authority (NNRA), Professor Shamsudeen Elegba said as part of its campaign to instill the culture of nuclear safety in the operators, NNRA organized a technical meeting for the stakeholders at the airport recently.

The objective of the meeting, he said was to develop strategies to stop the on-going practice of trans-shipment of radioactive sources exported from Nigeria to Europe and North America.

“Today’s activity will go a long way to improving verification of manifested consignment and detection of undeclared radioactive sources or nuclear materials in such consignment. The NNRA on its part will also continue its strategic partnership with the various security organizations in the areas of training and information sharing.” He said.

Industries which use radioactive materials include the petroleum industry, mining, manufacturing construction, agriculture and water resources, health and educational sectors. The products are imported from the G8 and other countries such as China, South Korea and South Africa.

(ngrguardiannews.com)

By Bei Hu

(Bloomberg) — China-Africa Development Fund will seek larger investments on the continent as it becomes more comfortable with the local environment, said Mark Fung, general counsel of the state-backed company.

The fund’s investments currently range from $5 million to $25 million, Fung said at the GaimAsia 2009 hedge fund conference in Hong Kong today.

They are also so-called passive investments because the fund doesn’t have the resources and expertise to more actively take part in the management of the projects it puts money in, he said. The fund usually seeks eight- to 10-year-long investments. It’s prohibited from taking majority stakes, Fung added.

“We want to be less passive and more active,” he added.

The state-backed fund was set up in June 2007 with an initial $1 billion from China Development Bank Corp. It is expected to grow to $5 billion, according to a statement issued through PR Newswire last month.

The fund has facilitated almost $400 million in Africa, including a cotton planting and processing facility in Malawi, a power station in Ghana, a glass factory in Ethiopia, and trade zones in Egypt and Nigeria.

Critics say China’s push into Africa for oil and raw materials to feed its growing economy disregards environmental laws, labor standards and human rights in some cases.

Fung said the fund was among the first among Chinese funds to insist on an environmental assessment of the projects it invests in.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net.

(bloomberg.com)

Visiting Chinese Foreign Minister Yang Jiechi and his Egyptian counterpart Ahmed Abul Gheit held talks Tuesday, during which they agreed to strengthen cooperation between the two countries.

Yang said Egypt is an important partner of China among developing countries, and the bilateral relations have stepped into a new phase after establishing ties of strategic cooperation 10 years ago. China cherishes its relations with Egypt and is willing to expand the cooperation in various areas.

China and Egypt should keep contacts at all levels and prepare for the 4th ministerial meeting of the China-Africa Cooperation Forum, which will be held in Egypt this year, he said.

As for the Mideast peace process, Yang said that all parties concerned should push forward the process under the framework of peace negotiations, and should take measures to accumulate mutual trust and inject momentum and hopes into the talks.

China supports the two-state solution which is the only way out for the Palestinian-Israeli conflict, Yang said, adding that the international community should focus on the issue and support the Palestinian unity and economic development.

For his part, Abul Gheit said that Egypt and China have witnessed substantial achievements in their strategic ties and the bilateral cooperation in various domains are carried out smoothly.

The 4th ministerial meeting of the China-Africa Cooperation Forum will not only boost Egypt-China ties, but also pave the way for the Africa-China cooperation in the future, Abul Gheit said.

He also reiterated Egypt’s adherence to the one-China policy and its position of recognizing Tibet as an inalienable part of China.

Source:Xinhua

SHANGHAI (AP) — From the glossy black Geely Excellence “business limousine” to Great Wall’s tiny Gwperi subcompact, China’s own automakers are proving they have the prowess to put together practically any type of vehicle imaginable.

But they have yet to demonstrate they have mastered the expertise to design, make and sell world-class cars in markets outside the developing world, those working in the industry say.

Nearby was Geely Automobile Holding’s egg-shaped ig (intelligent geely) concept model, a three-plus-one seater that is meant to be solar-powered and cost 10,000 yuan ($1,300), not including the engine.

There is no questioning the aspirations of these up-and-coming automakers.

“Grand Hwatai in Great China” declared a slogan at Hwatai’s big booth, where all five vehicles were big Santa Fe model SUVs.

“It’s obvious we have a price advantage which will help our automakers to export our homemade vehicles to the global market,” Zhang Xiaoyu, vice chairman of the China Machinery Industry Federation, told a conference on the sidelines of the auto show.

“That’s why I’m not worried at all. We will get stronger,” he said.

On the way to marketing, though, some things get lost in translation.

Many of the domestic makers confine themselves to cryptic alphanumeric model names, like the popular Chery A3 and QQ, and battery-making BYD Auto’s new hit sedan, the F3.

But with many of the most evocative names — Mustang, Thunderbird, Cutlass — already taken, there are plenty of tongue twisters: Chery Automobile Co. has the Fulwin, Great Wall Motor Co., the Gwperi, the Wingle A5 four-seat pickup truck, the Cowry and the Florid.

Unable for now to break into Western markets, China’s automakers are making inroads Latin America, the Middle East, Russia and Africa, exporting 680,700 cars in 2008, up 11 percent from 2007.

Such emerging markets, including China, are bound to offer the biggest potential for growth in coming decades.

