A Chinese state-owned rail company has signed $5.5bn worth of contracts in Africa, in the latest sign that the country’s “New Silk Road” strategy to build infrastructure around the developing world is showing tangible results.
African units of China Railway Construction Corp will build a $3.5bn intercity rail line in Nigeria and a $1.9bn residential real estate project in Zimbabwe, the company said in exchange filings overnight on Monday.
The latest deal follows a $12bn contract that CRCC reportedly signed for a separate rail line in Nigeria last November, days after Mexico cancelled a $3.6bn high-speed rail contract with a consortium led by CRCC.
China’s “One Road, One Belt” strategy includes plans to build roads, railways, ports, natural gas pipelines and other infrastructure stretching into south and Southeast Asia, the Middle East, and through central Asia to Europe to create demand for China’s industrial exports in the face of overcapacity at home.
The 21st Century Maritime Silk Road and a land-based counterpart, the Silk Road Economic Belt, are expected to drive sales to Chinese trainmakers, port operators and electricity producers. China’s two other largest rail groups are also engaged in a merger aimed at creating a globally competitive giant.
CRCC said financing for its rail project had not been finalised but last week state media reported that China’s central bank would use the country’s foreign exchange reserves to inject $62bn in fresh capital into the country’s non-commercial “policy banks”, which are expected to play a key role in supporting the New Silk Road initiative.
China Development Bank, the largest of China’s three policy banks, has granted more loans to Africa than the World Bank, the African Development Bank and the Asian Development Bank combined over the past six years, the official China Daily newspaper reported in December.
In addition to CDB, China has pledged to create a new $40bn Silk Road Fund to finance overseas investments. The China-led Asia Infrastructure Investment Bank, in which at least 47 countries will participate, could be another source of funding.
Large Chinese investments in Africa have been controversial, however, in part because of concerns over transparency and corruption at Beijing’s largest state companies. The use of imported Chinese labour has also been a source of tension.
CRCC is listed in Shanghai and Hong Kong but is majority-owned by China’s central government. Its Shanghai-listed shares were up more than 6 per cent on Tuesday morning.
So-called concept stocks related to “One Road, One Belt” have performed especially well amid a broader China stock market boom that pushed the Shanghai Composite Index to a seven-year high on Monday.
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