China’s EXIM Lend More to Sub-Sahara Africa Than World Bank, Fitch Says

Export-Import Bank of China extended $12.5 billion more in loans to sub-Saharan Africa in the past decade than the World Bank, Fitch Ratings said.

State-owned EXIM lent about $67.2 billion to the world’s poorest region between 2001 and 2010 compared with the World Bank’s $54.7 billion, the ratings company said in a report e- mailed from London today.

“It is estimated that 20 percent of EXIM bank’s total business volume is conducted with Africa,” Fitch said. “Angola, Ethiopia, Nigeria and Sudan have been traditional recipients of EXIM loans since the bank’s founding in 1994. However, more recent projects suggest an even distribution across the African continent.”

China has been boosting ties with Africa, as it seeks to secure access to the continent’s raw materials and new markets for its manufactured goods. In return it has provided African governments with financing to help develop their economies, attaching less stringent loan conditions than institutions such as the World Bank and International Monetary Fund.

“Absence of political strings, competitive interest rates and flexible repayment schedules compared with Western counterparts, makes China’s loans highly attractive,” Fitch said. “For countries dependent on foreign aid, such as Ghana and Mozambique, Chinese loans offer an alternative source of capital against more traditional donor demands, particularly given growing infrastructure needs.”

Foreign Direct Investment

Chinese loans to sub-Saharan Africa exceed the Asian nation’s foreign direct investment in the region, with cumulative investment reaching $11 billion as of 2010, according to the ratings company. Most EXIM loans have been used for infrastructure projects, Fitch said.

China Development Bank Corp., the state-owned policy lender, has its own special loan program with Africa to help small- and medium-sized companies secure financing and build local markets. Since the program’s inception last year, the bank has helped fund more than 1,000 projects that created 50,000 jobs in more than 25 African countries, Fitch said, citing data provided by the state lender.

“Long-term debt sustainability is a concern, given poor transparency regarding loan terms and the weak debt management capacity of borrowers,” Fitch said. By the end of 2009 “35 African countries had debts canceled by China, amounting to approximately $30 billion.”

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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