But Chinese automakers will not overtake their Western rivals if they just keep on copying the competition, says Thomas Schiller, managing director at Arthur D. Little China.

“It’s good for testing the market, but what about the next step? They need to develop technical competence in research and development. They need competence on product strategy and marketing,” Schiller said in an interview.

Partnering with global big names like General Motors Corp., Volkswagen AG and Toyota Motor Corp. has helped China build a modern automotive industry and ramp up production — now the world’s second-largest market. Its passenger car sales exceeded U.S. sales in January-March.

But those tie-ups have left local manufacturers beholden to foreign technology in most areas.

State-owned FAW Group’s vehicles, for example, run on Mazda platforms, with Toyota bodies and Audi-based designs.

“There is nothing of their own in that vehicle,” said Wang Zhongwei, a former Ford Motor Co. engineer now working for motorcycle maker turned automaker Li Fan Industry (Group) Co.

“Chinese car makers use foreign engines, foreign chassis, foreign designs, foreign this and foreign that,” Wang said. “This makes producing cars very expensive.”

BYD has so far done the most to develop its own components, outsourcing only tires, engines and glass. Few others have that degree of control over cost and quality.

As growing numbers of domestic and foreign automakers crowd into the industry, competition is pushing prices relentlessly downward — bad news for everyone, except car buyers.

“Companies think they can make a lot of money by making cars, just like GM and Ford did,” said Wang, who began his career at FAW before spending 20 years in the U.S. “But the profit margins are very small.”

(latimes.com)

The Egyptian Foreign Ministry spokesman Hossam Zaki said that Egypt attaches great importance to the Egypt-China relations, and both countries should continue to step up their strategic ties of cooperation.

In an interview with Xinhua on Tuesday, Zaki said “China is a big country and we not only seek economic ties but also cherish the heritage of our traditional relations since the founding of the People’s Republic of China in the middle of the 20th century.”

“Egypt is interested in coordinating and consulting with China in different regional topics on the Middle East and other topics on the international issues,” he added.

“There is good cooperation and consultation between Egypt and China, but we have to go on developing the ties by rounds of political and strategic talks on multilateral matters as disarmament, human rights, reform and expansion of UN Security Council,” said Zaki.

He praised China’s stances regarding the Arab issues especially in supporting the rights of the Palestinian people.

About Chinese position on Darfur crisis, he said, “China has an important stance in the light of its relations with Sudan.” Egypt and China can work together to contribute to the peace and stability in the Darfur region in cooperation with the Sudanese government.

Chinese Foreign Minister Yang Jiechi is on a brief visit to Egypt which aims at enhancing China-Egypt relations. Yang held talks on Tuesday with his Egyptian counterpart Ahmed Abul Gheit and both agreed to strengthen cooperation between the two countries.

Source:Xinhua

by Collin Spears, BFPR Chief Foreign Policy Correspondent Washington, D.C.

In 2001, Former Singaporean Ambassador to the United Nations, Kishore Mahbubani asked a simple question, which was also the title of his book, “Can Asians Think?” Mr. Mahbubani sought to challenge, what he perceived as, Western paternalism. He believes that Asians do not need indefinite guidance by the Western world, because Asians are capable of independent thought, and just because these thoughts may differ from the West does not mean they are the result of defective thinking. A befitting question for the coming decade is, “Can Sub-Saharan Africans think?” For many Westerners it would seem the answer is, “No”, at least as far as Africa’s relationship with China.

In 2005, the Western media began to express “concern” with the increasing Chinese presence in Sub-Sahara Africa (Africa). During this period, many foreign policy observers began to promote the idea that China is plotting to take over Africa in some neo-colonialist attempt to gain unlimited access to natural resources. For example, Karin Kortmann, a German parliamentary state secretary stated in November of 2006, “our African partners really have to watch out that they will not be facing a new process of colonization”. The same year, Lord Chancellor of Great Britain, Jack Straw, made similar allegations “Most of what China has been doing in Africa today is what we did in Africa 150 years ago.” This Sinophobic boilerplate is hyperbole, but the narrative suggests that the average African is impotent and their leaders are all iniquitous or ineffectual.

Modern Sino-African relations were born in the aftermath of the Sino-Soviet split of the 1960’s. The government of Beijing was isolated from the Soviet bloc and the U.S. did not recognize it. China moved to increase its links with the developing world by exporting its own variant of revolutionary communism, Maoism. China had a special appeal to many in Africa, as it was not a former colonial power.

In recent years, the Sino-African relationship has evolved toward capitalist trade. Chinese and African officials routinely describe their relationship as a mutually beneficial one, based on mutual respect, and free of exploitation or paternalism, both common complaints against Western nations. China has over 800 Chinese companies with 750,000 Chinese nationals operating in 49 out of 53 African countries. Since the 1990’s, the Chinese have invested billions of dollars in African infrastructure, resource extraction, and other business ventures. This investment has been the source of much Western suspicion.

