CHINA/AFRICA: A PROVINCIAL PERSPECTIVE FROM HENAN

UNCLAS SECTION 01 OF 02 BEIJING 003853 SENSITIVE SIPDIS TREASURY FOR OASIA E.O. 12958: N/A TAGS: ECON EINV EFIN ETRD AX CH SUBJECT: CHINA/AFRICA: A PROVINCIAL PERSPECTIVE FROM HENAN Refs: A) Beijing 10969; B) "China's Outward Foreign Direct Investment", OECD Secretariat Draft Report, 22FEB2008 ¶1. (SBU) Summary: China's efforts to expand trade and investment ties with Africa were prominently on display at the 5th China Henan International Investment and Trade Fair held in Zhengzhou, Henan Province August 26-28, although little concrete business materialized. A day-long "Go Global" investment seminar and an evening reception with participants from approximately 30 African as well as Latin American and Pacific countries showed that the push to promote China's outward investment to Africa and other developing countries is evident even at the provincial level and continues two years after the November 2006 Forum on China-Africa Cooperation (FOCAC) was held in Beijing. End Summary. The Normal Rhetoric -------------- ¶2. (U) Econoff attended the August 26-28 5th China Henan International Investment and Trade Fair held in Zhengzhou, Henan Province. The Vanuatu Ambassador to China Lo Chi Wai was the ranking diplomat at the opening ceremonies on August 26 but representatives from Africa constituted the largest block of foreign diplomats and commercial attaches. The Ethiopian Ambassador to China Hailekiros Gessesse made keynote remarks at a banquet hosted by Henan Vice Governor Xu Jichao for the visiting diplomats. In his remarks Vice Governor Xu focused on Africa, noted China's commitment to Africa since FOCAC in 2006, and said that Henan was promoting local companies' efforts to increase exports and invest in Africa and other foreign countries in order to promote mutual development. The Ethiopian Ambassador highlighted strong south-south ties, strong economic growth in Ethiopia and Africa in recent years, and the role that China has played in helping Africa achieve these high growth rates. (Note: African diplomats generally outranked representatives from other Embassies, with Nigeria and Uganda also represented by their Deputy Chiefs of Mission. Henan trade and investment fair organizers offer to pay for the hotel and living costs for all diplomats, not just those from Africa. End Note.) Backed By Little Substance -------------- ¶3. (SBU) Ambassador Lo and other embassy representatives from Africa, Latin America, and the Pacific gave presentations at an August 27 all-day "Go Global" investment forum. Approximately 100 Chinese business representatives participated in the event, but Econoff spoke with a few Chinese participants that clearly had neither the capacity nor intention to invest in Africa. Wei Zhiyong, Director of the Henan Development and Reform Commission Foreign Economy Department told Econoff that Henan-based companies have some trade ties with Africa but have not invested significantly on the continent. Outward investment in Asia and other more familiar markets was somewhat more common. (Note: Between 2000 and 2006 China's overall outward FDI grew at an average annual growth rate of 116 percent, which is among the fastest in the world. By the end of 2006, 64% of China's outward FDI stock was in Asia, compared to only 3.4% in Africa (Ref B). We do not have provincial-level figures for Henan. End Note.) ¶4. (SBU) Embassy representatives from Sierra Leone, Kenya, Zimbabwe, Nigeria, and Uganda mentioned some existing investment projects and ongoing trade ties with their respective countries but did not appear enthusiastic about new business resulting from the fair. Sam Savou, Representative for the Pacific Islands Forum Trade Office said he was not aware of any significant trade or investment agreements signed, but that many of the African, Latin American and Pacific Island representatives saw this event as a networking opportunity that would hopefully produce business in the future. But a Reflection on China's Commitment to Ties with BEIJING 00003853 002 OF 002 Africa Nonetheless -- Comment and Background -------------- -------------- ¶5. (SBU) African countries participated in a similar fashion in the 2006 Henan Trade Fair (Ref A) and Henan designated 2007 as "China-Africa Cooperation Year." Similarly, we have observed African and other developing countries taking advantage of other trade and investment fairs in China as well, including the September 2008 China International Trade and Investment Fair in Xiamen. Henan's event is therefore not a new phenomenon. It is also not a good indicator of actual trade and investment flows. But the Henan Provincial government's consistent focus on at least making the public effort to promote these trade and investment ties indicates that China's efforts to promote outward investment and increase ties with Africa and other developing countries are serious enough that they extend to a province that is among the least likely to play a prominent role in this area. ¶6. (SBU) Henan Province lags behind coastal provinces both in attracting foreign direct investment and shifting to export-oriented manufacturing (Ref A),as well as in outward investment. Henan's economy is still largely dominated by agriculture, not the industrial or energy-focused companies that dominate China's outward investment in Africa (Ref B). ¶7. (SBU) Trade between China and Africa accelerated between 2000 and 2006 at an average rate of 33 percent per annum and Beijing expects trade with Africa to hit USD 100 billion by 2010, according to the OECD and press reports. China's exports to Africa grew from USD 4.2 million in 2000 to USD 22.9 billion in 2006 (Ref B). PICCUTA