Resources locomotive needs fuel from banks

Updated: 2013-03-29 07:15

By He Jingtong (China Daily)

  Print Mail Large Medium  Small 分享按钮 0

Emerging markets are important to overseas development of China's financial institutions

The export of oil, metals, minerals and agricultural products is one of the drivers of economic growth in most African economies. Thanks to such exports, African economies were spared the worst of the global financial crisis, compared with developed countries and large emerging economies.

Africa's banking market has become all the more appealing to Chinese financial institutions, too. The China Development Bank, the Export-Import Bank of China, Industrial and Commercial Bank of China, Bank of China, China Construction Bank and other financial institutions have all set up branches in Africa in the hope of a complete world economic recovery. Their presence will become even more important when growing China-Africa economic ties and trade place much heavier demands on financial services.

The banks' main task now is to grasp the important long-term strategic investment opportunity to accelerate business growth in Africa.

To cope with the adverse effects of the global financial crisis, African governments and enterprises have taken various measures and achieved some success.

Africa is poised not only to improve its infrastructure, adjust the economic structure, and accelerate regional economic integration, but also to reap the huge potential of growth in the financial markets.

Over the past 10 years, economic stability in Africa has laid a solid foundation for improving the financial system, and in fact the financial system in many African countries is significantly better than it was at the outbreak of the global crisis.

More than half the people of sub-Saharan Africa enjoy banking services, and that offers huge potential for the banking industry in the region, something that will result in more banks entering the market and branches expanding rapidly.

Emerging markets are an important part of the overseas development strategy of China's commercial banks and financial institutions. Africa no doubt accounts for the majority of business in those markets, as evidenced by the Industrial and Commercial Bank of China's hefty investment in Standard Bank of South Africa.

Africa and China both have large populations and advanced personal remittance business. The deployment of expatriate labor on both sides and expatriate remittances offer huge business potential. Chinese banks and financial institutions should take advantage of their developed networks and information technology to build a global express remittance business brand.

Working with local banks in the global remittance business would help with the efficiency and speed of such services.

China Development Bank's practices are distinctly different to those of other foreign banks in Africa. Often the business is done through bilateral financing. So gradually many infrastructure projects in Africa require additional financing.

African countries have been working closely with foreign financial institutions to help inject fresh blood into the local financial sector.

In addition, with most African countries committed to modernization, a number of state-owned enterprises hope to raise funds by issuing stocks and bonds, giving the securities market in Africa huge growth potential.

The author is a professor at Nankai University in Tianjin, who specializes in China-Africa investment and market policies. The views do not necessarily reflect those of China Daily.

(China Daily 03/29/2013 page7)