Trade between Africa and China went from $10 million in the 1980s, to $100 million in 2008. This was a rapid increase from $55 billion in 2006. The West still holds a dominant economic position to China in Africa. Harry Broadman (2007) found in his book, “Africa’s Silk Road: China and India’s New Economic Frontier”, that although China’s investment is growing quickly, it is not yet comparable with that of the West. China’s overall exports to Africa in 2006 were about 35% of total exports, equaling $27 billion. These exports were predominately light-manufacturing products. The growth rate of African exports to China was 1.7 times the global export total, 73% were oil products. One-third of China’s oil imports are from Africa, which was only 9% of Africa’s total oil exports, as compared to 33% going to the U.S. in 2006. The same year, 10% of Africa’s total global exports went to China, which amounted to $29 billion.

By 2008, China exported $50.8 billion worth of goods to Africa, which was a rise of 36% from the previous year. The import of goods from Africa rose 54% or $56 billion, as reported by the Chinese news agency Xinhua. China’s major trading partners in terms of total trade were Angola; South Africa; Sudan; and Nigeria. By some estimates, China will likely surpass the United States in 2010 as Africa’s single most important trading partner. Currently, China ranks as Africa’s second highest trading partner, only second to the U.S.

In 2006, African FDI to China was $1.1 billion whereas Chinese FDI to China was $900 million. China’s total FDI to Africa was 5% of its total, mainly to the mining and oil sectors, although there has been a diversifying trend. Europe and North American were still the main foreign investors in Africa, accounting for 68% and 22% of the FDI stock, respectively. No recent reliable data exists, but estimates put Chinese FDI as high as 30% of Africa’s total 2008.

China’s prevailing business model in Africa has been to look for niche opportunities where Western companies have found it too politically controversial, too risky, or financially enviable. For example, many of the assets held by China’s national oil company were too small for international oil companies and were either passed on or relinquished. China has also marketed itself as an alternative for African nations that are no longer interested in traditional Western aid programs, which often required economic and political restructuring. China offers less aid and more loans and business opportunities.

In addition, China is often willing to pay for goods with infrastructure projects and training. By the end of 2008, China trained 11,000 African professionals. Two thousand African students receive scholarships to study in China each year, most of whom study engineering, medicine, and science; that number is expected to double. China sends professionals to Africa to work on various environmental, medical, and agricultural projects. China has also dedicated $3 billion to the China-Africa Development Fund, which has funded 20 projects. The fund provides preferential loans to African nations and preferential buyers’ credit, as well as waives bad debts.

In spite of these humanitarian efforts, China continues to take heavy criticism from the West. Many complain that much of Africa is already struggling to develop and China not only promotes and enables bad governance, but also destroy domestic businesses through unfair competition. Beijing’s economic model for development runs counter to Western free market neo-liberalism, which critics often complain is a detrimental example for African governments.

There are also complaints about China’s lending practices. The former Bush Administration accused China of being a “rogue creditor” by not only bypassing the World Bank and the International Monetary Fund, but also not adhering to their lending standards, which encourage transparency and assesses the overall fiscal health of the lender. To maintain good long-term relations, China has canceled the debt of 31 African countries to the tune of $1.2 billion.

China has been panned for its military sales and reluctance to punish nations the West see as pariah states. It is true that China has a non-interference policy in the domestic affairs of sovereign nations, which it has long promoted in the UN Security Council. Despite this, China has pushed for a stronger role for Peacekeepers in Sudan, where it has contributed its own troops, as well the Democratic Republic of Congo and Liberia.

From 2003 to 2006, 15% percent of total arms sales to Africa came from China, putting them behind Russia and Germany. These sales included those to Sudan, Equatorial Guinea, Ethiopia, Eritrea, Burundi, Tanzania, and Zimbabwe. Still the United States and other Western nations express hypocritically selective outrage. During the Cold War, the West propped up dictatorships or overthrew democratically elected governments based on its interests and continues to do so. China’s behavior is far from unique; the real issue is that China and the West have interests that currently conflict.

Many in the West also charge China with unfair competition, citing that their government heavily subsidizes many Chinese firms, and in turn, these companies flood struggling African markets with their goods without hiring Africans workers. China’s oversight agencies do not have direct authority over Chinese corporations overseas, especially the many that are not government owned. The Chinese government organizes loose syndicates that work in coordinate to further business goals.

Chinese goods do often flood African markets, often smothering local fledgling competition, which causes unemployment. Most of this labor cannot transfer to Chinese companies because up to 70% of their laborers are imported from China. Chinese firms are vertically integrated which allows them to avoid negotiating with African trade unions and transferring skills that might eventually make Africans more competitive, but there are not many corporations that willingly help potential competition.

Many Western China critics attack the Chinese government and business for allegedly assisting African governments to oppress their people in order to gain a firm control over resources that China needs to fuel its development. They complain about China’s failure to engage the broader African population in an altruistic manner. These detractors seem to forget that the Chinese are engaging in business, not charity. Further, they do not believe that Africans are capable of doing what is in their own interest. Hypocritical attempts to take the moral high ground, claiming to be a champion for Africa’s oppressed masses is a cover to mask the discomfort generated by unwanted strategic competition with China in Africa.

