Financing is one of the major problems encountered by Chinese enterprises during their 'going global'. In this regard, Wang Fujian suggested that enterprises should fully understand and grasp the various types of financial support policies for overseas contracted projects and investment, and then do a good job of financing feasibility analysis including national risk analysis, project economic and technological feasibility analysis, analysis of the owners ability, contractor ability, guarantee situation and so on.

A few days ago, 'Go to Africa' seminar hosted by Peking University attracted a lot of enterprises. Wang Fujian, head of the overseas investment risk research group at CITIC Capital Credit Rating Center, believes that Africa is an area where country who want to get on the world stage can not give up. China still needs to invest in Africa in areas like trade, investment and engineering.

Last year, China made great progress in trade and project contracting with Africa. In 2016, the bilateral trade sum between China and Africa was 149.1 billion U.S. dollars, the new contracted value of construction projects was 82 billion U.S. dollars, and the contracted value of completed construction projects was 52.1 billion U.S. dollars. China is Africa's largest trading partner, the largest source of infrastructure financing and the third largest aid provider.

However, the proportion of China's investment in Africa is is still very small compared with the total Chinese investment. In 2016, China's foreign investment was 196.15 billion U.S. dollars, of which over half was invested in Europe and the United States, investment in Africa was only 3.26 billion U.S. dollars, accounting for 1.92% of the total. In the first half of 2017, China invested 1.59 billion U.S. dollars in Africa, accounting for 3.3% of the total.

As for the major challenges Chinese enterprises face in Africa, Wang Fujian analyzed that in addition to the challenges of the external business environment, the internal development challenges for Chinese enterprises include: China's cost advantage no longer exists in low-end markets; its business model is single and homogeneous competition is serious; financing is difficult and cost is high; management capabilities need to be further improved; state-owned enterprises are regulated more strictly and so on.

'At present, there are not many projects that we invest in Africa, most investments involve energy, minerals and power stations, and there is still a slight discrepancy with the China-Africa capacity cooperation positioning with us.' Wang Yulong, General Manager of China-Africa Capacity Cooperation Fund, pointed out that China-Africa cooperation should focus on solving the problems of logistics, information flow and financing flow. 'If these three pivot problems are not solved, China-Africa production capacity cooperation will not be possible.'

'At present, there are not many projects that we invest in Africa, most investments involve energy, minerals and power stations, and there is still a slight discrepancy with the China-Africa capacity cooperation positioning with us.' Wang Yulong, General Manager of China-Africa Capacity Cooperation Fund, pointed out that China-Africa cooperation should focus on solving the problems of logistics, information flow and financing flow. 'If these three pivot problems are not solved, China-Africa production capacity cooperation will not be possible.'

Wang Yulong pointed out that the space of China-Africa cooperation is very large. At present, the advantages of China's labor force are declining. By 2050, 50% of the world's new population will come from Africa. China can enter Africa through technology and production capacity. In this process, China's financial advantages can also play a huge role.

China-Africa Capacity Cooperation Fund invests 1.07 billion Dollars in one year

China-Africa Capacity Cooperation Fund is a national-level foreign investment fund aimed at serving the construction of Africa's 'three networks and one modernization', it mainly focus on manufacturing, high technology, agriculture, financial cooperation, energy, minerals and infrastructure. The fund was announced to set up on December 4, 2015 by President Xi Jinping and started in January 2016,it worked officially in April 2016. In the first phase funds of the 10 billion U.S. dollars, the State Administration of Foreign Exchange and EIBC respectively invested 8 billion U.S. dollars and 2 billion U.S. dollars.

According to reports, within about one year since its establishment, the Fund has approved 10 projects with a total investment of 1.07 billion US dollars. The scope of investment in the China-Africa Capacity Cooperation Fund is relatively broad, the equity investments is the mainstay, together with various types of investments such as claims, funds and loans. 'In a project, we often use a variety of means of investment and we can make both equity investment and bond investment. Through the combination of investment, we can solve the problem during enterprises' financing to the utmost extent. Wang Yulong said.

For the fund's asset allocation principles, Wang Yulong introduced that we should actively carry out high-quality or mature project buyout, steady investment in new projects; continue to optimize the investment portfolio, focus on risk control at preliminary stage, and gradually allocate the common stock investment. As for the project screening criteria, he pointed out that we require the country risk should be controllable, project economy should be feasible and partners should have the project operational ability.

'In general, our investment decision-making process is three to four months and there is no need to declare any other agency so that we can ensure the efficiency of project approval. For the moment, we are quicker in developing financial institutions in China. ' Wang Yulong said, 'Once the decision to lend is made, the dollars will be credited within 7 to 10 days.'