The reality is that the primary barriers to Africa’s development are internal; but it is rare a Western analyst looking at China’s position in Africa, asks what responsibility Africans have to themselves. Countries with significant oil and mineral deposits frequently fail to grow, despite investment, due to corruption and the Dutch Disease. Africa’s non-commodity exports have limited penetration to China’s market, not due to tariff barriers, but due to lack of competitive products, high transportation costs, and a weak financial system that does not properly allocate capital to domestic firms. As to corruption, Transparency International reported that China is one of the most willing nations to pay bribes, but at the same time, a World Bank survey of 68 countries found that Africa leads other regions in corruption. These issues are internal to Africa and not the responsibility of China.

African leaders can drive a harder bargain by exploiting existing political advantage and strengthening continental institutions. Africa is responsible for China gaining its seat in the UN Security Council, as well as China’s ascension to the WTO. Africa also supports China in the UN against human right allegations and by limiting Taiwan’s diplomatic movements. Africans need to build a stronger African Union that can provide a multilateral trade infrastructure and coherent continental Chinese economic policy; this will only strengthen the continents ability to negotiate. The current situation is a type of “prisoner’s dilemma” where individual countries benefiting from Chinese trade do not want the African Union involved in their affairs.

African citizens are not helpless. In some African nations, civil society has pressured governments concerning their nation’s relationship with China. This has promoted some African governments to change the nature of their engagement with China. This is something China has shown flexibility for, because China wants to avoid some of the strong anti-Chinese movements that have occurred in Namibia, Zimbabwe, Angola, and Lesotho, Zambia, and Gabon in recent years. There is likely a correlation between good governance and the amiability of citizens to trade with China. This is something China might be reflecting upon.

Due to the current global financial crisis, revenues have been falling for many Chinese firms. Harry Broadman found that Africa averaged 6% GDP growth in 2007, but projects growth to be 3% in 2009. The economic contraction is greatest where capital markets are most developed, as in South Africa and Nigeria. FDI has also declined an commodity prices have dropped significantly in some markets, 50% in the oil market. Consequently, these firms have become more risk averse in their African business.

The contraction of Western economies will push Africa even closer to China, as China’s economy probably only slow to 8% GDP growth in 2009. The demand generated by this growth will be important to Africa, as it might prevent a complete collapses of commodity prices. In 2007, Pew Global Attitudes Project found that most Africans see China’s influence being more positive and growing faster than America’s. This finding will be prescient, if the West does not change its attitudes. To remain competitive the West should focus on trade over aid. Aid is will still be necessary, but as William Easterly stated in his book “The White Man’s Burden”, the West should target aid based on what Africans wants not on what they think Africans need; which is a de facto acknowledgment of the fact that Africans can think.

(brooksreview.wordpress.com)

Hello!

I’m connecting with you once again from Haiti after spending an absolutely splendid day at a school of over 500 students that has been supported for the last seven years by members of a California local of one of our national unions. The children greeted us in Kreyol, French, and English showing us the efficacy of people-to-people missions in instances where U.S. policy is absolutely abominable.

The Haitians rightly feel a sense of betrayal at the way their neighbor to the north has treated them because they know that they helped our country in the Revolutionary War in its Battle of Savannah and again they helped us against the Brits in the War of 1812. Seven Haitians are counted among the Tuskegee Airmen.

Haitians know that they sent ships, soldiers, and ammunition to the liberators trying to free Latin America from Spanish colonialism and Hugo Chavez has embraced them and thanked them for their help. But they also know that they are being punished because they defeated Napoleon Bonaparte, the French Empire, and symbolically, the white race. In its policies, the United States seems to have chosen race over right.

Interestingly, throughout my education in International Relations, I was taught that the first defeat of a white country by a country of color came in the 1905-6 defeat of Russia by Japan. Nowhere at the University of Southern California or The Fletcher School of Law and Diplomacy was there an acknowledgment that the textbooks were wrong and that the first defeat came one hundred years earlier at the hands of the Africans who defeated the leader of the French Empire. It took my Haitian friends to school me on that.

But when the Haitians defeated Napoleon, they also defeated the backers of Napoleon. And who were these people who were the financial backers of Napoleon? Pierre Branda, an economist and author, has written several books and articles on Napoleon: Le prix de la gloire: Napoleon et l’argent (The Price of Glory: Napoleon and Money); “Les finances et le budget de la France napoléonienne” (Finance and the French Napoleonic Budget); and “Le testament de Napoléon: une affaire d’argent avant tout” (The Testament of Napoleon: Above All, a Money Affair). Branda writes that “[m]oney was one of Napoleon’s most important allies. At several moments, he used it to forge his own destiny.”

From Branda we also learn that after France’s defeat in Haiti, finance became Napoleon’s all-consuming goal. Eventually, finance turned against Napoleon and the international “merchants, industrialists . . . major banks (such as Barings) and speculators (such as the Rothschilds),” gave their support to Britain who defeated Napoleon in 1815 at the Battle of Waterloo. Branda concludes, “it is up to readers to judge whether this ‘hidden war’ which Napoleon waged either with or against money deserves to stand alongside the more famous military campaigns.”

Important side note

Louisiana at this time was a part of the French Empire, where commerce included the transfer of Haitian slaves onto the US mainland. In fact, from the time of the first slave revolts in Haiti in the 1780s, many French slave owners took their Haitian slaves with them to Louisiana to escape the revolts. And during our Power to the People campaign, as we drove over the southern bayous, this aspect of our intertwined history came alive for my friend, Daveed, in the names of the places from southern Alabama to New Orleans.

In this way, the Louisiana Purchase not only facilitated Napoleon’s military finances in advance of an invasion of Britain, but created the problem of “containment” of “Haitianism” for U.S. slaveholders, the origins of current US policy toward Haiti. The Louisiana Purchase took place in 1803 and the slaves in Haiti defeated the French in 1804.

Indeed, I have always said that the fundamental question we must ask is who is going to finance our revolution? Certainly, you won’t see the scions of capital financing our side. And if you do, then you have to wonder about the commitment to our values of those who take their money. The key to understanding history is also to understand whose revolution was financed, and by whom. We must be willing to finance our own revolution.

Napoleon had this to say about finance:

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that vies is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” I found this quote in Matthias Chang’s book, “The Shadow Money Lenders,” which I highly recommend to you and will quote later.

Now, all of this is relevant because we find ourselves in the same situation as Napoleon after the loss of Haiti: The scions of capital are making their move against us. In fact, President Obama’s economic advisors are hastening our day of reckoning.

George Soros, who recently told “the Australian” that making $4 billion in the last two years, despite the financial crisis, was “in a way, the culminating point of my life’s work” characterizes Russia, Venezuela, and Iran as the “enemies of the prevailing world order.” Soros asserts that he’s having “a very good crisis,” but interestingly projects a significantly less bright outlook for the United States. In fact, he compares the current situation to the demise of the Soviet Union.

In my last message, I likened President Obama to Mikhail Gorbachev, the last President of the Soviet Union. A reader responded that President Obama might be more like Boris Yeltsin, the first President of Russia after the dissolution of the Soviet Union. This certainly bears investigation. But either way, the course is clear that big changes are underway.

I can only guess what the endgame is. But George Soros is one of President Obama’s advisors that we should be listening to. He says that he is hopeful that President Obama will propose increasing the capital of the International Monetary Fund (IMF) to include the issue of Special Drawing Rights to facilitate the international creation of money by the IMF.

Under the proposed scheme as described by Soros, countries will get an allocation that they can draw at a very low interest rate. International credit creation, he calls it, ostensibly for the benefit of the developing countries. Hmm, isn’t this expanding to a global scale exactly what is wrong with the U.S. financial system?

According to Soros, under this scheme, the developed world would provide the money in order to stimulate domestic demand in poorer countries so that the poorer countries can buy products from the developed world. According to Soros, the U.S. has the Federal Reserve and the credibility to print money, and this proposal is a kind of redistribution of resources that empowers the poorest. (I’m transcribing directly from a Soros video posted on youtube.)

According to Soros, this is the moment that this instrument should be used. If Obama makes this proposal, it will show that he has the leadership and the vision to restore confidence and protect the poorest and the richest countries and make everyone feel that they are better off.

On April 2, 2009, President Obama proposed just such a scheme as Congressman Gregory Meeks, head of the House Financial Services Subcommittee on International Monetary Policy and Trade seconded the idea.

Matthias Chang has some ideas about what that endgame might be. I’ll conclude with some quotes from his book, “The Shadow Money Lenders:”

The Objective of the Shadow Money Lenders

“And while the Europeans are screaming that an over-valued Euro will hurt European exports, Britain is quite contented to having a strong currency.

“The reason is obvious. The benefits of the pound taking over the dollar as the global reserve currency far outweighs the short and immediate dislocation in export earnings.

“Britain’s historical ties with the corrupt, fascist and retarded Muslim regimes in the Middle East were critical in this global financial strategy. The ‘petro-dollars’ would be switched to ‘petro-pounds’ and once more Britania will rule the waves!

The Problem of the Shadow Money Lenders

“But the US and Britain did not foresee that Saddam in the 1990s and now Iran would dump the dollar in the oil trades and opt for Yen and Euros as the preferred alternative currency. The pound was not even considered. . . . But when events turned out against their expectations, they joined hands to ravage Iraq and to threaten Syria and Iran as well as Lebanon.”

What the Shadow Money Lenders Will Do to Ensure Victory

“The policy of ‘controlled chaos’ will be implemented and we will witness in major cities of the USA, UK and Europe of street battles, orchestrated by the Intelligence Services, between the white folks and the immigrant population. In the USA it will be against the Latinos and then the blacks . . . In the UK and Europe, it will be against mainly immigrants from Turkey, the Northern Mediterranean states and Pakistan and they are essentially Muslims. There is therefore, the added fuel of Islamic radicalism, which in the first place, was the creation of the Western intelligence services.”

A Solution Antithetical to the Shadow Money Lenders’ Vision

“China’s economy is built on the sound principles of hard work and prudent financial management, the cornerstone being savings–on a massive scale. . . . China has recently launched a Sovereign Wealth Fund amounting to US$200 billion! Just pause and think–in just under 30 years, China has been transformed from a rural agriculture-based economy to become the world’s factory. The West took over 200 years to become an industrial power, and in the process plundered the world’s resources through wars of conquest.