The first project funded by the China-Africa Capacity Cooperation Fund is the Angola Section Aluminum Plant project which is built together with CITIC Construction Co., Ltd. The project covers a total area of 20 hectares with a total investment of about 40 million U.S. dollars. The project is expected to put into operation in 2018 with an annual output of 10,000 tons, it provided 500 jobs and is currently the largest sectional material investment project in Angola. When completed, the project will not only provide a great deal of solution to the demand for section aluminum in Angola, but will also serve as an alternative to imports, reduce foreign exchange expenditures and increase export exchange for Angola, whose foreign exchange reserves are highly dependent on oil exports.

This year, China-Africa Capacity Cooperation Fund also held B rounds of financing towards SHENZHEN TRANSSION together with six agencies including Temasek and Netease. Wang Yulong introduced taht, 'We have seen the unique nature of SHENZHEN TRANSSION from the beginning. Last year, they shipped more than 80 million cellphones to Africa, accounting for 40% of Africa's market, making them one of the best-selling cellphones in Africa and creating more than 8,000 jobs. It has now become a focus of diplomacy among the great powers. ' According to him, SHENZHEN TRANSSION is ready to return to the A-share market next year, because of entering earlier, the fund's investment return in this project is high, it also plans to support the development of SHENZHEN TRANSSION payment business.

Innovate financing mode on the basis of fully understanding

Financing is one of the major problems encountered by Chinese enterprises in their "going global". In this regard, Wang Fujian suggested that enterprises should fully understand and grasp the various types of financial support policies for overseas contracted projects and investment, and then do a good job of financing feasibility analysis, including national risk analysis, economic and technological feasibility analysis of the project, the analysis of owners ability, contractor ability and guarantee situation, etc.

He cited an example: in a country in Africa, local and third-country owners plan to build a total investment of 800 million U.S. dollars 300MW coal-fired power stations, power transmission and transformation, coal mining and water supply projects. Among them, the owner invested 30% of the equity capital, the rest was solved through loans. Chinese-funded enterprises are involved in the construction of power stations and power transmission and transformation to assist the owners in completing the project financing of about 370 million U.S. dollars.

Wang Fujian pointed out that this project does not have a sovereign guarantee and the project owner only provides limited guarantee. However, project financing was achieved through innovative insurance models - 'political risk + government default' and government defaults aim at pre-payment for the entire contract.

Ma Xiangdong, general manager of cross-border finance department of CMBC, said that as a commercial bank, they will consider the risks in all aspects of the project when they decide whether to lend. For example, in Angola's Kakar Hydropower Station export buyer credit project, total bank consortium loan sum is 4.2 billion U.S. dollars, of which CMBC loan sum is 500 million U.S. dollars and the loan term is 15 years. CITIC Insurance provides export buyer credit insurance including political insurance and commercial insurance with a loss ration of not less than 95%, while the Angolan government makes sovereign guarantee.

According to him, for the project, they first considered the rationality of power planning. Angola power plan is made up to 2025, the current per capita installed capacity is relatively low, and large number of economic development is needed. It is estimated that the electricity market will still not oversupply when the 15-year loan period ends. However, at the same time, he pointed out that in Angolan countries, the country risk is relatively high, the industry is relatively simple, the exchange rate fluctuations are relatively large, the foreign exchange reserves may decline further, and the balance of payments imbalance may worsen.

'Ultimately, we did this project because, given that it is a sovereign-funded project, as long as international energy price is stable, the country's foreign exchange reserves will recover. In addition, Angola's political situation is relatively stable and is promoting economic reform. The follow-up potential is still high, and the economy and structure of the project are relatively reasonable. ' Ma Xiangdong said.

At present, EPC projects are commonly adopted by Chinese enterprises involved in engineering projects in Africa (that is, the companies are entrusted by the owners and undertake the whole process or stages of contracting for the design, procurement, construction and commissioning of construction projects according to the contract) Sources of financing include China Commercial Loans, China Liang You Loans and international multilateral or other financial institutions. Wang Yulong pointed out that the EPC model generally requires owners to pay 15% of the project money as a prepayment, but many African countries still feel it difficult to pay that payment. In response to this question, he pointed out that the China-Africa Capacity Cooperation Fund is considering playing a greater role.

'We are now ready to comprehensively sort out projects supported by EIBC's "two preferential" loans (short for China's foreign aid preferential loans and preferential buyer's credit, it is the preferential capital arrangement given by the Chinese government to developing country governments, and EIBC is the only contracting bank), pick out fundamentally good projects and take over the projects by transferring the holdings and we will exit the projects once they reach operational conditions.' Wang Yulong pointed out that 'the preferential loan department of EIBC has the debt ceiling. By transferring the project to us, they have new borrowing space and can support the new EPC project again.'