The West’s economic and military power was built on the sweat and broken bones of the millions of slave labor from Asia and Africa. China’s transformation is therefore unique, a change brought about without wars or colonial exploitation. No wonder, the United States and Britain fear China’s rise. The recent intense disinformation, that the global imbalances are the result of China’s growing surplus, is an attempt by the G-7 countries to white-wash their failed policies and to cover up their fraudulent global banking Ponzi schemes.”

On 60 Minutes, Alan Greenspan admits that he’s diversified his currency holdings. That means he’s not holding only dollars the way most of us are. He won’t be hurt by the endgame the way we will be. Matthias writes, “Soros is Mary Poppins when compared to what Alan Greenspan has committed on behalf of his Masters. He has destroyed the lives of millions.”

I’ll conclude with the 1992 quote Matthias uses from George Herbert Walker Bush:

“‘If the American people ever knew what we have done, we would be chased down the street and lynched.’”

And oh, that family-owned Barings Bank, chartered in 1762, that financed the Louisiana Purchase and Britain against Napoleon’s Waterloo? It failed in 1995, and at the time, the failure was blamed on a single rogue trader with bad luck.

I think I need a drink now; I propose a toast to better luck and a people-powered, people-financed revolution!

Cynthia McKinney

(panafricannews.blogspot.com)

In the northern Indian state of Haryana, courtship is generally intricate business, but the mothers of the brides-to-be have simplified matters by clearing stating to potential grooms: “If you don’t have a toilet, you cannot marry my daughter.”

The slogan, which is a bit longer in Hindi and specifically reads: “If you don’t have a proper lavatory in your house, don’t even think about marrying my daughter,” has been plastered all across villages as part of a campaign to increase the number of available facilities.

The chronic shortage of proper plumbing is ironic in a region of the country where more households have TV sets than toilets.

Believe it or not, it is estimated that in India more than 660 million people still defecate in the open, causing a myriad of medical conditions ranging from diarrhea to polio.

With 8% more men than women, the fairer sex in India have become more vocal about expressing their resentment at having to relieve themselves outside, giving brides more leverage in pre-marital bargaining.

“Women suffer the most from this situation. They must go outside and they have to do so before sunrise or after nightfall so they can’t be seen,” said Bindeshwar Pathak, founder of Sulabh, a company that has built toilets for ten million Indians, and the recipient of this year’s Stockholm Water Prize for developing eco-friendly lavatories to improve public health.

The campaign has yielded very positive results. About 1.4 million lavatories have been built in the state since 2005, many of them with significant government subsidies. “We have more toilets, less shame among women and less disease,” said S.K.Monda, the official in charge of the program.

There are still those who fight progress, as some upper-caste communities are not happy having lavatories in their homes because it is believed such an arrangement is unclean.

(weirdasianews.com)

Walk into a bookstore in Beijing and you will find shelves filled with books about Huawei Technologies. As one of China’s fledging multinational companies and a major force in the international telecommunications equipment industry, Huawei is rewriting the rules of competition in a global industry. Moreover, it is the first non-state-owned Chinese company to successfully expand its operations internationally, some observers say, and it has become a model for other Chinese companies and a source of national pride.

Despite the challenges facing the global economy and the telecommunications industry, Huawei achieved contract sales of $16 billion, representing a 45% year-over-year increase, with approximately 72% of its revenues coming from international markets. In less than a decade, Huawei has penetrated almost every market around the world, investing heavily in its business and technology product lines, which includes fixed networks, mobile networks, data communications, optical networks, software and services, and terminals.

According to an industry insider, Huawei segments the telecom equipment industry into three major categories: Internet switches, fixed line networks and wireless networks. “Huawei is currently the number three global company in wireless networks and number two in fixed line and switches,” says founder and CEO Ren Zhenfei. “But Huawei’s goal is to become number one in all three segments.” Its competitors include both well-known European and American companies, such as Alcatel-Lucent, Cisco Systems, Nokia Siemens Networks and Ericsson Telephone Co., as well as lower-cost Chinese competitors such as ZTE Corp.

Huawei currently serves 270 operators in about 100 countries, including 35 of the world’s top 50 telecommunications companies. As of March 2007, Huawei had more than 83,000 employees worldwide, of whom 43% are engaged in R&D. The company reports that it dedicates at least 10% of its revenues to R&D and is now the fourth largest patent applicant worldwide, with more than 20,000 applications filed by 2007. Last year, Huawei won 45% of all new Universal Mobile Telecommunications System and High Speed Packet Access contracts, making it the top supplier in this area. Huawei is also now one of the top three suppliers in the global GSM market; by the end of 2007, it had shipped base stations with total capacity of 700,000 carrier frequencies, serving more than 300 million GSM users worldwide. (GSM is currently the most popular second-generation standard for mobile phones.)

It is hard to understand Huawei’s success without considering its humble origins and distinctive corporate culture. In 1988, Ren, a former People’s Liberation Army (PLA) officer, founded the company as a third-party reseller of telecom devices in Shenzhen, China. Five years later, Huawei achieved its first breakthrough when it launched its C&C08 digital telephone switch, which had the largest switching capacity in China at the time. By initially deploying in small cities and rural areas, the company gradually gained market share and made its way into the mainstream market. From 1996 to 1998, Huawei experienced exponential growth, coinciding with the boom in China’s telecommunications industry. After winning its first overseas contract in 1996 with Hong Kong’s Hutchison-Whampoa, Huawei expanded to Russia and Africa. In Africa, Huawei began operations in 1998, starting in Kenya, and has now become the largest CDMA product provider in the region. During the same year, Huawei hired IBM consultants to gain expertise in management strategies in a concerted effort to learn industry best practices

Learning from the Master

Another factor behind its African success is its attention to superior customer service. In 2000-2001, Huawei faced a confluence of challenges: IT investment dried up, profit margins shrank and the market faced oversupply, leading profit growth to evaporate. IBM consultants stressed increasing profits through better supply-chain management, stronger R&D and more integrated corporate structure. However, Huawei was also learning a key strength of IBM: unparalleled service. Ren appreciated the value of this concept under looming adversity. Unmatched attention and commitment to service eventually came to dominate the firm’s global strategy.

Indeed, superior service was a distinguishing feature of Huawei’s business model in Africa and its core competitive advantage. Yang explains how this aspect of Huawei’s business model ultimately led to global growth: “Three years into its Africa experiment, Huawei still had only 20 employees on the ground and very few contracts. However, our existing clients noticed the unparalleled responsiveness of management and personnel. We brought a Chinese attitude to both work ethic and relationship building in Africa. The result was that clients soon realized they could rely on Huawei 24 hours a day, seven days a week. We emphasized close relationships to foster that reliability and soon began to realize collateral benefits. All of a sudden, our reputation for superior service and higher quality gained us introductions to decision makers in new markets, faster network building and advanced notification of competitive bids. This enhanced Huawei’s ability to price safely below the competition.”

Huawei is also using its business in Africa as a training ground for establishing itself as a global brand through three distinct channels: policy, local investment and marketing. Huawei leverages its resources and products to connect with developmental policy throughout Africa. . In May 2007, at a forum held in conjunction with the 2007 annual meeting of the African Development Bank Group (ADBG), Huawei set out a vision for Africa that is centered on “‘bridging the digital divide and enriching the lives of Africans.” Huawei prides itself on giving back to the African community; one of the ways it does this is through donating educational communications equipment to schools.

Huawei has begun to establish regional training centers in African countries such as Nigeria, Kenya, Egypt, Tunisia, Angola and Guinea. By August 2004, Huawei had invested more than $10 million dollars into its Nigerian training center. Recently, Huawei opened a new training facility in South Africa, its fifth training center on the continent. There is a sixth center currently being built in Angola. The company now provides training for up to 2,000 people annually. Such local investments by Huawei help bolster the local economy with job creation and localized management while improving the company’s image in the eyes of local consumers, businesses and potential partners.

Huawei is asserting its brand potential in Africa by means of smart marketing strategies and “going green,” including optional use or solar and wind energy. It actively promotes its GSM base stations as among the most eco-friendly in the business, claiming that it cuts energy usage by 47% compared to regular towers. By the end of 2007, Huawei reported that it had deployed more than 100,000 green base stations, which saved 570 million kilowatt-hours, or 170,000 tons of coal.

Huawei Technologies has built a world-class enterprise, reaped tremendous profits in Africa over the last 10 years and is contributing to growth in Africa. In China, domestic media have heralded Huawei’s success as a model for other Chinese companies trying to transform themselves from domestic entities into global players. Huawei has already profitably penetrated the European market, winning major contracts and servicing prominent clients such as Vodafone and Telefónica. As Huawei leads the way for home-grown Chinese corporations, the challenges its leaders face going forward include maintaining its growth and transferring the lessons learned in Africa to Europe and North and South America, all of which represent both enormous profit potential and new strategic challenges.

This article was written by Christine Chang, Amy Cheng, Susan Kim, Johanna Kuhn-Osius, Jesús Reyes and Daniel Turgel, members of the Lauder Class of 2010.

(knowledge.wharton.upenn.edu)

Thirteen of the world’s 20 top-performing big miners are based in China, thriving amid profits, and hot on the merger and transactions trail.

JOHANNESBURG -

Mining stocks continue to lead the attempted recovery in global equities; from a country perspective, mining leadership is coming mainly from China, and from a commodities perspective, from specialist miners of zinc, nickel, tin, coal and copper. Gold and primary silver miners are pretty much out of the limelight for now, nursing several months’ worth of speeding tickets.

Where the broad-based MSCI Barra dollar index for all global equities has risen 28% from recent multi year lows, the world’s top 100 miners, measured by market value, have increased by an average of 92%. A good deal of the outperformance is explained by the general surge in Chinese stocks; the broad CSI 300 is now up by 67% from its lows; the 81% recovery in the Micex Russia has also played a part. Russian potash miner Uralkali has bounced by more than 300% from its price lows, and Polyus, the country’s leading gold digger, by more than 200%.

The 20 top performing big mining stocks list is dominated by Chinese names such as Sichuan Hongda (zinc and derivatives), which has seen its stock price rise more than 300% from lows, Ji Lin Ji En (nickel), and SDIC Xinji (power generation, coal, and other), which recently announced that it anticipates that its net profit for the first quarter of 2009 would increase by over 50% compared to that of the same period for 2008.

Other top performers include Shanxi Lu’an (coal), Shanxi Xishan, (coal and power generation), Yunnan Chihong (zinc and other), Shandong Gold, Yunnan Copper, Jiangxi Copper, Tongling (copper and other), Shenzhen Zhongjin (lead, zinc and other), Western Mining (base metals), and Shanxi Lanhua (coal and fertilisers).

Chinese mining companies, which often have close ties to government, at all levels, are benefiting heavily from China’s USD 585bn stimulus package, prompted by the so-called global markets crisis. At the same time, the strong financial position of Chinese mining companies, and indirect access to the world’s biggest country foreign reserves, has seen a number of vulnerable mining companies in other jurisdictions scrambling to settle deals with Chinese entities.

The mood is buoyant indeed in Chinese mining investment circles, as seen in this week’s news that China Zhong Wang, a big aluminium producer, aims to list in Hong Kong in May, selling about a quarter of its enlarged equity to raise a targeted equivalent of USD 1.6bn.

In terms of size, the leading (proposed) mining transaction out of China involves Rio Tinto, which, with massive net debt of USD 38.17bn on 31 December 2008, wants to raise USD 12.3bn from smaller rival Chinalco by selling equity stakes in some of Rio Tinto’s most prized aluminium, copper and iron ore assets. Chinalco holds 38.6% of listed Chalco, a big Chinese aluminium producer, and also 26.6% of listed Yunnan Copper.

Rio Tinto also wants to sell convertibles worth USD 7.2bn to Chinalco; if these hybrid debt-equity instruments are indeed sold and one day converted, Chinalco’s stake in Rio Tinto would increase to 18%. Alcoa, a US-based aluminium producer, and, like Rio Tinto, also somewhat challenged by debt issues, in February jointly announced with Chinalco that the duo “intend to explore opportunities to expand their commercial relationship by identifying strategic ventures that will benefit from the companies’ complementary strengths in bauxite, alumina, aluminum and fabricated products”.

In 2007 Rio Tinto paid a gigantic USD 38bn in cash for Alcan, trumping an earlier bid from Alcoa. This year has seen Rio Tinto sell USD 3.5bn in bonds, at fairly expensive coupons over five and ten years. In other bids to shore up it balance sheet after the Alcan experience, Rio Tinto has in 2009 sold some fine assets, separately to the proposed Chinalco deal: Jacobs Ranch for USD 761m; potash assets for USD 850m, and certain iron ore assets for USD 750m.

This week, it emerged that Rio Tinto planned to sell its 27% percent stake in Nonfemet International (China-Canada-Japan) Aluminum, a Chinese aluminium processing joint venture, to its partner, Shenzhen Zhongjin. Rio Tinto acquired the stake as part of the Alcan acquisition; this week Shenzhen Zhongjin said the transaction was “required by Alcan’s global industry adjustment,” in a statement in the official China Securities Journal. In late 2008, Rio Tinto agreed to sell its half in a Chinese aluminium smelting joint venture to its partner Qingtongxia Aluminium.

The global aluminium sector remains trouble prone. During the so-called commodities super cycle from early 200 to mid-2008, aluminium prices increased the least in percentage terms, within the base metals complex. By the same token, aluminium has shown the smallest percentage in price recoveries since multi year lows around five months ago. Lead leads with a 71% price recovery, compared to aluminum at the other end of the scale with 13%.

For years China has ranked as the top country producer (and consumer) of aluminium. While Chinese mined aluminum oxide (alumina) is at the higher end of the global industry cost curve, electrical smelting, the single biggest cost in primary aluminium production, is available with competitive advantages in China. The country has shown an ability to bring new power stations on line on time; huge markets for finished primary and extruded and formed product lie within close proximity.

The likes of Rio Tinto and Alcoa may have little choice other than to forge direct relationships at different levels with Chinese firms. Russia’s debt-soaked Rusal has made little in the way of advances in this context, and is instead pre-occupied with legal and other challenges in Guinea, Nigeria and Jamaica. Last month Rusal won a limited standstill on debt of USD 14bn. Beyond the aluminium space, Chinese miners have been active across the world; Australia is often a favourite, both for its relative proximity and fabulous natural endowments.

Earlier this year, Shenzhen Zhongjin acquired a 50.1% stake in Australian base metals miner Perilya; Minmetals has struck a deal worth more than USD 1bn to take over most of the assets in the debt-troubled OZ Minerals, and Australian iron ore company Fortescue was recently involved in equity deals to Hunan Valin, selling AUD 558m worth of stock (225m shares) on 25 February when Hunan Valin also bought a further 275m Fortescue shares from an existing shareholder, and, on 8 March, by selling another 35m new Fortescue shares to raise AUD 87m. Other examples include European Nickel’s multi-level partnership with China Tianchen Engineering Corporation, and Arafura Resources announcing a deal this week with Jiangsu Eastern China Non-Ferrous Metals Investment Holding.